Hunters Pointe Partners Ltd. Partnership v. U.S. Fidelity & Guar. Co.

• Court: Court of Appeal of Michigan
• Writing for the Court: PER CURIAM
• Citation: Hunters Pointe Partners Ltd. Partnership v. U.S. Fidelity & Guar. Co., 442 N.W.2d 778, 177 Mich.App. 745 (Mich. App. 1989)
• Decision Date: 27 July 1989
• Docket Number: Docket No. 106664
• Parties: HUNTERS POINTE PARTNERS LIMITED PARTNERSHIP, Plaintiff/Counter-Defendant-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a foreign corporation, Defendant-Appellee, and Hoffman Construction Company, a Michigan corporation, Defendant/Counter-Plaintiff-Appellee.

Page 778

442 N.W.2d 778

177 Mich.App. 745

HUNTERS POINTE PARTNERS LIMITED PARTNERSHIP Plaintiff/Counter-Defendant-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a foreign corporation, Defendant-Appellee and Hoffman Construction Company, a Michigan corporation Defendant/Counter-Plaintiff-Appellee.

Docket No. 106664.

Court of Appeals of Michigan.

Submitted April 5, 1989.

Decided June 20, 1989.

Released for Publication July 27, 1989.

Dykema Gossett by Nancy G. Edmunds and Maureen E. Thomas, Bloomfield Hills, for plaintiff/counter-defendant-appellant.

Poling, McGaw & Poling, P.C. by D. Douglas McGaw and Gregory C. Hamilton, Troy, for defendant-appellee.

Before MICHAEL J. KELLY, P.J., and J.H. GILLIS and CYNAR, JJ.

PER CURIAM.

Plaintiff, Hunters Pointe Partners Limited Partnership, appeals as of right from a May 4, 1988, judgment entered by the trial court. Specifically, plaintiff challenges a February 5, 1988, order of summary disposition dismissing United States Fidelity & Guaranty Company as a defendant. We reverse.

This action involves plaintiff's claim for damages resulting from various defects in the construction of an apartment complex located in Southfield, Michigan. On May 6, 1981, a construction contract was executed between Hunters Glen, Ltd., as owner, and Hoffman Construction Company, as contractor, for the construction of an apartment complex. As required by the construction contract, a performance bond was issued by USF & G, as surety, naming Hoffman as the principal and Hunters Glen as obligee, guaranteeing Hoffman's performance under the construction contract. Article 2, p B of the construction contract expressly required the contractor to correct any defects due to faulty materials or workmanship which might appear within one year from the date of completion. Article 2, p D of the construction contract defined the date of completion as the date that the HUD representative's trip report is signed indicating construction is complete and which report is subsequently endorsed by the chief architect as being the final inspection report. The HUD representative's trip sheet was signed on September 29, 1982, and the chief architect's final inspection report was signed on October 14, 1982. In addition to the construction contract, part of the consideration Hoffman was to receive for construction of the apartment complex was a limited partnership interest in Hunters Glen which Hoffman was required to sell to Hunters Glen upon completion of construction. Although USF & G was not a party to the supplemental agreement, an addendum to the supplemental agreement, dated May 6, 1981, was executed by Hoffman, Hunters Glen, and USF & G indicating that the benefits inuring to Hoffman under the supplemental agreement would be extended to USF & G as an inducement for USF & G's issuance of the payment and performance bonds.

As a result of financial instability, Hunters Glen filed for Chapter 11 bankruptcy in April, 1983. As part of Hunters Glen's plan of reorganization, a purchase agreement was entered into on June 30, 1983, between Hunters Glen and Northern Capital, Inc., as nominee for Hunters Pointe, which agreement was approved by the bankruptcy court by order dated August 15, 1983. Although the plan of reorganization was accepted by Hoffman, USF & G was not a party to the bankruptcy proceedings, did not receive direct notice from the bankruptcy court as to any issue, and did not participate in any of the bankruptcy court hearings concerning the project. At a closing which took place on October 13, 1983, Hunters Pointe closed the HUD mortgage and acquired fee simple title to the project from Hunters Glen. Hunters Pointe concedes that Hoffman was never paid in full for its limited partnership interest in Hunters Glen. By assignment dated October 17, 1983, all assets of Hunters Glen were assigned to Hunters Pointe.

As a result of numerous alleged defects in the construction of the apartment complex, plaintiff filed suit, on November 28, 1984, against both Hoffman, as contractor, and USF & G, as surety, under the performance bond. On February 5, 1988, the trial court granted summary disposition in favor of USF & G on the basis that, as a surety, it was discharged from liability when the construction contract and performance bond were assigned from Hunters Glen to Hunters Pointe without the express consent of USF & G. Plaintiff proceeded to trial against Hoffman and, on May 4, 1988, a judgment was entered awarding Hunters Pointe damages in the amount of $453,813 against Hoffman plus interest of $186,946.08 and costs of $12,448.77. Plaintiff now appeals, asserting that the lower court's order of summary disposition in favor of USF & G was in error.

Plaintiff argues that the trial court erred in ruling that plaintiff's failure to obtain the consent of USF & G to the assignment of the construction contract and performance bond operated to discharge USF & G as surety under the performance bond. We agree.

USF & G was not a party to the construction contract and its consent to an assignment of the contract by the original owner, Hunters Glen, was not necessary. Article 9, p A provided for an assignment of the...