Mccoig Materials, LLC v. Galui Constr., Inc.

• Decision Date: 15 March 2012
• Docket Number: Docket No. 301599.
• Citation: 818 N.W.2d 410,295 Mich.App. 684
• Parties: McCOIG MATERIALS, LLC v. GALUI CONSTRUCTION, INC.
• Court: Court of Appeal of Michigan — District of US

295 Mich.App. 684

818 N.W.2d 410

McCOIG MATERIALS, LLC

v.GALUI CONSTRUCTION, INC.

Docket No. 301599.

Court of Appeals of Michigan.

Submitted Feb. 15, 2012, at Detroit.

Decided March 15, 2012, at 9:05 a.m.

Finkel Whitefield Selik (by David E. Sims and Daniel G. LeVan), Farmington Hills, for McCoig Materials, LLC.

Frasco Caponigro Wineman & Scheible, PLLC (by J. Christian Hauser, Bloomfield Hills, and Jonathan D. Ordower, Southfield), for Galui Construction, Inc., and Ohio Casualty Insurance Company.

Before: SAAD, P.J., and KIRSTEN FRANK KELLY and M.J. KELLY, JJ.

PER CURIAM.

In this action alleging breach of contract, plaintiff, McCoig Materials, LLC, appeals by leave granted the trial court's order denying its second motion for summary disposition. The trial court denied this motion for summary disposition and plaintiff's motion for reconsideration, holding that defendant, Galui Construction, Inc.,¹ was entitled to raise the affirmative defense of recoupment. We reverse and remand for proceedings consistent with this opinion.

I. BASIC FACTS AND PROCEDURAL HISTORY

Plaintiff filed this litigation to recover for defendant's alleged breach of contract and to collect on the performance bond (provided by Ohio Casualty Insurance Company) for defendant's purported failure to pay for concrete ordered and delivered pursuant to an open-account contract. Plaintiff operates a business manufacturing and selling concrete materials for use in construction projects. Plaintiff receives orders from specific customers for an exact amount of concrete material to be delivered to a particular job site. Plaintiff's employees deliver the concrete to the job site in accordance with the purchaser's instructions. After the material is delivered to the job site, the employee gives a delivery ticket to the purchaser and provides a carbon copy of the delivery ticket to plaintiff's accounting department. After obtaining the delivery ticket, the accounting department creates an invoice for all materials delivered that day and mails the purchaser the invoice. At the end of each month, a statement of account is created that delineates all charges for materials, payments by the purchaser, and any credits issued.

Defendant performs concrete construction work. On February 7, 2007, plaintiff entered into a contract with defendant for the sale of concrete materials on a revolving basis. The contract provided that the goods were furnished to defendant on an open-account basis, but if defendant failed to pay, the account would be modified to require cash on delivery until the account was made current. The contract between the parties provided, in relevant part:

This is a contract to obtain materials on open account from the McCoig Materials, LLC (“McCoig”). Buyer understands and expressly acknowledges that it is executing this Agreement with McCoig for the purchase of concrete materials on open account (McCoig shall be referred to as a Seller throughout this Agreement)....

* * *

7. Defects/Limitation of Liability: Notice of any defect in materials or nonconformity to specifications shall be made in writing within 15 days from receipt of such materials, after which any such claim for such defect or nonconformity shall be deemed waived, except that yield complaints must be made in writing no later than 48 hours after receipt of materials. Seller's liability for such defective or nonconforming materials shall be limited, under any theory of law, to their replacement or refund of the purchase price. Seller shall have the right to inspect and satisfy itself as to the validity of any such claims. Seller shall have no responsibility for damage or shortage of any materials unless such damage or shortage is noted on the delivery ticket and materials claimed to be damaged are held and made available for Seller's inspection. IN THE CASE OF ALL CLAIMS MADE AGAINST SELLER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR FAILURE OR DELAY IN DELIVERY, SELLER SHALL IN NO EVENT BE LIABLE FOR ANY LOSS [SIC] PROFITS, SPECIAL OR CONSEQUENTIAL DAMAGES. NO ACTION, REGARDLESS OF FORM, ARISING OUT OF THE TRANSACTIONS UNDER THIS AGREEMENT MAY BE BROUGHT BY BUYER MORE THAN ONE YEAR AFTER THE MATERIALS SUPPLIED PURSUANT TO ANY ORDER UNDER THIS AGREEMENT HAVE BEEN DELIVERED.

SELLER DISCLAIMS ANY AND ALL WARRANTIES, WHETHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MECHANTABILIYT [SIC] OR FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS OTHERWISE PROVIDED HEREIN UNLESS MADE SPECIFICALLY IN WRITING, SIGNED BY AN OFFICER OF SELLER, AND ATTACHED TO AND MADE PART OF THIS CONTRACT.

Between August 5, 2008, and September 18, 2008, plaintiff furnished concrete to defendant for work performed on a project in the city of Center Line. Pursuant to the terms of the contract, defendant was required to notify plaintiff of any defects within 15 days from receipt. Defendant did not timely notify plaintiff of any defects regarding the concrete used in the Center Line project, and it did not file a lawsuit within one-year after the materials were supplied. Between November 1, 2008, and December 3, 2008, plaintiff delivered concrete to defendant for repair work in the city of Warren. Defendant allegedly failed to pay for the goods supplied for the city of Warren project. On April 1, 2010, plaintiff filed this litigation to compel payment, asserting that a balance of $51,837.93 was due and owing for the deliveries for defendant's Warren project.

On April 30, 2010, defendant filed an answer, affirmative defenses, and a counterclaim in response to plaintiff's complaint. In its affirmative defenses, defendant asserted that it was entitled to offsets, backcharges, and costs incurred by defendant to correct defective concrete provided by plaintiff. Defendant's counterclaim asserted breach of contract and breach of warranty by plaintiff arising from the defective concrete materials furnished for the city of Center Line project.²

On July 23, 2010, plaintiff moved for summary disposition of defendant's counterclaim pursuant to MCR 2.116(C)(7), relying on the one-year limitations period set forth in the February 7, 2007 contract between the parties. Plaintiff also moved for summary disposition of its complaint under MCR 2.116(C)(10), contending that there was no genuine issue of material fact regarding the terms of the agreement, the concrete was delivered as promised, and defendant failed to pay the money owed without justification. On August 24, 2010, defendant filed a brief in opposition to the motion under MCR 2.116(C)(10), alleging that there were disputed issues of material fact regarding the quality of the concrete supplied by plaintiff and the amount due and owing in light of plaintiff's misapplication of payments. On September 8, 2010, the trial court entered an order dismissing defendant's counterclaim and denying plaintiff's motion for summary disposition of its complaint without prejudice.

On October 7, 2010, plaintiff filed its second motion for summary disposition pursuant to MCR 2.116(C)(10), asserting that there was no genuine issue of material fact regarding defendant's obligation to pay plaintiff for materials sold in connection with the Warren project. Plaintiff also alleged that defendant was obligated to pay the contract price because it accepted the goods at issue without objection. On October 25, 2010, defendant filed a brief in opposition to this motion, contending that there were genuine issues of material fact regarding any outstanding balance as well as the propriety of the interest charges. In this brief, defendant did not raise an issue regarding any alleged defective concrete.

On November 9, 2010, the trial court issued an opinion and order denying plaintiff's second motion for summary disposition. The trial court rejected defendant's challenge to the balance due and the argument that plaintiff misapplied payments. Nonetheless, the trial court denied plaintiff's motion, holding that defendant could recoup potential costs it suffered as a result of defective concrete plaintiff supplied for the Center Line project:

Significantly, the dismissal of defendant Galui Construction's counterclaim does not preclude it from asserting its potential costs to replace the defective concrete on the Center Line project as a defense to plaintiff's claim for breach of contract on the Warren project. See Mudge v. Macomb County, 458 Mich. 87, 106–107, 580 N.W.2d 845 (1998) (“plaintiff will not be permitted to insist upon the statute of limitations as a bar to such a defense when he is seeking to enforce payment of that which is due him under the contract out of which the defendant's claim for recoupment arises”).

Defendant Galui Construction's ability to assert recoupment as a defense necessarily creates a question of fact as to any balance due plaintiff.

On November 29, 2010, plaintiff moved for reconsideration of the summary disposition ruling, challenging the trial court's decision to raise sua sponte the defense of recoupment, an issue not raised or briefed by defendant. In light of the trial court's dismissal of defendant's counterclaim, the only remaining issue in the case involved the misapplication of payments. Plaintiff alleged that the doctrine of recoupment did not apply because it only applied to debts arising from the same transaction. Defendant contested the quality of the concrete supplied for the city of Center Line project, and plaintiff's complaint challenged the payments made for the city of Warren project.

On December 9, 2010, the trial court issued an opinion and order denying plaintiff's motion for reconsideration. The trial court held, in relevant part:

Plaintiff's argument regarding the misapplication of recoupment in avoidance of the statute of limitations under Mudge v. Macomb County, 458 Mich. 87, 106–107, 580 N.W.2d 845 (1998) lacks merit.

Significantly, plaintiff's motions for summary disposition evidence but a single Contract for...