National Sand, Inc. v. Nagel Const., Inc.

• Decision Date: 07 March 1990
• Docket Number: Docket No. 106970
• Citation: 451 N.W.2d 618,182 Mich. App. 327
• Parties: NATIONAL SAND, INC., a Michigan corporation, Plaintiff-Appellant, and Mark Williams, Plaintiff, and Ionia County National Bank, a Michigan corporation, Plaintiff-Appellee, v. NAGEL CONSTRUCTION, INC., a Michigan corporation, Douglas Nagel, Progressive Engineering, Inc., a Michigan corporation, and Missaukee Sanitary Drain Commission, Defendants-Appellees. 182 Mich.App. 327, 451 N.W.2d 618
• Court: Court of Appeal of Michigan — District of US

Page 618

451 N.W.2d 618

NATIONAL SAND, INC., a Michigan corporationPlaintiff-Appellant and Mark Williams, Plaintiff and Ionia County National Bank, a Michigan corporationPlaintiff-Appellee, v.NAGEL CONSTRUCTION, INC., a Michigan corporation, Douglas Nagel, Progressive Engineering, Inc., a Michigan corporation, and Missaukee Sanitary Drain Commission, Defendants-Appellees.

Docket No. 106970.

182 Mich.App. 327, 451 N.W.2d 618

Court of Appeals of Michigan.

Submitted June 13, 1989.

Decided Feb. 20, 1990.

Released for Publication March 7, 1990.

[182 MICHAPP 329]Catchick & Dodge by James M. Catchick, Grand Rapids, for plaintiff-appellant.

Cholette, Perkins & Buchanan by Kenneth L. Block, Grand Rapids, for Progressive Engineering, Inc.

Miller, Canfield, Paddock & Stone by Richard A. Gaffin and Christopher G. Hastings, Grand Rapids, for Missaukee Sanitary Drain Comn.

Before HOLBROOK, P.J., and SAWYER and GRIFFIN, JJ.

SAWYER, Judge.

PlaintiffNational Sand, Inc., appeals from an order granting partial summary disposition pursuant to MCR 2.116(C)(7) and (8), dismissing defendantsProgressive Engineering, Inc., and Missaukee Sanitary Drain Commission from the suit.The order was certified as a final order under MCR 2.604(A).We affirm in part and remand.

Defendant drain commission contracted with defendantNagel Construction, Inc., to construct a sewage treatment facility.Nagel subcontracted with National Sand to excavate the sewage pits and to line the pits with clay.Progressive Engineering prepared the plans and specifications for the project.

[182 MICHAPP 330] In October, 1984, National Sand began excavating the sewage pits at the site of the sewage treatment facility.During excavation, National Sand discovered that there was insufficient clay on the site for lining the sewage pits.¹Thereafter, an alternate site was sought which contained sufficient clay.A site was located in 1985 and the contracts were modified to provide compensation for the additional expenditures of money and labor required as a result of the insufficient clay deposits.

However, on September 16, 1985, it was again discovered that there were insufficient clay deposits in the areas set forth in Progressive Engineering's plans.The contracts were again modified to provide compensation for the additional costs.

Ultimately, National Sand completed its services under the original subcontract and Nagel Construction paid National Sand the amount due under the original subcontract, but refused to pay an additional $258,000 which National Sand claimed was incurred as a result of the insufficient clay deposits.

The instant action was filed on October 1, 1987.Count I of the complaint alleges breach of contract.Count II alleges negligence by Progressive Engineering in preparing the construction plans and in failing to use proper procedures in locating the clay deposits.

First, we briefly consider Progressive Engineering's argument that the jurisdiction of this Court has not been properly invoked because the order appealed from was not properly entered.However, this issue was considered by this Court on Progressive Engineering's motion to dismiss, which denied [182 MICHAPP 331] the motion by an order entered July 25, 1988.We see no need to revisit the issue.

Next, we briefly consider plaintiff's arguments that Progressive Engineering and the drain commission are proper parties to the suit despite the lack of privity of contract.Contrary to plaintiff's arguments, on the basis of the Supreme Court's decision in Williams v. Polgar, 391 Mich. 6, 215 N.W.2d 149(1974), Michigan has not "categorically eliminated" the requirement of privity of contract.Rather, Williams concluded that privity is no longer a requirement for liability by a title abstracter.Id. at 15-18, 215 N.W.2d 149.That is, a third party injured by the negligence of the abstracter may maintain an action in tort, specifically, negligent misrepresentation.Id. at 20, 215 N.W.2d 149.Similarly, this Court has allowed a contractor to maintain an action in tort (specifically, negligence) against a project engineer despite the lack of privity of contract.Bacco Construction Co. v. American Colloid Co., 148 Mich.App. 397, 413-416, 384 N.W.2d 427(1986).

Thus, what can be concluded is not, as plaintiff suggests, that a breach of contract claim can be maintained regardless of privity; rather, it is that a plaintiff may maintain an action in tort where he is injured by the defendant's negligent performance of contract even where there is no privity between the parties.Thus, in the case at bar, the trial court properly dismissed plaintiff's breach of contract claims against Progressive Engineering and the drain commission since there was no contractual relationship between plaintiff and those two defendants.However, that does not preclude plaintiff from maintaining its tort claim against Progressive Engineering.²

This then brings us to the issue whether the [182 MICHAPP 332] period of limitations has run on plaintiff's tort claim against Progressive Engineering.The trial court concluded that the two-year malpractice limitation period of M.C.L. Sec. 600.5805(4);M.S.A. Sec. 27A.5805(4) was applicable and barred plaintiff's claim.Plaintiff argues that the six-year limitation period for "other personal actions" contained in M.C.L. Sec. 600.5813;M.S.A. Sec. 27A.5813 should apply, relying on Bacco, supra.For the reasons to be discussed below, we believe that Sec. 5805 controls the instant case.

M.C.L. Sec. 600.5805;M.S.A. Sec. 27A.5805, often referred to as the "negligence"statute of limitations, provides in pertinent part as follows:

(1) A person shall not bring or maintain an action to recover damages for injuries to persons or property unless, after the claim first accrued to the plaintiff or to someone through whom the plaintiff claims, the action is commenced within the periods of time prescribed by this section.

* * * * * *

(4) Except as otherwise provided in this chapter, the period of limitations is 2 years for an action charging malpractice.

* * * * * *

(8) The period of limitations is 3 years after the time of the death or injury for all other actions to recover damages for the death of a person, or for injury to a person or property.

Plaintiff, relying on Bacco, supra, argues that, since its injury is financial rather than a physical injury to "persons or property," the provisions of Sec. 5813, relating to "other personal actions," apply.While Bacco does support plaintiff's position, we believe Bacco was incorrectly decided.

The effect of the "injuries to persons or property" language in Sec. 5805 has been the source of a [182 MICHAPP 333] great deal of confusion in the case law.In Bacco, the plaintiff was a contractor engaged to construct a waste-water lagoon.Leaks developed in the lagoon and the work was rejected.By agreement of the parties, the plaintiff made the necessary repairs with none of the parties admitting liability for the problem.The plaintiff sought to recover damages for its additional expenses.Its complaint alleged, inter alia, negligence by the materials supplier and its sales agent as well as by the project engineer.The Bacco Court concluded that Sec. 5813 applied since there was no physical harm to persons or property.In reaching its decision, the Court relied on Coats v. Uhlmann, 87 Mich.App. 385, 274 N.W.2d 792(1978), Borman's, Inc. v. Lake State Development Co., 60 Mich.App. 175, 230 N.W.2d 363(1975), andTel-Twelve Shopping Center v. Sterling Garrett Construction Co., 34 Mich.App. 434, 191 N.W.2d 484(1971).

Bacco's reliance on Coats, supra, is misplaced.First, Coats specifically acknowledged that this Court does not strictly require a physical injury for Sec. 5805 to be applicable.Coats, supra87 Mich.App. at 391-392, 274 N.W.2d 792, citingStringer v. Bd. of Trustees of Edward W. Sparrow Hosp., 62 Mich.App. 696, 233 N.W.2d 698(1975).Coats, which involved negligent misrepresentations by realtors, looked to Sweet v. Shreve, 262 Mich. 432, 247 N.W. 711(1933), a case involving fraud in a real estate transaction.The Coats Court concluded that there was no distinction between negligent misrepresentation and fraud and, accordingly, applied Sec. 5813 on the basis of the authority of Sweet.However, Sweet was decided consistently with a long line of Michigan cases which applied the six-year period of limitations to fraud actions.Id.262 Mich. at 435, 247 N.W. 711.This Court, in Stringer, supra62 Mich.App. at 700, 233 N.W.2d 698, similarly distinguished away the fraud case of Case v. Goren, 43 Mich.App. 673, 204 N.W.2d 767(1972), ³[182 MICHAPP 334] ] as being decided as part of a long line of Michigan cases applying the six-year limitation period to fraud actions.We agree with Stringer and conclude that Coats and the fraud cases such as Sweet and Case are inapplicable to the instant case.

Both Borman's, supra, and Tel-Twelve, supra, involved negligence by a contractor in performing a contract, and both looked to Schenburn v. Lehner Associates, Inc., 22 Mich.App. 534, 177 N.W.2d 699(1970), in deciding to apply the six-year limitation period.In Schenburn, the plaintiff employed the defendant to survey the plaintiff's property.The survey was allegedly done negligently and the plaintiff was sued as a result of his reliance on the survey.The plaintiff in turn sued the defendant.However, Schenburn did not consider whether Sec. 5813 should be applied.Rather, the question was whether to apply Sec. 5805 in light of the tort allegations or Sec. 5807 in light of the contract allegations.The Court concluded that, since the plaintiff's injury was to his financial expectations rather than to his person or specific property, the contract period of limitation should control.

Returning to Tel-Twelve, supra, it involved the same decision between applying Sec. 5805 or Sec. 5807.Borman's, supra, is unclear as to...