Pi-Con, Inc. v. A.J. Anderson Const. Co.

• Decision Date: 18 July 1988
• Docket Number: INC,PI-CO,Docket No. 95471
• Citation: 169 Mich.App. 389,425 N.W.2d 563
• Parties: , Plaintiff-Appellee, v. A.J. ANDERSON CONSTRUCTION COMPANY and Federal Insurance Company, Defendants-Appellants. 169 Mich.App. 389, 425 N.W.2d 563
• Court: Court of Appeal of Michigan — District of US

Page 563

425 N.W.2d 563

PI-CON, INC., Plaintiff-Appellee, v. A.J. ANDERSON CONSTRUCTION COMPANY and Federal Insurance

Company, Defendants-Appellants.

Docket No. 95471.

169 Mich.App. 389, 425 N.W.2d 563

Court of Appeals of Michigan.

Submitted Nov. 19, 1987.

Decided June 20, 1988.

Released for Publication July 18, 1988.

[169 MICHAPP 390] Goldstein, Serlin, Eserow, Rosenbaum & Baker, P.C. by Barry M. Rosenbaum and Richard E. Baker, Southfield, for plaintiff-appellee.

Schier, Deneweth & Parfitt, P.C. by David W. Yaldo and Carl F. Schier, Birmingham, for defendants-appellants.

Before MacKENZIE, P.J., and DOCTOROFF and CLULO, ^* JJ.

CLULO, Judge.

Defendants appeal as of right from the trial court's grant of summary disposition pursuant to MCR 2.116(C)(10) in favor of plaintiff and the entry of judgment for plaintiff in the amount of $25,140. We reverse.

Plaintiff, Pi-Con, Inc., brought suit under the Michigan public works bond act, M.C.L. Sec. 129.201 et seq.; M.S.A. Sec. 5.2321(1) et seq., against defendant A.J. Anderson Construction Company and its bonding company, defendant Federal Insurance Company. Anderson Company was the general contractor for a building project at Cass Tech High School in Detroit. Brian & Gregory was a subcontractor to [169 MICHAPP 391] Anderson Company. Pi-Con was a subcontractor to Brian & Gregory. Brian & Gregory filed for bankruptcy and Pi-Con was unable to secure compensation in the bankruptcy proceedings for materials and labor it furnished on the project. Pi-Con then sought payment from Anderson Company and Federal Insurance upon the bond secured by Anderson Company. M.C.L. Sec. 129.207; M.S.A. Sec. 5.2321(7). Pi-Con alleged that it had furnished labor and materials for the construction project to Brian & Gregory amounting to $25,140.

On December 15, 1982, Pi-Con sent a notice to the Detroit Board of Education, with copies to Brian & Gregory and to Anderson Company, stating that it had entered into a contract with Brian & Gregory to supply materials and installation services. This letter was sent by ordinary first class mail, and Anderson Company claims that this letter could not be found in its files. On December 7, 1982, Anderson Company had sent a mailgram to Brian & Gregory expressing concerns over Pi-Con's performance as a subcontractor. Pi-Con completed its work on the project on June 29, 1984. On September 6, 1984, Pi-Con sent notice to Anderson Company and the Board of Education stating that Brian & Gregory owed it $25,140 for labor and materials. This notice was sent by return mail, receipt requested.

On May 10, 1985, Pi-Con filed suit for $25,140 pursuant to M.C.L. Sec. 129.207; M.S.A. Sec. 5.2321(7). Defendants claimed that Pi-Con had not complied with the notice requirement of the bond statute because it had not sent the first notice by certified mail. Defendants also claimed that they lacked knowledge of the dates labor and materials were furnished, whether money was owed plaintiff on the project, and in what amount. Plaintiff filed a motion for summary disposition pursuant to MCR [169 MICHAPP 392] 2.116(C)(10) alleging that there was no genuine issue of material fact. At the hearing, defendants argued only that plaintiff had not complied with the statutory requirements for perfecting a claim against the bond.

The trial court granted summary disposition for plaintiff, finding that defendants had received some notice and that plaintiff had substantially complied with the statutory requirements. The trial court then granted plaintiff's motion for judgment in the amount of $25,140. Defendants opposed entry of this judgment, arguing that there was a material issue of fact as to the amount of damages.

At issue is the interpretation of Sec. 7 of the Michigan public works bond statute, M.C.L. Sec. 129.201 et seq.; M.S.A. Sec. 5.2321(1) et seq., which was enacted to protect contractors and materialmen working on public projects, since the mechanic's lien law does not apply to public buildings. Adamo Equipment Rental Co. v. Mack Development Co., Inc., 122 Mich.App. 233, 236, 333 N.W.2d 40 (1982). Section 7 of the act specifies the procedure for a subcontractor who does not deal directly with the primary contractor to perfect a claim against the performance bond. M.C.L. Sec. 129.207; M.S.A. Sec. 5.2321(7) provides in pertinent part:

"A claimant who has furnished labor or material in the prosecution of the work provided for in such contract in respect of which payment bond is furnished under the provisions of section 3, and who has not been paid in full therefor before the expiration of a period of 90 days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which claim is made, may sue on the payment bond for the amount, or the balance thereof, unpaid at the time of institution of the [169 MICHAPP 393] civil action, prosecute such action to final judgment for the sum justly due him and have execution thereon. A claimant not having a direct contractual relationship with the principal contractor shall not have a right of action upon the payment bond unless (a) he has within 30 days after furnishing the first of such material or performing the first of such labor, served on the principal contractor a written notice, which shall inform the principal of the nature of the materials being furnished or to be furnished, or labor being performed or to be performed and identifying the party contracting for such labor or materials and the site for the performance of such labor or the delivery of such materials, and (b) he has given written notice to the principal contractor and the governmental unit involved within 90 days from the date on which the claimant performed the last of the labor or furnished or supplied the last of the material for which the claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. Each notice shall be served by mailing the same by certified mail, postage prepaid, in an envelope addressed to the principal contractor, the governmental unit involved, at any place at which said parties maintain a business or residence...."

In the instant case, it is undisputed that Pi-Con had no direct contractual relationship with the principal contractor, Anderson Company. Nor is it disputed that Pi-Con sent the required second notice to the governmental unit and to Anderson Company by certified mail within ninety days of completing its work for the subcontractor, Brian & Gregory. Pi-Con did not, however, comply with the statute's requirement that notice be sent by certified mail to the principal contractor within thirty days of furnishing the first of the material or labor to be provided.

[169 MICHAPP 394] Pi-Con argues that mailing timely notice by regular mail, rather than by certified mail, constitutes substantial compliance satisfying the statute's notice requirement. Pi-Con points out that the principal contractor, Anderson Company, had actual notice that Pi-Con was working on the project, as evidenced by the mailgram Anderson Company sent to Brian & Gregory.

We hold that mailing notice by regular mail, despite evidence of actual notice, does not satisfy the statute and that strict compliance with the statute's notice requirements is required....