Thomas Industries, Inc. v. C & L Elec., Inc., Docket No. 173849

• Decision Date: 14 May 1996
• Docket Number: Docket No. 173849
• Citation: 216 Mich.App. 603,550 N.W.2d 558
• Parties: THOMAS INDUSTRIES, INC., Plaintiff-Appellant/Cross-Appellee, v. C & L ELECTRIC, INC., and United States Fidelity and Guaranty Company, Defendants-Appellees/Cross-Appellants.
• Court: Court of Appeal of Michigan — District of US

Page 558

550 N.W.2d 558

216 Mich.App. 603

THOMAS INDUSTRIES, INC., Plaintiff-Appellant/Cross-Appellee, v. C & L ELECTRIC, INC., and United States Fidelity and Guaranty Company, Defendants-Appellees/Cross-Appellants.

Docket No. 173849.

Court of Appeals of Michigan.

Submitted Feb. 14, 1996, at Lansing.

Decided May 14, 1996, at 9:20 a.m.

Released for Publication July 12, 1996.

Muller, Muller, Richmond, Harms, Myers & Sgroi (by William R. Farran), Grand Rapids, for plaintiff.

Oskar M. Hornbach, Lansing, for defendants.

Before WHITE, P.J., and FITZGERALD and THOMAS, ^* JJ.

PER CURIAM.

Plaintiff appeals as of right an order granting summary disposition pursuant to MCR 2.116(C)(10) for defendants. The trial court held that, under § 7 of the relevant public works construction bond act, M.C.L. § 129.207; M.S.A. § 5.2321(7), plaintiff's failure to satisfy the statutory notice requirements precluded it from recovering $17,473.05 against the payment bond defendant C & L Electric, Inc., procured through defendant United States Fidelity and Guaranty Company (USF & G). Defendants cross appeal, arguing that the court erred in denying their motion for costs and attorney fees. We affirm.

The facts are undisputed. C & L was the principal contractor on a construction project for the Holt Public Schools. Pursuant to the requirements of M.C.L. § 129.203; M.S.A. § 5.2321(3), C & L furnished a payment bond, issued by defendant USF & G as surety, for the protection of certain claimants supplying labor or materials for the project. In connection with the project, plaintiff supplied materials to Michigan Brass & Electric Co., subcontractor to C & L. Plaintiff "drop-shipped" these materials, with packing slips attached, directly to C & L at the construction site on March 30 and April 7, 1993. The packing slips were "checked against the actual parts for delivery purposes, then they were put into the job file at the construction site by the electrician." Once the project was completed, C & L removed the job file and stored it in a closed-project file without reviewing the packing slips. C & L allegedly made a final payment to Michigan Brass & Electric on May 10, 1993, but Michigan Brass did not pay plaintiff for the supplied materials. By certified letter dated June 21, 1993, plaintiff notified C & L and Holt Public Schools of its unpaid claim. Plaintiff then commenced the present suit, seeking recovery under the payment bond.

Defendants moved for and were granted summary disposition. The trial court held that the packing slips did not constitute "adequate notice" or advise C & L of a claim. The trial court further held that delivery of the supplies to the job site, rather than to a business office, did not comply with statutory requirements. Plaintiff appeals from this order, and defendants cross appeal from the trial court's denial of their request for attorney fees and costs.

On appeal, plaintiff argues that the trial court erred in concluding that C & L did not receive notice as required by M.C.L. § 129.207; M.S.A. § 5.2321(7). We disagree.

The public works construction bond act, M.C.L. § 129.201 et seq.; M.S.A. § 5.2321(1) et seq., requires a principal contractor to furnish a performance bond and a payment bond to the governmental unit. Kammer Asphalt Paving Co., Inc. v. East China Twp. Schools, 443 Mich. 176, 179, 504 N.W.2d 635 (1993). Because materialmen or contractors may not obtain a mechanics' lien on a public building, the Legislature provided that the payment bond shall be obtained "solely for the protection of claimants ... supplying labor or materials to the principal contractor or his subcontractors in the prosecution of the work provided for in the contract." M.C.L. § 129.203; M.S.A. § 5.2321(3), Kammer, supra at 181-182, 504 N.W.2d 635. See Milbrand Co. v. Dep't of Social Services, 117 Mich.App. 437, 440, 324 N.W.2d 41 (1982). It is undisputed that plaintiff met the statutory definition of a claimant entitled to bring suit on the bond. M.C.L. § 129.206; M.S.A. § 5.2321(6).

Section 7 of the act specifies the procedure by which a claimant not having a direct contractual relationship with the principal contractor may perfect a claim against the payment bond:

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 ... 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 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. The principal contractor shall not be required to make payment to a subcontractor of sums due from the subcontractor to parties performing labor or furnishing materials or supplies, except upon the receipt of the written orders of such parties to pay to the subcontractor the sums due such parties. [M.C.L. § 129.207; M.S.A. § 5.2321(7) (emphasis added).]

Plaintiff first argues that the packing slips enclosed with the supplies constitute sufficient notice as required under condition a of § 7. The written packing slips dated February 16, 1993, and March 23, 1993, and the three notices dated March 25, 1993, all contain a description of the materials shipped, identify the party contracting for the materials (Michigan Brass & Electric), and indicate the address of the job site or place of delivery (Holt Elementary School). While the packing slips contain the information required by condition a of § 7, defendants argue that they do not constitute proper notice because (1) they were not mailed and (2) they were not sent to any place of business maintained by C & L.

With regard to the "mailing" requirement, the Supreme Court has stated:

The purpose behind the thirty-day notice ... is to provide principal contractors with detailed notice of a subcontractor's involvement on a project before, if not soon after, the commencement of that involvement. Such notice is necessary to ensure principal contractors knowledge...