William C. Reichenbach Co. v. State

• Decision Date: 18 December 1979
• Docket Number: Docket No. 78-3225
• Citation: 288 N.W.2d 622,94 Mich.App. 323
• Parties: The WILLIAM C. REICHENBACH COMPANY, Plaintiff-Appellant, v. STATE of Michigan and Michigan State University Board of Trustees, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 622

288 N.W.2d 622

94 Mich.App. 323

The WILLIAM C. REICHENBACH COMPANY, Plaintiff-Appellant, v. STATE of Michigan and Michigan State University Board of Trustees, Defendants-Appellees.

Docket No. 78-3225.

Court of Appeals of Michigan.

Dec. 18, 1979.

Released for Publication Feb. 28, 1980.

Steven C. Hess, Thomas M. Doyle, Lansing, for plaintiff-appellant.

Leland W. Carr, Jr., Lansing, for defendants-appellees.

Before DANHOF, C. J., and V. J. BRENNAN and CARROLL, ^* JJ.

CARROLL, Judge.

This case arises out of a contract signed by Michigan State University on July 20, 1969, with Ackerman Construction Company for the renovation of one of its dormitories. Ackerman, in turn, subcontracted a portion of the work to the plaintiff in the amount of $40,504.80. On December 2, 1969, the University made its final payment to Ackerman in the sum of $50,200. Ackerman then deposited the check in its account at the Bank of Lansing and simultaneously made a check out to Reichenbach for $20,504.80, the amount due and owing under the subcontract. However, the Bank refused to honor the check since it had attached the total amount of Ackerman's account and applied the proceeds to Ackerman's indebtedness to the bank. On October 10, 1972, Reichenbach filed suit in the Court of Claims alleging that the University's failure to compel Ackerman to supply a performance and payment bond was negligence which was the proximate cause of plaintiff's financial injury. The University raised a series of collateral defenses in response, including governmental immunity. Initially, the lower court rejected all of the University's arguments. However, on May 9, 1978, the Court of Claims reversed its decision with respect to governmental immunity. Plaintiff appeals as of right.

At trial, the University raised the following defenses: (1) plaintiff's claim was barred by the statute of limitations; (2) plaintiff was estopped from recovering from the Michigan State University Board of Trustees under the facts of this case; (3) the provisions of 1963 P.A. 213 were inapplicable to the University; and (4) plaintiff's claim was barred by governmental immunity. All of these matters are raised as issues on appeal. We will consider them Seriatim.

I. Statute of limitations.

The Michigan State University Board of Trustees is a corporate entity that derives its authority from the Michigan Constitution. Const.1963, art. 8, § 5. State-supported colleges and universities are within the jurisdiction of the Court of Claims. Fox v. Board of Regents of University of Michigan, 375 Mich. 238, 134 N.W.2d 146 (1965); Doan v. Kellogg Community College, 80 Mich.App. 316, 263 N.W.2d 357 (1977); Kiluma v. Wayne State University, 72 Mich.App. 446, 250 N.W.2d 81 (1976). State law provides that claims against the state, if they are to be heard in the Court of Claims, must be filed "within 3 years after the claim first accrues". M.C.L. § 600.6452(1); M.S.A. § 27A.6452(1). Because the instant suit was properly brought in the Court of Claims, the three year statute of limitations is applicable.

The defendant argues that a one-year statute of limitations is more appropriate relying upon the language found in the payment-bond statute. In pertinent part that statute reads:

"An action instituted on the payment bond shall be brought only in the appropriate court in the political subdivision in which the contract was to be performed. No action shall be commenced after the expiration of 1 year from the date on which final payment was made to the principal contractor." M.C.L. § 129.209; M.S.A. § 5.2321(9).

The statute is clearly not applicable since, by its very terms, it concerns actions instituted on a payment bond. In the instant case, no payment bond was ever filed. Moreover, plaintiff's suit is grounded in negligence, not in any rights arising from a payment bond.

There remains to be determined on what date the statute of limitations began to run. Williams v. Polgar, 391 Mich. 6, 215 N.W.2d 149 (1974), reaffirmed the following as a guideline in making that determination:

" 'In the case of an action for damages arising out of tortious injury to a person, the cause of action accrues when all of the elements of the cause of action have occurred and can be alleged in a proper complaint.

" 'Those elements are four in number:

" '(1) The existence of a legal duty by defendant toward plaintiff.

" '(2) The breach of such duty.

" '(3) A proximate causal relation between the breach of such duty and an injury to the plaintiff.

" '(4) The plaintiff must have suffered damages.' " Id., at 25, 215 N.W.2d at 158, quoting from Connelly v. Paul Ruddy's Equipment Repair & Service Co., 388 Mich. 146, 150, 200 N.W.2d 70 (1972).

We find that the statute of limitations began to run on December 2, 1969, the date on which plaintiff's check was dishonored by the bank. In particular, on that date, defendants arguably owed a legal duty to plaintiff to protect plaintiff by requiring the filing of a performance bond (but see issue III, Infra ); there was a proximate causal relationship between the breach and an injury to plaintiff; and on that date, plaintiff suffered injury. Hence, plaintiff's suit, which was initiated on October 10, 1972, was filed timely.

II. Estoppel.

Defendants contended before the lower court that plaintiff was estopped from asserting its claim. The Court of Claims rejected that argument:

"So far as the claim of estoppel is concerned, this court fails to find any basis for estoppel within the set of stipulated facts. The arugument (Sic ) is made in the defendant's brief that in some way MSU participated in the pay arrangement between Ackerman and the plaintiff and, relying on such arrangement, issued its check to Ackerman with the knowledge, approval and agreement of the plaintiff. Based on the stipulated facts, this would be sheer speculation. The court agrees with the law cited by the defendant, but fails to find the facts to justify the application of such law."

A trial court's findings of fact may not be set aside unless they are found to be clearly erroneous. GCR 1963, 517.1; Tuttle v. Dep't of State Highways, 397 Mich. 44, 243 N.W.2d 244 (1976). Our Supreme Court has stated that a finding is clearly erroneous where the reviewing court "on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id., at 46, 243 N.W.2d at 245.

Estoppel arises where a party, by representations, admissions or silence, intentionally or negligently induces another party to believe facts, and the other party justifiably relies and acts on this belief, and will be prejudiced if the first party is permitted to deny the existence of the facts. Conel Development, Inc. v. River Rouge Savings Bank, 84 Mich.App. 415, 269 N.W.2d 621 (1978).

Our review of the stipulated facts in this case does not lead us to conclude that the lower court's finding was clearly erroneous. There is nothing in the stipulated facts that tends to show that there was any contact between plaintiff and defendants regarding the manner in which the prime contractor was to be paid by defendants. Thus, there is no indication that defendants relied upon any statements or actions of the plaintiff when tendering final payment to the prime contractor.

III. Inapplicability of 1963 P.A. 213.

Plaintiff argues that state law imposed a duty upon the defendants to require the prime contractor to furnish a payment bond. At the time the events in question occurred, the statute relied upon by the plaintiff read as follows:

"Before any contract, exceeding $5,000.00 for the construction, alteration or repair of any public building or public work or improvement of the state or a county, city, village, township, school district, public educational institution, other political subdivision, public authority or public agency, except the state highway department, hereinafter referred to as the 'governmental unit', is awarded, the proposed contractor, hereinafter referred to as the 'principal contractor', shall furnish at his own cost to the governmental unit a performance bond and a payment bond which shall become binding upon the award of the contract to the contractor. Neither the invitation for bids, nor any person acting, or purporting to act, on behalf of the governmental unit shall require that the bonds be furnished by a particular surety company, or through a particular agent or broker, or through a company, agent or broker in any particular locality." 1963 P.A. 213, § 1.

Defendants argue that the University is not included within the sweep of the statute's coverage and point to Weinberg v. Regents of the University of Michigan, 97 Mich. 246, 56 N.W. 605 (1893), as support for their contention. In that case, defendant had entered into a contract with a William Biggs for the construction of a hospital. Id., at 247-248, 56 N.W. 605. Biggs in turn sublet a portion of the contract to John Cusac who then purchased material from the plaintiff. Id., at 248, 56 N.W. 605. Although plaintiff furnished the material in question, he did not receive payment. Id. As a result, he filed suit alleging negligence on the part of defendant in failing to require a payment bond from Biggs as required by state law. Id., at 249, 56 N.W. 605.

The statute before the Supreme Court in Weinberg is not the same statute that is before us in the present case. The statutory provisions before the Court in Weinberg, 1885 P.A. 45, provided:

"That when public buildings or other public works or improvements are about to be built, repaired, or ornamented under contract, at the expense of this State, or of any county, city, village, township, or school-district thereof, it shall be the duty of the board of officers, or agents, contracting on behalf of the State, county, city, village, township, or school district, to require sufficient security by bond, for the payment by the contractor, and all sub-contractors,...