Wyandotte Elec. Supply Co. v. Elec. Tech. Sys., Inc.

• Decision Date: 03 May 2016
• Docket Number: Docket No. 149989.,Calendar No. 3.
• Citation: 881 N.W.2d 95,499 Mich. 127
• Parties: WYANDOTTE ELECTRIC SUPPLY COMPANY v. ELECTRICAL TECHNOLOGY SYSTEMS, INC.
• Court: Michigan Supreme Court

499 Mich. 127

881 N.W.2d 95

WYANDOTTE ELECTRIC SUPPLY COMPANY

v.ELECTRICAL TECHNOLOGY SYSTEMS, INC.

Docket No. 149989.

Calendar No. 3.

Supreme Court of Michigan.

Argued Nov. 5, 2015.

Decided May 3, 2016.

Honigman Miller Schwartz and Cohn LLP (by John D. Pirich, Lansing and Brian T. Quinn, East Lansing) for Wyandotte Electric Supply Company.

Cavanaugh & Quesada, PLC, Royal Oak (by Peter J. Cavanaugh and Gary Quesada ), for KEO & Associates, Inc., and Westfield Insurance Company.

Deneweth, Dugan & Parfitt, PC, Troy (by Ronald A. Deneweth and Anthony Vittiglio II ), for Westfield Insurance Company.

Facca, Richter & Pregler, PC, Troy (by Patrick A. Facca ), for the Associated General Contractors of Michigan.

BERNSTEIN

, J.

This case concerns several facets of the public works bond act (PWBA), MCL 129.201 et seq.

First, it poses the question of whether actual notice is required for a sub-subcontractor to recover on a payment bond when that sub-subcontractor has complied with the notice requirements set forth in MCL 129.207. Second, the case raises the question of whether a PWBA claimant may recover a time-price differential and attorney fees that were provided for by the claimant's contract with a subcontractor, but were unknown to the principal contractor holding the payment bond as well as the principal's surety. Finally, we consider what postjudgment interest is appropriate under the PWBA. We hold that the PWBA contains no actual notice requirement for claimants that comply with the statute, that the trial court properly awarded a time-price differential and attorney fees on past-due invoices to plaintiff Wyandotte Electric Supply Company (Wyandotte), and that the trial court erred in awarding postjudgment interest under MCL 600.6013(7)

. Accordingly, we affirm the judgment of the Court of Appeals with regard to the first two issues and reverse with regard to the third. We remand this case to the trial court for further proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

In 2009 and 2010, the south wing of the Detroit Public Library was renovated. Defendant KEO & Associates, Inc. (KEO) was the principal contractor for this project.

Defendant Westfield Insurance Company (Westfield) supplied KEO with a payment bond worth $1.3 million, as required by the PWBA. KEO was identified as the principal contractor and Westfield as the surety on the bond. KEO subcontracted with defendant Electrical Technology Systems, Inc. (ETS) to provide labor and materials for electrical work. The agreement between KEO and ETS included a pay-if-paid clause, obliging KEO to pay ETS only after KEO had been paid for the relevant portion of work performed.

ETS in turn subcontracted with Wyandotte for materials and supplies, making Wyandotte a sub-subcontractor from KEO's perspective. ETS and Wyandotte first formed a relationship in 2003, when they entered into an “open account” agreement that governed ETS's purchases from Wyandotte. Under this agreement, ETS was to pay a “[t]ime price differential” of 1.5% per month (18% per annum) on invoices unpaid after 30 days.¹ For the Detroit Public Library project, ETS solicited a quote from Wyandotte. On August 13, 2009, Wyandotte submitted a quote that included the 1.5% time-price differential provision. On February 19, 2010, ETS accepted the quote by issuing a purchase order totaling $143,613.25. Wyandotte first delivered materials to ETS for the project on March 3, 2010. Over the course of the project, ETS paid Wyandotte only sporadically and the unpaid balance grew. Initially, Wyandotte supplied materials on credit and credited ETS's payments to the oldest outstanding balance, but eventually Wyandotte began to ship materials only for cash on delivery. The last shipment with an unpaid balance was delivered on or about July 22, 2010; Wyandotte continued making deliveries on a cash basis until September 30, 2010.

On March 3, 2010, when it began work on the library project, Wyandotte sent letters to KEO and Westfield asking for a copy of the payment bond related to the library renovation project. The letter, on Wyandotte's letterhead, referred to the “Detroit Public Library South Wing with [ETS.]” According to Wyandotte, KEO provided a copy of the payment bond the next day. One week later, on March 10, 2010, Wyandotte sent KEO a 30–day “Notice of Furnishing” in accordance with MCL 129.207

, explaining that it was one of ETS's suppliers. Wyandotte also sent copies of the letter to Westfield, the library, and ETS. As specified by MCL 129.207, Wyandotte sent these notices by certified mail. Additionally, Wyandotte sent the notices with return receipts requested. The notices to Westfield, ETS, and the library were all received. It is unclear what happened to the notice sent to KEO—United States Postal Service tracking indicated that it was at the Detroit Post Office on March 13, 2010, but it apparently never reached its destination. KEO states that it never received the 30–day notice. Again in accordance with the requirements of MCL 129.207, Wyandotte provided a 90–day notice of furnishing on November 1, 2010, to KEO, Westfield, ETS, and the library, stating that its last day of furnishing materials had been September 30, 2010.

Throughout the renovation project, KEO made progress payments to ETS totaling more than $248,000,² but ETS was not fully paying Wyandotte. KEO claims not to have been aware of Wyandotte's involvement in the project before receiving the 90–day notice in November 2010. After receiving the 90–day notice from Wyandotte, KEO requested information from ETS confirming payments in the form of a sworn statement.

According to KEO, ETS provided a falsified sworn statement averring that Wyandotte had been paid $80,000. In January 2011, KEO terminated its subcontract with ETS, citing an abandonment of the project.

On January 28, 2011, Wyandotte filed a claim directly with Westfield to recover on the payment bond. Westfield denied the claim, asserting a lack of liability. Consequently, on March 14, 2011, Wyandotte filed suit against ETS, KEO, and Westfield. KEO filed a cross-claim against ETS on March 29, 2011. ETS had apparently gone out of business and its president had declared personal bankruptcy, so it failed to appear and was defaulted. Wyandotte continued to pursue claims against KEO and Westfield on the basis of the surety bond.³

On September 7, 2011, Wyandotte moved for summary disposition under MCR 2.116(C)(10)

, which tests the factual sufficiency of a complaint. The trial court heard oral argument on whether there was a valid bond claim when KEO had not received the 30–day notice of furnishing and whether Wyandotte could recover the 1.5% time-price differential and attorney fees on a bond claim. On November 4, 2011, the trial court granted Wyandotte's motion in part, concluding that there was a valid bond claim because Wyandotte had complied with the notice requirements, and that Wyandotte could recover the time-price differential as well as attorney fees. The only remaining issue was the amount of damages, and a bench trial was held on that narrow question. The trial court found that the unpaid balance owed to Wyandotte was $154,343.29, that Wyandotte was entitled to a total time-price differential of $76,403.44, and that Wyandotte was entitled to $30,000 in attorney fees.⁴ Wyandotte moved for entry of judgment and further requested postjudgment interest under MCL 600.6013(7)

. The trial court granted the motion over defendants' objections and entered a judgment in the total amount of $272,927.70.⁵ The Court of Appeals affirmed the judgment in an unpublished opinion.

II. NOTICE UNDER THE PWBA

Defendants first contend that Wyandotte did not have a cause of action against them because KEO did not receive Wyandotte's 30–day notice. We review a trial court's summary disposition order de novo. Debano–Griffin v. Lake Co., 493 Mich. 167, 175, 828 N.W.2d 634 (2013)

. Likewise, questions of statutory interpretation are subject to review de novo. Elba Twp. v. Gratiot Co. Drain Comm'r,

493 Mich. 265, 278, 831 N.W.2d 204 (2013). When interpreting a statute, our foremost rule of construction is to discern and give effect to the Legislature's intent. Aroma Wines & Equip, Inc. v. Columbian Distribution Servs., Inc., 497 Mich. 337, 345, 871 N.W.2d 136 (2015). Because the language chosen is the most reliable indicator of that intent, we enforce clear and unambiguous statutory language as written, giving effect to every word, phrase, and clause. Id. at 345–346, 871 N.W.2d 136.

Traditionally, public property cannot be the subject of a lien unless a statute specifically permits it. Knapp v. Swaney, 56 Mich. 345, 347, 23 N.W. 162 (1885)

. The Legislature enacted the PWBA to protect contractors and suppliers working on public projects who, unlike their private-works counterparts, have no recourse when other contractors default on their obligations. Adamo Equip. Rental Co. v. Mack Dev. Co., Inc., 122 Mich.App. 233, 236, 333 N.W.2d 40 (1982)

, citing Ford v. State Bd. of Ed., 166 Mich. 658, 132 N.W. 467 (1911). While contractors and suppliers can place mechanics' liens on private projects, the PWBA protects those workers on public projects by requiring the principal contractor on a public project valued at $50,000 or more to obtain a payment bond. MCL 129.201. Payment bonds serve to protect subcontractors in privity with a principal contractor, as well as remote sub-subcontractors like Wyandotte, who are not fully compensated for their contributions to a public project. MCL 129.203. The principal contractor who obtains the bond, as well as the principal's surety if applicable, is liable to compensate suppliers of labor or materials. Id.

MCL 129.207

provides for recovery under a principal contractor's payment bond, but prescribes a two-step notice procedure for a remote party from the principal contractor's perspective, that is, one lacking a direct contractual relationship with the principal...