Case Name: CHARLES W. ANDERSON COMPANY v. ARGONAUT INSURANCE COMPANY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1975-07-22
Citations: 62 Mich. App. 650
Docket Number: Docket No. 21042
Parties: CHARLES W. ANDERSON COMPANY v ARGONAUT INSURANCE COMPANY
Judges: Before: V. J. Brennan, P. J., and J. H. Gillis and D. F. Walsh, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 62
Pages: 650–657

Head Matter:
CHARLES W. ANDERSON COMPANY v ARGONAUT INSURANCE COMPANY
Opinion of the Court
1. Principal and Surety — Surety Bonds — Construction Contractors — Statutes—Notice of Claim — Substantial Compliance.
A subcontractor who has no direct contractual relationship with the principal contractor is precluded from bringing an action for payment on a surety bond where the subcontractor fails to serve notice of his claim upon the principal contractor within 30 days of the commencement of the subcontractor’s work; the statutory 30-day notice provision is to be strictly adhered to, and substantial compliance is not sufficient (MCLA 129.207).
2. Principal and Surety — Surety Bonds — Construction Contractors — Notice of Claim — Pleadings—Delay—Waiver—Statutes.
A defendant surety company which failed to assert a notice defense to an action by a construction subcontractor on a surety bond until two years after the filing of the original pleadings did not waive the defense where the delay was traceable to plaintiff’s reliance in its complaint upon the wrong statute and where neither the original nor amended complaint specified the date on which work was commenced, which was information necessary to determine compliance with the statutory notice provision (MCLA 129.207).
Dissent by V. J. Brennan, P. J.
3. Principal and Surety-Surety Bonds — Construction Contractors — Notice of Claim — Statutes—Substantial Compliance.
Substantial compliance with a statutory notice requirement, by a construction subcontractor seeking recovery on a surety bond, is sufficient to allow the maintenance of the action absent a showing of prejudice to the surety; the statute requires notice of the claim to be given to the principal contractor, not the surety, and a surety may not beneñt by a subcontractor’s noncompliance with the statute (MCLA 129.207).
Reference for Points in Headnotes
12 Am Jur 2d, Bonds § 6 et seq.; § 52 et seq.
Appeal from Lapeer, Norman A. Baguley, J. Submitted March 10, 1975, at Detroit.
(Docket No. 21042.)
Decided July 22, 1975.
Leave to appeal denied, 395 Mich —.
Complaint by Charles W. Anderson Company against Argonaut Insurance Company for recovery on a surety bond. Summary judgment for defendant. Plaintiff appeals.
Affirmed.
Hart, Meier, Howlett, McConnell & Googasian (by Eric J. McCann), for plaintiff.
Taylor & Patterson, for defendant.
Before: V. J. Brennan, P. J., and J. H. Gillis and D. F. Walsh, JJ.

Opinion:
D. F. Walsh, J.
The plaintiff is a subcontractor who performed certain excavation work in connection with the construction of a pumping plant for the City of Detroit. Plaintiff had no direct contractual relationship with the principal contractors. This action was brought to recover on a payment bond executed by defendant surety company. Summary judgment was entered against the plaintiff for failure to serve the principal contractor with notice of its claim within 30 days of beginning work as required by MCLA 129.207; MSA 5.2321(7), which provides:
" 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. " (Emphasis supplied.)
The excavation work was begun on July 14, 1971, and completed on August 4, 1971. Plaintiff acknowledges that the first notice was not served on the principal contractor until August 30, 1971, 17 days after the date on which it was required under the statute. The second notice, however, was served on September 8, 1971, 55 days prior to the date on which it was required to be served. Plaintiff argues that it substantially complied with the notice provisions of the statute and that it should not be precluded from bringing this action for payment under defendant insurance company's bond.
We are not out of sympathy with plaintiff's position but the plain language of the statute and the force of the precedent which we must apply in our interpretation thereof compel us to the conclusion that substantial compliance is not sufficient.
Prior to the enactment of the present law, 1905 PA 187 governed the payment of subcontractors who furnished the labor and materials in connection with all governmental construction projects. The notice provisions of that statute, contained in MCLA 570.102; MSA 26.322, required a subcontractor who intended to rely upon the payment bond given by the principal contractor to serve written notice upon the governmental body within 60 days of the completion of his services.
This statutory language regarding the notice requirement was construed by our Supreme Court as being mandatory and creating a "condition precedent to recovery on the bond", even absent a showing that the defendant surety company had been damaged by the subcontractor's failure to serve timely notice. People, for use of Wheeling Corrugating Co v W L Thon Co, 307 Mich 273, 277; 11 NW2d 886 (1943).
This rigid application of the 60-day requirement was reaffirmed in the later case of People, ex rel F Yeager Bridge & Culvert Co v Cooke Contracting Co, 372 Mich 563, 565; 127 NW2d 308 (1964). And the harshness of the rule — as well as the binding precedent set by the Wheeling decision — was recently confirmed in Judge (now Justice) Levin's concurring opinion in Dover & Co v United Pacific Insurance Co, 38 Mich App 727, 732-734; 197 NW2d 126 (1972). See also State Highway Comm v United Pacific Insurance Co, 52 Mich App 157, 159; 216 NW2d 469 (1974).
The notice provision contained in the new statute has not as yet been subjected to appellate review. And in fact the § 7(a) deadline (30 days from the beginning of work) was not previously required. But the legislative purpose behind both notice requirements is indistinguishably similar. Protection of the surety is contemplated so that it might have timely notification that a claimant who has not had any direct dealing with the surety's principal but, rather, with a subcontractor, intends to hold the surety responsible on its bond in the event of default by one of the contractors. Cf. Cooke Contracting Co, supra.
Section 7(a) requires that notice of the nature of work to be performed must be given to the principal contractor within 30 days of the commencement of work by the claimant so that the principal and his surety are apprised of potential liability. Section 7(b) gives the claimant 90 days from the completion date of his work to notify both the principal contractor and the governmental unit of the amounts due from any of the subcontractors.
Unlike the provisions of MCLA 570.101 et seq.; MSA 26.321 et seq., however, the Legislature has spelled out the consequences befalling the claimant "not having a direct contractual relationship with the principal contractor" who fails to comply with either notice requirement: He simply "shall not have a right of action upon the payment bond". Such explicit language leaves very little room for judicial construction.
The plaintiff's next claim is that the defendant surety company waived the notice defense by failing to assert it until two years after the filing of the original pleadings. However, it appears that defendant's delay is traceable to the plaintiff's own failure to cite the proper statute on which it relied in its complaint. Moreover, neither the original nor the amended complaint specified the date on which work was commenced by the plaintiff. Such information was obviously necessary to determine compliance with § 7(a).
We have considered the plaintiff's final contention and find that argument without merit.
The order granting defendant's motion for summary judgment is therefore affirmed.
J. H. Gillis, J., concurred.
MCLA. 129.211; MSA 5.2321(11), renders that statute (MCLA 570.101 — 570.105; MSA 26.321-26.325) inapplicable to contracts for public buildings or other public works except construction and maintenance contracts of the state highway commission.