In an opinion issued on May 3, 2016, the Michigan Supreme Court addressed multiple issues relating to the public works bond act (PWBA), MCL §§ 129.201, et seq.

Wyandotte Electric Supply Company v. Electrical Technology Systems, Inc., 499 Mich. 127; - N.W.2d – (2016) arose from a construction project to renovate the south wing of the Detroit Public Library. The primary contractor on the project was KEO & Associates, Inc. Westfield Insurance Company supplied KEO with a $1.3 million payment bond as required by the PWBA. KEO hired Electrical Technology Systems (“ETS”) to provide electrical work under a subcontract which included a pay-if-paid provision. ETS hired Wyandotte Electric Supply Company to furnish materials and supplies. These companies had a relationship dating back to 2003, when Wyandotte and ETS entered into an “open account” agreement under which ETS was to pay a “time price differential” of 1.5 percent per month (18 percent per year) on invoices unpaid after 30 days, to compensate for the increased cost to Wyandotte of selling materials on credit. In addition, under the agreement Wyandotte was entitled to recover attorneys’ fees in the event of a payment default.

Wyandotte sent KEO a notice of furnishing within 30 days of first furnishing materials, as required by the PWBA (specifically MCL § 129.207), copying the Library, Westfield, and ETS. KEO did not receive the notice, though copies were received by the other recipients. Wyandotte later sent a notice within 90 days of last furnishing materials for the project to KEO, Westfield, ETS, and the Library. KEO claimed not to have known about Wyandotte’s involvement in the project until receiving the 90-day notice, and by then Wyandotte had furnished all materials required of it to KEO.

During the course of the project KEO made payments of over $248,000 to ETS, which was not fully paying Wyandotte’s invoices. After receiving Wyandotte’s 90-day notice and requesting information from ETS, KEO terminated its subcontract with ETS. After a bond claim filed directly with Westfield was denied, Wyandotte sued ETS (which by that time was out of business), KEO, and Westfield. The trial court granted Wyandotte’s motion for summary disposition, finding that its bond claim was valid even though KEO had not received the 30-day notice, and that Wyandotte could recover the time price differential and attorneys’ fees as part of its bond claim. After conducting a bench trial on damages, the trial court entered a judgment of $272,927.70 in favor of Wyandotte. The Michigan Court of Appeals affirmed the trial court in an unpublished opinion. Wyandotte Electric Supply Company v. Electrical Technology Systems, Inc., 2014 WL 3529430 (Mich. App. July 15, 2014).

The Supreme Court’s Opinion first addressed the issue of whether Wyandotte’s claim was barred because KEO did not receive the required 30-day notice of furnishing. MCL § 129.207 provides that, “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.” Wyandotte complied with the statute, which does not specify that actual receipt is a requirement. Noting that the Legislature has required actual notice in other statutes, the Court declined to read an actual notice requirement into MCL § 129.207. Wyandotte complied with the statute, so there was no actual notice requirement. In distinguishing this situation from those where service of a notice was completed by first class rather than certified mail, the Court reaffirmed the holding of Pi-Con, Inc. v. A.J. Anderson Constr. Co., 435 Mich. 375; 458 N.W.2d 630 (1990) that actual notice is required when a claimant does not comply with the statutory notice procedure.

The court next addressed the issue of the time price differential and attorneys’ fees, rejecting an assertion that these amounts were not recoverable because Wyandotte was not in contractual privity with ETS. The whole point of the PWBA is to allow remote contractors to recover on payment bonds, so to require privity would undercut the remedies provided under the PWBA. The dispositive issue was the amount of the “sum justly due” to Wyandotte, as that term is used in MCL § 129.207. The court concluded that the amount justly due corresponded to what Wyandotte was entitled to recover on its contract with ETS, noting that this approach is consistent with how federal circuit courts of appeal have interpreted the Miller Act. The Court further determined that the contract between Wyandotte and ETS was evidenced by the subcontract for this specific project, and the 2003 open account agreement. Because that agreement intended that the attorneys’ fee provision would apply for the duration of the parties’ business relationship, the trial court properly awarded such fees. (In a partial dissenting opinion, Chief Justice Young explained the reasons why he would reverse the award of attorneys’ fees.)

Finally, the court determined that interest should have been awarded under MCL § 600.6013(8), the general rule for interest on money judgments, rather than MCL § 600.6013(7), which applies to judgments rendered on a written instrument, because Wyandotte’s claim arose under the PWBA. (The dissent agreed with this conclusion, but not the majority’s reasoning.)