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May 06, 2016

MSC holds that, under the Public Works Bond Act, actual receipt of notice is not necessary

In Wyandotte Electric Supply v Electrical Technology Systems, Inc, No 149989, the Michigan Supreme Court held that if a claimant complies with the method of service provided in the 30-day notice provision of the Public Works Bond Act (“PWBA”), actual receipt of the notice is not required under the statute.  Moreover, the Court held that a PWBA claimant may recover a time-price differential and attorney fees that were provided for by the claimant’s contract and that post-judgment interest based on the written instrument is not appropriate under the PWBA.
 
Defendant KEO & Associates, Inc. (“KEO”) was hired by the Detroit Public Library to complete a renovation.  KEO hired Electrical Technology Systems (“ETS”) as its subcontractor.  ETS then entered into a sub-subcontract with Wyandotte Electric Supply (“Wyandotte”) for the supplies necessary to complete the project.  In the agreement between ETS and Wyandotte, ETS promised to pay for materials within 30 days of delivery, with all late-paid invoices subject to a 1.5% time-price differential.  ETS further agreed to pay one-third of any attorney fees necessitated by Wyandotte’s collection efforts.  In August 2009, Wyandotte supplied a quote to ETS for the materials needed on the library subcontract.  Wyandotte sent notice by certified mail of its first supply of materials to ETS; however, Wyandotte’s notice did not reach KEO.  ETS failed to pay its accumulated debt to Wyandotte for the library project materials and Wyandotte filed suit. 
 
The Court of Appeals held that Wyandotte complied with the 30-day notice provision of the PWBA because the plain language of the statute makes no mention of actual receipt of this notice as a condition precedent to filing suit.  The court further held that the attorney fees and time-price differential awarded to plaintiff represent sums “justly due” under the contract because they were an integral part of the contract between the parties.  The court also awarded post-judgment interest, finding that the contract between Wyandotte and ETS constituted a written instrument evidencing indebtedness with a specified interest rate.
 
The Michigan Supreme Court affirmed in part and reversed in part.  With respect to the sufficiency of the notice and recovery of attorney fees and time-price differential, the Court affirmed.  First, the Court held that the plain language of the PWBA does not require actual receipt of the notice.  Instead, if the claimant uses the method of service outlined in the statute—in this case, certified mail—then proof of actual receipt is not required.  Second, the Court held that ETS and Wyandotte clearly intended the time-price-differential and past-due-accounts provisions to be integral to the agreement and thus, these amounts were part of the sum “justly due” to Wyandotte under the statute.  However, the Court reversed with respect to the post-judgment interest, specifically noting that judgment was not rendered on the written instrument, but rather, on the statutory claim under the PWBA.  Accordingly, interest should have been calculated under the rule for interest on a money judgment in a civil case.
 
Chief Justice Young concurred in part and dissented in part.  Specifically, he agreed that Wyandotte complied with the notice requirements and that a time-price differential was recoverable under the statute, but he noted that the attorney fee award was not integrally related to the materials Wyandotte furnished, so the attorney fee award was not a sum “justly due.”  Moreover, while he agreed that post-judgment interest was not proper, he claimed that the general civil interest rate applied for a different reason than that stated by the majority.
 
Justice Zhara also concurred in part and dissented in part.  Specifically, he agreed that the notice provided by Wyandotte was sufficient and that the general civil rule governed the calculation of post-judgment interest, but disagreed with the majority’s reasoning regarding the calculation of interest.  He also did not agree that Wyandotte could claim attorney fees and a time-price differential under the payment bond. 

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