National Sand, Inc v. Nagel Construction, Inc

451 N.W.2d 618, 182 Mich. App. 327

• Court: Michigan Court of Appeals
• Decided: February 20, 1990
• Docket: Docket 106970
• Status: Published

Opinion

Sawyer, J.

Plaintiff National Sand, Inc., appeals from an order granting partial summary disposition pursuant to MCR 2.116(C)(7) and (8), dismissing defendants Progressive Engineering, Inc., and Missaukee Sanitary Drain Commission from the suit. The order was certified as a final order under MCR 2.604(A). We affirm in part and remand.

Defendant drain commission contracted with defendant Nagel Construction, Inc., to construct a sewage treatment facility. Nagel subcontracted with National Sand to excavate the sewage pits and to line the pits with clay. Progressive Engineering prepared the plans and specifications for the project.

In October, 1984, National Sand began excavating the sewage pits at the site of the sewage treatment facility. During excavation, National Sand discovered that there was insufficient clay on the site for lining the sewage pits. 1 Thereafter, an alternate site was sought which contained sufficient clay. A site was located in 1985 and the contracts were modified to provide compensation for the additional expenditures of money and labor required as a result of the insufficient clay deposits.

However, on September 16, 1985, it was again discovered that there were insufficient clay deposits in the areas set forth in Progressive Engineering’s plans. The contracts were again modified to provide compensation for the additional costs.

Ultimately, National Sand completed its services under the original subcontract and Nagel Construction paid National Sand the amount due under the original subcontract, but refused to pay an additional $258,000 which National Sand claimed was incurred as a result of the insufficient clay deposits.

The instant action was filed on October 1, 1987. Count i of the complaint alleges breach of contract. Count ii alleges negligence by Progressive Engineering in preparing the construction plans and in failing to use proper procedures in locating the clay deposits.

First, we briefly consider Progressive Engineering’s argument that the jurisdiction of this Court has not been properly invoked because the order appealed from was not properly entered. However, this issue was considered by this Court on Progressive Engineering’s motion to dismiss, which denied the motion by an order entered July 25, 1988. We see no need to revisit the issue.

Next, we briefly consider plaintiff’s arguments that Progressive Engineering and the drain commission are proper parties to the suit despite the lack of privity of contract. Contrary to plaintiff’s arguments, on the basis of the Supreme Court’s decision in Williams v Polgar, 391 Mich 6; 215 NW2d 149 (1974), Michigan has not "categorically eliminated” the requirement of privity of contract. Rather, Williams concluded that privity is no longer a requirement for liability by a title abstracter. Id. at 15-18. That is, a third party injured by the negligence of the abstracter may maintain an action in tort, specifically, negligent misrepresentation. Id. at 20. Similarly, this Court has allowed a contractor to maintain an action in tort (specifically, negligence) against a project engineer despite the lack of privity of contract. Bacco Construction Co v American Colloid Co, 148 Mich App 397, 413-416; 384 NW2d 427 (1986).

Thus, what can be concluded is not, as plaintiff suggests, that a breach of contract claim can be maintained regardless of privity; rather, it is that a plaintiff may maintain an action in tort where he is injured by the defendant’s negligent performance of contract even where there is no privity between the parties. Thus, in the case at bar, the trial court properly dismissed plaintiff’s breach of contract claims against Progressive Engineering and the drain commission since there was no contractual relationship between plaintiff and those two defendants. However, that does not preclude plaintiff from maintaining its tort claim against Progressive Engineering. 2

This then brings us to the issue whether the period of limitations has run on plaintiffs tort claim against Progressive Engineering. The trial court concluded that the two-year malpractice limitation period of MCL 600.5805(4); MSA 27A.5805(4) was applicable and barred plaintiffs claim. Plaintiff argues that the six-year limitation period for "other personal actions” contained in MCL 600.5813; MSA 27A.5813 should apply, relying on Bacco, supra. For the reasons to be discussed below, we believe that §5805 controls the instant case.

MCL 600.5805; MSA 27A.5805, often referred to as the "negligence” statute of limitations, provides in pertinent part as follows:

(1) A person shall not bring or maintain an action to recover damages for injuries to persons or property unless, after the claim first accrued to the plaintiff or to someone through whom the plaintiff claims, the action is commenced within the periods of time prescribed by this section.

(4) Except as otherwise provided in this chapter, the period of limitations is 2 years for an action charging malpractice.

(8) The period of limitations is 3 years after the time of the death or injury for all other actions to recover damages for the death of a person, or for injury to a person or property. [Emphasis added.]

Plaintiff, relying on Bacco, supra, argues that, since its injury is financial rather than a physical injury to "persons or property,” the provisions of § 5813, relating to "other personal actions,” apply. While Bacco does support plaintiffs position, we believe Bacco was incorrectly decided.

The effect of the "injuries to persons or property” language in § 5805 has been the source of a great deal of confusion in the case law. In Bacco, the plaintiff was a contractor engaged to construct a waste-water lagoon. Leaks developed in the lagoon and the work was rejected. By agreement of the parties, the plaintiff made the necessary repairs with none of the parties admitting liability for the problem. The plaintiff sought to recover damages for its additional expenses. Its complaint alleged, inter alia, negligence by the materials supplier and its sales agent as well as by the project engineer. The Bacco Court concluded that § 5813 applied since there was no physical harm to persons or property. In reaching its decision, the Court relied on Coats v Uhlmann, 87 Mich App 385; 274 NW2d 792 (1978), Borman’s, Inc v Lake State Development Co, 60 Mich App 175; 230 NW2d 363 (1975), and Tel-Twelve Shopping Center v Sterling Garrett Construction Co, 34 Mich App 434; 191 NW2d 484 (1971).

Bacco’s reliance on Coats, supra, is misplaced. First, Coats specifically acknowledged that this Court does not strictly require a physical injury for § 5805 to be applicable. Coats, supra at 391-392, citing Stringer v Bd of Trustees of Edward W Sparrow Hosp, 62 Mich App 696; 233 NW2d 698 (1975). Coats, which involved negligent misrepresentations by realtors, looked to Sweet v Shreve, 262 Mich 432; 247 NW 711 (1933), a case involving fraud in a real estate transaction. The Coats Court concluded that there was no distinction between negligent misrepresentation and fraud and, accordingly, applied § 5813 on the basis of the authority of Sweet. However, Sweet was decided consistently with a long line of Michigan cases which applied the six-year period of limitations to fraud actions. Id. at 435. This Court, in Stringer, supra at 700, similarly distinguished away the fraud case of Case v Goren, 43 Mich App 673; 204 NW2d 767 (1972), 3 as being decided as part of a long line of Michigan cases applying the six-year limitation period to fraud actions. We agree with Stringer and conclude that Coats and the fraud cases such as Sweet and Case are inapplicable to the instant case.

Both Borman’s, supra, and Tel-Twelve, supra, involved negligence by a contractor in performing a contract, and both looked to Schenburn v Lehner Associates, Inc, 22 Mich App 534; 177 NW2d 699 (1970), in deciding to apply the six-year limitation period. In Schenburn, the plaintiff employed the defendant to survey the plaintiffs property. The survey was allegedly done negligently and the plaintiff was sued as a result of his reliance on the survey. The plaintiff in turn sued the defendant. However, Schenburn did not consider whether § 5813 should be applied. Rather, the question was whether to apply § 5805 in light of the tort allegations or § 5807 in light of the contract allegations. The Court concluded that, since the plaintiffs injury was to his financial expectations rather than to his person or specific property, the contract period of limitation should control.

Returning to Tel-Twelve, supra, it involved the same decision between applying §5805 or §5807. Borman’s, supra, is unclear as to whether it was relying on Schenburn for the proposition that the six-year limitation period of § 5807(8) applied or the six-year limitation period of § 5813 applied. Bacco, supra, however, did extend the cases to apply to § 5813, ignoring the fact that both Tel-Twelve and Borman’s involved a contract between the parties and that the case the two were based upon, Schenburn, as well as Tel-Twelve (and possibly Borman’s), was considering whether to apply § 5805 or § 5807, with § 5813 not being a consideration.

Bacco also ignores the fact that Stringer, supra, specifically rejected a narrow reading of § 5805 as requiring a physical injury. Indeed, as the Stringer Court noted, §5805 applies to several causes of action which rarely or never involve a physical injury. 4 Stringer, supra at 701-702. Stringer, supra at 701, takes an expansive view of what constitutes "injuries to persons” as including " 'invasions of rights that inhere in man as a rational being,’ ” quoting Commerce Oil Refining Corp v Miner, 98 RI14, 20-21; 199 A2d 606 (1964).

Bacco also overlooks the decision in Krum v Sheppard, 255 F Supp 994 (WD Mich, 1966), aff'd 407 F2d 490 (CA 6, 1967), which concluded that "injuries to persons” has a broader meaning than physical injuries and includes such things as loss of consortium, libel, slander and deprivation of civil rights. Id. at 999.

For the above reasons, we conclude that Bacco was incorrectly decided. That is, Bacco erred in looking to whether there was physical damage to property in determining which period of limitation to apply. Similarly, plaintiff’s argument in the case at bar that § 5805 is inapplicable because there has been no physical injury, merely an injury to its financial expectations, is misplaced.

Concluding that the Bacco approach is incorrect does not, however, resolve the question of which statute of limitations should be applied. For this, we must rely on recent Supreme Court cases. In Citizens for Pretrial Justice v Goldfarb, 415 Mich 255; 327 NW2d 910 (1982), the Court considered whether to apply §5805 or §5813. The Court rejected the plaintiffs’ argument that § 5805 was inapplicable because their claims did not allege injuries to persons or property, but instead were claims for pecuniary loss. 5 Id. at 268. Rather, the Court stated that pecuniary losses are an element of damages and do not determine the applicable period of limitation. Id. The Court went on to conclude that § 5805(7) [now § 5805(8)] applies to traditional, primarily common-law, torts. Id. at 269. Thus, the Court concluded that, since the plaintiffs’ injury was not the result of a traditional tort, it must fall under the residual six-year period of limitation contained in § 5813.

The cases cited by Goldfarb also help illuminate the issue. Goldfarb cited Rhule v Armstrong, 384 Mich 709; 187 NW2d 223 (1971) (wrongful death), and Coates v Milner Hotels, Inc, 311 Mich 233; 18 NW2d 389 (1945) (negligence by hotel in allowing the plaintiff to be assaulted by third party in the hotel), as examples of the three-year period for traditional, common-law torts. 6 As examples of cases falling under the six-year residual period of limitation under § 5813, Goldfarb cited Metzen v Dep’t of Revenue, 310 Mich 622; 17 NW2d 860 (1945) (assumpsit for sales tax refund), and Walper v Knowles, 295 Mich 687; 295 NW 363 (1940) (action to collect assessment by banking commissioner against bank stockholder pursuant to a statute). See also Hart v Detroit, 416 Mich 488; 331 NW2d 438 (1982), wherein the Court applied § 5813 to an inverse condemnation proceeding. 7

Next, we consider the impact of Sam v Balardo, 411 Mich 405; 308 NW2d 142 (1981), and Dennis v Robbins Funeral Home, 428 Mich 698; 411 NW2d 156 (1987). In Sam, the Court applied the two-year malpractice period of limitation under § 5805 to an attorney malpractice action. In Sam, the attorney’s alleged malpractice was the failure to attend to the defense of a client’s civil litigation. There was no physical injury. In Dennis, the plaintiff’s injury was mental anguish. The Court applied the three-year period of limitation under § 5805(8). 8

Turning to the case at bar, if plaintiff pled malpractice or some other traditional, common-law tort, then we must apply § 5805. Otherwise, § 5813 would be appropriate. In looking to the pleadings, plaintiff’s complaint is not a picture of clarity. However, Count n appears to sound in common-law negligence. Moreover, in its brief on appeal, plaintiff declares the claim to be one of negligence. Finally, the trial court and Progressive Engineering categorize plaintiff’s claim as malpractice, which is certainly a common-law tort. Accordingly, we conclude that plaintiff’s claim as pled falls under § 5805 as either a malpractice claim under § 5805(4) or a negligence claim under § 5805(8).

It is not altogether clear, however, that the trial court’s categorization of this case as malpractice for purposes of the statute of limitations issue is correct. "Malpractice” does generally refer to professional misconduct or lack of skill. See Black’s Law Dictionary (5th ed), p 864. However, "malpractice” has a narrower definition for purposes of applying the two-year period of limitation under § 5805(4).

In Sam, supra, the Court noted that the Revised Judicature Act does not define the term "malpractice” as used in § 5805. Accordingly, the Court held that "malpractice” within the meaning of § 5805 must refer only to those actions which were recognized as constituting malpractice when the Judicature Act of 1915 and the Revised Judicature Act of 1961 were adopted. Sam, supra at 425. Since the common law recognized an action for legal malpractice at the time of the adoption of the ja and the rja, it follows that legal malpractice is "malpractice” within the meaning of § 5805(4) and, therefore, malpractice claims against attorneys are subject to the two-year period of limitation found therein.

The Supreme Court revisited the issue in Dennis, supra. Dennis involved a claim against a funeral director. The Court concluded that since the common law did not recognize a malpractice action against a funeral home or funeral director when the ja or rja was enacted, such a cause of action does not come within the meaning of "malpractice” for purposes of the statute of limitations. Dennis, supra at 703. This is true even though the Court recognized that a person engaged in the practice of mortuary science is practicing a profession. Id. at 705. Thus, not all professional misconduct or negligence is "malpractice” for purposes of the statute of limitations. 9

Thus, we must determine whether the common law recognized a malpractice claim against engineers. The earliest case we have been able to find which appears to recognize a malpractice action against an engineer is Marysville v Pate, Hirn & Bogue, Inc, 154 Mich App 655; 397 NW2d 859 (1986). However, the Marysville decision seems to be based upon the assumption that negligence by an engineer is malpractice rather than concluding that an action against an engineer is a malpractice action. The Court concluded that MCL 600.5839; MSA 27A.5839 10 did not apply to the case and, therefore, affirmed the trial court’s application of the two-year malpractice period of limitation. The Court, apparently assuming that the case was properly categorized as a malpractice action, did not discuss whether the three-year negligence limitation should be applied rather than the malpractice limitation.

The Marysville decision was followed by Midland v Helger Construction Co, Inc, 157 Mich App 736; 403 NW2d 218 (1987). Midland concluded that the so-called general malpractice statute, MCL 600.5838; MSA 27A.5838, applies to architects, citing Sam, supra at 425-427, and Chapel v Clark, 117 Mich 638, 640; 76 NW 62 (1898). Sam, however, merely concluded that the malpractice period of limitation applies to attorneys as well as physi cians and surgeons, adopting the rule discussed above concerning the common law recognizing a malpractice action against the particular profession at issue. Id. at 425. Moreover, Sam specifically rejected the argument that § 5838 establishes that the malpractice period of limitation applies to all state-licensed professionals; rather, Sam concluded that § 5838 pertains to when a malpractice action accrues and does not define malpractice. 11 As for the reference to Chapel, supra, while there is some language in the opinion which indicates that architects have the same level of professional responsibility as attorneys and physicians, the case itself was not a malpractice action. Rather, it was an action in assumpsit by an architect to recover his fee from a dissatisfied client. Moreover, even if Chapel could be read as recognizing that a malpractice action may be brought against architects, it does not recognize such an action against engineers. 12

Our research leads us to believe that an action for malpractice against engineers was not recognized by the common law at the time of the passage of the ja and the rja. Accordingly, under Sam, supra, the two-year malpractice period of limitation would be inapplicable and it would be necessary to apply the three-year negligence period of limitation under § 5805(8). However, we are reluctant to reach such a determination where the issue was not addressed by the trial court or briefed by the parties. Since, if we were to apply the three-year period of limitation to this case, a remand would be necessary to determine when plaintiffs action accrued, 13 our decision is without prejudice to Progressive Engineering’s arguing that the common law did recognize a malpractice action against engineers sufficiently long ago to meet the Sam requirement. 14

Accordingly, unless Progressive Engineering concedes that the three-year period of limitation is applicable, the trial court is free to conclude that the two-year period of limitation for malpractice nevertheless applies provided Progressive Engineering establishes that the common law recog nized a malpractice action against engineers in accordance with Sam.

Finally, we would like to urge the parties to seek review of this issue in the Supreme Court. As our discussion of this issue indicates, the determination of when to apply § 5805 rather than § 5813 has produced a great deal of confusion and the case law is difficult, if not impossible, to harmonize. 15 Accordingly, further review and illumination of this issue by the Supreme Court would be welcomed.

For the above reasons, we affirm the dismissal of the breach of contract claims against both the drain commission and Progressive Engineering. However, the grant of summary disposition in favor of Progressive Engineering on the tort claim is reversed.

Affirmed in part, reversed in part and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. Defendant Missaukee Sanitary Drain Commission may tax costs; appellant and defendant Progressive Engineering may not tax costs, neither having prevailed in full.

1 Progressive Engineering’s plan called for the clay to be obtained from excavations on the project site.

2 Plaintiff has not pled a tort action against the drain commission.

3 Which was also cited by Coats, supra.

4 I.e., § 5805(2) (false imprisonment), § 5805(3) (malicious prosecution), § 5805(5) (sheriffs misconduct), § 5805(6) (constable’s misconduct), and § 5805(7) (libel and slander). Also, malpractice, § 5805(4), when committed by a physician results in physical injury, but rarely does when committed by an attorney.

5 The plaintiffs claimed that defendants, bail bondsmen, charged a greater fee than permitted by statute.

6 See also Baatz v Smith, 361 Mich 68; 104 NW2d 787 (1960), which applied the three-year period of limitation in an assumpsit action with facts similar to Coates, supra, and James v Logee, 150 Mich App 35; 388 NW2d 294 (1986), which, in light of Goldfarb, supra, applied the three-year period under § 5805, rather than the six-year period under § 5813, for a tortious interference with a contract claim, concluding that it was a traditional, common-law tort.

7 The common theme Of Goldfarb, Metzen, Walper, and Hart is that the right to recovery does not arise from a common-law right, but arises from a statute. Goldfarb involved overcharging under, the bail bondsmen statute, Metzen a refund under a tax statute, Walper the collection of an assessment under a statute, and Hart the right to compensation for an inverse condemnation.

8 It should be noted, however, that the Dennis Court did not consider whether § 5813 would be applicable. Rather, it was faced with the question whether to apply the two-year malpractice period of § 5805(4) or the three-year period of § 5805(8).

9 Progressive Engineering’s argument to the contrary is, therefore, incorrect. Progressive Engineering argues that professional negligence by engineers must be malpractice and cannot be converted to simple negligence by semantics, invoking Gertrude Stein’s famous truism from Sacred Emily, "Rose is a rose is a rose is a rose.” See Bartlett, Familiar Quotations (13th ed, 1955), p 877. However, to extend Progressive Engineering’s analogy, the Supreme Court has distinguished between yellow roses and red roses, and the color of the rose determines whether a two-year or a three-year period of limitation is applied.

10 This statute, inter alia, contains a special restriction on actions against architects and engineers for injuries arising from a defective and unsafe condition of a building. Specifically, the action must be brought within six years of the time the building is occupied or within one year after the defect is discovered or should have been discovered.

11 See, however, Adkins v Annapolis Hosp, 420 Mich 87; 360 NW2d 150 (1984), wherein the Court concluded that the Legislature’s 1975 amendment of § 5838 to add a list of various health-care professionals necessitated the conclusion that those professionals could be sued for malpractice. The Court, however, reaffirmed the principle that § 5838 is an accrual provision and not a definitional section. Adkins, supra at 94. It viewed the Legislature’s amendment as a modification of the common law to add the list of health-care professionals to the list of those professionals who could be guilty of malpractice. Id. at 95.

12 We should add that we disagree with the trial judge that Bacco, supra, stands for the proposition that an action for malpractice may be maintained against engineers. Rather, Bacco merely concluded that a negligence action may be maintained, never labeling such an action "malpractice.” While professional negligence may be casually referred to as "malpractice,” as discussed above, the two-year malpractice period of limitation applies only to those actions which the common law recognized as being "malpractice” or, in light of Adkins, supra, that the Legislature has specifically referred to as "malpractice.” As to the latter point, we note that § 5839 refers to an engineer’s "gross negligence,” not his "malpractice.” In any event, even if Bacco should be read as standing for the proposition that engineers commit malpractice, it appears to be a recent determination and does not support the proposition that the common law recognized such an action. In fact, the discussion in Bacco, supra at 413-416, suggests that the tort liability of engineers to third parties is a relatively recent innovation in the law. See also O’Brien v Hazelet & Erdal, 410 Mich 1, 14; 299 NW2d 336 (1980).

13 This issue was not raised on appeal or discussed in the trial court’s opinion beyond the conclusion that the action accrued more than two years before the complaint was filed. Progressive Engineering’s brief indicates that "the most charitable view” would indicate that plaintiffs action accrued on or about September 16, 1985, which would be within three years prior to the filing of the complaint on October 1,1987.

14 We would note that, under our reading of Sam, it is not merely sufficient that the common law recognized a tort action against engineers, but that the action was known as "malpractice.” Under Sam, if the common law did not recognize an action as being for malpractice, the Legislature could not have intended to include such an action within the term "malpractice” as used in the statute of limitations.

15 Including some older Supreme Court cases which we have reviewed, but do not discuss in this opinion.