Miller-Davis Company was the general contractor for an $8.7 million series of improvements, including a new natatorium, to YMCA buildings. Miller-Davis hired Ahrens Construction to install a roof system on the natatorium. Ahrens finished work in February 1999; on April 26, 1999, Ahrens certified to Miller-Davis that the work was complete. Miller-Davis paid Ahrens the next day. A temporary certificate of occupancy was issued for the whole project on June 11, 1999.
The YMCA’s contract with Miller-Davis included a one-year warranty on materials and workmanship. Within the first year, when the weather turned cold, the YMCA noticed condensation in the natatorium, so severe that at times it appeared to be “raining” in the pool area. Efforts were made to resolve the problem, but it continued into 2003, when Miller-Davis’ architect recommended removing the roof to determine the cause. Once the roof was removed and inspected, the architect concluded that it had been improperly installed. Ahrens disagreed, arguing that the roof was defectively designed. After unsuccessful efforts to have Ahrens perform corrective work, Miller-Davis eventually performed the work itself in the fall of 2003.
On May 12, 2005, Miller-Davis sued Ahrens and another defendant. Miller-Davis brought two claims against Ahrens: breach of contract, for installing a roof that did not conform to plan specifications, and indemnity. Ahrens moved for summary disposition, alleging that the Miller-Davis lawsuit was untimely because it was filed after the expiration of the six-year period specified in the statute of repose, MCL 600.5839. That statute states: “No person may maintain any action to recover damages for any injury to property, real or personal . . . arising out of the defective and unsafe condition of an improvement to real property . . . against any state licensed architect or professional engineer performing or furnishing the design or supervision of construction of the improvement, or against any contractor making the improvement, more than 6 years after the time of occupancy of the completed improvement, use, or acceptance of the improvement . . . .” The trial court denied the motion.
The case proceeded to a bench trial, and the trial court ruled in Miller-Davis’ favor, awarding damages of $348,851.50. The court determined that Ahrens materially breached the parties’ contract by performing defective work on the roof.
Ahrens appealed by right to the Court of Appeals, raising a number of arguments, including that the judgment violated the statute of repose. In a published per curiam opinion, the Court of Appeals agreed with Ahrens on the statute of repose issue and reversed the judgment. But the Supreme Court reversed the Court of Appeals, holding that “MCL 600.5839 is limited to tort actions,” so that statute did not bar Miller-Davis’ claim. Rather, the general six-year limitations period for breach of contract actions applied – but, because there was “a question about the date plaintiff’s action accrued,” the Supreme Court remanded the case to the Court of Appeals “to resolve this issue, as well as other issues not yet considered.” Miller-Davis Co v Ahrens Const, Inc, 489 Mich 355 (2011).
In a published per curiam opinion, the Court of Appeals again ruled in Ahrens’ favor, stating that Miller-Davis had filed its lawsuit after the six-year statute of limitations on contract claims expired. The court reasoned that the six-year period began to run “on or before defendant completed its portion of the overall construction project” in February 1999.
MCL 600.5807 provides that “No person may bring or maintain any action to recover damages or sums due for breach of contract, or to enforce the specific performance of any contract unless, after the claim first accrued to himself or to someone through whom he claims, he commences the action within the periods of time prescribed by this section. … (8) The period of limitations is 6 years for all other actions to recover damages or sums due for breach of contract.”
“Thus, MCL 600.5807(8) requires that an action to recover damages for breach of contract must be brought within six years after the claim first accrued,” the Court of Appeals explained. “A contract claim accrues when the wrong occurs, i.e., when the promise is breached, regardless of when damage results. The ‘wrong’ on which the contract claim is based is determined by examining the parties’ contract.”
In this case, Miller-Davis’ claim was based on Ahrens’ alleged failure “to install the Roof System correctly and in compliance with the plans and specifications ….” That alleged failure implicated a contractual provision stating that “[a]ll materials and/or work furnished on this order shall comply with the terms and requirements of the plans and specifications …,” the appellate panel said.
“Because defendant completed its work on the roof by the end of February 1999, the breach that plaintiff alleged—that defendant had failed to comply with the terms and requirements of the plans and specifications—must have occurred by that date,” the panel stated. “Further, because plaintiff did not file its complaint until May 12, 2005, more than six years after February 1999 and more than six years after plaintiff accepted the work through its payment at the end of April 1999, the statute of limitations barred those claims.”
The Court of Appeals rejected Miller-Davis’ arguments that its breach of contract action was timely under other provisions in the parties’ contract, including an indemnification clause. Miller-Davis argued that Ahrens breached the indemnification clause by not reimbursing Miller-Davis for the 2003 corrective work, so the 2005 lawsuit was brought within the six-year limitations period. But Miller-Davis could not use 2003 as an alternative accrual date, the Court of Appeals held. Indemnification clauses are intended to protect parties to a contract against claims by outside parties, the panel noted, but no such claims had been brought against Miller-Davis: “[N]o one had brought a claim or demand against plaintiff within the meaning of the indemnification clause. Thus, because no claims or demands were ‘made, brought or recovered against’ plaintiff, defendant did not breach this provision of the contract.”
In addition, the Court of Appeals said, “There is no evidence in the record that supports a conclusion that defendant’s alleged defective workmanship caused the moisture problem other than an inference drawn from the fact that after the corrective work it was no longer present.”
Miller-Davis appealed, and, in an order dated June 5, 2013, the Supreme Court granted leave to appeal. The court directed the parties to address “(1) whether the indemnification clause in the plaintiff’s contract with defendant Ahrens applies to this case; (2) if so, whether the plaintiff’s action for breach of that provision was barred by the statute of limitations, MCL 600.5807(8); and (3) whether the plaintiff adequately proved that any breach of the indemnification clause caused its damages, including the issue whether the trial court clearly erred in concluding that defendant Ahrens’ performance of nonconforming work caused the natatorium moisture problem.”