Dynamic Construction Co. v. Barton Malow Co.

214 Mich. App. 425 (1995) 543 N.W.2d 31

DYNAMIC CONSTRUCTION COMPANY
v.
BARTON MALOW COMPANY

Docket No. 154993.

Michigan Court of Appeals.

Submitted October 18, 1995, at Lansing. Decided November 28, 1995, at 9:05 A.M.

Couzens, Lansky, Fealk, Ellis, Roeder & Lazar, P.C. (by Bruce J. Lazar), for Dynamic Construction Company.

Kohl, Secrest, Wardle, Lynch, Clark, and Hampton (by Michael L. Updike), for Barton Malow Company.

Before: MacKENZIE, P.J., and FITZGERALD and J.P. O'BRIEN,^[*] JJ.

PER CURIAM.

This case involves a breach of contract claim, brought on the theory that plaintiff Dynamic Construction Company was a third-party beneficiary of a contract between the University of Michigan and defendant Barton Malow (hereafter defendant). Defendant appeals by leave granted from an order denying its motion for summary disposition pursuant to MCR 2.116(C)(8). We reverse.

In 1981, the University of Michigan hired defendant to act as construction manager to supervise the planned expansion of its hospital. Article 15 of the contract between defendant and the university contains the following pertinent language:

EXTENT OF AGREEMENT

15.1 This agreement represents the entire and integrated Agreement between the Owner and Construction Manager.... This Agreement shall not be superseded by provisions of contracts for construction and may be amended only by written instrument signed by both Owner and Construction Manager.

15.2 Nothing contained herein shall be deemed to create any contractual relationship between the Construction Manager and the Architect or any of the contractors ... on the Project; nor shall anything contained herein be deemed to give any third party any claim or right of action against the Owner or the Construction Manager which does not otherwise exist without regard to this Agreement. [Emphasis added.]

By separate contract, the university hired plaintiff as a general contractor for the hospital expansion project. There was no contract between plaintiff and defendant.

After the project was finished, plaintiff filed a number of claims with the university for extra compensation allegedly attributable to differing site conditions, defective plans and specifications, change of field orders, and unanticipated extra work and delays. When those parties could not settle all the claims, plaintiff began this action against the university. Plaintiff later added a breach of contract claim against defendant. Defendant moved for summary disposition on the basis that plaintiff failed to state a claim for breach of contract because there was no contract between plaintiff and defendant. The trial court denied the motion, ruling that plaintiff was a third-party beneficiary of defendant's contract with the university. It is this ruling that defendant challenges on appeal.

MCL 600.1405; MSA 27A.1405 provides in relevant part:

Any person for whose benefit a promise is made by way of contract, as hereinafter defined, has the same right to enforce said promise that he would have had if the said promise had been made directly to him as the promisee.

(1) A promise shall be construed to have been made for the benefit of a person whenever the promisor of said promise has undertaken to give or to do or refrain from doing something directly to or for said person.

When determining whether the parties to the contract intended to make a third person a third-party beneficiary, a court should examine the contract using an objective standard. Kammer Asphalt Paving Co, Inc v East China Twp Schools, 443 Mich. 176, 189; 504 NW2d 635 (1993); Arrow Sheet Metal Works, Inc v Bryant & Detwiler Co, 338 Mich. 68, 79-80; 61 NW2d 125 (1953). Third-party beneficiary status requires an express promise to act to the benefit of the third party; where no such promise exists, that third party cannot maintain an action for breach of the contract. Fishbach-Natkin, Inc v Shimizu America Corp, 854 F Supp 1294, 1303 (ED Mich, 1994). Thus, a person who incidentally benefits from the performance of some duty required under a contract has no rights under the contract. Kammer Asphalt, supra; Arrow Sheet Metal, supra. In Kammer Asphalt, supra at 190, our Supreme Court, quoting Greenlees v Owen Ames Kimball, Co, 340 Mich. 670, 676; 66 NW2d 227 (1954), explained:

"A third person cannot maintain an action upon a simple contract merely because he would receive a benefit from its performance or because he is injured by the breach thereof. Where the contract is primarily for the benefit of the parties thereto, the mere fact that a third person would be incidentally benefited does not give him the right to sue for its breach."

Contractors, subcontractors, and their employees are generally held not to be the third-party beneficiaries of the contract between the general or supervisory contractor and the project owner. See, e.g., Arrow Sheet Metal, supra; Nat'l Sand, Inc v Nagel Construction, Inc, 182 Mich. App. 327; 451 NW2d 618 (1990); Rieth-Riley Construction Co, Inc v Dep't of Transportation, 136 Mich. App. 425; 357 NW2d 62 (1984); Local 80 Sheet Metal Workers Int'l Ass'n, AFL-CIO v Tishman Construction Corp, 103 Mich. App. 784; 303 NW2d 893 (1981).

While, as plaintiff claims, there is no Michigan case involving the relationship between a general contractor and a construction manager, our research has found two cases that examined that relationship and found no third-party beneficiary relationship in favor of the general contractor or a subcontractor. In a case strikingly similar to the present one, Buchman Plumbing Co v Regents of the Univ of Minnesota, 298 Minn 328; 215 NW2d 479 (1974), the university contracted with James Steele Construction Company as general contractor for the project and separately with a number of prime subcontractors, including Buchman Plumbing, for the building's mechanical systems. Buchman claimed breach of the contract between Steele Construction Company and the university for damages from delays allegedly caused by Steele. The university and Steele denied that Buchman was a third-party beneficiary of their contract, and the Supreme Court of Minnesota agreed. The court held that Buchman failed to state a claim against the defendant based on a general provision in the principal contract that the university would not delay the project.

In A R Moyer, Inc v Graham, 285 So 2d 397 (Fla, 1973), the Supreme Court of Florida held that a general contractor was not a third-party beneficiary of the contract between the owner and the supervising architect or supervising engineer of a construction project because the owner's contract with the supervising firm was for the owner's benefit and the contractor had only an incidental interest in it. The court noted that, in the absence of the owner-supervising architect's or engineer's contracts in that case, general principles precluded recovery. The court noted:

Our review of the law suggests to us that supervision generally is undertaken for the benefit of the owner to insure that the construction is proceeding in compliance with the plans and specifications approved by the owner. In general terms, a contractor is an incidental beneficiary absent clear intent manifested in the owner-architect contract to the contrary. Exceptions may exist possibly, such as in supervision to insure compliance with safety regulations which would be for the benefit of third party construction workers; however, no exceptions are apparent in the third question as posed. The theory that a supervising architect acts as agent for the owner also militates against a third party beneficiary approach. [285 So 2d 403.]

Review of the contract between defendant and the university in this case shows no express promises to act to the benefit of plaintiff; in fact, the contract expressly states that it does not give rise to any third-party beneficiary status in favor of any other contractors involved in the hospital project. In Kammer Asphalt, supra, the contract involved contained a similar clause repudiating the creation of any third-party beneficiaries; the Court concluded that any benefit to the plaintiff was incidental and did not give rise to a third-party beneficiary relationship. 443 Mich. 190. Further, review of the contract indicates that the promises to manage the overall project ran to the university rather than the parties being managed. Although defendant's contractual duties to supervise and manage the project would necessarily affect, and possibly benefit, plaintiff, such benefits are incidental, and did not make plaintiff a third-party beneficiary of the contract. Arrow Sheet Metal, supra; Buchman Plumbing, supra; A R Moyer, supra.

Reversed.

NOTES

[*] Recorder's Court judge, sitting on the Court of Appeals by assignment.