McCoig Materials, LLC v. Galui Construction, Inc.
295 Mich. App. 684
| Mich. Ct. App. | 2012Background
- McCoig Materials sues Galui Construction for breach of contract and to collect on a performance bond for Warren project payments.
- Open-account contract dated February 7, 2007; terms include one-year limitations, 15-day defect notice, 48-hour yield/defect deadlines, and liability limitations.
- Center Line project defects were not timely alleged; no suit within one year after delivery for those materials.
- Warren project deliveries occur Nov-Dec 2008; plaintiff seeks $51,837.93; defendant asserts offsets for Center Line defects.
- Trial court denied second summary disposition; allowed recoupment defense raised sua sponte to offset Warren balance.
- Court of Appeals reverses and remands, holding recoupment cannot apply where transactions are discrete and need to originate from same contract/transaction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Recoupment applicability to discrete transactions under open account | McCoig argues recoupment applies to the open-account, continuous contract transactions. | Galui contends recoupment can apply to related but separate transactions within one contract. | Recoupment not applicable to discrete transactions under open account. |
| Court sua sponte raising of recoupment as defense | McCoig argues recoupment was not properly pleaded and raised by the court. | Galui argues recoupment was a valid defense under the contract. | Trial court erred by raising recoupment sua sponte; reversed and remanded. |
Key Cases Cited
- Mudge v Macomb Co, 458 Mich 87 (1998) (recoupment is defense arising from same transaction; limitations do not bar defense when action timely)
- Wallich Ice Machine Co v Hanewald, 275 Mich 607 (1936) (timely objection required; acceptance of phase of construction bars recoupment)
- Morehouse v Baker, 48 Mich 335 (1882) (recoupment aims to prevent multiplicity of suits; must rest on same transaction)
- Oakland Metal Stamping Co v Forest Indus, Inc, 352 Mich 119 (1958) (plaintiff must prove breach of contract; recoupment premised on same contract/transaction)
- Peerless Woolen Mills v Chicago Garment Co, 347 Mich 326 (1956) (recoupment cannot premised on separate prior transaction not arising from the current suit)