MARIE VANERIAN V CHARLES L PUGH CO INCAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
July 1, 2008
Wayne Circuit Court
LC No. 05-531590-CB
CHARLES L. PUGH CO., INC.,
G & G FLOOR COMPANY,
Advance Sheets Version
Before: Donofrio, P.J., and Sawyer and Murphy, JJ.
Plaintiff appeals as of right the trial court’s order granting summary disposition, under
MCR 2.116(C)(10), in favor of defendant G & G Floor Company (defendant). The trial court
ruled that plaintiff was not an intended third-party beneficiary of the contract between defendant
and defendant Charles L. Pugh Company, Inc. (Pugh). We reverse and remand.
The underlying facts in this case are not in dispute. Plaintiff’s basement flooded, causing
damage to her home. Plaintiff’s homeowner’s insurance company hired Pugh to repair the
plumbing, sewer or drainage system, and the wood floor in plaintiff’s basement. Plaintiff
discussed the floor repairs with a Pugh representative, who suggested to plaintiff that if she
already had a flooring contractor, she should contact that person again to make the repairs.
Defendant had previously performed work for plaintiff in her kitchen and dining room, so
plaintiff contacted defendant to discuss the repairs needed for her basement floor. Subsequently,
defendant and Pugh entered into a contract under which defendant agreed to replace plaintiff’s
floor. Under the contract, the name of the job was entitled “Marie Vanerian Residence.”
Specifically, the contract required defendant to “[t]ear out water damaged flooring and subfloor
and haul away debris from the family room and the bar room[,] [s]upply and install a plywood
subfloor in the same above rooms[, and] [s]upply, install, sand, stain, seal, and finish maple
flooring in the same above rooms.” The contract also contained a detailed list of instructions and
requirements relative to the job, including, for example, the need for others to remove all
furniture, wall hangings, and window treatments. The work to be performed under the contract
related entirely to repairs and improvements in plaintiff’s house. At some later date, plaintiff’s
basement flooded again, and the floor installed by defendant buckled and became unusable.
Plaintiff proceeded to file suit against Pugh and defendant. She sought to recover for the damage
to the floor and related structures, for accumulation of mold, and for other incidental and
consequential damage. Plaintiff asserted that she was an intended third-party beneficiary of the
contract between Pugh and defendant. The trial court disagreed and summarily dismissed the
case against defendant without oral argument.1
This Court reviews de novo a trial court’s decision on a motion for summary disposition.
Kreiner v Fischer, 471 Mich 109, 129; 683 NW2d 611 (2004).
MCL 600.1405 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 had undertaken to give or to do or
refrain from doing something directly to or for said person.
It cannot reasonably be disputed that the promises made by defendant in the contract to
tear out the old damaged floor and to supply and install a new floor were for plaintiff’s benefit.
All the work under the contract expressly related to repairs in plaintiff’s basement. Indeed,
plaintiff and defendant discussed the project with each other at the time the contract was formed
at the behest of Pugh, and plaintiff and defendant agreed that defendant would replace her maple
floors with oak floors. Defendant undertook to do something directly for plaintiff. The caselaw
does not contradict our conclusion that plaintiff was an intended third-party beneficiary under the
In Schmalfeldt v North Pointe Ins Co, 469 Mich 422, 427-428; 670 NW2d 651 (2003),
the Michigan Supreme Court set forth the principles governing the proper analysis under MCL
“[T]he plain language of this statute reflects that not every person
incidentally benefitted by a contractual promise has a right to sue for breach of
that promise . . . . Thus, only intended, not incidental, third-party beneficiaries
may sue for a breach of a contractual promise in their favor.
Plaintiff stipulated the dismissal of Pugh.
A person is a third-party beneficiary of a contract only when that contract
establishes that a promisor has undertaken a promise directly to or for that person.
By using the modifier directly, the Legislature intended to assure that contracting
parties are clearly aware that the scope of their contractual undertakings
encompasses a third party, directly referred to in the contract, before the third
party is able to enforce the contract. An objective standard is to be used to
determine, from the form and meaning of the contract itself, whether the promisor
undertook to give or to do or to refrain from doing something directly to or for the
person claiming third-party beneficiary status.
. . . [A] court should look no further than the form and meaning of the
contract itself to determine whether a party is an intended third-party beneficiary
within the meaning of § 1405. [Citations omitted.]
In Schmalfeldt, the plaintiff was injured in a bar fight and directly sued the bar’s insurer
to secure payment for dental bills on the basis that he was a third-party beneficiary of the
insurance contract between the bar and the insurer. Our Supreme Court held that the plaintiff
was not a third-party beneficiary under the insurance policy. Schmalfeldt, supra at 423. The
The focus of the inquiry . . . should be whether [the insurer], by its
agreement to cover medical expenses for bodily injuries caused by accidents, had
undertaken to give or to do or refrain from doing something directly to or for [the
plaintiff] pursuant to the third-party beneficiary statute, MCL 600.1405(1). Thus,
. . . we must turn to the contract itself to see whether it granted [the plaintiff]
third-party beneficiary status.
We affirm the decision of the Court of Appeals because the contract
contains no promise to directly benefit [the plaintiff] within the meaning of §
1405. Nothing in the insurance policy specifically designates [the plaintiff], or the
class of business patrons of the insured of which he was one, as an intended thirdparty beneficiary of the medical benefits provision. At best, the policy recognizes
the possibility of some incidental benefit to members of the public at large, but
such a class is too broad to qualify for third-party status under the statute.
[Schmalfeldt, supra at 429 (citations omitted).]
Here, plaintiff was not an incidental beneficiary; the whole and singular purpose of the
contract was to secure repairs to the flooring in plaintiff’s basement. The focus of the contract is
on restoring plaintiff’s property; defendant promised to do the work directly for plaintiff. This is
not a case involving “the possibility of some incidental benefit to members of the public at
large.” Id. Viewing the contract objectively, defendant undertook a promise directly benefitting
plaintiff, and plaintiff is expressly referred to in the contract. Any argument that defendant was
not clearly aware that the scope of its contractual undertakings encompassed plaintiff is absurd,
given the nature of the contract; it was the “Marie Vanerian Residence” job. This case is easily
distinguishable from Schmalfeldt.
Our case is also distinguishable from Brunsell v City of Zeeland, 467 Mich 293; 651
NW2d 388 (2002), in which the plaintiff tripped and fell on a sidewalk defect, and the sidewalk
was part of an area leased to the defendant city by a bank. The city-bank lease required the city
to repair the sidewalk, and the plaintiff sued the city, claiming that she was a third-party
beneficiary of the lease and that the city breached its contractual undertaking to repair the
sidewalk. Id. at 294-295. The Supreme Court held that the plaintiff was not a third-party
beneficiary of the city-bank lease agreement. Id. at 299. The Court reasoned:
In the present case, plaintiff can only plausibly claim third-party
beneficiary status under the lease agreement as a member of the public because
her claim is premised on contractual language referring to the city repairing
improvements “as may be necessary for the public safety.” There is nothing in
the lease agreement that specifically designates plaintiff (or any reasonably
identified class) as an intended beneficiary of the promise. Accordingly, . . .
plaintiff cannot be considered an intended third-party beneficiary under MCL
600.1405 because the public as a whole is too expansive a group to be considered
“directly” benefitted by a contractual promise.
Moreover, an objective analysis of the contract at issue indicates that the
contractual provision at issue was intended to delineate the obligations of the city
and the bank with regard to the premises, not to directly benefit third parties. The
allocation to the city of responsibility to “repair the improvements which it
constructs on the premises as may be necessary for the public safety” is in the
same paragraph of the lease agreement as the allocation to the bank of the duties
to “remove snow, pick-up litter, and perform such other sanitary maintenance as
may be required.” This reflects that the parties were defining their obligations to
each other with regard to maintenance concerns, not acting for the purpose of
directly benefiting third parties. With regard to its promise, the city was assuring
the bank that the bank would not be responsible for repairing the improvements
on the premises to protect public safety. There is no reason to conclude that the
bank, obviously a business and not a charitable institution, was acting to protect
parties other than itself in receiving this promise. Accordingly, plaintiff was not
an intended third-party beneficiary of the lease agreement because an objective
analysis reflects that the city's promise to the bank that the city would be
responsible for repairs was not intended to directly benefit third parties. [Id. at
Here, the Pugh-defendant contract specifically designates plaintiff as an intended
beneficiary of the promise, i.e., the promise is to remove and replace flooring in the basement of
plaintiff’s home. There is no expansive group or unidentified party that is benefited by
In its opinion, the Court stated that a third-party beneficiary can be a member of a class;
however, the class must be sufficiently described. Brunsell, supra at 297, quoting the lead
opinion in Koenig v South Haven, 460 Mich 667, 680; 597 NW2d 99 (1999).
defendant’s promises. The obligations delineated in the contract concerned repair of the floor in
plaintiff’s basement. Pugh was necessarily contracting with defendant for the purpose of
directly benefiting plaintiff because Pugh had an obligation to see to it that the basement floor
The trial court and defendant relied on Kisiel v Holz, 272 Mich App 168, 171-172; 725
NW2d 67 (2006), in which this Court stated:
In general, although work performed by a subcontractor on a given parcel
of property ultimately benefits the property owner, the property owner is not an
intended third-party beneficiary of the contract between the general contractor and
the subcontractor. 9 Corbin, Contracts (interim ed), § 779D, p 41; see also 2
Restatement Contracts, 2d, § 302, comment e, illustration 19, p 444 (property
owner is only an incidental beneficiary of construction subcontract between
general contractor and subcontractor). Absent clear contractual language to the
contrary, a property owner does not attain intended third-party-beneficiary status
merely because the parties to the subcontract knew, or even intended, that the
construction would ultimately benefit the property owner. See, e.g., 155 Harbor
Drive Condo Ass’n v Harbor Point Inc, 209 Ill App 3d 631, 646-647; 568 NE2d
365 (1991); see also Gentile v Ristas, 160 Ohio App 3d 765, 791-792; 828 NE2d
1021 (2005); Thomson v Espey Huston & Assoc, Inc, 899 SW2d 415, 419-420
(Tex App, 1995); Vogel Bros Bldg Co v Scarborough Constructors, Inc, 513 So
2d 260, 261-262 (Fla App, 1987).
In the present case, on the basis of an objective review of the contract, we
conclude that plaintiff [homeowner] was not an intended third-party beneficiary
of the oral subcontract between GFA [subcontractor] and Holz [contractor].
Before the start of construction, Holz orally subcontracted with GFA for
excavation and concrete work. Plaintiff does not dispute the scope of this oral
subcontract. There is nothing in the scope of the oral contract to suggest that GFA
expressly promised to provide plaintiff with concrete walls. Because the oral
contract did not contain an express promise to create the basement walls for
plaintiff's benefit, and because the contract was primarily executed for the benefit
of the contracting parties, plaintiff was only an incidental beneficiary.
Accordingly, plaintiff is unable to maintain an action against GFA for breach of
The problem with Kisiel, as we view it, is that there is no discussion regarding the nature
of the oral contract and the particular communications between the contractor and the
subcontractor, other than an indication that the subcontract was for excavation work and the
pouring of concrete. There is no language suggesting that the plaintiff homeowner was
mentioned or referenced by name during verbal communications between the contractor and
subcontractor when the oral contract was formed. There is no indication that the plaintiff was
“directly referred to in the contract.” Schmalfeldt, supra at 428. As recited above, the Kisiel
panel concluded that “[t]here is nothing in the scope of the oral contract to suggest that GFA
expressly promised to provide plaintiff with concrete walls.” Id. at 172. Here, the contract
expressly and directly references plaintiff by name, and defendant promised to tear out the old
damaged floor and to supply and install a new floor in the basement of plaintiff’s home. In fact,
plaintiff and defendant discussed the project with each other at the time the contract was formed
on Pugh’s suggestion, and plaintiff and defendant agreed that defendant would replace her maple
floors with oak floors. Defendant undertook to do something directly for plaintiff. MCL
600.1405(1); Schmalfeldt, supra at 428.
While we find Kisiel distinguishable, we also note our concern that Kisiel suggests that
there is a different or separate standard for determining third-party-beneficiary status in
construction cases involving contracts between contractors and subcontractors. As evident from
the plain language of MCL 600.1405, there are no situational distinctions created by the statute
in analyzing whether a party is a third-party beneficiary. Most telling in the Kisiel opinion is the
panel’s reliance, not on Michigan authority, but on out-of-state authority and general treatises,
although the out-of-state cases ultimately, for the most part, support our resolution of this appeal.
First, there is no reference to any relevant statutory provision on the issue of third-party
beneficiaries in any of the out-of-state cases, which all rejected a finding that third-party
beneficiary status was conferred relative to contractor-subcontractor agreements under the facts
presented, and here we are confined to the language in MCL 600.1405; common-law principles
were at work in these other jurisdictions. 155 Harbor Drive, supra at 645-648; Gentile, supra at
791-793; Thomson, supra at 419-420; Vogel Bros, supra at 261-262. Furthermore, in 155
Harbor Drive, supra at 647, the Illinois appellate court concluded:
We find that the trial court properly dismissed plaintiff's third-party
beneficiary claims. Plaintiff has the burden of proving that defendants intended to
confer a direct benefit upon the Association. Plaintiff has failed to meet this
burden. The Association has failed to identify any language in the subcontract
which constitutes a virtual express declaration to overcome the presumption that
the parties contracted only for themselves. The subcontracts make no reference
to the Association or its members, and do not express an intent to directly benefit
either the Association or its members. The provisions in the construction contracts
regarding guarantees to be provided by the contractor and the subcontractors do
not mention the unit owners. There is no question that the parties were aware that
the building was being built for subsequent purchasers. However, “[i]t is not
enough that the parties know, expect or even intend that” such people may benefit
or that they are referred to in the contract.
Here, the subcontract expressly references plaintiff by name, and the subcontract is
directly for her benefit.
In Vogel Bros, supra, the contractor and the subcontractor included an arbitration
provision in their contract in case of disagreements regarding the amount to be paid, and there
was no mention of any third party. The city of Tarpon Springs, owner of the construction project
at issue, had filed a motion to abate court litigation that had arisen, attempting to invoke the
We note that MCL 600.1405 creates no presumptions under Michigan law.
arbitration provision as a third-party beneficiary. Id. at 261. The Florida appellate court
reversed the trial court ruling that granted the motion, and the appellate court reasoned that there
was nothing in the plain language of the contract suggesting that the contractor and the
subcontractor had intended for the city to primarily and directly benefit from the arbitration
provision. Id. at 261-262. Again, in the case at bar, there is contractual language indicating that
the flooring work was to be performed directly for plaintiff.
In Gentile, supra at 792, the Ohio appellate court rejected the plaintiff’s third-party
beneficiary claim, holding that “the evidence does not create a reasonable inference that [the
contractor and the subcontractor] entered into the roof-replacement contract in contemplation of
the [plaintiff] purchasing the home. It is undisputed that when [the contractor] contracted with
[the subcontractor] to have the new roof installed, neither [the contractor] nor [the subcontractor]
had ever met the [plaintiff].” The appellate court refused to infer intent to create a third-party
beneficiary solely on the basis of broad, conclusory assertions that the contractor understood that
the roof was being replaced for the benefit of someone who would eventually purchase the home.
Id. at 792-793. The flooring work here was not for some unknown person or persons who would
eventually benefit from the work; rather, plaintiff was an expressly identified third party under
In Thomson, supra at 419-420, the Texas appellate court first stated that “absent clear
evidence to the contrary, a property owner is not a third-party beneficiary of a contract between
the general contractor and a subcontractor.”4 The plaintiffs in Thomson claimed third-party
beneficiary status on the basis of two contracts. The first contract involved engineering services
that had been subcontracted relative to the construction of an apartment complex, and the
contractor-subcontractor agreement did mention in its title that the project was located on the
plaintiffs’ property. Id. at 417-418. The Texas court, however, concluded that the plaintiffs
were merely incidental beneficiaries because the plaintiffs indirectly benefited from the contract
as real-estate development almost always benefits the property owner. Id. at 420. While this
case might run contrary to our conclusion here, the ruling would be inconsistent with MCL
600.1405 and the Supreme Court precedent cited above, where our statute simply requires the
existence of a promise to do something directly for a third party, i.e., a third party referenced in
the contract. The second contract relied on by the plaintiffs in Thomson was rejected by the
court as a basis for a third-party beneficiary claim because that contract contained no mention of
the plaintiffs or the property. Thomson, supra at 420. Such is not the case here.
We hold that plaintiff is a third-party beneficiary of the Pugh-defendant contract under
MCL 600.1405 as a matter of law, and the trial court on remand is to enter an order granting
summary disposition in favor of plaintiff on this issue. MCR 2.116(I)(2). Of course, plaintiff
must now proceed to litigate whether defendant breached the contract, whether plaintiff incurred
damages, and whether the breach caused the alleged damage.
As indicated above, we emphasize that MCL 600.1405 does not create special rules for cases
involving contractors and subcontractors.
Reversed and remanded for proceedings consistent with this opinion. We do not retain
/s/ William B. Murphy
/s/ Pat M. Donofrio
/s/ David H. Sawyer