Statute of limitations, performance bond contract, surety, creditor, contract, reasonable suspicion

The Supreme Court of Michigan rules on an appeal from Camelot Excavating Company Inc., which brought suit against St. Paul Fire and Marine Insurance Co., the surety on a performance bond, claiming $18,848 as the balance due for excavation work. St. Paul brought a third-party suit against the performance bond principal, Priestly Contracting Inc.

Wayne Circuit Court granted summary judgment in favor of Camelot, noting that the limitations of the one-year performance bond were ambiguous and, therefore, the six-year statute of limitations for breach of contract applied. The appeals court reversed the lower court ruling, noting that the one-year limitation of the performance bond is not ambiguous or unreasonable, and that it could be enforced against Camelot.

St. Paul wins. The Supreme Court of Michigan affirmed appeal court ruling, noting that, as a third-party beneficiary, Camelot is "limited to reasonable conditions specified by the contract." The Supreme Court further found "no violation" of public policy, and affirmed the limitation provision, noting that the language provided "no basis" to construe its limitation against St. Paul.