McCloskey & Company, Inc. v. Wright

• Court: U.S. District Court — Eastern District of Virginia
• Writing for the Court: MERHIGE
• Citation: McCloskey & Company, Inc. v. Wright, 363 F. Supp. 223 (E.D. Va. 1973)
• Decision Date: 20 June 1973
• Docket Number: Civ. A. No. 102-73-R.
• Parties: McCLOSKEY & COMPANY, INC., etc. v. Marcellus WRIGHT, Jr., et al.

363 F. Supp. 223

McCLOSKEY & COMPANY, INC., etc. v. Marcellus WRIGHT, Jr., et al.

Civ. A. No. 102-73-R.

United States District Court, E. D. Virginia, Richmond Division.

June 20, 1973.

Hunton, Williams, Gay & Gibson, Beverly C. Read, Richmond, Va., for plaintiffs.

Murray H. Wright, McGuire, Woods & Battle, Richmond, Va., for defendants.

MEMORANDUM

MERHIGE, District Judge.

McCloskey & Company-C. H. Leavell Company, a joint venture (hereafter "builders") brings this action against Marcellus Wright, J., and other architects (hereafter "architects") for damages allegedly incurred by virtue of faulty construction design. Jurisdiction is attained by virtue of 28 U.S.C. § 1332. The parties are presently before the Court pursuant to the architects' motion to dismiss. Respective counsel have briefed the issues raised thereby, and it is upon same that this matter is ripe for disposition.

The basic and undisputed facts are as follows. On June 30, 1966 the United States contracted with the architects for the design of a post office building in Richmond, Virginia and the supervision of its construction. Pursuant to that contract the architects developed plans and specifications. Subsequently plaintiff builders were awarded a contract from the United States to build the post office. In February of 1968 the United States assigned to the builders the drawings and specifications prepared by the architects for construction of the project. The builders proceeded to erect the post office upon the architects' design. The United States took possession of the post office on October 1, 1970 but withheld formal acceptance of the project because of a defective roof. Builders allege that they have been forced to incur additional expense to repair the roof and seek damages here from the architects on the premise that construction inadequacies were caused by faulty design and/or construction supervision by the architects. Builders also seek indemnity from the architects for legal expenses involving litigation with the roofing subcontractor.

Specifically, the amended complaint sets forth five theories of recovery:

1. Count I: breach of warranty and breach of contract,

2. Count II: breach of contract for a third party beneficiary,

3. Count III: negligence in design,

4. Count IV: negligence in supervision,

5. Count V: indemnity for litigation expenses incurred by builders in suits against them by the roofing subcontractor.

The legal issues posed with respect to each count will be considered seriatim.

Count I

The gravamen of Count I is that architects warranted that the project design was fit, accurate and complete and that for the alleged breach of said warranty, builders may recover expenses caused it in repairing the roof. Architects have moved to dismiss Count I on several grounds, but in view of the Court's disposition of their plea of the statute of limitations only the latter need be treated.

The applicable statute of limitations is supplied by the law of Virginia, the lex fori, see Hospelhorn v. Corbin, 179 Va. 348, 19 S.E.2d 72 (1942). Va. Code § 8-13 provides a period of limitations of five years for actions based upon contracts in writing not under seal. Under familiar principles of law, the statute begins to run from the time of a violation or breach of a legal duty or obligation owed a plaintiff by a defendant. Caudill v. Wise Rambler, Inc., 210 Va. 11, 168 S.E.2d 257 (1969). See also Kilduff v. United States, 248 F.Supp. 310 (E.D.Va.1961).

The architects allege in support of their motion that up to the date of the assignment of plans, the government had a cause of action, if any, for breach of warranty. This theory impliedly states that the violation of the warranty occurred at the tendering to the government of the design, discussion infra. They therefore assert that builders' claim should be measured from no later than the date of assignment, 2/12/68. The builders agree in part with this reasoning but contend that the assignment was not effective until March 11, 1968, when they accepted the assignment by the government of the plans and drawings. Because the complaint was filed March 2, 1973, under this theory of arising obligation developed by counsel, the date of effective transfer of obligations is crucial. Builders also allege, however, that the breach did not precede the assignment of the plans but rather that it occurred at the time the government required McCloskey to do corrective work. While that date is not specified, it obviously was subsequent to the acceptance of the assignment and within the five year period.

These contentions in turn raise two issues. First, when did the alleged breach occur, at the time the plans were submitted to the government or at the time the present plaintiff suffered monetary injury? Second, when did the legal obligation, which was allegedly breached, arise, on February 12, 1968 (date of assignment), March 11, 1968 (date of acceptance), or from the date the obligation arose to builders' assignor?

In Richmond Redevelopment and Housing Authority v. Laburnum Construction Corporation, 195 Va. 827, 80 S.E.2d 574 (1954), the Virginia Supreme Court ruled that a property damage claim upon a theory of tortious breach of warranty arises at the time the defect or condition causing the breach occurs. Thus in Laburnum, a defective gas pipe was installed six feet under ground. Several years later gas leaked from the pipe and caused an explosion. Plaintiff had no knowledge that the pipe was defective and it was undisputed that acquiring that knowledge before the explosion would be difficult. The Court held that the cause accrued from the time the pipe was installed because the warranty applied to the pipe. While damages caused by the explosion were "consequential" and thus possibly recoverable, the direct damage in violation of the warranty giving rise to the cause of action was the installation of the defective pipe. Moreover, the Court added, significantly for these purposes, that "the difficulty in ascertaining that a cause of action exists plays no part in the general rule." This ruling was subsequently reaffirmed in Caudell, 168 S.E.2d 257, and recognized as controlling by the United States Court of Appeals for the Fourth Circuit in Sides v. Richard Machine Works, Inc., supra, 406 F.2d 445 (1969). While Laburnum strictly deals with the tortious act of breaching a contract, rather than liability under the contract for breach of same, the conclusion that the same principle applies to accrual of the cause of action is inescapable.

Applying this reasoning to the present matter, the breach of warranty occurred at the time the architects tendered allegedly defective plans to the government. The fact that the defect may not have been ascertainable until a later date is of no consequence under the Laburnum rule.¹

Given the conclusion, therefore, that the breach occurred upon the tendering of the plans (8/24/67), it must be determined when, for these purposes, a legal obligation arose between the parties. There are two possibilities:

1) The assignment effected ipso facto, a transfer to builders of architects' obligation to the government and therefore builders acquired an existing cause of action upon assignment which dates from August 24, 1967, the date the plans were tendered to the government.

2) The alleged obligation of architects to builders arose at the time the government effectively assigned the plans (either 2/12/68 or 3/11/68) and the cause of action matured by virtue of the alleged defect in specifications, the moment the assignment was effected.

Builders' claim in Count I is in the main premised upon the theory that the assignment of plans by the government transferred the obligations owed the government by the architects to the builders.² These obligations included a warranty of fitness of the specifications. As stated by the builders, "McCloskey the builders, as assignee of the government's contract with the architect, steps into the shoes of the government assignor." Plaintiff's brief at 16. This assertion in turn requires the application of the general rule that a party may assert the same defenses against an assignee that he can against an assignor. Were the assignor in this matter a private party, it would therefore be logical to deduce that the statute of limitations assertable against a private assignor could be so asserted against the architects-assignees. The reason for this result is that the statute of limitations is directed to the claims sought to be asserted, not to the parties seeking to assert them. Street v. Consumers Mining Corporation, 185 Va. 561, 39 S.E.2d 271 (1946). To allow the assignee to recommence the running of the statute, absent a new promise from the party sued, at the time of assignment, would defeat the purpose and design of the statute as a statute of repose. See Street, supra.³

The assignor in this matter is not, of course, a private party — it is the government; and the government is immune to the bar of the statute of limitations. Guaranty Trust Co. of New York v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224 (1938). The law appears to be well-settled, however, that an assignee of a government claim may not rely upon the government's immunity to the statute of limitations where it is intended to enforce the claim for private benefit. Lovey v. Escambia County, 141 So.2d 761 (Fla.App.1962), Fidelity & Deposit Co. of Md. v. First National Bank, 165 Tenn. 395, 54 S.W.2d 964 (1932). See generally 53 C.J.S. Limitations of Actions § 18.

The remaining question, therefore, is whether the statute begins to run from the moment the cause of action arises in favor of the government, or whether it begins to run from the date of assignment. The Court is unaware of any Virginia case dealing with this matter, but the few jurisdictions that have considered it have in effect adopted the former interpretation, i. e., that the statute runs...