American Towers Owners Ass'n, Inc. v. CCI Mechanical, Inc., 950136

• Court: Supreme Court of Utah
• Writing for the Court: Tim Dalton Dunn; HOWE; ZIMMERMAN, C.J., and DURHAM; STEWART
• Citation: 930 P.2d 1182
• Parties: 306 Utah Adv. Rep. 3 AMERICAN TOWERS OWNERS ASSOCIATION, INC., a Utah corporation, Plaintiff and Appellant, v. CCI MECHANICAL, INC., Christiansen Brothers, Inc., American Towers, Inc., Trossen Wright Architects, P.A., Donald A. Wright, Duane A. Trossen, Block 58 Associates, a limited partnership, Block Associates, Inc., Dee W. Christiansen, West Temple Associates, a limited partnership, CL Management Ltd., a limited partnership, Howard S. Clark, Estate of George A. Leaming, MB Management, Inc., Daw Incorporated, Hunter Insulation, Inc., First Security Bank of Utah, N.A., REH Incorporated, MCC Powers Process Controls, and Red-White Valve Corp., Defendants and Appellees.
• Docket Number: No. 950136,950136
• Decision Date: 20 December 1996

Page 1182

930 P.2d 1182 306 Utah Adv. Rep. 3 AMERICAN TOWERS OWNERS ASSOCIATION, INC., a Utah
corporation, Plaintiff and Appellant,
v.
CCI MECHANICAL, INC., Christiansen Brothers, Inc., American
Towers, Inc., Trossen Wright Architects, P.A., Donald A.
Wright, Duane A. Trossen, Block 58 Associates, a limited
partnership, Block Associates, Inc., Dee W. Christiansen,
West Temple Associates, a limited partnership, CL Management
Ltd., a limited partnership, Howard S. Clark, Estate of
George A. Leaming, MB Management, Inc., Daw Incorporated,
Hunter Insulation, Inc., First Security Bank of Utah, N.A.,
REH Incorporated, MCC Powers Process Controls, and Red-White
Valve Corp., Defendants and Appellees. No. 950136. Supreme Court of Utah. Dec. 20, 1996.

Page 1183

Craig G. Adamson, Eric P. Lee, Cameron S. Denning, Salt Lake City, for American Towers Owners Association.

John L. Young, Salt Lake City, for CCI Mechanical.

George A. Hunt, Kurt M. Frankenburg, Reed L. Martineau, John R. Lund, Julianne Blanch, Salt Lake City, for Christiansen Brothers, Block 58 Associates, Dee W. Christiansen.

Raymond Scott Berry, Salt Lake City, for American Towers, Inc.

Karra J. Porter, Geoffrey C. Haslam, Salt Lake City, for Trossen Wright Architects, Duane Trossen, Donald Wright.

Terry M. Plant, Bradley R. Helsten, Salt Lake City, for West Temple Associates, Howard Clark, CL Management Ltd., Estate of George Leaming, MB Management.

Tim Dalton Dunn, J. Rand Hirschi, Salt Lake City, for Daw Incorporated.

Merrill F. Nelson, Gregory M. Simonsen, Salt Lake City, for Hunter Insulation, Red-White Valve Corp.

Jonathan A. Dibble, Keith A. Kelly, Salt Lake City, for First Security Bank, REH Incorporated.

Page 1184

Harold L. Petersen, Salt Lake City, for MCC Powers Process Controls, Mark Controls Corporation.

Craig C. Coburn, Bret M. Hanna, Salt Lake City, for amicus Consulting Engineers Council, amicus Utah Society of American Institute of Architects.

HOWE, Justice:

Plaintiff American Towers Owners Association, Inc. (the Association), brought this action against numerous defendants, alleging design and construction defects in the plumbing and mechanical systems of a large condominium complex. The district court granted defendants' motions for summary judgment, and the Association appeals.

BACKGROUND

In reviewing this grant of summary judgment, we view the facts in the light most favorable to the Association and recite them accordingly. The American Towers complex consists of two 26-story towers containing 357 residential units and some commercial space. Architectural services for the complex commenced in 1980, and a general contractor was hired in 1981. The complex was substantially completed in July 1983.

Defendants were all involved in the complex's design, development, and construction. CCI Mechanical, Inc. (CCI), was the complex's mechanical subcontractor and engineer and was responsible for the planning and installation of the culinary water, sewer, heating, cooling, and fire protection systems. Christiansen Brothers, Inc., was the general contractor. American Towers, Inc., was the original developer and was one of the original borrowers on the complex's construction loan. Trossen Wright Architects, P.A., Donald A. Wright, and Duane A. Trossen were the architects. Block 58 Associates, Block Associates, Inc., Dee W. Christiansen, West Temple Associates, CL Management, Ltd., Howard S. Clark, the late George A. Leaming, and MB Management, Inc., were all involved in the development and/or financing of the complex. ¹ Daw Incorporated was the dry wall subcontractor. Hunter Insulation, Inc., was the insulation subcontractor. First Security Bank of Utah, N.A., and its wholly owned subsidiary REH Inc., foreclosed its security interest in 1984 and became a successor developer of the complex. ²

The Association's second amended complaint ³ sought damages for unjust enrichment, breach of contract/warranty (third-party beneficiary), negligence, and breach of implied warranty. ⁴ The allegations generally concern problems with the complex's plumbing and mechanical systems. For example, instead of using premanufactured T-shaped joints at the ninety degree plumbing connections, builders fabricated the joints on site. These joints were allegedly incorrectly made, resulting in thin walls that are inherently weaker than standard premanufactured joints. These weak joints began to progressively spring leaks in late 1990 as the complex reached full occupancy. Other problems include (1) piping systems that were installed without adequate provision for expansion and contraction and without sufficient guides and anchors, resulting in pipe breaks and leaks, (2) pipes that are too small in some locations, resulting in pressure loss and failures, (3) domestic water system pressure that exceeds the code limit at some fixtures, and (4) lack of outside air vents and exhaust systems.

First Security filed a motion to dismiss the complaint which the district court treated as

Page 1185

a motion for summary judgment. The court granted the motion, concluding that First Security entered into a May 1989 release with the Association that covered the claims asserted in the complaint and that the release was not subject to rescission on the basis of mutual mistake.

Most of the remaining defendants moved for summary judgment beginning in May 1994. In response, the Association moved for a continuance under rule 56(f) of the Utah Rules of Civil Procedure, on which motion the court apparently did not rule. In July 1994, the Association filed a second rule 56(f) motion.

The district court conducted a hearing in August 1994, denied the Association's rule 56(f) motion, and granted all of the summary judgment motions, concluding that (1) the unjust enrichment claim fails because the subject matter of the claim was preempted by the existence of express contracts and because the Association conferred no benefit upon defendants, (2) the third-party beneficiary claim fails because the Association was not an intended beneficiary, (3) the negligence claim fails because the alleged damages are for economic loss, not for injury to persons or other property, (4) the implied warranty of habitability claim fails because Utah does not recognize such a claim in this circumstance, (5) all of the Association's claims accrued more than six years prior to the commencement of this action and are time-barred, and (6) the discovery rule does not apply to toll the running of the statute of limitations. ⁵

Following the court's decision, Hunter Insulation, Inc., and American Towers, Inc., moved for summary judgment. The court granted the motions on the same basis as the prior motions.

The sole remaining defendant, Block Associates, Inc., did not respond to the second amended complaint. Consequently, the Association moved for entry of default judgment. The district court directed entry of Block Associates' default but denied the request for a money judgment, holding that granting one would be inconsistent with the court's prior holdings in the case.

On review of a grant of summary judgment, we will affirm only if there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Andreini v. Hultgren, 860 P.2d 916, 918 (Utah 1993).

FIRST SECURITY & REH

We first address the district court's grant of summary judgment to First Security and its wholly owned subsidiary REH (collectively, "First Security") on a basis unique from the other defendants. The court held that (1) First Security entered into a release with the Association that covered the claims asserted in the complaint, and (2) the release is not subject to rescission on the basis of mutual mistake. These are questions of law that we will review for correctness.

In 1983, First Security provided financing for the complex under a participation agreement with American Savings, the original lender on American Towers. In 1984, First Security foreclosed its security interest and took ownership of American Towers. In 1987, the Association sued First Security, claiming that it owed unpaid assessments on the units it owned. In addition, some owners in the complex who were also members of the association filed another action against First Security.

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In May 1989, the Association and First Security entered into a "Settlement Agreement and Mutual Release of Claims" (the Release). The Release states that First Security denied liability for the past due assessments and had its own claims and offsets against the Association. The Release also provides:

WHEREAS, the Association did not assert other claims in [its action], but is willing to release all other claims against Lenders it may have which arise out of or relate to the acquisition, foreclosure, management, control, supervision or ownership by Lenders of the American Towers project from its inception to the present.

....

2. The Association, by authority of its Board of Trustees and exercising all of the powers of the Association vested in it by law, the Articles of Incorporation, By-Laws, and Declaration of Condominium, does hereby release, acquit, and forever discharge Lenders and their respective agents, employees, affiliates, successors and assigns from all claims asserted in and arising out of [the action], ... and from all other claims, actions, causes of action, and/or damages against Lenders which arise out of or relate to the acquisition, foreclosure, management, supervision, operation or control by Lenders.

(Emphasis added.) Under the Release, First Security and American Savings paid $100,000 to the Association, $51,807.20 of which was provided by First Security. The parties to the Release verified that they had consulted with legal counsel and were authorized to enter into the agreement.

The district court found that in consideration of the Release, First Security "paid significant consideration, gave up valuable...