Automatic Sprinkler Corp. of America v. Coley & Petersen, Inc.

• Decision Date: 12 January 1979
• Docket Number: No. 770728,770728
• Court: Virginia Supreme Court
• Parties: "AUTOMATIC" SPRINKLER CORPORATION OF AMERICA v. COLEY & PETERSEN, INC., et al. Record

Page 765

250 S.E.2d 765

219 Va. 781

"AUTOMATIC" SPRINKLER CORPORATION OF AMERICA v. COLEY & PETERSEN, INC., et al.

Record No. 770728.

Supreme Court of Virginia.

Jan. 12, 1979.

Wilbur L. Hazlegrove, William D. Elliot, Roanoke (Hazlegrove, Dickinson & Rea, Roanoke, on briefs), for plaintiff in error.

Ronald M. Ayers, Roanoke, John D. Epperly, Martinsville (Diane McQ. Strickland, Roanoke, Junius D. Warren, Martinsville, Woods, Rogers, Muse, Walker & Thornton, Roanoke, Broaddus, Epperly, Broaddus, Beck & Warren, Martinsville, on brief), for defendants in error.

Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, HARMAN, POFF and COMPTON, JJ.

COMPTON, Justice.

This appeal arises from a contract to construct a public facility. Following an incident which resulted in damage to portions of the structure, two subcontractors sued a third subcontractor for recovery of costs and expenses incurred during repair of the damage. Upon review, we consider whether the plaintiffs below had standing to sue, whether contractual waiver provisions barred the plaintiffs' actions, and whether certain items of damage were properly admitted in evidence.

In 1968, the City of Roanoke entered into a lump sum contract in the amount of $11 million with Nello L. Teer Company, the general contractor, for construction of the Roanoke Civic Center, consisting of an Auditorium, Coliseum and Exhibit Hall. Thereafter, Teer entered into separate written subcontracts with plaintiff-appellee Coley & Petersen, Inc., plaintiff-appellee Clear-Bullock Electrical Company, Inc. and defendant-appellant "Automatic" Sprinkler Corporation of America for installation of the mechanical work (heating, air-conditioning, plumbing), electrical work and the automatic sprinkler system respectively. Several years later, and before final completion of the project, a cast iron pipe installed by the defendant broke causing water damage to some of the mechanical and electrical equipment in a basement below the Auditorium. The plaintiffs repaired the damage and when the defendant refused their demands for reimbursement of the amounts of their claimed losses, these two actions in tort, filed separately but later consolidated, followed in 1972. Coley & Petersen initially sought to recover approximately $15,000 while Clear-Bullock's suit was for almost $36,000.

Evidentiary hearings by the trial court sitting without a jury were held in 1976 upon defendant's several special pleas and motions. At these hearings, the court considered the questions of standing and waiver, ruling adversely to defendant. Later in 1976, a four-day jury trial was held on the merits at which responsibility for the damage was fixed upon the defendant and damages were assessed in favor of the plaintiffs. Coley & Petersen was awarded $8,934.47 and Clear-Bullock recovered $24,770.59. Subsequently, the trial court overruled defendant's post-trial motions and we granted defendant a writ of error to the February 1977 judgment orders confirming the verdicts.

We will first examine the questions of standing to sue and waiver. All the evidence pertaining to these issues was taken at the pre-trial hearings.

The record reveals that immediately following the March 1968 execution of the prime contract between the City and Teer, the general contractor entered into the three subcontracts, containing identical basic provisions, with the parties to this action. The work proceeded for a period of about four years. Final completion and the City's final acceptance of the project occurred during February of 1972.

In early 1971, in part because the City had "booked at least one and maybe more activities" for the Civic Center in 1971 which would have been "extremely costly" to cancel, the City and Teer agreed that the City would be permitted to use certain parts of the building provided the architect made an inspection and issued a certificate of substantial completion. Accordingly on March 24, 1971, such a certificate was issued and March 25, 1971 was established as the date of substantial completion. The certificate further provided that the City had the responsibility to purchase and maintain insurance to protect itself, Teer, the public, and "all other parties from claims or losses which may arise out of or result from (the City's) occupancy and use" of the completed portions of the project. On March 19, 1971, the City had obtained an insurance policy providing coverage for the Civic Center against the peril of fire, with extended coverage. Effective March 25, 1971, the builder's risk insurance policy for the project obtained by Teer was cancelled. Teer then obtained, as required by the certificate of substantial completion, an "Insurance Installation Floater Policy" providing coverage for losses which might arise from its operations in completing the work. According to the testimony and the exhibits, the Civic Center "opened" on March 27, 1971 and at least six more events were held there prior to the date the damage in issue happened.

On May 18, 1971, a break occurred in the flange of the six-inch sprinkler main at a point just inside the interior wall of the basement of the Auditorium. The basement area was flooded and a substantial amount of equipment and other installed work of the plaintiffs in the area was heavily damaged. At the time, although plaintiffs had completed substantially all their work, neither had fully performed its contract. Each had remaining responsibilities to Teer under the subcontracts. The defendant had finished its work of installing the sprinkler system prior to March 25, 1971.

The day after the damage occurred, Teer notified defendant and its liability insurance carrier that "Automatic" Sprinkler was required under its subcontract to repair any damage it had caused as a result of its work. Defendant refused to authorize the several subcontractors to proceed with the repairs and on May 28, 1971, Teer issued written notice to the plaintiffs that under their contracts they had the duties to protect their work from damage until final acceptance, to make any and all repairs necessary and to prepare all work acceptable to the architect and to the owner. Article 20 of the subcontracts provided:

The Subcontractor will be responsible for the care and protection of his work until the final inspection and acceptance by the Architect and/or Owner. The Contractor assumes no responsibility for the collection of any charges claimed by this Subcontractor against another Subcontractor and/or Supplier.

Any damage inflicted by another Subcontractor shall be repaired by this Subcontractor and be billed on a weekly basis to the Subcontractor responsible for the damage. The party responsible for the damage must be notified in writing, before repairs or corrective work is done.

Pursuant to that provision, Teer advised both plaintiffs in the May 28 letter that

if your work is damaged by others or by another subcontractor, the burden is upon you to collect the cost of such damages from him. You will note that work should not start until you have given him proper Written notice.

The letter concluded with the request that plaintiffs "act immediately," as outlined in the letter, because "expedient completion of the work is an essential element of (Teer's) contract with the owner." The plaintiffs then proceeded to repair the damage, after giving written notice to defendant. Subsequently, defendant failed to reimburse plaintiffs for any of the expenses incurred.

The first question is whether the trial court was correct in ruling that the plaintiffs could bring these tort actions against the defendant. Asserting that the court below erred, and relying on several Virginia cases, defendant contends that because the project had been substantially completed, neither plaintiff had any "legal interest in the completed mechanical and electrical work and no standing to maintain these actions." Defendant asserts that "the General Conditions of the prime contract expressly provided for passage of title to supplies and materials as and when they were incorporated in the work" and argues that the certificate of substantial completion between the City and Teer "expressly provided that the risk of loss or damage to the Civic Center would be upon the City of Roanoke from and after 12:01 a. m. on March 25, 1971." The "essential purpose", the defendant continues, "of the certificate of substantial completion was to set at rest all questions of title, possession and risk of loss as to the completed aspects of the work."

The plaintiffs, on the other hand, contend that defendant has failed to carry its burden of proof on the standing issue and that the cases relied on by defendant are not applicable here. Plaintiffs urge that because they were still performing work on the project pursuant to the subcontracts at the time the damages were incurred and because they were required by the terms of the subcontracts, specifically Article 20, to effect all necessary repairs, they had standing to sue for the cost of repairs. We agree with the plaintiffs.

The uncontradicted evidence established that on the day the pipe burst the plaintiffs each had personnel at the project site performing work required by the respective subcontracts. Although the portion of completion of the plaintiffs' two contracts exceeded 99 per cent, the fact remained that under the clear terms of the subcontracts, the plaintiffs were responsible for the care and protection of their work until the final inspection and acceptance. Such event had not occurred when the water main ruptured. Furthermore, when damages occurred the general contractor ordered both plaintiffs to immediately repair the damage. Again, under Article 20, each had no option but to comply with Teer's directive because the contract specifically provided that such damage "shall be repaired" by the respective plaintiffs.

At the bar defendant argued that Article 20 "does not survive...