Burris Chemical, Inc. v. USX Corp., s. 91-2758

Citation10 F.3d 243
Decision Date18 November 1993
Docket NumberNos. 91-2758,92-1254,s. 91-2758
PartiesBURRIS CHEMICAL, INCORPORATED, Plaintiff-Appellee, v. USX CORPORATION, Defendant-Appellant. BURRIS CHEMICAL, INCORPORATED, Plaintiff-Appellee, v. USX CORPORATION, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

Wayne Lee Emery, Warsaw, VA, argued (S.P. Groves, Sr., Young, Clement, Rivers & Tisdale, Charleston, SC, on brief), for defendant-appellant.

Keith Watson Vaughan, Womble, Carlyle, Sandridge & Rice, Winston-Salem, NC, argued (Jeffrey L. Furr, Womble, Carlyle, Sandridge & Rice, Winston-Salem, NC, George Before RUSSELL, WIDENER, and HALL, Circuit Judges.

E. Campsen, Jr., Charleston, SC, on brief), for plaintiff-appellee.

OPINION

WIDENER, Circuit Judge:

This is an appeal from judgment on a jury verdict awarding Burris Chemical, Inc. (Burris) damages against USX Corporation (USX) in the amount of $1,330,719.03. 1 While USX raises on appeal numerous issues contesting this award, the dispositive issue concerns the proper interpretation and application of a notice provision contained in an Agreement of Sale and Purchase of Assets (agreement) executed between Burris and USX. Reviewing the decision of the district court de novo, see Scarborough v. Ridgeway, 726 F.2d 132, 135 (4th Cir.1984), we are of opinion that the language of the notice provision is unambiguous and that Burris did not give timely notification to USX. We are also of opinion that the district court improperly interpreted the notice provision of the agreement and thus improperly submitted the issue of indemnification to the jury. Thus, Burris is not entitled to indemnification. Accordingly, we reverse.

I.

On April 29, 1983, Burris purchased from USX certain property and assets located in Miami, Dade County, Florida. USX had used this property as a Solvents Distribution Center for part of its Chemicals Division. Among the assets transferred to Burris was a tank farm consisting of at least 42 underground storage tanks. Because A.A. Burris, Jr., the president and principal owner of Burris Chemical, was not familiar with underground storage tanks, he was wary of potential environmental liability and wanted some protection against claims arising from events occurring prior to the closing date of the agreement. Therefore, he bargained during contract negotiations for an indemnification provision that was included in the agreement. 2 In connection with the indemnification provision, USX and Burris also agreed to include in the agreement a notification provision that would preclude liability if not complied with. 3

In the Spring of 1985 the Metropolitan Dade County Department of Environmental Resources Management (DERM), pursuant to a local regulation, required Burris to determine if any ground-water contamination existed at the tank farm site by sinking 24 monitoring wells. As a result of these monitoring wells, Burris detected ground-water contamination at the tank farm site. Consequently, DERM issued to Burris a Notice of Violation and Orders for Corrective Actions on May 14, 1985. 4

In response to the notice, Burris submitted to DERM a bailing plan to correct the situation. Burris conducted this bailing plan from May until the latter part of November when Burris received another directive from DERM dated November 21, 1985. This directive stated that Burris's bailing operation was not removing the contamination and ordered Burris to test all of the underground tanks and submit to DERM a formal remedial action plan within 30 days. Burris had the underground tanks tested and submitted a proposed remedial action plan to DERM on December 23, 1985. By letter dated January 22, 1986, DERM approved Burris's remedial action plan only to the extent that it called for removing the underground tanks. 5

By letter dated February 25, 1986, Burris first notified USX about the problem with the underground tanks. 6 In response to the notice, USX took no action and refused to indemnify Burris for its clean up costs. Consequently, Burris filed a diversity suit against USX in April 1988 seeking indemnification under Sec. 5.4 of the agreement. A jury returned a verdict upon which judgment was entered which resulted in this appeal.

II.

Under Florida law, 7 we are to decide as a matter of law whether or not contract provisions are ambiguous. See Specialty Restaurants Corp. v. Miami, 501 So.2d 101, 103 (Fla. 3rd Dist.Ct.App.1987). Finding no ambiguity in the contract provisions at issue, we next are to decide as a matter of law the proper construction and interpretation of the contract provisions. See DEC Electric, Inc. v. Raphael Constr. Corp., 558 So.2d 427, 428 (Fla.1990). Although Sec. 5.4 of the agreement states that USX will indemnify Burris for "all claims, demands and actions arising out of or connected with ownership or operation of the Included Assets prior to the close of business on the date of Closing[,]" this indemnification obligation is limited by the notice provision in Sec. 5.5 of the agreement. Section 5.5 states that "[i]f a claim arises or is asserted against [USX] or BURRIS to which indemnification ... applies, then [USX] or BURRIS ... shall give written notice of the claim to the other party ... within sixty (60) days from the date the claim is asserted." Therefore, under the clear and unambiguous language of Secs. 5.4 and 5.5, USX did not have to indemnify Burris under the agreement if Burris failed to give to USX proper and timely notice of a claim, demand or action.

As contained in the district court's instructions to the jury, 8 the district court determined as a matter of law that DERM's May 14, 1985 notice of violation was a claim, demand or action within the meaning of Sec. 5.5 of the agreement, and we are of opinion that such instructions were correct. Because Burris did not give notice of this claim to USX until February 25, 1986, Burris's notice was well beyond the 60-day notification period specified in the agreement. Based on our interpretation of the agreement and the factual findings of the district court, we are of opinion that Burris's claim for indemnification under the agreement is barred as a matter of law because of its violation of the 60-day notice provision of Sec. 5.5 of the agreement.

Although the district court properly found Sec. 5.5 of the agreement to be unambiguous as a matter of law, it then improperly interpreted the unambiguous language of Sec. 5.5. While it realized that the assertion of a claim against Burris triggered the 60-day notice provision of Sec. 5.5, the district court stated that the jury must decide two things under Sec. 5.5: when a claim was filed against Burris and when Burris knew or should reasonably have known that the claim was one to which the indemnity provisions of Sec. 5.4 applied. As for the actual filing of the claim, the district court removed this determination from the jury by instructing the jury that DERM's May 14, 1985 notice of violation was a claim, demand or action within the meaning of Sec. 5.5. Having decided the date of the claim for the jury, the district court next instructed the jury concerning the appropriate date from which to ascertain whether or not Burris properly notified USX within the required 60-day period:

You determine on what date a claim was made against Burris from which a reasonable person standing in Burris' shoes, with Burris' expertise and under the circumstances would or should have known of the claim for indemnification might apply or exist. You determine that date. Then you determine if Burris gave notice within 60-days after that date.

As for the necessity of this latter instruction, the district court stated the following:

Well, as a matter of law, I have inserted [into the Agreement that notice was proper if made] within 60-days from the time Burris knew or should have known as a reasonable person with their expertise and under their circumstances that the indemnification agreement might apply.

It is on this point, the insertion of a discovery clause into Sec. 5.5 by the corresponding instruction to the jury, that we find the district court in error.

Relying explicitly on Senfeld v. Bank of Nova Scotia Trust Co., 450 So.2d 1157 (Fla. 3d Dist.Ct.App.1984), the district court engrafted a discovery clause into the notice provision contained in Sec. 5.5 of the agreement. In Senfeld, the Florida Third District Court of Appeals applied the discovery rule to application of the statute of limitations in the Bank of Nova Scotia's action for conversion. 450 So.2d at 1163. Although the applicable four-year statute of limitations had run as measured from the date of the conversion, the court held that the applicable statute of limitations only began to run when "the plaintiff knows or is chargeable with knowledge of an invasion of his legal right[.]" 450 So.2d at 1162 (citations omitted).

The Senfeld decision follows a line of Florida cases recognizing the discovery rule and favoring "application of the blameless ignorance doctrine in those instances where the injured plaintiff was unaware or had no reason to know that an invasion of his legal rights has occurred." Creviston v. General Motors Corp., 225 So.2d 331, 334 (Fla.1969); see Creviston, supra (applying discovery rule to statute of limitations in action for personal injury arising from breach of implied warranty in circumstances where warranty not governed by Uniform Commercial Code); Miami Beach First Nat'l Bank v. Edgerly, 121 So.2d 417 (Fla.1960) (applying discovery rule to statute of limitations in action for recovery on forged check); City of Miami v. Brooks, 70 So.2d 306 (Fla.1954) (applying discovery rule to statute of limitations in action for personal injury based on x-ray received in 1944 but not causing any diagnosable injury until 1949); Lund v. Cook, 354 So.2d 940 (Fla. 1st Dist.Ct.App.) (applying discovery rule to statute of limitations in action for...

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