Burton-Dixie Corp. v. Timothy McCarthy Const. Co., 30455 Summary Calendar.

• Decision Date: 14 January 1971
• Docket Number: No. 30455 Summary Calendar.,30455 Summary Calendar.
• Citation: 436 F.2d 405
• Parties: BURTON-DIXIE CORPORATION, Plaintiff-Appellee, v. TIMOTHY McCARTHY CONSTRUCTION COMPANY, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

436 F.2d 405 (1971)

BURTON-DIXIE CORPORATION, Plaintiff-Appellee, v. TIMOTHY McCARTHY CONSTRUCTION COMPANY, Inc., Defendant-Appellant.

No. 30455 Summary Calendar.^*

United States Court of Appeals, Fifth Circuit.

January 14, 1971.

J. Corbett Peek, Jr., J. Robert Hardcastle, Atlanta, Ga., for defendant-appellant.

Robert L. Pennington, Henry B. Troutman, Jr., Atlanta, Ga., for plaintiff-appellee.

Before WISDOM, COLEMAN, and SIMPSON, Circuit Judges.

WISDOM, Circuit Judge:

This appeal is from the district court's order denying the alternative motions of Timothy McCarthy Construction Company for a new trial or for judgment notwithstanding the jury verdict rendered in favor of Burton-Dixie Corporation. We affirm.

In 1960 Burton-Dixie Corporation engaged Timothy McCarthy Construction Company to construct a building in Blacksburg, South Carolina. Burton-Dixie furnished McCarthy with a general idea of what it wanted, and McCarthy agreed to supply all the materials and prepare the final plans and specifications. The parties memorialized their agreement on a standard form contract issued by the American Institute of Architects. The building was completed about March 1, 1961, and Burton-Dixie soon began its occupancy. Burton-Dixie made final payment of the contract price on May 31, 1961. On May 12, 1962, Burton-Dixie first noticed a leak in the roof of the building. An inspection showed that a large portion of the roof was blistered, that is, there were places on the roof similar to mole hills. This was immediately reported to McCarthy. McCarthy had its roofing subcontractor make temporary repairs, but those repairs failed to stop the leaks. Sporadic efforts to repair the roof continued for several years. When it appeared, however, that the only real solution to the problem would be to rip out the roof and install a new one, McCarthy disclaimed liability. After giving notice to McCarthy, Burton-Dixie then employed Industrial Decking and Roofing Company to replace the defective roof with a proper one.

When McCarthy again denied liability, Burton-Dixie commenced this action against McCarthy for breach of contract and demanded damages in the amount of $13,687.92, the cost of its new roof. The district court denied McCarthy's motion for summary judgment, and the case was tried before a jury. At the conclusion of the evidence, the court denied McCarthy's motion for a directed verdict, and the jury returned a verdict in favor of Burton-Dixie in the amount of $13,687.92. The court then denied McCarthy's alternative motions for a new trial or for judgment notwithstanding the verdict, and McCarthy appealed.

I.

McCarthy first contends that Burton-Dixie's failure to submit the dispute to "the Architect" for decision and its subsequent failure to submit the matter to arbitration bars it from any recovery in this case. Article 20 of the General Conditions of the contract, dealing with the contractor's liability for faulty work, provides that "all questions arising under this Article shall be decided by the Architect subject to arbitration." Article 40 states that all disputes subject to arbitration under the contract shall be submitted to arbitration in accordance with American Institute of Architects procedures and that "the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other." It is undisputed that Burton-Dixie never submitted the dispute to the architect or demanded arbitration. Therefore, argues McCarthy, the plaintiff's suit is barred as a matter of law, and the district court erred in denying McCarthy's motion for judgment notwithstanding the verdict.¹ We cannot agree.

It is well established that agreements to submit disputes to architects or to arbitrators, just like any other contract terms, may be waived. See, e. g., Cornell & Co. v. Barber & Ross Co., 1966, 123 U.S.App.D.C. 378, 360 F. 2d 512, 513; E. I. duPont deNemours & Co. v. Lyles & Lang Constr. Co., 4 Cir. 1955, 219 F.2d 328, 334; American Locomotive Co. v. Gyro Process Co., 6 Cir. 1950, 185 F.2d 316, 318; American Sugar Ref. Co. v. The Anaconda, 5 Cir. 1943, 138 F.2d 765, 767; Galion Iron Works v. Adams, 7 Cir. 1942, 128 F.2d 411, 413. There is no set rule, however, as to what constitutes a waiver or abandonment of the arbitration agreement. The question depends upon the facts of each case and usually must be determined by the trier of facts. See, e. g., Amtorg Trading Corp. v. Camden Fibre Mills, Inc., 1952, 304 N.Y. 519, 109 N.E. 2d 606, 607. In this case the district court properly charged the jury that any conduct of the parties inconsistent with the notion that they treated the arbitration provision in effect or any conduct that might be reasonably construed as showing that they did not intend to avail themselves of the arbitration provision may amount to a waiver. See Premier Petroleum Co. v. Box, Tex.Civ. App.1950, 255 S.W.2d 298, 301, writ ref'd, 152 Tex. 321, 257 S.W.2d 105; 5 Am.Jur.2d Arbitration & Award § 51; Annot., 161 A.L.R. 1426, 1428; Annot., 117 A.L.R. 301, 304. In accordance with the test announced in Boeing Co. v. Shipman, 5 Cir. 1969, 411 F.2d 365, our task is then to examine the record to see whether substantial evidence supports the jury's conclusion that McCarthy waived its right to insist upon submission of the dispute to the architect or to arbitration.

Mr. T. D. Wilkins, vice-president of Burton-Dixie, testified that when the first leak appeared on May 12, 1962, McCarthy immediately took steps to have its roofing subcontractor make the necessary repairs. Although the roofer did make some repairs, within three or four months the roof began leaking again. Burton-Dixie again reported the trouble to McCarthy, who again urged its subcontractor to correct the problem. Nevertheless, the roofer's efforts were ineffective in eliminating the leaks. In October 1965, after three years of Burton-Dixie's complaints, correspondence and meetings with McCarthy and McCarthy's subcontractors, McCarthy finally disclaimed any responsibility for the defective roof. Until that time everyone concerned had agreed that the roof was faulty, and McCarthy had repeatedly promised to take care of the problem. At this point, however, an inspection showed forty or fifty leaks and variations in the thickness of the concrete deck from three-quarters of an inch to two inches although the specifications called for a uniform thickness of at least two inches. Burton-Dixie concluded that nothing short of a new roof would solve the problem.²

Mr. Wilkins testified, and McCarthy admitted in its answers to interrogatories, that at no time before answering the complaint in the instant lawsuit did McCarthy demand that the matter be submitted to the architect or to arbitration. Even when Burton-Dixie filed suit against McCarthy, McCarthy did not attempt to invoke the arbitration provision in the contract. In its answer to the complaint, McCarthy did not ask the court to stay proceedings pending arbitration, but rather denied liability and set up as an affirmative defense Burton-Dixie's failure to arbitrate. Moreover, McCarthy impleaded as third-party defendants two of its subcontractors and proceeded to litigate the dispute over the defective roof.

From these facts we conclude that the jury could reasonably find that McCarthy waived its right to insist upon arbitration. On this ground, therefore, the district court did not err in failing to grant the motions for a new trial and for judgment notwithstanding the verdict.

II.

Second, McCarthy contends that under Article 20 it is required to remedy only those defects in the building that appear within a period of one year from the date of final payment or from the date of the owner's occupancy, whichever is earlier.³ McCarthy argues that the alleged defect in this case first appeared on May 12, 1962, more than one year after Burton-Dixie began occupancy on March 1, 1961. Therefore, concludes McCarthy, as a matter of law it could not be liable for the alleged defects in the roof, and the district court erred in denying its motion for judgment notwithstanding the verdict.

Burton-Dixie, on the other hand, argues that Article 20 is inapplicable to this case. In its view Article 20 is a special warranty or guaranty by the contractor for a specified period of time. Burton-Dixie maintains that it is not basing its right to damages upon this special warranty but rather upon McCarthy's failure to perform its contract in a proper, workmanlike manner. Thus the one-year time limit on defects contained in the first sentence of Article 20 is in this case immaterial. In support of its argument, Burton-Dixie points to the second sentence of Article 20: "Neither the foregoing nor any provision in the contract documents, nor any special guarantee time limit, shall be held to limit the Contractor's liability for defects, to less than the legal limit of liability in accordance with the law of the place of building." As long as its suit for breach of contract was filed within the applicable statute of limitations, Burton-Dixie argues, it is entitled to damages for faulty construction no matter when the defective condition first appeared.

Since there are apparently no decisions of the South Carolina or Georgia⁴ state courts construing contract provisions similar to Article 20, McCarthy calls our attention to a Virginia case, Richmond Redevelopment & Housing Authority v. Laburnum Constr. Corp., 1954, 195 Va. 827, 80 S.E.2d 574. In that case the owner sued the contractor for damages to one of its buildings in a housing project destroyed by a gas explosion alleged to have been caused by the contractor's faulty workmanship. The construction contract contained the following language: "The contractor shall remedy any defects in the work and pay for any damage to other work resulting therefrom which shall appear within a...