Farmers Nat. Bank v. Wickham Pipeline Const., 17090

• Decision Date: 20 July 1988
• Docket Number: No. 17090,17090
• Citation: 114 Idaho 565,759 P.2d 71
• Parties: FARMERS NATIONAL BANK, Plaintiff, v. WICKHAM PIPELINE CONSTRUCTION; Edward W. Wickham and Beverly J. Wickham, husband and wife; Scona, Inc.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Defendants. WICKHAM PIPELINE CONSTRUCTION; Edward W. Wickham and Beverly J. Wickham, husband and wife, Defendants, cross claimants, appellants, v. SCONA, INC.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Defendants, cross defendants. SCONA, INC.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Third party plaintiff-appellants, v. BEALL PIPE, INC., Third party defendant-respondent.
• Court: Idaho Supreme Court

Page 71

759 P.2d 71

114 Idaho 565

FARMERS NATIONAL BANK, Plaintiff, v. WICKHAM PIPELINE CONSTRUCTION; Edward W. Wickham and Beverly J. Wickham, husband and wife; Scona, Inc.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Defendants.

WICKHAM PIPELINE CONSTRUCTION; Edward W. Wickham and Beverly J. Wickham, husband and wife, Defendants, cross claimants, appellants, v. SCONA, INC.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Defendants, cross defendants.

SCONA, INC.; Darrell L. Cook, G. Brent Stolworthy and G.T. Newcomb, dba CNS, Third party plaintiff-appellants, v. BEALL PIPE, INC., Third party defendant-respondent.

No. 17090.

Supreme Court of Idaho.

July 20, 1988.

Paine, Roy & Nielson, Twin Falls, for appellants. Robert C. Paine (argued).

Cantrill, Skinner, Sullivan & King, Boise, for respondent. Robert D. Lewis (argued).

BAKES, Justice.

Third party plaintiffs, Scona, Inc., and Cook, Newcomb and Stolworthy, doing business as CNS, filed a complaint for indemnification against third party defendant, Beall Pipe, Inc. Upon Beall's motion for summary judgment, the third party complaint was dismissed with prejudice because the statute of limitations under I.C. § 28-2-725 had run. Appellants appeal from the summary judgment order. We affirm.

I

About July 3, 1978, Scona, Inc. (Scona), entered into a contract with the United States for the construction of a certain project known as the "Deep Creek Farm Irrigation Measure." ¹ Sixteen days later, Edward W. Wickham and Beverly J. Wickham, doing business as Wickham Pipeline Construction (Wickham), entered into a subcontract with Scona to perform certain work relative to the primary contract. Certain sums subsequently accrued in favor of Wickham as the result of work performed under the subcontract, but Scona defaulted on the prime contract with the United States and abandoned its work thereunder.

CNS (Cook, Newcomb and Stolworthy) had executed two performance bonds dated July 6, 1978, and July 20, 1978, guaranteeing Scona's performance of its prime contract with the United States. When Scona defaulted on the prime contract, CNS entered into a separate agreement with the United States dated June 5, 1979, by which CNS undertook the completion of the project in place of Scona, including the then existing obligation owing to Wickham.

In the course of performing these agreements, both Scona and CNS purchased pipe from Beall Pipe, Inc. (Beall), to be used on the construction project. Wickham was to install the pipe. The date of Beall's last delivery was October 25, 1979. Prior to, and at the time of the last pipe delivery, Wickham notified CNS that the pipe was defective and did not meet contract specifications and, as a result, additional costs would be incurred in installing the pipe, entitling Wickham to additional payments. When Wickham and CNS could not immediately agree on a resolution of the problem, Wickham was required to borrow moneys from Farmers National Bank (the bank) for the purpose of paying the additional costs. As security for the loan, CNS (presumably with Wickham's participation) assigned to the bank all the proceeds from the project due and owing Wickham.

Upon completion of the project and distribution of all of the contract funds, Wickham still owed the bank approximately $105,000 on the loan. On November 5, 1981, the bank filed a complaint for the money due on the notes against Wickham, Scona and CNS. On April 27, 1982, Scona and CNS filed an answer to the bank's complaint. One month later, Wickham filed its answer to the bank's complaint, which answer also included a cross claim against Scona and CNS. On August 26, 1982, Scona and CNS filed an answer to Wickham's cross claim.

More than two years later, on September 17, 1984, Scona and CNS filed the instant third party complaint against Beall seeking indemnification in the event Wickham recovered against them pursuant to the cross claim. When the third party complaint was filed, no judgment had been entered on the cross claim, nor had there been any settlement. Beall answered the third party complaint on July 25, 1986, and on June 7, 1987, filed a motion for summary judgment, alleging that the statute of limitations had run on the third party complaint pursuant to I.C. § 28-2-725. ² A hearing was held and summary judgment was granted for Beall. The district judge held that the I.C. § 28-2-725 4-year statute of limitations governing sales of goods expired on October 25, 1983, and that the instant third party action, which was not filed until September 17, 1984, was thus barred. He then ordered the third party complaint dismissed with prejudice. Appellants appeal from the district court's order.

II

There is only one issue on appeal. Is I.C. § 28-2-725 the applicable statute of limitations which commenced when Beall allegedly breached the sales contract by supplying non-conforming goods on October 25, 1979, or does some other statute of limitations apply? We hold that I.C. § 28-2-725 is the applicable statute of limitations, and that it commenced to run when Beall allegedly breached its contract for the sale of the pipe on October 25, 1979.

Third party plaintiffs, Scona and CNS, term their complaint as one for indemnification. At the same time, though, they also acknowledge that their action stems from Beall's breach of the sales contract. Their third party complaint, filed in the district court, stated:

"WHEREFORE, Defendants and Third Party Plaintiffs Scona, Inc., and C.N.S. pray for judgment against Beall in the amount of any judgment recovered by Wickham against them for defective pipe furnished by Beall, ...." (Emphasis added.)

Further, in their brief on appeal before this Court, appellants state:

"Thus, the primary issue before this Court is whether the statute of limitations on a claim for indemnification, arising out of the sale of goods covered by the Uniform Commercial Code, begins running on the date of the last delivery of the goods ... ?" Brief of Appellants, p. 9 (emphasis added).

Scona and CNS had a contractual relationship with Beall in which Beall agreed to supply them with pipe pursuant to the specifications contained in the primary contract with the United States. If Beall did not deliver pipe meeting the specifications of the contract, a breach of contract action accrued and, upon delivery of the deficient pipe, Scona and CNS had a direct legal cause of action against Beall. I.C. § 28-2-725(2). The damages incurred by Scona and CNS would have been the amount necessary to make the goods conform to the contract specifications, and any damages caused by delay while the goods were made to conform. I.C. §§ 28-2-714, -719. Yet, rather than proceeding on their legal claim when it was ripe, Scona and CNS delayed, asserting now that they are allowed to proceed on an equitable claim for indemnification when they passed up their legal claim.

For over 200 years it has been recognized "that suits in equity shall not be sustained ... in any case where plain, adequate and complete remedy can be had at law." Parker v. Winnipiseogee Lake Cotton & Woolen Co., 67 U.S. (2 Black) 545, 551, 17 L.Ed. 333, 337 (1863), quoting Judiciary Act of 1789, § 16. "During the development of the jurisdiction of courts of equity, it came to be recognized that equitable relief would not be granted if the award of damages at law was adequate to protect the interests of the injured party." Restatement (Second) of Contracts § 359 comment a (1981). Accordingly, there is no need to entertain an equitable cause of action for indemnification when Scona and CNS, a fortiori, had a legal cause of action against Beall for breach of contract.

"[R]elief in equity will never be available to secure the same judgment that could be obtained at law. The possibility of equity jurisdiction is present only when the plaintiff seeks some form of relief that he cannot obtain at law. By traditional theory the assertion of equity power in such cases is dependent on the inadequacy of the remedies at law ...." G. Palmer, The Law of Restitution § 4.7 (1978).

On point is Austin v. North American Forest Products, 656 F.2d 1076 (5th Cir.1981). In Austin the United States Court of Appeals, Fifth Circuit, held that where a contractor-buyer previously had, under Louisiana law, a legal cause of action against the manufacturer of the product, the contractor-buyer could not maintain an equitable action for indemnification, notwithstanding the fact that the statute of limitations had run on the legal cause of action before it was brought.

Austin (contractor) contracted with the Corps of Engineers for the construction of a housing project. Subsequently, Austin reached an agreement with North American Forest Products and Glassow Sales Co. (sellers) to supply the exterior doors for the housing project. In turn, sellers then ordered the doors from a manufacturer. Upon being notified by the Corps of Engineers that the doors were defective, Austin sought to recover damages from sellers and the manufacturer for breach of warranty in contract for the sale of goods. The court found, however, that the applicable statute of limitations had already run and that Austin's legal remedy was prohibited by the statute of limitations. The court in Austin distinguished the Louisiana case of Minyard v. Curtis Products, Inc., 251 La. 624, 205 So.2d 422 (1967), noting that in that case Minyard had no legal remedy. Consequently, Minyard was allowed to proceed with his action in equity for indemnification. By way of contradistinction, though, the Austin court observed that Austin had a remedy at law against the manufacturer, it being an action for breach of warranty in a contract for the sale of goods. The statute of limitations had run on that breach of warranty action, and the Fifth Circuit held that because Austin had had an adequate legal remedy he therefore could not proceed with his equitable action against the...