Forsyth Memorial Hosp., Inc. v. Armstrong World Industries, Inc.

• Decision Date: 17 June 1994
• Docket Number: No. 319PA92--F,319PA92--F
• Citation: 444 S.E.2d 423,336 N.C. 438
• Court: North Carolina Supreme Court
• Parties: , Prod.Liab.Rep. (CCH) P 13,970 FORSYTH MEMORIAL HOSPITAL, INC., a North Carolina Nonprofit Corporation, and Carolina Medicorp, Inc., a North Carolina Nonprofit Corporation, v. ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvania Corporation. orsyth.

Page 423

444 S.E.2d 423

336 N.C. 438, Prod.Liab.Rep. (CCH) P 13,970

FORSYTH MEMORIAL HOSPITAL, INC., a North Carolina Nonprofit Corporation, and Carolina Medicorp, Inc., a North Carolina Nonprofit Corporation, v. ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvania Corporation.

No. 319PA92--Forsyth.

Supreme Court of North Carolina.

June 17, 1994.

Haywood, Denny, Miller, Johnson, Sessoms & Patrick by Michael Patrick, Chapel Hill, for plaintiff/appellant.

Hutchins, Tyndall, Doughton and Moore by H. Lee Davis, Jr. and Thomas J. Doughton, Winston-Salem, for defendant/appellee.

EXUM, Chief Justice.

This is an action arising out of the purchase and installation on plaintiffs' premises of asbestos-contaminated construction materials allegedly furnished by defendant. Plaintiffs filed suit sounding in negligence, breach of implied warranty and willful and wanton disregard for the rights of plaintiffs and others similarly situated. The issue presently dividing the parties concerns which statute of repose governs the action and whether such statute of repose time bars the claim. Because under plaintiffs' allegations, they may be able to prove that defendant, as a materialman, supplied directly to the jobsite the offending materials, plaintiffs' claim may be governed exclusively by the real property improvement statute of repose, N.C.G.S. § 1-50(5)(a)-(b) (1983), rather than the products liability statute of repose, N.C.G.S. § 1-50(6) (1983). While the six-year limitation period of section 1-50(5)(a) may bar plaintiffs' claim for negligence and breach of implied warranty, it would not bar their claim for willful and wanton misconduct because fraud and willful and wanton misconduct are specifically excepted from the six-year limitation period. N.C.G.S. § 1-50(5)(e).

Plaintiffs own and operate a hospital in Forsyth County known as Forsyth Memorial Hospital, Inc. Plaintiffs filed this action on 30 August 1990 in Forsyth County Superior Court, alleging that "[f]loor tile and sheet vinyl flooring manufactured, sold and furnished by defendant was installed during the construction of certain parts of the hospital," including an addition constructed in 1976 and 1977. During hospital renovations in 1989-90, plaintiffs discovered that some of the flooring materials supplied by defendant contained asbestos, an allegedly known hazardous material, and that plaintiffs were forced to incur additional costs resulting from its removal. The complaint further alleged that at the time of the manufacture of the flooring material, defendant was aware that the asbestos in the flooring material was not readily identifiable by others and that if inhaled, the asbestos could cause asbestos-related disease. Despite this knowledge, plaintiffs alleged, defendant manufactured and sold the asbestos-contaminated materials until 1983.

In praying for both compensatory and punitive damages, plaintiffs alleged negligence, breach of implied warranty and intentional, willful and wanton disregard of the rights of plaintiffs and others similarly situated. The superior court dismissed the action on defendant's Rule 12(b)(6) motion and the Court of Appeals affirmed, 107 N.C.App. 110, 418 S.E.2d 529. We now reverse in part the Court of Appeals and hold plaintiffs' claim for willful and wanton misconduct was wrongfully dismissed.

Because this appeal is before us by way of the Court of Appeals on a motion to dismiss for failure to state a claim upon which relief can be granted, we take all allegations of fact as true. Amos v. Oakdale Knitting Co., 331 N.C. 348, 351, 416 S.E.2d 166, 168 (1992). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint by presenting "the question whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief can be granted under some [recognized] legal theory." Lynn v. Overlook Dev., 328 N.C. 689, 692, 403 S.E.2d 469, 471 (1991). A statute of limitation or repose may be the basis of a 12(b)(6) dismissal if on its face the complaint reveals the claim is barred. Oates v. Jag, 314 N.C. 276, 333 S.E.2d 222 (1985); F.D.I.C. v. Loft Apartments, 39 N.C.App. 473, 250 S.E.2d 693, disc. rev. denied, 297 N.C. 176, 254 S.E.2d 39 (1979); Travis v. McLaughlin, 29 N.C.App. 389, 224 S.E.2d 243, disc. rev. denied, 290 N.C. 555, 226 S.E.2d 513 (1976); Teague v. Asheboro Motor Company, 14 N.C.App. 736, 189 S.E.2d 671 (1972); Wright & Miller, Federal Practice and Procedure: Civil § 1357, at 608 (1969).

Analyzing the sufficiency of plaintiffs' claim first requires a determination of the applicable statute of repose. The Court of Appeals held, and we agree, that plaintiffs' complaint was governed by the real property improvement statute of repose, N.C.G.S. § 1-50(5) (1983). N.C.G.S. § 1-50(5) is the statute of repose governing claims of defective improvements to real property against a materialman, who is one furnishing or supplying materials used in building construction, renovation or repair. See Carolina Builders Corp. v. Howard-Veasey Homes, Inc., 72 N.C.App. 224, 229, 324 S.E.2d 626, 629, disc. rev. denied, 313 N.C. 597, 330 S.E.2d 606 (1985); N.C.G.S. § 44A-8 (1989). It provides:

a. No action to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property shall be brought more than six years from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement.

b. For purposes of this subdivision, an action based upon or arising out of the defective or unsafe condition of an improvement to real property includes:

. . . . .

9. Actions against any person furnishing materials, or against any person who develops real property or who performs or furnishes the design, plans, specifications, surveying, supervision, testing or observation of construction, or construction of an improvement to real property, or a repair to an improvement to real property.

N.C.G.S. § 1-50(5)(a)-(b) (emphasis added).

We conclude, as did the Court of Appeals, that upon installation the vinyl flooring became an improvement to plaintiff's real property. We also conclude that the phrase, "any person furnishing materials," refers to a materialman who furnished materials to the jobsite either directly to the owner of the premises or to a contractor or subcontractor on the job.

Our conclusion finds support in other jurisdictions. See Snow v. Harnischfeger Corp., 823 F.Supp. 22, 25 (D.Mass.1993) (defendant's "particularized service in designing and constructing [the materials] installed ... makes it an actor within the protection of the Massachusetts statute of repose"); City of Dover v. International Tel. and Tel. Corp., 514 A.2d. 1086, 1089 (Del.SuperCt.1986) (defendant "was more than a mere supplier of [the materials], because [defendant] fabricated the [materials] it delivered" to plaintiff). But see Independent School District # 197 v. W.R. Grace & Co., 752 F.Supp. 286 (D.Minn.1990); Cape Henry Towers, Inc. v. National Gypsum Co., 229 Va. 596, 331 S.E.2d 476 (1985) (extending statute of repose to apply to even remote manufacturers); Corbally v. W.R. Grace & Co., 993 F.2d 492 (5th Cir.1993); Nichols by Nichols v. Swimquip, a Div. of Weil McClain, 171 Cal.App.3d 216, 217 Cal.Rptr. 272 (1985) (declining to extend statute's coverage to materialmen on job). Though the statutes of repose in the cases supporting our position do not specifically refer to "any person furnishing materials" but rather to "furnishing the design" of any improvement to real property, the United States Court of Appeals for the Sixth Circuit has construed "furnishing the design" to mean the same as "[furnishing materials] intended to become part of the realty." In Re Beverly Hills Fire Litigation, 695 F.2d 207, 225 (6th Cir.1982).

Defendant contends that section 1-50(5) is not applicable to plaintiffs' claim because the statute was not intended to cover actions against manufacturers of products. Although plaintiffs' complaint alleged that defendant manufactured, sold and furnished material purchased by plaintiffs, defendant contends it did not allege defendant directly sold material to plaintiffs or to the contractor who installed the material. Defendant submits plaintiffs' claim should be governed by N.C.G.S. § 1-50(6), the products liability statute of repose applicable to manufacturers of allegedly defective products, which provides:

(6) No action for the recovery of damages for personal injury, death or damage to property based upon or arising out of any alleged defect or any failure in relation to a product shall be brought more than six years after the date of initial purchase for use or consumption.

N.C.G.S. § 1-50(6) (1983). Defendant contends this provision clearly applies to manufacturers, whereas the Court would have to "strain the language of G.S. 1-50(5) to make it also apply."

Insofar as plaintiffs' claims are concerned, the difference in the two statutes of repose, as we will show, is this: The real property improvement statute of repose expressly exempts all claims sounding in fraud or willful and wanton misconduct, whereas the products liability statute of repose contains no such exemption.

Defendant construes plaintiffs' complaint too narrowly. "A complaint should not be dismissed under Rule 12(b)(6) '... unless it affirmatively appears that the plaintiff is entitled to no relief under any state of facts which could be presented in support of the claim.' " Ladd v. Estate of Kellenberger, 314 N.C. 477, 481, 334 S.E.2d 751, 755 (1985) (quoting Presnell v. Pell, 298 N.C. 715, 719, 260 S.E.2d 611, 613 (1979)). We agree that if defendant were only a remote manufacturer whose materials found their way to plaintiffs' jobsite indirectly through the commerce stream, then defendant would not be a materialman and would not have furnished materials on the...