Garden City Osteopathic Hosp. v. HBE Corp.

• Decision Date: 01 June 1995
• Docket Number: No. 94-1202,94-1202
• Citation: 55 F.3d 1126
• Parties: GARDEN CITY OSTEOPATHIC HOSPITAL, Plaintiff-Appellant, v. HBE CORPORATION; Hospital Building and Equipment Company, Incorporated; Hospital Designers, Incorporated; and Kummer Construction Company, Incorporated, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1126

55 F.3d 1126

GARDEN CITY OSTEOPATHIC HOSPITAL, Plaintiff-Appellant, v. HBE CORPORATION; Hospital Building and Equipment Company,

Incorporated; Hospital Designers, Incorporated;

and Kummer Construction Company,

Incorporated, Defendants-Appellees.

No. 94-1202.

United States Court of Appeals, Sixth Circuit.

Argued March 13, 1995.

Decided June 1, 1995.

Jon Feikens, Gary T. Tandberg (argued and briefed), Feikens, Foster, Vander Male, Bellamy & Gilchrist, Detroit, MI, for Garden City Osteopathic Hosp.

Steven R. Lefkofsky (argued and briefed), Donald K.S. Petersen, Petersen & Lefkofsky, Bloomfield Hills, MI, for HBE Corp.

Steven R. Lefkofsky, Petersen & Lefkofsky, Bloomfield Hills, MI, for Hosp. Designers, Inc.

Before: LIVELY, RYAN, and DAUGHTREY, Circuit Judges.

RYAN, Circuit Judge.

In this diversity action under Michigan law, the plaintiff, Garden City Osteopathic Hospital (GCOH), seeks damages allegedly arising from construction work performed by the defendants, HBE Corporation and Hospital Designers, Inc. (HDI). The district court granted summary judgment to the defendants, reasoning that a Michigan statute of repose, Mich.Comp.Laws Ann. Sec. 600.5839, barred the plaintiff's claims. We find the statute of repose inapplicable, and REVERSE the entry of summary judgment.

I.

Garden City Osteopathic Hospital is located in Garden City, Michigan. Sometime in the Fall of 1970, GCOH entered into a contract with Kummer Construction Co., the predecessor of HBE, to build some additions to the hospital. GCOH cannot now locate a signed copy of the contract; to prove the contract's terms, GCOH relies on a photocopy of a document that appears to be a contract between GCOH and Kummer, but is signed only by Kummer. Under the "contract," HBE served as the contractor for the construction work, and HDI served as the project's architect. The contract also incorporated several drawings and documents, including "Specifications dated September 2, 1970, Section 1 through 36," and "General Conditions Document A201," a standard form published by the American Institute of Architects. Section 12 of the Specifications, entitled "Lathing and Plastering," provided, in part:

Before beginning the work, this contractor shall examine all surfaces that are to be plastered and report to the Architect if these are found to be out of plumb, true or insecure, and shall be held strictly to a straight job throughout.

Furthermore, the General Conditions form included a warranty:

The Contractor warrants to the Owner ... that ... all Work will be of good quality, free from faults and defects and in conformance with the Contract Documents. All Work not so conforming to these standards may be considered defective.

General Conditions art. 4.5.1.

The work began in September 1970. In a letter dated February 23, 1971, an HDI architect, Fred Petry, warned Kummer that a west basement wall was experiencing "lateral movement" because the wall was built near a "frozen inclined plane." Petry also described a construction method that might prevent the other walls from similarly moving. Ultimately, the east basement foundation wall was built three inches out of plumb; that is, if one were facing the wall, the top of the wall would be three inches further away than the base of the wall. The basement foundation wall supported the walls of the first and second stories of the hospital, also built by HBE under the contract. In fact, the basement wall eventually supported a third-story wall built in 1980 by HBE and HDI under another contract with GCOH.

The basement wall's out-of-plumb condition was discovered years later. In 1990, GCOH decided to expand the hospital by constructing an addition adjacent to the building's east side. The project called for replacing the first floor's east wall with five columns. Before beginning the project, the new contractor visually inspected the basement wall, but did not detect the out-of-plumb problem. Apparently, a coat of plaster had been applied to the basement wall so that it appeared straight. In 1991, the new contractor discovered the out-of-plumb state when the contractor drilled a hole in the first floor. The contractor determined that the basement wall could not alone support the five columns. GCOH and the contractor decided to retain the five-column design, but added reinforcements around the basement wall.

In February 1992, GCOH sued HBE in Michigan state court. HBE removed the case to the United States District Court for the Eastern District of Michigan. GCOH amended its complaint by adding HDI as a defendant and alleging that HDI was owned by HBE as a corporate vehicle to provide architectural services. GCOH asserted five counts against both defendants with respect to the 1970 contract: (1) breach of contract; (2) negligent performance of a contract, (3) breach of express warranties of fitness, (4) silent fraud, and (5) fraud. GCOH claimed that the defendants had concealed the basement wall's out-of-plumb condition by plastering the wall so that it appeared straight.

On the defendants' motion for summary judgment, the district court held that Mich.Comp.Laws Ann. Sec. 600.5839, a Michigan statute of repose, barred GCOH's claims. As to HDI, the district court applied the original, 1967 version of section 600.5839(1). Relying upon a Michigan appellate court decision, the district court found that the original version of section 600.5839 applied to suits against architects by owners based on improvements to real property. Because section 600.5839 provides for a six-year repose period after the date of occupancy, the district court held that GCOH's claims against HDI expired six years after 1971, well before GCOH filed suit in 1992. As to HBE, the district court applied a different part of section 600.5839(1), and held that a ten-year repose period, running from the date of occupancy, applied to claims against HBE. Thus, the statute of repose barred GCOH's claims against HBE because the repose period expired ten years after 1971, again well before the plaintiff filed suit in 1992. The plaintiff timely appealed.

II.

a. Standard of Review

We review a grant of summary judgment de novo and apply the same test as used by the district court. Brooks v. American Broadcasting Cos., 932 F.2d 495, 500 (6th Cir.1991). In reviewing summary judgment motions, courts must view the evidence in the light most favorable to the nonmoving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Under Federal Rule of Civil Procedure 56(c), summary judgment is proper if all the evidence before the district court " 'show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to [a] judgment as a matter of law.' " Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir.1988) (quoting Fed.R.Civ.P. 56(c)).

b. Choice of Law

The parties have assumed that Michigan law governs, and because the contract was presumably executed and performed in Michigan, and any other alleged basis for recovery occurred in Michigan, it does appear that Michigan law governs. When deciding a diversity case under state law, a federal court must apply the law of the state's highest court. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). If, however, the state's highest court has not decided the applicable law, then the federal court must ascertain the state law from "all relevant data." Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir.1985). Relevant data include the state's appellate court decisions:

[W]e are mindful that an intermediate appellate court's judgment that announces a rule of law is "a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise."

FL Aerospace v. Aetna Casualty and Sur. Co., 897 F.2d 214, 218-19 (6th Cir.) (quoting West v. American Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940)), cert. denied, 498 U.S. 911, 111 S.Ct. 284, 112 L.Ed.2d 238 (1990). Finally, relevant data also include the state's supreme court dicta, restatements of law, law review commentaries, and the majority rule among other states. Angelotta v. American Broadcasting Corp., 820 F.2d 806, 807 (6th Cir.1987).

III.

Our initial task is to determine whether section 600.5839 applies to GCOH's causes of action. Below, the parties focused their dispute on which version of section 600.5839, which has been amended several times, governs the causes of action. The most recent version of section 600.5839 serves as a statute of repose for

any action to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, ... against any state licensed architect or professional engineer performing or furnishing the design or supervision of construction of the improvement, or against any contractor making the improvement....

Mich.Comp.Laws Ann. Sec. 600.5839(1) (emphasis added). If section 600.5839 applies, then the statute of repose might bar the plaintiff's causes of action against both the contractor, HBE, and the architect, HDI. We think, however, that the threshold question is not which version of section 600.5839 applies to this suit, but whether any version of section 600.5839 applies. All versions of section 600.5839 have limited its applicability to "any action to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death." (Emphasis added.) All agree that this case is not an "action to recover damages for ... bodily injury or wrongful death," and thus we must determine whether GCOH's causes of action are "to recover damages for any injury to property."...