Investment Properties, Inc. v. Lyttle

• Decision Date: 27 August 1999
• Docket Number: No. 98-050.,98-050.
• Citation: 739 A.2d 1222
• Court: Vermont Supreme Court
• Parties: INVESTMENT PROPERTIES, INC., James B. Foster, and Pizzagalli Construction Company v. Jonathan LYTTLE, Dennis Keefe, Lyttle & Keefe Architects, Inc., and Keefe Associates, Inc.

739 A.2d 1222

INVESTMENT PROPERTIES, INC., James B. Foster, and Pizzagalli Construction Company v. Jonathan LYTTLE, Dennis Keefe, Lyttle & Keefe Architects, Inc., and Keefe Associates, Inc.

No. 98-050.

Supreme Court of Vermont.

August 27, 1999.

John Davis Buckley and Jeffry W. White of Theriault & Joslin, P.C., Montpelier, for Plaintiffs-Appellants Investment Properties, Inc. and Foster.

Allan R. Keyes of Ryan Smith & Carbine, Ltd., Rutland, for Plaintiff-Appellant Pizzagalli Construction Co.

Michael B. Clapp, Burlington, for Defendants-Appellees.

Present AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

JOHNSON, J.

Plaintiffs appeal an order of the superior court granting summary judgment for defendants on the majority of plaintiffs' claims.¹ Plaintiffs are Investment Properties Incorporated (IPI) (the project owner of the Overlake Condominium project), James Foster (IPI's agent), and Pizzagalli (the general contractor for the project). Plaintiffs sued defendant architects in a variety of capacities under theories of negligence, intentional misrepresentation, negligent misrepresentation, and breach of implied and express warranties arising from a failed attempt to correct a problem with deteriorating subfloors in the condominium project. We affirm in part and reverse and remand in part.

"[S]ummary judgment is appropriate only when the record clearly shows that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Bacon v. Lascelles, 165 Vt. 214, 218, 678 A.2d 902, 905 (1996). The following material facts are undisputed. IPI was the project owner of the Overlake Condominium project, James Foster was IPI's agent, and Pizzagalli contracted with IPI to be its general contractor. IPI contracted with architects to provide architectural services. There was no contract between architects and either Foster or Pizzagalli. In the Spring of 1982, plaintiffs noticed that the concrete subfloors in the condominium units were deteriorating. The parties, in consultation with one another, settled on application of a material called Ardex K-15 over the surface of the concrete to remedy the situation. Architects made no affirmative representation concerning the suitability of the Ardex K-15 remedy. Architects agreed to pay $15,000 — the cost of the Ardex K-15 remedy — in return for a release of all claims against them arising out of the "design, installation and maintenance of a lightweight concrete underlayment for carpeting in the Overlake Condominium project."

The Ardex K-15 remedy was applied, but it also failed in May of 1988. In November of 1988, the Overlake Condominium Homeowners Association (OCHA) sued IPI, Foster and Pizzagalli for damages incurred as a result of the defective flooring. IPI, Foster and Pizzagalli filed a third-party complaint against the architects, which was dismissed without prejudice. The parties to the original litigation settled for $150,000. Architects made no contribution to the settlement. As part of the settlement, IPI, Foster and Pizzagalli were assigned all the rights of OCHA against the architects. Plaintiffs now pursue the assigned claims and also pursue architects to recover the settlement sum.

The current litigation was filed in May 1993. Plaintiffs alleged on behalf of IPI/Foster and Pizzagalli (1) a breach of the duty of professional care, (2) a breach of express and implied warranties that the materials selected to remedy a problem caused by other faulty materials were suitable for that purpose, (3) fraudulent misrepresentation, (4) and negligent misrepresentation. The warranty claims were based directly on the relationship between architects and plaintiffs while the other claims were based on a theory that architects should indemnify plaintiffs for the $150,000 settlement sum paid out to OCHA. Plaintiffs further alleged on behalf of OCHA (1) a breach of the duty of professional care and (2) breach of an implied warranty.

In their motion for summary judgment, architects argued that no contract existed between architects and Foster, between architects and Pizzagalli, or between architects and OCHA on which a breach of warranty claim could be based. They additionally argued that they did not make any representations to anyone about the suitability of the Ardex K-15 remedy and that any claims based on the use of light-weight concrete flooring material were barred by the release. Architects also asserted that the three-year statute of limitations applied to plaintiffs' claims because they were claims for personal property, and that this statute of limitations had expired. See 12 V.S.A. § 512(5).

The superior court granted summary judgment with respect to the majority of plaintiffs' claims, concluding that plaintiffs' contractual claims on behalf of Pizzagalli failed because there was no contract, and that those on behalf of IPI/Foster failed because of the release. The court furthermore held that plaintiffs' claims based on indemnification also failed because of the release and because they were claims for personal property and were thus subject to the three-year statute of limitations, which began running when OCHA filed the original suit in November of 1988.

The court held that the rights assigned to plaintiffs to sue on behalf of OCHA for failure of the Ardex K-15 remedy were subject to the six-year statute of limitations because the claim involved interference with use and enjoyment of property. See 12 V.S.A. § 511; Alpstetten Ass'n, Inc. v. Kelly, 137 Vt. 508, 512, 408 A.2d 644, 646 (1979) (six-year statute of limitations applies to action alleging interference with use and enjoyment of property because it is not "injury to the person"). Nonetheless, the court concluded that the undisputed facts did not indicate there was any misrepresentation by architects to OCHA, any express warranty, or any basis for finding an implied warranty, because implied warranties are applicable only to the business of selling and not to the business of manufacture. See Bolkum v. Staab, 133 Vt. 467, 470, 346 A.2d 210, 211 (1975) (implied warranties arise from business of selling, not business of manufacture). There was no direct contractual basis for finding a breach of warranty because it was undisputed that there was no contractual relationship between architects and OCHA. The court did not, however, grant summary judgment on the claim based on professional negligence asserted on behalf of OCHA because liability under this theory turned on a question of fact.

On appeal, plaintiffs confine their argument to three issues. Did the superior court err in: (1) applying the three-year statute of limitations to plaintiffs' indemnification claims; (2) ruling that no warranties could be implied with respect to OCHA because of the lack of contractual privity; and (3) ruling that the release barred any claims based on failure of the Ardex K-15 remedy?

I. The Statute of Limitations

We first address plaintiffs' contention that the trial court erred in applying the three-year statute of limitations, found in 12 V.S.A. § 512(5), to bar their indemnification claims. The trial court reasoned that, because plaintiffs were seeking to recover a sum of money, their claim was one for personal property governed by the three-year statute of limitations. The trial court reached this conclusion by applying Foucher v. First Vt. Bank & Trust Co., 821 F.Supp. 916, 924 (D.Vt.1993), in which the federal district court, applying Vermont law, held that damages for breach of duty as a bailee and the conversion of money assets were damages for personal property governed by the three-year statute of limitations.

The question on appeal then is whether the trial court properly determined that an indemnity action is for damage to personal property. An indemnity action is based on "`a right accruing to a party who, without active fault, has been compelled by some legal obligation ... to pay damages occasioned by the negligence of another.'" Chapman v. Sparta, 167 Vt. 157, 159, 702 A.2d 132, 134 (1997) (quoting Morris v. American Motors Corp., 142 Vt. 566, 576, 459 A.2d 968, 974 (1982)). The right to indemnification "exists where one party has expressly agreed or undertaken to indemnify another, or where the circumstances are such that the law implies such an undertaking." Id. See also State v. Stewart's Ice Cream Co., 64 N.Y.2d 83, 484 N.Y.S.2d 810, 473 N.E.2d 1184, 1186 (1984) (in cases where unjust enrichment would result from third party assuming debt or obligation of another, contract to reimburse or indemnify is implied by law).

There is no statute of limitations specific to indemnity actions. Civil actions in general are subject to a six-year statute of limitations. See 12 V.S.A. § 511. Actions for assault and battery, false imprisonment, slander and libel, injury to the person, or damage to personal property, however, are subject to a special three-year statute of limitations. See 12 V.S.A. § 512. Plaintiffs argue that this Court should look to the underlying harm — the damage to the condominiums — in determining the applicable statute of limitations. Under plaintiffs' theory, the indemnification action would be categorized as an action for damage to real property as opposed to personal property and would be subject to the general six-year statute of limitations as a result.

We agree with plaintiffs' theory. Based on our decision in Union School District v. Lench, 134 Vt. 424, 425, 365 A.2d 508, 509 (1976), it is clear that the homeowners' association had six years from the accrual of their cause of action to bring that suit. The facts indicate that their claim accrued in 1988 when the Ardex K-15 "fix" failed. Applying the same limitation period and date of accrual to the indemnity action as we would apply to the underlying action, we conclude that both the homeowners' association suit and this indemnity action were brought within the six-year...