Monson v. Paramount Homes, Inc.

• Decision Date: 18 May 1999
• Docket Number: No. COA98-463.,COA98-463.
• Parties: Donald M. MONSON, Plaintiff, v. PARAMOUNT HOMES, INC., Defendant and Third-Party Plaintiff, v. Simplex Products Division of K2Inc. and Carolina Builders Corporation, Third-Party Defendants.
• Court: North Carolina Court of Appeals

515 S.E.2d 445

133 NC App. 235

Donald M. MONSON, Plaintiff, v. PARAMOUNT HOMES, INC., Defendant and Third-Party Plaintiff, v. Simplex Products Division of K2Inc. and Carolina Builders Corporation, Third-Party Defendants.

No. COA98-463.

Court of Appeals of North Carolina.

May 18, 1999.

Brown, Todd & Heyburn, P.L.L.C., by Julie M. Goodman, Lexington, and Smith Helms Mulliss & Moore, L.L.P., by Gary R. Govert, Raleigh, for defendant and third-party plaintiff-appellant.

Hunton & Williams by Steven B. Epstein, Raleigh, for third-party defendant-appellee Carolina Builders Corporation.

HUNTER, Judge.

In August 1990, general contractor defendant Paramount Homes, Inc. ("Paramount") completed the house at issue in this case. Paramount sold the home to the original owner, who subsequently sold the house to plaintiff in 1993. On 29 August 1996, plaintiff filed suit against Paramount for defective construction of the house. Plaintiff alleged use of defective materials and improper installation of windows, doors, and exterior insulation and finish systems ("EIFS") cladding, also known as synthetic stucco. Paramount, in turn, sought indemnity and contribution from Simplex Products Division of K2inc. ("Simplex"), the manufacturer of the EIFS installed at plaintiff's house, by third-party complaint filed 20 December 1996. During discovery, Paramount learned that Carolina Builders Corporation ("CBC") had made repairs and replacements to the windows and doors at the house at plaintiff's request in 1994. CBC had manufactured and sold the materials to Paramount during original construction of the house. Paramount filed a motion on 16 October 1997 to add CBC as a second third-party defendant, which was granted on 23 October 1997. Paramount filed its amended third-party complaint on 29 October 1997 alleging causes of action against CBC for breach of contract, breach of express and implied warranties, and negligence. CBC moved to dismiss, pursuant to Rules 12(b)(1) and 12(b)(6) of the North Carolina Rules of Civil Procedure. CBC's motion was granted on the grounds that Paramount's claims were filed after the applicable statute of repose had expired. On 28 April 1998, plaintiff filed a voluntary dismissal with prejudice of his lawsuit. On 29 May 1998, Paramount filed a voluntary dismissal with prejudice of its third-party claims against Simplex. Paramount appeals the dismissal of CBC as a third-party defendant.

The parties acknowledge that the applicable statute of repose in the present case is the real property improvement statute which states:

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.

N.C. Gen.Stat. § 1-50(5)(a) (1996) (emphasis added). While the statute does not clarify the meaning of "last act or omission" any further, "substantial completion" means

that degree of completion of a project, improvement or specified area or portion thereof (in accordance with the contract, as modified by any change orders agreed to by the parties) upon attainment of which the owner can use the same for the purpose for which it was intended. The date of substantial completion may be established by written agreement.

N.C. Gen.Stat. § 1-50(5)(c) (1996). N.C. Gen.Stat. § 1-50(5) applies to defective improvements to real property by a materialman, meaning one who furnishes or supplies materials used in building construction, renovation or repair. Forsyth Memorial Hospital v. Armstrong World Industries, 336 N.C. 438, 444 S.E.2d 423 (1994). Thus, N.C. Gen. Stat. § 1-50(5) applies to CBC in the present case.

Paramount contends the court erred in granting CBC summary judgment because its "last act or omission" giving rise to the relevant claims was the repairs completed by CBC in 1994; therefore, the claim is valid since it was filed in 1997, well within the six year statute of repose. Paramount supports its position by citing New Bern Assoc. v. The Celotex Corp., 87 N.C.App. 65, 359 S.E.2d 481, disc. review denied, 321 N.C. 297, 362 S.E.2d 782 (1987).

In New Bern, plaintiff New Bern Associates brought suit against the Celotex Corporation ("Celotex") alleging breach of warranties in connection with roofing materials manufactured by Celotex and installed on plaintiff's building. Construction of the building, including the installation of Celotex's roofing materials, had been substantially completed on or prior to 18 March 1975. On 28 April 1986, Celotex asserted third-party claims for indemnity and contribution against T.A. Loving Company ("Loving"), the general contractor responsible for constructing the building and installing the roofing materials. In regards to when the statute of repose began to run, the Court held that the 1963 version of the statute applicable in New Bern is the same as the 1981 version, stating: "We think it means nothing different from the language of the 1981 version in which the statute runs `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.'" Id. at 70-71, 359 S.E.2d at 485. Therefore, the Court found that the claim against Loving would be valid, under the statute of repose, only if the substantial completion date or last act or omission of Loving occurred on or after 28 April 1980.

The evidence in New Bern indicated that the completion date was 18 March 1975; however, one of Loving's employees was involved in continuous efforts to repair the property from the 18 March 1975 completion date until after 28 April 1980. This Court found that the dispute over whether the individual was actually Loving's agent after 28 April 1980 was a genuine issue of material fact as to whether Loving's "last act or omission alleged to give rise to plaintiff's injury occurred within six years of the date Celotex filed its third-party complaint," and remanded the case in order for this determination to be made. Id. at 71, 359 S.E.2d at 485. The Court did not hold that the individual's acts, if he were Loving's agent after 28 April 1980, would qualify as Loving's "last act or omission" under the statute of repose. Therefore, New Bern is persuasive, but not controlling in the case sub judice. The dispositive issue in the present case is whether a repair qualifies as the "last act or omission" under N.C. Gen.Stat. § 1-50(5).

While the Court in New Bern referred to the repairs in question as continuous efforts after the completion date, it gave no indication whether these repairs were pursuant to the original improvement contract, a warranty, or new and separate contracts. In the present case, Paramount alleges in its third-party complaint that CBC, pursuant to contract, supplied Paramount with windows, doors, and associated materials for use in construction of the house in 1990. Paramount further alleges that, pursuant to the plaintiff's dissatisfaction with the materials:

CBC returned to the House [sic] in approximately the spring or summer of 1994 to inspect, repair, and replace the windows about which the plaintiff had complained. Upon information and belief, CBC performed this repair and replacement work pursuant to a warranty and did not charge the plaintiff for replacement parts provided.

While alleging in its third-party complaint that the repairs were completed pursuant to a warranty given in 1990, Paramount also attempts, in its brief, to classify the 1994 repairs as duties under the original 1990 improvement contract. The allegations of the third-party complaint must be treated as true, as the court is ruling on a motion to dismiss for failure to state a claim upon which relief can be granted. Hickman v. McKoin, 337 N.C. 460, 462, 446 S.E.2d 80, 82 (1994). Paramount never alleges in its third-party complaint, or in its brief, that CBC failed to complete performance and finish the improvement in 1990. The record reveals, and both parties concede, that the plaintiff's house was completed in 1990. Thus, CBC had completed its duties under its contract with Paramount in 1990 and the statute of repose began to run.

Paramount has not contended that the 1994 repair should be classified as a new and separate improvement, thus starting the running of a second statute of repose. Therefore, this issue is not addressed. Paramount, however, does contend that the statute of repose did not begin running or was "reset" in 1994 because CBC "must have believed that it had a duty to do those [1994] repairs, and any such duty could only have been created pursuant to its contract with Paramount and the warranties provided in connection with that contract." While Paramount opines as to why CBC made the repairs, it presents no evidence that CBC had a continuing duty to complete any repairs under the original 1990 improvement contract. Also, there is no evidence in the record indicating that CBC had a continuing duty to repair under any implied or express warranty.

Assuming arguendo that a continuing duty of repair existed pursuant to a warranty, no evidence indicates that CBC had a continuing duty to repair under the improvement contract with Paramount. A warranty is unique in that it anticipates future performance; therefore, this Court has held that a statute of limitations is tolled during the time the seller endeavors to make repairs to enable the product to comply with a warranty. Haywood Street Redevelopment Corp. v. Peterson Co., 120 N.C.App. 832, 463 S.E.2d 564 (1995). In that case, the defendant gave a written express warranty on a waterproofing surface on plaintiff's parking lot on 15 June 1988 and agreed to correct deficiencies in the work until 15 March 1993. The Court stated that the warranty "is in the nature of a prospective warranty, in that it guarantees the future...