Walker Manufacturing Co. v. Dickerson, Inc.

THOMSEN, Senior District Judge:

I.

On August 6, 1975, Walker Manufacturing Company (Walker) filed its complaint herein against Dickerson, Incorporated (Dickerson) and its surety, Seaboard Surety Company (Seaboard), alleging that Dickerson had breached a written contract by the improper construction of the roof on a manufacturing and warehouse building at Arden, North Carolina. Walker was the owner of the building and Dickerson was the general contractor for its construction. Dickerson and Seaboard filed third-party complaints for indemnity and contribution against the roofing subcontractor, Edward’s Roofing & Sheet Metal Company (Edwards), the architect, Piedmont Engineering and Architects, Inc. (Piedmont), and the manufacturer of the roofing materials, The Celotex Corporation (Celotex).¹ Edwards cross-claimed against both Piedmont and Celotex for indemnity.

Prior to trial all parties filed motions for summary judgment; the court granted Seaboard’s motion and dismissed it from the case. Walker did not appeal from that order. The district judge severed the third-party claims and cross-claims, and the principal case was tried before a jury in July 1976. At the conclusion of the plaintiff’s evidence the court granted Dickerson’s motion for a directed verdict, holding that Walker’s action was barred by the North Carolina three-year statute of limitations. N.C.Gen.Stat. § 1-52(1). In applying the statutory bar, the district court concluded that the evidence was insufficient to permit the jury to consider the application of the doctrine of equitable estoppel. Upon appeal we concluded that upon the facts presented at the trial reasonable men could differ on the issue of equitable estoppel, and, accordingly, that the district court erred in directing a verdict. In remanding the case, we also directed that the court determine whether the ten-year period of limitations for sealed instruments under N.C.Gen.Stat. § 1-47(2) had any application to the case. Walker Manufacturing Co. v. Dickerson, 560 F.2d 1184 (4 Cir. 1977).

Following the remand, on cross-motions for summary judgment, the district judge held that the ten-year statute of limitations for sealed instruments did not apply in this action, and that it was governed by the three-year statute. Walker did not appeal from that ruling. The principal case was re-tried and upon the issues submitted to it the jury found that Dickerson had breached its contract with Walker and was estopped by its conduct from asserting the defense of the statute of limitations. Damages were assessed by the jury in the amount of $194,-000, and judgment was entered against Dickerson in that amount. Dickerson has appealed.

At the trial of the third-party claims, the court submitted twelve issues to the jury, which found that Edwards had breached its subcontract with Dickerson, and that Dickerson was entitled to recover the sum of $194,000 from Edwards. Although the jury found that Piedmont and Celotex had been negligent, the jury also found that Dickerson was estopped from asserting any claim against either of them. The jury found, however, that Celotex had breached its warranty with Edwards and that Edwards was entitled to recover $97,000 from Celo-tex; ² the jury also awarded Edwards $48,-500 from Piedmont. A judgment was entered reflecting the various findings of the jury, and Dickerson, as well as the third-party defendants, Edwards, Piedmont and Celotex, appealed. Piedmont, however, has dismissed its appeal. This opinion deals with all of the appeals still pending.

II.

The factual background, briefly stated, is as follows: On April 21, 1969, Walker entered into a written contract with Dickerson as general contractor for the construction of the subject building. The roofing specifications called for the installation of a “twenty year bonded tar and slag roof” which would be “absolutely water tight” when the installation was completed. Under the contract, which conformed to the model agreement of the American Institute of Architects, Dickerson, as general contractor, was responsible “for the acts and omissions of all [its] employees and all Subcontractors, their agents and employees, and all other persons performing any of the work” under a contract with Dickerson. Construction began in 1969 and was completed in May of 1970. The installation of the roofing was performed by Edwards, as subcontractor, and when the roofing work was completed Edwards gave Dickerson and Walker a one year guaranty or warranty of good workmanship, extending from May 25, 1970, until May 24, 1971.

Shortly after completion of the work blisters and leaks developed in the roof. Edwards made a number of unsuccessful attempts to correct the problem, but ceased its efforts when the warranty expired. Walker then turned to Dickerson for correction of the problem, but Dickerson’s attempts to repair the roof were largely unsuccessful, despite the fact that Dickerson spent over $75,000 in the effort. We need not detail the various steps taken by Dickerson nor the negotiations between Walker and Dickerson covering the period from June 1971 until May 1975. We find sufficient evidence in the record to support the jury’s finding that Dickerson had breached its contract with Walker and was estopped from asserting the defense of the statute of limitations against Walker. Accordingly, the judgment obtained by Walker against Dickerson is affirmed.

With respect to the various third-party claims the indemnity clause in Edwards’ roofing subcontract supports the judgment in favor of Dickerson against Edwards in the full amount of the $194,000 verdict which Walker had obtained against Dickerson in the trial of the principal case. Piedmont has dismissed its appeal from the judgment obtained by Edwards in the cross-claim of Edwards against it. So, the questions remaining for our consideration deal with (A) the propriety of the judgment which Edwards obtained against Celotex in the amount of $97,000 based upon its breach of warranty, and (B), Dickerson’s contention that it was entitled to judgment against Celotex based on the alleged negligence of Celotex.

III.

The involvement of Celotex in this action stems from its sale to Edwards of roofing felt known as Philip Carey 300. The materials were delivered to Edwards during the period September-December 1969. Celotex offered, for a stated premium, to issue bonds on roofs using its materials and installed in accordance with its specifications, but no bond was obtained from it by any of the parties to this controversy. After roofing problems developed, a sales representative of Celotex met with representatives of the other parties at the job site on September 16, 1971. Thereafter, its representative received copies of two letters directed to Walker by Dickerson, the last letter dated November 16, 1971. None of the parties made a claim or demand against Celotex based upon the sale of the roofing material to Edwards until Dickerson’s third-party complaint was filed in this action on September 8, 1975.

(A)

In challenging Edwards’ judgment against it, the principal contention of Celo-tex is that any claim of Edwards growing out of the sale of the roofing material is time-barred by the provisions of the Uniform Commercial Code, N.C.Gen.Stat. 25-2-725, effective in North Carolina on July 1, 1967, which provides:

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

Since the statute states that the cause of action accrues upon tender of delivery, regardless of any lack of knowledge on the part of the aggrieved party, Celotex contends that Edwards’ claim is time-barred because its third-party complaint was filed well over four years after the last delivery of roofing material in December 1969.

Edwards argues and the district court held that under North Carolina law, where one person’s liability for a tort or breach of warranty committed by another is secondary, the statute of limitations does not commence to run against his right to indemnity from the party primarily liable until damages have been paid to the injured party.

The contract for the roofing material was made in North Carolina; the material was delivered and used in that state; so, North Carolina law applies. In Premier Corp. v. Economic Research Analysts, 578 F.2d 551, at 553-54 (4 Cir. 1978), we said:

North Carolina follows the general rule that a cause of action on an obligation to indemnify normally accrues when the indemnitee suffers actual loss. Lackey v. Southern Ry., 219 N.C. 195, 13 S.E.2d 234 (1941); Pritchard v. Norfolk Southern Ry., 166 N.C. 532, 82 S.E. 875 (1914); Hager v. Brewer Equipment Co., 17 N.C.App. 489, 195 S.E.2d 54 (1973); 7 Strong’s North Carolina Index 3d, § 2.3, at 96 (1977).²

The footnote quoted from 6 Williston on Contracts § 2004, at 5641-42 (2d ed. 1938), as follows:

The Statute [of Limitations] runs from the time of the breach though no damage occurs until later; and it is no exception that on an obligation to indemnify against loss there must be damage before the statutory period begins, for by the nature of such a contract there is no breach until there is damage.

In Hager, cited in the above quotation from Premier Corp., a worker was injured when the driveshaft of an elevator broke, causing it to fall. An action in negligence was filed against the furnisher of the elevator; the furnisher then filed a third-party action against the seller of the elevator for indemnity, based upon negligence and breach of warranty. The court held that the applicable statute of limitations would not begin to run against the indemnity claim until after payment and satisfaction of the debt. The court quoted with approval the following passage from 51 Am.Jur.2d, Limitations of Actions, § 287, at p. 802:

The general rule is that where the original defendant alleges facts showing that the additional defendant is liable over to him, joinder is generally held to be proper, and the fact that the statute of limitations will bar the plaintiff from a direct recovery against the additional defendant has no effect on the defendant’s right to enforce his claim of contribution or indemnity, since the cause of action owned by the plaintiff is distinct from the cause of action arising out of the duty of the additional defendant to indemnify the original defendant.

17 N.C.App. at 492-93, 195 S.E.2d at 56-57.

The court further stated:

Except in states which have enacted statutes providing otherwise, it is almost universally held that where one person’s liability for a tort or breach of warranty committed by another is secondary, the statute of limitations does not start running against his right to indemnity from the party primarily liable until he has paid damages to the injured party.

Id. at 493, 195 S.E.2d at 57.

The Hager court noted that § 25-2-725 of the U.C.C. had not been adopted in North Carolina at the time the sales involved therein had been made; but indicated that its decision would not have been different if that section had been applicable; it noted that the third-party plaintiff therein was not seeking to recover for damages it sustained as a direct result of a defect in the elevator at the time of purchase. The court stated:

. Such a claim for relief would be barred because Brewer would have had a right to sue for nominal damages at least at the time it purchased the elevator, (citing cases) Brewer’s claim for indemnity is separate and distinct from any possible claim that may have arisen at the time the elevator was purchased and consequently the statute of limitations did not begin to run against the indemnity claim at that time.

17 N.C.App. at 494, 195 S.E.2d at 58.

The indemnity claim which Edwards is asserting against Celotex in the case at bar was filed promptly after the third-party claim by Dickerson against Edwards was filed. We conclude that it was not time-barred. The U.C.C. was not intended to shield manufacturers of defective products from indemnity claims made by their purchasers more than four years from the date of sale by the manufacturer. The judgment entered by the district court in favor of Edwards against Celotex was proper.

(B)

Finally, we come to Dickerson’s claim against Celotex for $75,000 spent by Dickerson in attempting to repair the defective roof. This claim is in addition to the claim of Dickerson against Edwards, on which Dickerson received a judgment for $194,000, the full amount for which Dickerson was held liable to Walker. Edwards, in turn, has received a judgment for half of this liability ($97,000) against Celotex and for half of the remainder against Piedmont.

The court below submitted to the jury four issues dealing with Dickerson’s claim against Celotex. Those issues and the jury’s answer to each were as follows:

6. Was Celotex negligent in the design or manufacture of the roofing materials used in the Arden plant, or was it negligent in providing defective specifications for the application of said roofing materials?

ANSWER: Yes

7. If so, was such negligence the proximate cause of the failure of the Arden plant roof?

ANSWER: Yes

8. What damages, if any, is Dickerson, Incorporated, entitled to recover of Celo-tex?

ANSWER: $-0-

12. Is Dickerson, Incorporated, es-topped from asserting any claims against Celotex and Piedmont?

ANSWER: Yes

There was evidence to justify all of the findings the jury made on these issues. We have considered the arguments made by Dickerson in its brief and oral argument on the question of estoppel, but find no reversible error in the submission of those issues to the jury or the instructions given to the jury by the trial judge thereon.

For the foregoing reasons, the judgment of the district court is

AFFIRMED.

1 . The roofing materials were supplied by Philip Carey Corporation, the predecessor of Celotex. To simplify matters, they will be referred to herein collectively as Celotex.

2 . Edwards’ cross-complaint alleged negligent manufacture by Celotex in language similar to that employed by Dickerson. However, Edwards tendered no issue on the charge of negligence and its claim against Celotex was submitted to the jury only upon the issue of breach of warranty.