prospect venture v. engelberth

STATE OF VERMONT

CHITTENDEN COUNTY, SS.
PROSPECT VENTURE. L.P., )
Plaintiff, )
)
v. )
)
ENGELBERTH CONSTRUCTION, INC., ) Chittenden Superior Court
Defendant, ) Docket No. $1273-00 CnC
)
Vv. ) be CHITTENDEN SoUNT ——
) se FILED IN CLERKS OFFI |
FRENCH & BULEY CONSTRUCTION, INC, 9) fs} Ses
BOB SCHUMACHER, NORMAN HAYES, ) fst gy ep oe
CHRIS KITTELL, d/b/a/ KITTELL BUILDERS) ~2am |.
AND CARL FRITZ, d/b/a EAGLE BUILDERS, ) i wh a Pe
Third-Party Defendants. ) be MA MLE a

MEMORANDUM OF DECISION
Motions for Summary Judgment

This case is before the court on numerous motions for summary judgment filed by the
defendant and third-party defendants. The first was filed by Third-party Defendant Chris Kittell
on January 14, 2002. The second was filed by Third-party Defendant Carl Fritz on January 28,
2002. The third was filed by Third-party Defendant Bob Schumacher on February 5, 2002. On
February 5, 2002, Defendant Engelberth Construction filed a Motion for Summary Judgment
against the plaintiff and filed a partial opposition to the third-party defendants’ motions for
summary judgment. On March 6, 2002, plaintiff replied in opposition to all of the summary
judgment motions. On March 22, 2002, Engelberth filed a reply to plaintiff's opposition and on
March 25, 2002, Kittell filed a reply to both plaintiff and defendant’s opposition. Third-party
defendant Chris Kittell is represented by Michael H. Lipson, Esq. Third-party defendant Carl
Fritz is represented by Richard Wadhams, Jr., Esq. Third-party defendant Bob Schumacher is -
represented by E. William Leckerling, Esq. Defendant, Engelberth Construction, is répresented
by Daniel L. Burchard, Esq. Plaintiff, Prospect Venture, is represented by Michael J. Harris, Esq.

The facts in this case are undisputed as set forth in the third-party defendants’,
defendant’s, and plaintiff's statements of undisputed facts, supporting affidavits and other
documents. In 1992, plaintiff, Prospect Venture, and defendant, Engelberth, entered into a
contract for the construction of a student apartment complex (known as the “Redstone
Apartments”) on the University of Vermont campus. Between 1992 and 1993, Engelberth hired
a number of subcontractors, including Third-party Defendants Kittell, Fritz and Schumacher, to

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help complete the proj ect. Written contracts for the subcontracting work were executed between
Engelberth and the individual subcontractors. None of the subcontractors executed contracts
with Prospect Venture directly.

By the end of August 1993, Prospect Venture took possession of the Redstone
Apartments and began to lease the apartments to UVM students for the fall 1993 semester. In
September 2000, plaintiff filed a Complaint against Engelberth claiming Engelberth had
negligently constructed the Apartments and that it had breached its contract and implied
warranties with the plaintiff. On July 17, 2001, Engelberth filed an indemnity claim joining the
third-party defendants. According to Engelberth, if Prospect Venture is entitled to recover, then
the third-party defendants, pursuant to the express terms of their subcontracts, are required to
indemnify Engelberth for any damages which it may be liable.

In the motions now before the court, Engelberth and the third-party defendants all claim
that summary judgment should be granted because the statute of limitations has expired based on
an accrual provision in the contract between Prospect Venture and Engelberth, and because
plaintiff failed to abide by certain conditions precedent in the contract prior to filing suit.
Plaintiff responds that the accrual provision of the contract is ambiguous and that Vermont’s
“discovery rule” should apply, rather than the accrual provision, which would extend the
expiration of the statute of limitations.

ANALYSIS

Defendants’ argument that the statute of limitations has expired is based on an accrual
provision in the contract between Prospect Venture and Engelberth that defines the
commencement of the statutory limitation period. According to the contract, the statute of
limitations period commences at one of three times depending on the nature of the acts or failures
to act: 1) Before Substantial Completion of the project pursuant to provision 13.7.1; 2) Between
Substantial Completion and Final Certificate for Payment pursuant to provision 13.7.2; and 3)
After Final Certificate for Payment pursuant to provision 13.7.3. Determining the
commencement of the statute of limitations depends on when the act complained of occurred. In
this case, because the alleged negligent construction occurred before the date of Substantial
Completion, the only relevant period for the purposes of this motion is the period before
Substantial Completion of the project.’

| Because the court’s decision rests on other grounds, the claim that the plaintiff failed to
abide by conditions precedent in the contract will not be addressed.

2 In its opposition to the motions, plaintiff argues that if under 13.7.1 its claims are
barred as acts occurring before Substantial Completion, then it still retains a claim under 13.7.2
for acts occurring between the date of Substantial Completion and the issuance of a Final
Certificate for Payment. This claim is without merit. While Prospect Venture may have
“required [Engelberth] to return to the project well into 1994 to work on and correct problems

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All parties acknowledge that the date of Substantial Completion was no later than
September 1993, when the students moved in. The contract itself indicates that the date of
Substantial Completion was August 19", 1993. Contract, at 2. Plaintiff specifically asserts that
the meaning of the phrase “relevant date” [of Substantial Completion] in the pertinent clause in
the contract is not defined and is therefore ambiguous as it is capable of multiple meanings, and
that the defendants “fail to consider the modifying effect of the ‘relevant date’ clause.” (PI.’s
- Mot. in Opp’n. to Summ. J. at 4.) Plaintiff contends that under the frame of “relevant date,” the
court should apply the “discovery rule, and treat the statute of limitations period as starting
when defects in the work were discovered.

The court does not find the Substantial Completion provision ambiguous. The provision
clearly states:

13.7.1 As between the Owner and Contractor:

.1 Before Substantial Completion. As to acts or failures to act
occurring prior to the relevant date of Substantial Completion, any
applicable statute of limitations shall commence to run and any
alleged cause of action shall be deemed to have accrued in any and all
events not later than such date of Substantial Completion.

Contract Provision 13.7.1. The provision indicates that the applicable statute of limitations will
commence to run no later than the date of Substantial Completion. In this case, that means the
statute of limitations started no later than September 1993 and expired six years from that date

regarding such issues as patio deck door latches, heating deficiencies and roof shingle problems”
(Pl.’s Mot. In Opp’n. to Summ. J. at 6), these acts are not connected to the claims in this case.
Plaintiff does not assert, as a basis for the Complaint, that the defendants were negligent in their
work with the door latches, heating systems or shingles. Plaintiff cannot bootstrap its action on
this corrective work on individual items into a delay of the commencement of the statute of
limitations on the siding work completed in a timely manner under the contract . 13.7.2 does not
apply because the alleged defective construction occurred before the date of Substantial
Completion and not after.

3 Substantial Completion is defined by the contract as “the stage in the progress of the
Work when the Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy or utilize the Work for its intended use.”
Contract Provision 9.8.1.

4 The discovery rule would extend the beginning of running of the statute of limitations
beyond the date of completion. It defines the point at which the “cause of action accrues as the
time of the discovery of the injury.” University of Vermont v. W.R. Grace & Co., 152 Vt. 287,

289 (1989).

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pursuant to 12 V.S.A. § 511 (“[a] civil action .. . shall be commenced within six years after the
cause of action accrues and not thereafter.”). Using this construction, the statute of limitations in
this case had expired as of October 1, 1999.

Plaintiff argues that this interpretation of the contract does not take into account the
phrase “relevant date.” According to the plaintiff, because Vermont recognizes the discovery
rule, the term “relevant date” can, and does, refer to the date when the injury was discovered.

Plaintiff's construction of the term “relevant date” is inconsistent with the plain meaning
of the contract. The term “relevant date” as it appears in the context of the contract as a whole
only refers to the date that the parties have agreed upon and set as the date for Substantial
Completion. The “relevant date of Substantial Completion” allows the parties the freedom to set
the date of Substantial Completion according to the particular project. It does not somehow refer
to the date when the injury was discovered. The contract specifically sets the date of Substantial
Completion. If this court were to read the phrase “relevant date” utilizing plaintiff's
construction, then there would be no need to define the term Substantial Completion or to
provide for the date of Substantial Completion. The statute of limitations would merely begin to
run whenever the construction defect was detected. Using the plaintiff's interpretation, it would .
also not be necessary to define in the contract the three events (Before Substantial Completion,
Between Substantial Completion and Final Certificate for Payment and After Final Certificate for
Payment) which trigger a different date for commencing the statute of limitations. Again, the
limitations period would run from whenever the defect was discovered. Because this court must
interpret the contract to form a harmonious whole, In re Verderber, 13 Vt. L.Wk. 40, 41 (2002) (a
court must “give effect to every part of the instrument and form a harmonious whole from the
parts”), and because plaintiff's construction would be inconsistent with other provisions of the
contract, the court will not interpret the term “relevant date” as allowing for the statute of
limitations to run from the date the injury is discovered.

Plaintiff also argues that the term “relevant date” is sufficiently ambiguous to preclude
summary judgment. Plaintiff asserts that because it has demonstrated that “relevant date” might
have a different interpretation, the Substantial Completion provision should not be enforced.

This claim is without merit. “[I]f a writing appears to be plain and unambiguous on its
face, its meaning must be determined from the four corners of the instrument....” Isbrandtsen
y. North Branch Corp., 150 Vt. 575, 578 (1988). Here, the language of the Substantial
Completion provision is unambiguous and its meaning can be interpreted from the contract
itself.> There is a clear purpose for the use of the term “relevant date” that precludes any claim

5 yen if it could be shown that the contract language is ambiguous on its face, a contract
ambiguity will only be found “where a writing in and of itself supports a different interpretation
from that which appears when it is read in light of the surrounding circumstances, and both
interpretations are reasonable." Isbrandtsen 150 Vt. at 578. In this case, not only does the
writing itself not support a different interpretation, but the interpretation plaintiff suggests is not

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that it creates ambiguity: it provides the opportunity to have different Substantial Completion
dates for different portions of the contract project, as Article 3, section 3:2 of the contract clearly
states. This contract had only one Substantial Completion date, so that is the only relevant date.

Nothing in the contract mentions use of the discovery rule and the court will not interpret
the contract to include the use of the discovery rule when the language of the contract clearly:
indicates that the parties defined Substantial Completion and agreed to use the date of Substantial
Completion as the date to commence the statute of limitations. The parties, who are all familiar
with commercial construction, chose to use the AIA standard form contract which uses a highly
specific method of determining the statute of limitations date. In doing so, they determined the
rules for management of risk of economic loss arising from the project. The court will not
disturb their agreement, which is expressed in clear and unambiguous terms.

ORDER
For the foregoing reasons,
The Third-party Defendants’ Motions for Summary Judgment are granted.
Defendant Engelberth’s Motion for Summary Judgment is granted.
Plaintiff's contingent Motion to Stay the proceedings is moot.
Attorney Burchard shall prepare an appropriate Judgment Order.
UVa les each t

Hon. Maly Miles Teachout
Superior Court Judge

reasonable given the contract as a whole.