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SUFFOLK CITY SCHOOL BOARD v. CONRAD BROTHERS, INC.


SUFFOLK CITY SCHOOL
BOARD v. CONRAD BROTHERS, INC.


January 9, 1998
Record No. 970414

SUFFOLK CITY SCHOOL BOARD

v.

CONRAD BROTHERS, INC.

OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
FROM THE CIRCUIT COURT OF THE CITY OF SUFFOLK

Westbrook J. Parker, Judge
Present: All the Justices


This appeal arises from a suit by the Suffolk City School
Board (the Board) against a general contractor engaged to build
two high schools. The Board alleges that the contractor, Conrad
Brothers, Inc., installed defective roofs in the schools,
resulting in damage to both. The trial court ruled that the suit
was barred by the applicable five-year statute of limitations.
Code ? 8.01?246(2).
The issue we consider on appeal is whether the trial court erred
in this ruling. Specifically, we determine when the Board’s cause
of action accrued pursuant to the provisions of Code ? 8.01?230.

The essential facts are not in dispute. On February 26, 1986,
the Board entered into a contract with Shriver and Holland
Associates (the architects) to provide architectural services and
representation throughout the various phases of the planned
construction of the two high schools (the architects’ contract).
For purposes of determining the architects’ obligations and right
to compensation, this contract contained a provision that
"[t]he Construction Phase . . . will terminate
when final payment to the Contractor is due, or in the absence of
a final Certificate for Payment or of such due date, sixty days
after the Date of Substantial Completion of the Work, whichever
occurs first." On October 14, 1988, the Board entered into
two separate, but substantially similar, contracts with Conrad
Brothers as the general contractor for the construction of the
two high schools under the direction of the architects (the
construction contracts). The construction contracts fixed the
time for final completion of construction as the date of issuance
of a "final Certificate for Payment" by the architects.

Thereafter, Conrad Brothers commenced work on both schools and
the architects issued certificates noting substantial completion
for both schools as of September 3, 1990. The architects’
"punch lists" appended to each certificate showing what
further work was to be completed by the contractor before final
payment would be authorized included references to correction of
the defective roofs. On November 27, 1990, and on several
occasions thereafter, the Board contacted Conrad Brothers to
report leaks in the roofs of both schools. Conrad Brothers
received these notices and took steps to remedy the defective
condition of the roofs.

On February 4, 1991, Conrad Brothers submitted to the
architects an application for final payment with respect to
construction of both high schools. The architects issued
certifications for payment of Conrad Brothers to the Board on
March 13, 1991. The Board filed the present suit against Conrad
Brothers on February 13, 1996.[1] Conrad Brothers filed a plea of
the statute of limitations, asserting that the Board had notice
of the defective conditions of the roofs on or before September
12, 1990.

Following a hearing on Conrad Brothers’ plea, the trial court
issued a letter opinion in which it referenced the previously
noted provisions of the architects’ contract which specified that
the "construction phase" of the projects would expire
sixty days after the issuance of the certificates of substantial
completion. Determining that this date was November 2, 1990, the
trial court set the commencement of the limitations periods at
that point. Based upon this determination, the trial court held
that the statute of limitations ran on November 2, 1995, more
than three months prior to the filing of the Board’s motion for
judgment. A final order was entered on December 4, 1996, adopting
by reference the reasons stated in the trial court’s initial
opinion letter. We awarded the Board this appeal.

We first consider the trial court’s reliance on the terms of
the architects’ contract to determine the termination date of the
construction contracts. The construction contracts contain
express terms addressing their duration and termination, and
nothing within the construction contracts links their termination
to the termination of the construction phase defined in the
architects’ contract. Although using similar terms and related to
the same projects, the contracts are independent expressions of
the agreements between the Board and the architects, on the one
hand, and the Board and Conrad Brothers on the other.
Accordingly, the trial court’s determination that the Board’s
cause of action against Conrad Brothers accrued on November 2,
1990 pursuant to the architects’ contract was in error. Under the
applicable provisions of the construction contracts the
construction was complete upon the issuance of a "final
Certificate for Payment," which did not occur here until
March 13, 1991, less than five years before the litigation was
commenced.

Conrad Brothers asserts, however, that the trial court’s
judgment can be sustained under a "right result, wrong
reason" analysis. See, e.g., Harrison &
Bates, Inc. v. Featherstone Associates Ltd. Partnership
, 253
Va. 364, 369, 484 S.E.2d 883, 886 (1997). Conrad Brothers
contends that Code ? 8.01-230
abrogates the common law rule permitting a party to an
indivisible executory contract to elect between pursuing his
remedy when an action which would constitute a breach occurs or
awaiting the time fixed by the contract for full and final
performance. Continuing, Conrad Brothers contends that Code ? 8.01-230 provides
that the statute of limitations on any cause of action for breach
of contract involving damage to property commences upon the
occurrence of the breach, regardless of whether the breaching
party continues to perform. Thus, in the present case, Conrad
Brothers asserts that the statute of limitations began to run at
least prior to November 27, 1990 when the Board first
acknowledged that the roofs were defective.

Prior to the enactment of Code ? 8.01-230, the rule
with respect to the running of a statute of limitations for a
breach of an indivisible executory contract was clear:

In the case of an indivisible or entire contract, a party
seeking to recover for a breach committed while the contract
remained executory, or for an anticipatory breach committed
before expiration of the time agreed upon for full and final
performance, has the election of pursuing his remedy when the
breach occurs, or of awaiting the time fixed by the contract
for full and final performance. If he elects the latter
course, the statute of limitations does not begin to run
against his right of action until the time for final
performance fixed by the contract has passed. Andrews v.
Sams
, 233 Va. 55, 58, 353 S.E.2d 735, 738 (1987); County
School Bd. v. Beiro
, 223 Va. 161, 163, 286 S.E.2d 232,
233 (1982); Simpson v. Scott, 189 Va. 392, 400, 53
S.E.2d 21, 24 (1949).

Roberts v. Coal Processing Corp., 235 Va. 556, 561, 369
S.E.2d 188, 190 (1988).[2]

When the present construction contracts were executed, Code ? 8.01-230 provided in
pertinent part:[3]

In every action for which a limitation period is
prescribed, the cause of action shall be deemed to accrue and
the prescribed limitation period shall begin to run from the
date . . . when the breach of contract or duty
occurs in the case of damage to property and not when the
resulting damage is discovered . . . .

Conrad Brothers’ essentially contends that Code ? 8.01-230 eliminates
the distinction between divisible and indivisible executory
contracts. We disagree.

The revisers’ note to Code ? 8.01-230
is instructive here: "Section 8.01-230 retains the
traditional rule of Virginia case law that a cause of action
accrues when the wrongful act or breach of duty or contract
occurs." The express provisions of this code section are
consistent with the distinction we have previously noted between
divisible and indivisible contracts in determining when a cause
of action accrues. Thus, we conclude that Code ? 8.01-230 merely
codified existing law in this respect and, accordingly, we reject
Conrad Brothers’ contention that it overruled cases decided under
the former common law rule.[4] That being so, County School
Bd. v. Beiro
, 223 Va. 161, 286 S.E.2d 232 (1982), is almost
directly on point with the facts of the present case and controls
the outcome of this appeal.

In Beiro, the owner of a public school building brought
an action against the contractor claiming damages due to a
defective roof. There, as in the present case, the contract was
not divisible. Although the contractor had completed his work on
the roof well before the architect issued the certificate of
final payment, we held that no cause of action accrued until the
date of that certificate. Beiro, 233 Va. at 163, 286
S.E.2d at 233. The circumstances of the present case are
indistinguishable and the same result must apply.[5]

For these reasons, we hold that with respect to Conrad
Brothers’ potential liability for the defective condition of the
roofs, the five-year statute of limitations commenced upon the
date of the architects’ submission of the "final
Certificate[s] for Payment" to the Board on March 13, 1991,
and, thus, the Board’s suit was timely filed on February 13,
1996.

We will reverse the judgment order of the trial court
sustaining Conrad Brothers’ plea of the statute of limitations
and remand the case for a trial on the merits.

Reversed and remanded.

 

 

 

 

 

FOOTNOTES:

[1] The Board’s suit also asserts a
negligence claim against Conrad Brothers. See Code ? 8.01-272 (permitting
a party to join a claim in tort with one in contract provided
that such claims arise out of the same transaction or
occurrence); see also Code ? 8.01-243(B)
(providing a five-year limitations period for actions for injury
to property). Because the trial court did not specifically
address this claim and the parties have not addressed it on
appeal, we will not address it in this opinion. The Board also
asserted a claim for breach of contract against the architects,
but that claim is not a part of this appeal.

[2] Although Roberts and
several of the cases cited therein were decided after the
enactment of Code ? 8.01-230,
these cases dealt with contracts which predated the revision of
the Code.

[3] In 1996, Code ? 8.01-230 was amended,
and the term "right of action" was substituted for
"cause of action." The Board has concentrated much of
its argument on the distinction between these two terms,
asserting that its "right of action" accrued, and,
thus, in the Board’s estimation, the running of the statute of
limitations commenced, upon the termination of the construction
contracts, even if its "cause of action" accrued
earlier. Cf. Stone v. Ethan Allen, Inc., 232 Va.
365, 368-70, 350 S.E.2d 629, 631-32 (1986). We express no opinion
as to the merits of this assertion, as the distinction between
the Board’s "cause" and the "right" of action
is not relevant to our resolution of this appeal.

[4] See Roberts, 235
Va. at 242, 368 S.E.2d at 247 (distinguishing Beiro not on
the basis of the intervening enactment of Code ? 8.01?230 but based
on the nature of the contract itself). See generally Harris
v. K & K Ins. Agency
, 249 Va. 157, 161 at n.*, 453 S.E.2d
284, 286 at n.* (1995)(citing Nelson v. Commonwealth, 235
Va. 228, 243, 368 S.E.2d 239, 248 (1988), and Virginia
Military Inst. v. King
, 217 Va. 751, 759, 232 S.E.2d 895, 900
(1977), and noting the distinction between contracts divisible
into separate and distinct phases and contracts not set up in
such phases).

[5]
As an alternative position that the Board’s cause of action for
breach of contract accrued on the date of substantial completion
rather than upon the termination date, Conrad Brothers relies
upon a post-substantial completion warranty provision which, by
its express terms, was not to be "construed to establish a
period of limitation with respect to any other obligation"
under the contracts. The record is clear, however, that at the
time the certificate of substantial completion was issued, the
architects had not accepted the roofs as complete. Thus, it is
evident that the Board’s requests to Conrad Brothers to remedy
the defective condition of the roofs were merely requests for the
contractor to comply with its duties under the contract, and not
notices that a previously accepted condition had subsequently
been found to be defective and was subject to repair under the
post-completion warranty.

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