Cases of the Month
Significant Cases and Decisions Affecting the Construction Industry
By: Craig F. Martin
Lamson, Dugan & Murray, LLP
1. Contractor required to furnish progress payment even though supplier’s pipe was defective. U.S. Composite Pipe South, LLC v. Frank Coluccio Constr. Co., 2014 U.S. Dist. Lexis 144404 (D. Haw. Oct. 7, 2014).
* What the Court Considered: The contractor Frank Coluccio Construction Company (FCCC) installed pipe furnished by U.S. Composite Pipe South, LLC (Composite Pipe) for a sewer project in Hawaii. A failure occurred during installation that damaged FCCC’s equipment and flooding. FCCC sued Composite Pipe for damages for failure to timely deliver the pipe and claimed the pipe was defective or that it did not meet the contract specifications. Both parties moved for summary judgment. The court denied FCCC’s motion, but granted Composite Pipe’s on the grounds that payment was due under the contract. Specifically, the purchase order between FCCC and Composite Pipe contained three payment installments: 50 percent at signing, 25 percent after delivery of the pipe, and 25 percent after the pipe was installed. FCCC had only paid Composite Pipe the first 50 percent installment. Composite Pipe claimed it was entitled to $1.8 million for the second and third installments. The court found Composite Pipe was not entitled to the third installment because it could not be determined at Summary Judgment whether the pipe was defective. However, the second installment trigger had been met when the pipe was delivered.
* What the Court Said: The court found that FCCC failed to present any evidence that prevented payment upon delivery of the pipe. Therefore, FCCC had to pay the second installment.
* What the Opinion Means: A contractor may be obligated to pay under a contract even when a subcontractor has caused substantial damage.
2. Four-year statute of limitations begins to run at the end of the express warranty period under Neb. Rev. Stat. § 25-223 for construction defects.. James Adams v. Manchester Park, L.L.C. and Southfork Homes, Inc., 22 Neb. App. 525, 885 N.W.2d 819 (Neb. Ct. App. 2014). 278
* What the Court Considered: A contractor purchased a lot in Omaha from a subdivision developer in order to construct a new home. A buyer entered into a purchase agreement with the contractor for the construction of the new home. Upon completion, at the final walk-through of the home the contractor provided a one-year “New Home Limited Warranty” which covered “material defects in workmanship and materials.” After occupying the home for six months the homeowners discovered issues with the foundation of the home. Additionally, the roof leaked, tiles were cracking in the basement and some windows would not open. The contractor addressed the issues that were within the warranty period. However the issues continued outside of the one-year period and the contractor refused to fix them. The homeowners sued claiming breach of express warranty and implied warranty of workmanlike performance. The trial court dismissed the lawsuit finding that the claims were not filed with the four-year statutory limitation for construction defects under Neb. Rev. Stat. § 25-223. The homeowners appealed to the Nebraska Court of Appeals.
* What the Court Said: The Nebraska Court of Appeals found that the statute of limitations began to run when the one-year limited warranty period had ended. Therefore, the homeowners filing was timely.
* What the Opinion Means: In Nebraska, when a contractor provides a homeowner with a express warranty to repair material defects, the four-year statute of limitations under §25-223 for breach of express warranty or implied warranty of workmanlike performance commences at the end of the express warranty period.
Craig Martin is a partner in the firm of Lamson, Dugan & Murray, LLP, in Omaha, Nebraska; and is the primary author of the Construction Contractor Advisor blog, www.ConstructionContractorAdvisor.com. These summaries were drafted with the assistance of Jessica Weborg and Spencer Murphy. For more information, or if you have any questions, please contact us at firstname.lastname@example.org.