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SCHULMAN INV. CO. v. OLIN CORP.

September 26, 1979

SCHULMAN INVESTMENT COMPANY, Plaintiff, against OLIN CORPORATION, Defendant and Third Party Plaintiff, against HABER & HENRY, INC., TREMCO, INC., BRISK WATERPROOFING COMPANY, INC., THOMAS J. MANNINO and FRAIOLI, BLUM & YESSELMAN, Third Party Defendants, HABER & HENRY, INC., Fourth Party Plaintiff, against SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK AS REHABILITATOR OF EMPIRE MUTUAL INSURANCE COMPANY and UNITED STATES FIRE INSURANCE COMPANY, Fourth Party Defendant.


The opinion of the court was delivered by: TENNEY

This diversity action arises out of the construction of two office buildings owned by the plaintiff, Schulman Investment Company ("Schulman"). Schulman alleges that the glass curtain walls installed in the buildings by defendant Olin Corporation ("Olin") did not conform to the contract between the parties and were negligently designed and installed. Schulman charges Olin with breach of contract, breach of warranty, and negligence. In the motion before the Court, Olin moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Rules"). Olin contends that Schulman's claims are time-barred and that no cause of action for an implied warranty of fitness exists on the facts of this case. For the reasons discussed below, Olin's motion is denied.

Background

In October 1971, Schulman and Olin entered into a written contract for the construction of glass curtain walls at the premises now known as "Nos. 5 and 6 Corporate Park Drive, White Plains, New York." Building No. 5 was completed in June 1973, and Building No. 6 was completed in June 1972. *fn1" Olin performed some corrective and remedial work on both buildings in April 1973. Schulman alleges that between September 1973 and May 1974 it advised Olin of uncorrected defects. The repair and reconstruction work done by Olin was not completed until the summer of 1974. Olin received final payment on the contract in September 1974. In the spring of 1977, Schulman became aware that some of the glass in the curtain walls had shifted and cracked and had to be replaced. Schulman then hired an "expert curtain wall design consultant" who inspected the buildings and reported on the damage. According to Schulman, the defective installation of the curtain walls created latent defects in the buildings that could not be detected or cause actual damage until some time later when the glass was subjected to continuous cycles of temperature change during the year. Schulman therefore contends that the glass did not shift, and the buildings were not damaged, until the spring of 1975.

 Schulman informed Olin of this damage in August 1977 and demanded that Olin perform the necessary repairs. Olin refused on the grounds that it could not be held responsible for any defects in the building about which it had not been previously notified. Schulman then arranged to have the defective curtain walls repaired and has allegedly incurred ever-increasing expenses exceeding $ 400,000. In January 1978 Schulman commenced this action against Olin to recover damages for breach of contract, breach of express warranty, breach of an implied warranty of fitness, and negligence. Olin has joined five third-party defendants: Haber & Henry, Inc., the glazing subcontractor; Tremco, Inc., the manufacturer of the glazing materials; Brisk Waterproofing; Thomas J. Mannino, the architect; and Fraioli, Blum & Yesselman, the structural engineers. Each of the third-party defendants has counterclaimed against Olin and cross-claimed against the others. Haber & Henry, Inc. has added its insurance carrier as a fourth-party defendant. Olin now moves for summary judgment on the grounds that (1) Schulman's contract and warranty claims are time-barred under the terms of the written agreement between the parties; (2) Schulman has no cause of action for breach of an implied warranty of fitness; and (3) Schulman's negligence claim is barred by the applicable New York statute of limitations because the cause of action accrued more than three years before the action was commenced. *fn2"

 Discussion

 Rule 56(c) provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The court must resolve any doubts in favor of the party opposing the summary judgment motion. SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978). In deciding whether to grant the motion, a district court "cannot try issues of fact; it can only determine whether there are issues to be tried." Id., citing American Mfrs. Mut. Ins. Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272, 279 (2d Cir. 1967). If summary judgment is denied, Rule 56(d) directs the court to "ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted."

 The three claims made in defendant Olin's summary judgment motion will be discussed in turn. The disputed questions of fact surrounding particular issues cannot be resolved at this stage of the proceedings and make summary judgment inappropriate with respect to some claims. But because several "material factual issues are not in dispute, and furnish an adequate basis for the application of the proper legal principles," this Court may address some of the questions of law raised by Olin's motion. 6 Moore's Federal Practice P 56.15(1.-0), at 56-398 (2d ed. 1976). In a contract action, such as the case at hand, where a defense is predicated upon an unambiguous and integrated written agreement, no genuine issue of fact might exist after applying the parol evidence rule. Id. at P 56.17(11), at 56-778 to 79. Similarly, a statute of limitations defense may turn on a question of law, not on a question of fact. Id. at P 56.17(58), at 56-1058. In keeping with the "policy favoring efficient resolution of disputes, which is the cornerstone of the summary judgment procedure," SEC v. Research Automation Corp., supra at 33, this Court will rule on those legal questions arising from the undisputed facts of the case.

 Breach of Contract

 Schulman's breach of contract claim alleges that the glass curtain walls erected by Olin failed to conform to the contract between the parties and were improperly designed and installed. Olin contends that the two contract provisions on which Schulman's suit is based contain terms limiting the time period in which Olin could be held responsible, and Schulman could sue, for damages resulting from allegedly defective work and services. Because the precise meaning of these provisions is critical to this dispute, they are quoted in full:

 
III. All materials are to be new and of the best quality of the kind specified and of the most approved type unless material of inferior type is distinctly specified; and all work is to be done in a workmanlike manner. It is further mutually agreed by the parties hereto that all labor employed under this contract shall be that recognized by the Building Trades Employers' Association. The General Contractor is given the right to require the Subcontractor to immediately remove any foreman or workman employed at the building whom the General Contractor deems incompetent or a hindrance to the proper progress of the work. The Subcontractor upon receiving notice from the General Contractor of the substitution of inferior, improper or unsound work or materials (whether worked or unworked), or work or materials at variance with what is specified, will, within twenty-four hours, proceed to remove such work or materials and make good all other work or materials, damaged thereby. If the General Contractor permits said work or materials to remain, the General Contractor shall be allowed the difference in value or shall at his election have the right to have said work or materials repaired or replaced as well as the damage caused thereby at the expense of the Subcontractor at any time within one year after the completion of the building; and neither payments made to the Subcontractor, nor any other acts of the General Contractor shall be construed as evidence of acceptance, waiver or estoppel.
 
IV. The Subcontractor agrees if any portion of said materials or workmanship furnished by him shall not in every way be good, sound, efficient and well suited for the purposes for which it is intended, and such deficiency shall occur, or be detected by inspection or otherwise within 1 year from the date of the full completion of the building appurtenances, improvements and equipments, the Subcontractor shall, at any time and from time to time, upon written notice from the Architect or the General Contractor specifying a fault or imperfection in workmanship or material, promptly correct the same, and in the event of the failure of the Subcontractor to so correct the same, the General Contractor or Owner may remedy the same at the Subcontractor's expense and deduct the cost from any amount then due and thereafter to become due to the Subcontractor, and if such amount shall be insufficient, or if there shall be nothing due the Subcontractor, he shall pay the General Contractor such cost or the balance thereof.

 Affidavit of Plaintiff in Opposition to Defendant's Motion for Summary Judgment, Exhibit 2 (Schulman-Olin Contract).

 Olin contends that Article III provides Schulman with an option to repair defective materials or workmanship at Olin's expense, including incidental damages; that option, however, must be exercised within one year after the building is completed. Olin also contends that Article IV made it liable only for defects that occurred or were detected within one year of the building's completion. According to Olin, these provisions are "clearly analogous" to statutes of limitations because they limit the time in which Olin could be held responsible for defective work or materials. Olin argues that these provisions are consistent with N.Y.C.P.L.R. § 201 (McKinney 1972) and New York case law that permits parties to enter into agreements limiting the time in which contract rights can be enforced to a period shorter than that otherwise provided by the applicable statute of limitations. According to Olin, the depositions of Schulman's employees and Schulman's interrogatory answers conclusively establish that Schulman was unaware of the alleged defects in the curtain walls until 1977 and did not notify Olin or demand repairs before that year. Olin denies that any repair work it performed in April 1973, or any communication between the parties during 1973-1974, was related to the present curtain wall problem. Olin therefore contends that Schulman is now barred from recovering damages because it did not exercise its option or assert its rights under the contract within one year after the buildings were completed.

 Not surprisingly, Schulman proposes a different interpretation of Articles III and IV. Schulman asserts that these "warranty" provisions were included in the contract to provide additional rights and remedies against Olin in specific situations; no language in the agreement limits Schulman's time to bring an action for damages. Schulman points to several other provisions in the contract that allegedly establish that Olin "warrant(ed) its performance in writing above and beyond the normal warranty implicit in the U.C.C." and intended to be held to a very high standard of care. Schulman further contends that it notified Olin about defects in the curtain ...


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