Tuslaw Local School Dist. Bd. of Edn. v. CT Taylor Co., Inc. , 2019 Ohio 1731 ( 2019 )

[Cite as Tuslaw Local School Dist. Bd. of Edn. v. CT Taylor Co., Inc., 2019-Ohio-1731.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
JUDGES:
BOARD OF EDUCATION OF : Hon. W. Scott Gwin, P.J.
TUSLAW LOCAL SCHOOL : Hon. John W. Wise, J.
DISTRICT : Hon. Patricia A. Delaney, J.
:
Plaintiff-Appellant :
: Case No. 2018CA00099
-vs- :
:
CT TAYLOR COMPANY, INC, ET AL : OPINION
Defendants-Appellees
CHARACTER OF PROCEEDING: Civil appeal from the Stark County Court of
Common Pleas, Case No. 2018CV00086
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: May 6, 2019
APPEARANCES:
For Plaintiff-Appellant For Defendant-Appellee – CT Taylor
CHRISTOPHER MCCLOSKEY PATRICIA TROMBETTA
100 South Third Street 312 Walnut Street, Suite 2530
Columbus, OH 43215-4291 Cincinnati, OH 45202
For Defendant-Appellee For Defendant-Appellee
Hartford Insurance MKC Architects
ROYCE REMINGTON THOMAS ROSENBERG
200 Public Square, Suite 2800 41 South High Street
Cleveland, OH 44114 Huntington Center, 21st Floor
Columbus, OH 43215
Stark County, Case No. 2018CA00099 2
Gwin, P.J.
{¶1} Appellant appeals the June 26, 2018 judgment entry of the Stark County
Court of Common Pleas granting appellees’ motions to dismiss.
Facts & Procedural History
{¶2} On January 16, 2018, appellant the Board of Education of the Tuslaw Local
School District (“Board”) filed a complaint against appellees CT Taylor Company, Inc.
(“CT Taylor”), Hartford Casualty Insurance Company (“Hartford”), and MKC Architects,
Inc. (“MKC”). The Board alleges in its complaint that, as part of Ohio’s Expedited Local
Partnership Program, the Tuslaw New High School (“the Project”) was constructed. The
Board avers all construction and design of the Project was required to conform to the
standards set forth in the Ohio School Design Manual (“OSDM”) published by the Ohio
Facilities Construction Commission. The Board alleges the OSDM provides, “school
building structures and exterior enclosures shall be designed and constructed of materials
which will perform satisfactorily for 40 years with only minor maintenance and repairs,
and for 100 years before major repairs or replacement of primary structural or exterior
enclosure elements is required.”
{¶3} The Board alleges it entered into a written agreement, identified as the
“Design Contract,” with MKC to serve as the design professional for the Project and
entered into a written agreement, identified as the “General Trades Contract,” with CT
Taylor to serve as the general contractor for the Project. Further, the Board avers that
Hartford is the surety for CT Taylor on the Project and issued a bid guarantee and a
contract bond, identified as the “General Trades Bond.” The Board claims that various
alleged deficiency issues such as condensation, moisture intrusion, heat loss, excess
Stark County, Case No. 2018CA00099 3
humidity, premature deterioration, in areas of the roof and building envelope “of the
Project exist, which on information and belief, arise from deficiencies with the design,
construction, installation, and materials of the roof and building envelope” and will require
major repairs, including removal and replacement of the existing roof.
{¶4} Based upon the alleged deficiencies in the design and construction of the
roof and building envelope, the Board asserts three causes of action in its complaint. The
first cause of action (Count One) is a breach of contract claim against MKC. The Board
alleges MKC had a duty to comply with the express written terms of the Design Contract,
including the requirements of the ODSM and a duty to provide design professional
services for the Project conforming to the standard of care set forth in the Design Contract.
The Board avers MKC has failed to perform its obligations under the terms of the Design
Contract and such failure is a material breach of the Design Contract.
{¶5} The second count of action (Count Two) is a breach of contract claim
against CT Taylor. The Board alleges CT Taylor breached the General Trades Contract
by failing to properly install the roof system and building envelope in accordance with the
General Trades Contract and that CT Taylor’s work does not meet the requirements of
the OSDM. The Board avers the failure of CT Taylor to perform its work pursuant to the
terms of the General Trades Contract is a material breach. The third count of action
(Count Three) is a claim against the General Trades Surety Bond – Hartford. The Board
alleges CT Taylor is in material breach and default of its obligations under the General
Trades Contract and Hartford is liable to the Board to the same extent as CT Taylor.
{¶6} Attached to the complaint is a copy of one page of the ODSM; a copy of the
Design Contract dated July 15, 2002; five pages of the General Trades Contract dated
Stark County, Case No. 2018CA00099 4
September 5, 2003; a copy of the Consent of Surety to Final Payment issued on
November 4, 2005; a copy of the Contractor’s Payment of Debts and Claims dated
December 5, 2005 stating all payments had been made on the project, all obligations had
been satisfied, and all work, labor, and services had been performed on the project; and
a copy of the Contractor’s Affidavit of Release of Liens dated December 5, 2005.
{¶7} On February 20, 2018, MKC filed a motion to dismiss the complaint. The
Board filed its memorandum contra on March 2, 2018. On March 22, 2018, CT Taylor
and Hartford filed motions to dismiss the complaint. The Board filed memoranda in
opposition on April 9, 2018. The parties filed replies and sur-replies to the motions to
dismiss.
{¶8} The trial court issued a judgment entry on June 26, 2018 granting the
motions to dismiss. The trial court cited this Court’s case of State by and through Wray
v. Karl R. Rohrer Associates, Inc., 5th Dist. Tuscarawas No. 2017AP030008, 2018-Ohio-
65 and our holding that Ohio’s construction statute of repose bars the Board’s breach of
contract claims. The trial court found the Project in this case was completed no later than
2005, but the complaint was filed in January of 2018, more than ten years later. The trial
court further found the statute of repose allows bringing an action against those involved
in the construction industry to be extended by two years should issues be discovered
within the last two years of the statute of repose, but noted the complaint in this case does
not state a date of discovery. The trial court stated even if the two-year extension applies,
the Board’s claims expired in 2017 under the statute of repose.
{¶9} Appellant appeals the June 26, 2018 judgment entry of the Stark County
Court of Common Pleas and assigns the following as error:
Stark County, Case No. 2018CA00099 5
{¶10} “I. THE TRIAL COURT ERRED IN GRANTING THE MOTION TO DISMISS
OF MKC ARCHITECTS, INC.; CT TAYLOR, INC.; AND HARTFORD CASUALTY
INSURANCE COMPANY BECAUSE IT ERRONEOUSLY HELD THAT R.C. 2305.131(A)
APPLIES TO TORT AND BREACH-OF-CONTRACT CLAIMS.
{¶11} “II. THE TRIAL COURT ERRED IN GRANTING THE MOTIONS TO
DISMISS OF MKC ARCHITECTS, INC; CT TAYLOR, INC; AND HARTFORD
CASUALTY INSURANCE COMPANY BECAUSE IT ERRONEOUSLY HELD THAT THE
BOARD’S BREACH-OF-CONTRACT CLAIMS DID NOT ACCRUE WITHIN THE 10-
YEAR STATUTE OF REPOSE PROVIDED BY R.C. 2305.131.
{¶12} “III. THE TRIAL COURT ERRED IN GRANTING THE MOTIONS TO
DISMISS OF MKC ARCHITECTS, INC.; CT TAYLOR, INC.; AND HARTFORD
CASUALTY INSURANCE COMPANY BECAUSE IT ERRONEOUSLY HELD THAT THE
BOARD’S BREACH-OF-CONTRACT CLAIMS DO NOT FALL WITHIN THE EXPRESS-
WARRANTY EXCEPTION FOUND IN R.C. 2305.131(D).
{¶13} “IV. THE TRIAL COURT ERRED IN GRANTING HARTFORD CASUALTY
INSURANCE COMPANY’S MOTION TO DISMISS BECAUSE IT ERRONEOUSLY
HELD THAT THE BOARD DID NOT HAVE AN INDEPENDENT RATHER THAN SOLELY
DERIVATIVE CLAIM AGAINST THE CONTRACTOR’S SURETY.”
Standard of Review
{¶14} We review a trial court order granting a motion to dismiss pursuant to Civil
Rule 12(B)(6) de novo. Greeley v. Miami Valley Maintenance Contractors, Inc., 49 Ohio
St.3d 228, 551 N.E.2d 981 (1990). A motion to dismiss for failure to state a claim upon
which relief can be granted tests the sufficiency of the complaint. State ex rel. Hanson v.
Stark County, Case No. 2018CA00099 6
Guernsey County Bd. of Commrs., 65 Ohio St. 3d 545, 605 N.E.2d 378 (1989). Under a
de novo analysis, we must accept all factual allegations of the complaint as true and all
reasonable inferences must be drawn in favor the nonmoving party. Byrd v. Faber, 57
Ohio St. 3d 56, 565 N.E.2d 584 (1991). In order for a court to grant a motion to dismiss
for failure to state a claim, it must appear “beyond a doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to relief.” O’Brien v. Univ.
Community Tenants Union, Inc., 42 Ohio St. 2d 242, 327 N.E.2d 753 (1975).
I. & II.
{¶15} In its first and second assignments of error, the Board argues the trial court
erred in granting appellees’ motions to dismiss based upon this Court’s prior decision in
State by and through Wray v. Karl R. Rohrer Associates, Inc., 5th Dist. Tuscarawas No.
2017AP030008, 2018-Ohio-65. The Board contends Rohrer should be overruled as
wrongly decided and this Court should hold that only tort claims are subject to R.C.
2305.131 statute of repose provisions.
{¶16} R.C. 2305.131(A)(1) provides,
Notwithstanding an otherwise applicable period of limitations
specified in this chapter or in Section 2125.02 of the Revised Code and
except as otherwise provided in divisions (A)(2), (A)(3), (C), and (D) of this
section, no cause of action to recover damages for bodily injury, an injury
to real or personal property, or wrongful death that arises out of a defective
and unsafe condition of an improvement to real property and no cause of
action for contribution or indemnity for damages sustained as a result of
bodily injury, an injury to real or personal property, or wrongful death that
Stark County, Case No. 2018CA00099 7
arises out of a defective and unsafe condition of an improvement to real
property shall accrue against a person who performed services for the
improvement to real property or a person who furnished the design,
planning, supervision of construction, or construction of the improvement to
real property later than ten years from the date of substantial completion of
such improvement.
{¶17} In Rohrer, the appellee signed an agreement with the Ohio Department of
Administrative Services to provide design services related to structural engineering and
related supervision for the construction of an Ohio Department of Transportation garage.
Id. The appellants filed a complaint for negligence and breach of contract when there
were issues with the brick and windows in the building. Id. The appellee argued the
complaint was barred by Ohio’s statute of repose, R.C. 2305.131. Id. We held that R.C.
2305.131 applies to breach of contract claims. Id.
{¶18} We find the facts in this case analogous to the facts in Rohrer. The instant
action is an action for damages to property caused by allegedly defective design and/or
construction of an improvement to real property. Pursuant to the complaint, the Project
in this case was completed no later than December 5, 2005. However, the instant action
was filed in January of 2018, more than ten years after substantial completion of the
project. Thus, R.C. 2305.131(A)(1) applies to bar the Board’s complaint. We decline to
overrule or re-visit our decision in Rohrer.
{¶19} We again emphasize that the rationale for our decision in this case and in
Rohrer is based upon the plain language of R.C. 2305.131 and the uncodified law
demonstrating the General Assembly’s intent in reenacting R.C. 2305.131. In R.C.
Stark County, Case No. 2018CA00099 8
2305.131(F), the statute itself sets forth the legislature’s intention that it apply to any civil
action in which it is relevant, regardless of any prior rule of law. Further, the legislature
clearly set forth its purposes for reenactment of the statute of repose following the Ohio
Supreme Court’s declaration that the prior version was unconstitutional. In Section 3 of
2004 Am. Sub. S.B. No. 80, the General Assembly specifically states as follows:
(B) In enacting section 2305.131 of the Revised Code in this act, it is
the intent of the General Assembly to do all of the following:
(1) To declare that the ten-year statute of repose prescribed by
section 2305.131 of the Revised Code, as enacted by this act, is a specific
provision intended to promote a greater interest than the interest underlying
the general four-year statute of limitations prescribed by section 2305.09 of
the Revised Code, the general two-year statute of limitations prescribed by
section 2305.10 of the Revised Code, and other general statutes of
limitation prescribed by the Revised Code;
(2) To recognize that, subsequent to the completion of the
construction of an improvement to real property, all of the following
generally apply to the persons who provided services for the improvement
or who furnished the design, planning, supervision of construction, or
construction of the improvement:
(a) They lack control over the improvement, the ability to make
determinations with respect to the improvement, and the opportunity
or responsibility to maintain or undertake the maintenance of the
improvement.
Stark County, Case No. 2018CA00099 9
(b) They lack control over other forces, uses, and intervening causes
that may cause stress, strain, or wear and tear to the improvement.
(c) They have no right or opportunity to be made aware of, to
evaluate the effect of, or to take action to overcome the effect of the
forces, uses, and intervening causes * * *
(3) To recognize that, more than ten years after the completion of the
construction of an improvement to real property, the availability of relevant
evidence pertaining to the improvement and the availability of witnesses
knowledgeable with respect to the improvement is problematic;
(4) To recognize that maintaining records and other documentation
pertaining to services provided for an improvement to real property or the
design, planning, supervision of construction, or construction of an
improvement to real property for a reasonable period of time is appropriate
and to recognize that, because the useful life of an improvement to real
property may be substantially longer than ten years after the completion of
the construction of the improvement, it is an unacceptable burden to require
the maintenance of those types of records and other documentation for a
period in excess of ten years after that completion;
(5) To declare that section 2305.131 of the Revised Code, as
enacted by this act, strikes a rational balance between the rights of
prospective claimants and the rights of design professionals, construction
contractors, and construction subcontractors and to declare that the ten-
year statute of repose prescribed in that section is a rational period of
Stark County, Case No. 2018CA00099 10
repose intended to preclude the pitfalls of stale litigation but not to affect
civil actions against those in actual control and possession of an
improvement to real property at the time that a defective and unsafe
condition of that improvement causes an injury to real or personal property,
bodily injury, or wrongful death.
{¶20} As we noted in Rohrer, concerns underlying the reenactment of the statute
such as lack of control of the improvement, intervening causes, availability of evidence,
and availability of witnesses, apply to an action whether the action sounds in tort or
contract. 5th Dist. Tuscarawas No. 2017AP030008, 2018-Ohio-65.
{¶21} The Board further argues stare decisis requires this Court to follow the
Kocisko v. Charles Shutrump & Sons Co., 21 Ohio St. 3d 98, 488 N.E.2d 171 (1986) case
issued by the Ohio Supreme Court. In Kocisko, the Supreme Court held that a prior
version of R.C. 2305.131 applies only to actions which sounded in tort. However, as we
stated in Rohrer, “the current statute is clearly not a statute of limitations as the Kocisko
court characterized the prior version of R.C. 2305.131. Rather than limiting the time in
which the action may be brought, the current statute prevents the cause of action from
accruing after ten years has passed * * * we find Kocisko is not binding authority on this
Court for interpreting the current version of the statute.” 5th Dist. Tuscarawas No.
2017AP030008, 2018-Ohio-65. Accordingly, following our rationale in Rohrer, we find we
are not bound by the Kocisko case.
{¶22} Also in its second assignment of error, the Board contends Rohrer fails to
accord the word “accrues” its proper meaning. Specifically, that R.C. 2305.131 only
requires a claim to “accrue” within ten years of substantial completion and a claim is still
Stark County, Case No. 2018CA00099 11
subject to the breach of contract fifteen (15) year statute of limitations as to when the
action must be commenced after it accrues and the Board had fifteen years from the
substantial completion date of December 5, 2005 to bring its claims. In this argument,
the Board alleges R.C. 2305.131 is not a true statute of repose, in that while it bars a
cause of action from accruing more than ten years after substantial completion, it does
not bar a plaintiff from commencing a claim more than ten years after substantial
completion.
{¶23} However, in Rohrer, this Court did address the “accrual” language
contained in R.C. 2305.131 and found that R.C. 2305.131 is not a statute of limitations,
but is a true statute of repose that is a declaration of when a cause of action no longer
exists. Id. We stated, “R.C. 2305.131 prevents the cause of action from accruing” and
“extinguishes all claims ten years after completion of the project, irrespective of whether
the plaintiff has filed a complaint in a timely manner.” Id.
{¶24} Additionally, we find the Board’s interpretation contradicts the plain
language of R.C. 2305.131(A)(2). R.C. 2305.131(A)(2) states as follows:
Notwithstanding an otherwise applicable period of limitations
specified in this chapter or in section 2125.02 of the Revised Code, a
claimant who discovers a defective and unsafe condition of an improvement
to real property during the ten-year period specified in division (A)(1) of this
section but less than two years prior to the expiration of that period may
commence a civil action to recover damages as described in that division
within two years from the date of the discovery of that defective and unsafe
condition.
Stark County, Case No. 2018CA00099 12
{¶25} Thus, the statute allows the time for bringing an action against those
involved in the construction industry to be extended by two years should issues be
discovered within the last two years of the statute of repose. R.C. 2305.131(A)(2) would
be unnecessary if the statute were to be applied as the Board suggests, as (A)(2) would
have no effect on any claimant because once a claimant’s cause of action accrued, the
statute of repose would no longer apply and the statute of limitations would apply. We
must assume that the legislature does not use words unnecessarily, especially not entire
statutory provisions, and avoid construing a statute in a manner that would render some
portion of the provision “meaningless or inoperative.” State v. Moore, 154 Ohio St. 3d 94,
2018-Ohio-3237, 111 N.E.3d 1146, citing State ex rel. Myers v. Spencer Twp. Rural
School Dist. Bd. of Edn., 95 Ohio St. 367, 116 N.E. 516 (1917).
{¶26} Based on the foregoing, we find R.C. 2305.131(A)(1) applies to bar the
Board’s complaint. The Board’s first and second assignments of error are overruled.
III.
{¶27} In its third assignment of error, the Board argues the trial court erred in
granting the motions to dismiss because it erroneously held the Board’s breach of
contract claims do not fall within the express warranty exception. The Board contends
that even if R.C. 2305.131 is applicable to breach of contract claims, MKC and CT Taylor
breached an express warranty to the Board, allowing the Board to bring its claims within
the length of the warranty pursuant to R.C. 2305.131(D). The Board alleges the ODSM
creates a forty (40) year warranty that has not yet expired and it is thus permitted to bring
claims within that forty year period.
{¶28} R.C. 2305.131(D) provides:
Stark County, Case No. 2018CA00099 13
Division (A)(1) of this section does not prohibit the commencement
of a civil action for damages against a person who has expressly warranted
or guaranteed an improvement to real property for a period longer than the
period described in division (A)(1) of this section and whose warranty or
guarantee has not expired as of the time of the alleged bodily injury, injury
to real or personal property, or wrongful death in accordance with the terms
of that warranty or guarantee.
{¶29} Upon review of the complaint, we find the Board did not allege breach of
warranty claims against appellees. In its complaint, the Board alleges three causes of
action: breach of contract against MKC, breach of contract against CT Taylor, and a claim
against the surety bond issued by Hartford. In each count, the Board alleges MKC and/or
CT Taylor had a duty to comply with their respective contracts and the failure to perform
under the contracts constitutes a material breach. The Board did not include breach of
express warranty claims or allege that (1) a warranty existed; (2) the product failed to
perform as warranted; (3) plaintiff provided the defendant with reasonable notice of the
defect; and (4) plaintiff suffered injury as a result of the defect. See Hubbard v. AASE
Sales, LLC, 5th Dist. Delaware No. 17CAE070051, 2018-Ohio-2363.
{¶30} Additionally, we find that the Board did not make the warranty argument as
to CT Taylor or Hartford before the trial court, as the Board’s memoranda in opposition to
CT Taylor and Hartford’s motions to dismiss did not contain an argument that its claims
against CT Taylor and Hartford were breach of express warranty claims that were allowed
to be brought for forty years pursuant to R.C. 2305.131(D). Because the Board did not
present this argument to the trial court, it has waived this argument for purposes of appeal
Stark County, Case No. 2018CA00099 14
as to CT Taylor and Hartford. Large v. Lilley, 5th Dist. Delaware No. 17 CAE 06 0043,
2018-Ohio-1017; Huntsman v. State, 5th Dist. Stark No. 2016CA00205, 2017-Ohio-2622.
{¶31} Accordingly, the Board’s third assignment of error is overruled.
IV.
{¶32} In its fourth assignment of error, the Board contends the trial court erred in
granting Hartford’s motion to dismiss. The Board argues Hartford is liable on the bond
irrespective of whether its principle has a legal defense to the claim and the bond is an
independent obligation owed to the Board. We disagree.
{¶33} In general, a surety’s liability “is dependent upon, and can be no greater
than, that of the principal.” State v. Herbert, 49 Ohio St. 2d 88, 358 N.E.2d 88 (1976). In
this respect, it has been held that “a surety can assert the defenses of its principal,” and
thus whatever “amounts to a good defense to the original liability of the principal, is a
good defense for the sureties when sued upon the collateral undertaking.” Holben v.
Interstate Freight Sys., 31 Ohio St. 3d 152, 509 N.E.2d 938 (1987). The surety’s liability
is derived from that of the principal and the surety may plead defenses available to the
principal. Cain v. Panitch, 10th Dist. Franklin No. 16AP-758, 2018-Ohio-1595. In this
case, Hartford is entitled to assert, on its own behalf, any non-personal defense available
to its principal, CT Taylor. The complaint alleges, “CT Taylor is in material breach and
default of its obligations under the General Trades Contract and Hartford is liable to the
Board to the same extent as CT Taylor.” Thus, since the Board’s claim against CT Taylor
is barred by the statute of repose, the claim against Hartford must also fail. Id. The
Board’s fourth assignment of error is overruled.
{¶34} Based on the foregoing, the Board’s assignments of error are overruled.
Stark County, Case No. 2018CA00099 15
{¶35} The June 26, 2018 judgment entry of the Stark County Court of Common
Pleas granting appellees’ motions to dismiss is affirmed.
By Gwin, P.J.,
Wise, John, J., and
Delaney, J., concur