Court Opinion

ID: 3047047
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:20:31.566131+00
Date Added: 2024-06-11T11:41:11.005714
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 08-2334
                                  ___________

Discovery Group LLC; Explorer             *
Investments 1 LLC,                        *
                                          *
     Third Party Plaintiffs - Appellants, *
                                          * Appeal from the United States
       v.                                 * District Court for the
                                          * Western District of Missouri.
Chapel Development, LLC,                  *
                                          *
     Third Party Defendant - Appellee, *
                                          *
Jerry Campbell; Cohen Esrey Real          *
Estate Services, Inc.; Michael            *
Atcheson; Larry Haas,                     *
                                          *
     Third Party Defendants.              *
                                    ___________

                            Submitted: January 16, 2009
                               Filed: July 27, 2009
                                ___________

Before BYE, COLLOTON, and GRUENDER, Circuit Judges.
                           ___________

COLLOTON, Circuit Judge.

      Discovery Group LLC and Explorer Investments 1 LLC (“Explorer”) sought
indemnification from Chapel Development, LLC (“Chapel”), for losses incurred as
defendants in a suit by Lafarge North America, Inc. (“Lafarge”). The district court
concluded that the indemnification claim brought by Discovery Group and Explorer
(collectively, “appellants”) was barred by the statute of limitations, and granted
summary judgment for Chapel. We reverse and remand for further proceedings.

                                          I.

       In August 1999, Lafarge, a supplier of building and construction materials,
hired Discovery Group, a real estate company, to help secure a new location for
Lafarge’s divisional headquarters. Based on Discovery Group’s advice, Lafarge
selected a site in the Chapel Ridge development in Lee’s Summit, Missouri.

       In December 1999, Discovery Group entered into an agreement with Chapel to
purchase the site. The agreement contained several representations by Chapel. One
stated that Chapel “has not heretofore received any notice, and has no knowledge that
any . . . assessment or similar proceeding or charge affecting the Property or any
portion thereof exists or any such proceeding or charge is contemplated.” Another
provided:

      There will not be any action, suit or proceeding pending, or to the
      knowledge of [Chapel] threatened against or affecting the Property or
      any portion thereof, or relating to or arising out of the ownership,
      management or operation of the Property, in any court or before or by
      any federal, state, county or municipal department, commission, board,
      bureau or agency or other governmental instrumentality, except for any
      claims that may be hereafter asserted which will be disclosed in writing
      to [Discovery Group] and which must be approved by [Discovery
      Group] prior to Closing or [Discovery Group] shall have the right to
      terminate this Agreement.

The agreement also contained an indemnity clause, which required each party to
“indemnify and hold the other party and any assignee of the other party harmless from
any loss, cost, expense (including attorneys’ fees), or damages sustained by reason of

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a breach of any representation, warranty, covenant, agreement or indemnity by such
party, whether or not suit is brought.”

       After the agreement was executed, employees of Discovery Group learned that
Chapel had filed a petition in state court for the formation of a transportation
development district (“TDD”) encompassing the Chapel Ridge site. The petition
stated that the proposed TDD would seek to institute a district-wide sales tax of one-
half percent to fund the construction of a new highway interchange. In January 2000,
the petition was granted, and the TDD was formed. Soon thereafter, the TDD
imposed the sales tax. Discovery Group assigned its rights as purchaser of the Chapel
Ridge site to Explorer, and in May 2000, Chapel and Explorer closed on the sale of
the site.

       Explorer agreed to lease to Lafarge a building on the site for use as Lafarge’s
divisional headquarters. In March 2001, Lafarge was informed that business
conducted from the site could be subject to the TDD’s sales tax. After the Missouri
Department of Revenue confirmed that sales by employees who worked at the site
were subject to the tax, Lafarge sued appellants for failing to disclose that the site was
located in the TDD. See Lafarge N. Am., Inc. v. Discovery Group LLC, No. 08-2210
(8th Cir. July 27, 2009).

       In June 2006, appellants filed a third-party complaint against Chapel. The
complaint alleged that Chapel breached representations and warranties in the
agreement for the sale of the Chapel Ridge site by failing to disclose the formation of
the TDD. The complaint also alleged that Chapel made fraudulent and negligent
misrepresentations in the sale by denying knowledge of any proceeding or charge, as
well as any pending action or suit, affecting the property. Finally, appellants sought
indemnification under the agreement for any damages, expenses, or attorneys’ fees
incurred in defending against Lafarge’s suit, on the ground that any failure of theirs
to inform Lafarge of the additional sales tax in the TDD resulted from Chapel’s breach

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of representations and warranties in the agreement. The district court concluded that
all of appellants’ claims were barred by Missouri’s statutes of limitations, and granted
summary judgment for Chapel.

                                          II.

      Appellants challenge only the district court’s grant of summary judgment in
favor of Chapel on the indemnification claim. We review the grant of summary
judgment de novo. See Am. Family Mut. Ins. Co. v. Van Gerpen, 151 F.3d 886, 887
(8th Cir. 1998). The material facts are undisputed, and the question on appeal is
whether Chapel is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c).

       The parties agree that Missouri’s statute of limitations for “actions upon
contracts,” Mo. Rev. Stat. § 516.120, governs the timeliness of the indemnification
claim. That statute provides that all actions upon contracts must be brought within
five years of when the causes accrue. Id. Under Missouri law, such causes accrue not

      when the wrong is done or the technical breach of contract or duty
      occurs, but when the damage resulting therefrom is sustained and is
      capable of ascertainment, and, if more than one item of damage, then the
      last item, so that all resulting damage may be recovered, and full and
      complete relief obtained.

Id. § 516.100.

       Appellants contend that the district court erred in concluding that their
indemnification claim was barred by the statute of limitations. They note that when
they filed their third-party complaint against Chapel, Lafarge’s claims against them
remained unresolved. Accordingly, appellants argue, the full measure of their losses
in defending against LaFarge’s claims was not yet sustained or capable of

                                          -4-
ascertainment, so their cause for indemnity had not yet accrued. Appellants maintain
that their action against Chapel was therefore timely. We agree.

         Missouri recognizes two types of indemnity in contracts: indemnity against
loss and indemnity against liability. Ruysser v. Smith, 293 S.W.2d 930, 933 (Mo.
1956). By providing indemnity against “any loss, cost, expense (including attorneys’
fees), or damages,” the parties’ agreement contemplates indemnity against loss. See
Burns & McDonnell Eng’g Co. v. Torson Constr. Co., 834 S.W.2d 755, 758 (Mo. Ct.
App. 1992). “[W]here the contract is strictly one of indemnity . . . against loss or
damages, the indemnitee cannot recover until he has . . . suffered an actual loss or
damage against which the covenant runs.” Ruysser, 293 S.W.2d at 933 (internal
quotations omitted). Accordingly, “the indemnitee’s right of recovery accrues as soon
as he has suffered the loss or damage against which he was to be saved harmless.” Id.
(internal quotations omitted). If, however, “the contract is not limited to a single item
of . . . loss, . . . the statute of limitations for bringing a claim on indemnity does not
begin to run until all the loss or damage is sustained by the indemnitee.” Burns &
McDonnell, 834 S.W.2d at 759; see Mo. Rev. Stat. § 516.100.

       Based on these principles, we conclude that appellants’ cause of action for
indemnity had not yet accrued when they filed their third-party complaint against
Chapel. Although by then they had incurred some losses (namely, attorneys’ fees) in
defending against Lafarge’s suit, the outcome of the litigation was unresolved, so not
“all resulting damage” was sustained or capable of ascertainment. Mo. Rev. Stat.
§ 516.100 (emphasis added). Because their cause for indemnity had not yet accrued
under Missouri law, appellants’ action was not barred by the statute of limitations, and
the district court erred in granting summary judgment for Chapel on the ground that
their action was untimely.*

      *
       Appellants’ cause of action for indemnity was not premature, even though it
had not yet accrued when their third-party complaint was filed. Federal Rule of Civil
Procedure 14 allows a defendant to implead another party “who is or may be liable”

                                           -5-
       Chapel contends that even if appellants’ indemnification claim was not time-
barred, the district court’s grant of summary judgment should be affirmed on other
grounds. Chapel argues as one alternative ground that the indemnification claim is no
longer tenable, because appellants do not appeal the district court’s decision to dismiss
as time-barred their claim that Chapel breached the underlying representations and
warranties in the agreement. That their claim of breach was barred by the statute of
limitations, however, does not preclude appellants from proving breach as an element
of their indemnification claim; the timeliness of the one claim does not affect the
merits of the other. See Wentz v. Price Candy Co., 175 S.W.2d 852, 853 (Mo. 1943)
(“Ordinary statutes of limitation are held to affect the remedy only.”); Rincon v.
Rincon, 571 S.W.2d 475, 476 (Mo. Ct. App. 1978) (explaining that statutes of
limitations “merely suspend the remedy without extinguishing the right”).

       Chapel also urges affirmance on the ground that appellants waived their right
to indemnification by proceeding to close on the sale of the Chapel Ridge site despite
their knowledge of the petition to form the TDD. According to Chapel, appellants are
estopped from claiming indemnification for the same reason. Waiver and estoppel
were not considered by the district court, and we leave these defenses to be addressed
in the first instance on remand, without expressing any view as to their merit.

to the defendant for all or part of the plaintiff’s claim. “The words ‘may be liable’
mean that defendant is permitted to join someone against whom a cause of action has
not yet accrued, provided that the claim is contingent upon the success of plaintiff’s
action and will accrue when defendant’s liability is determined . . . or plaintiff’s claim
is satisfied.” 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure § 1451, at 405-06 (2d ed. 1990); see Williams v. Ford Motor
Credit Co., 627 F.2d 158, 160 (8th Cir. 1980).

                                           -6-
       The judgment of the district court is reversed, and the case is remanded for
further proceedings consistent with this opinion.
                      ______________________________

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