Court Opinion

ID: 3179623
Source: CourtListenerOpinion
Date Created: 2016-02-23 20:03:03.386213+00
Date Added: 2024-06-11T07:38:55.856560
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 15-1453

ST. PAUL MERCURY INSURANCE COMPANY,

                Plaintiff – Appellee,

NATIONAL SURETY CORPORATION,

                Defendant – Appellee,

          v.

THF CLARKSBURG DEVELOPMENT TWO, LLC; MICHAEL H. STAENBERG,

                Defendants – Appellants,

          and

LOWE'S HOME CENTERS, LLC,

                Defendant.

Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg. John Preston Bailey,
District Judge. (1:14-cv-00045-JPB)

Submitted:   January 27, 2016           Decided:   February 23, 2016

Before SHEDD and FLOYD, Circuit Judges, and Loretta C. BIGGS,
United States District Judge for the Middle District of North
Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion.
James C. Stebbins, Brittany A. Fink, LEWIS, GLASSER, CASEY &
ROLLINS, PLLC, Charleston, West Virginia, for Appellants. Peter
G. Zurbuch, Jeffrey S. Zurbuch, BUSCH, ZURBUCH & THOMPSON, PLLC,
Elkins, West Virginia, for Appellee St. Paul Mercury Insurance
Company; John P. Fuller, Michael W. Taylor, BAILEY & WYANT,
PLLC, Charleston, West Virginia, for Appellee National Surety
Corporation.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

     THF Clarksburg Development Two owns a large commercial real

estate development in Clarksburg, West Virginia.                           In 2002, THF

entered into two agreements with Lowe’s Home Centers, Inc.                              In

the first agreement, the ground lease, THF agreed to lease a

portion of the development to Lowe’s.                   In the second agreement,

the Site Development Agreement, Lowe’s agreed to pay THF over

$4,000,000 to perform development work on the tract of land,

including      the    preparation    of    a    building      pad    area    upon   which

Lowe’s could build a store.                CTL Engineering, a subcontractor

hired     by   THF,     prepared     the       building     pad      and    provided     a

geotechnical certification confirming that the building pad had

been prepared in accordance with the Site Development Agreement

and that it would support the construction of the Lowe’s store.

CTL tendered the certified building pad to THF on April 9, 2002,

and THF delivered it to Lowe’s on April 15, 2002.

     Lowe’s      built    the    store,    but    at    the    one-year      inspection

Lowe’s    discovered      a     settlement      issue     that      was    damaging    the

building.        An    engineer     advised      Lowe’s       that    the    settlement

problem    would      likely    cause     worsening       foundation        failure    and

continued wall movement.            Lowe’s notified Michael Staenberg, the

managing partner and half-owner of THF, of the problem on April

20, 2003.      THF then notified the subcontractors who had prepared

the building pad of the problem.                Although CTL had been involved

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in the preparation of the building pad, THF hired the firm again

to    determine      the   cause    of   settlement.           CTL   investigated      and

returned a report concluding that the settlement problem was

unrelated to the construction of the building pad and was likely

caused by an external force.              THF sent CTL’s report to Lowe’s on

March    22,    2005.      Eight    months       later,    having      not   received    a

response from Lowe’s, THF sent another letter stating that it

presumed from the lack of response that Lowe’s was in agreement

with CTL’s report.           Nearly two years later, Lowe’s sent THF a

letter explaining that it had delayed responding until its own

engineers      had    completed      tests.        It     further      stated   that    it

considered the underlying soil failures to be a latent defect to

which THF’s extended warranty applies and put THF on notice of

that claim.          On April 26, 2012, Lowe’s filed suit against THF

and Staenberg.

       In June, 2012, THF notified its insurers, St. Paul Mercury

Insurance Company and National Surety Corporation (NSC), about

the    Lowe’s     lawsuit.     On    March       13,    2014,    St.    Paul    filed    a

declaratory       judgment    action     against        THF,    NSC,    Staenberg,      and

Lowe’s, seeking a determination of the existence and scope of

coverage afforded under St. Paul’s and NSC’s policies insuring

THF.     The district court granted summary judgment for NSC and

St. Paul’s, finding that THF is not afforded any coverage under

either policy because of its delay in notifying the insurers of

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the potential claim.               Applying Missouri law *, the court explained

that in order to succeed on a claim that delayed notice excuses

an obligation to an insured party, the insurer must “establish

it was prejudiced by the insured’s failure to provide timely

notice.”       St. Paul Mercury Ins. Co. v. National Sur. Corp., No.

1:14-cv-45,       2015 WL 222477,   at        *6,   (N.D.W.Va.    2015)       (citing

Weaver v. State Farm Mut. Auto Ins. Co., 936 S.W.2d 818, 821

(Mo. 1997)).         Here, the court held that the insurance companies

were       prejudiced    as    a    matter     of      law   because   a   West    Virginia

statute of repose would bar them from asserting claims against

the subcontractors who completed the work on the building pad.

       THF     and   Staenberg         filed       a    Motion    to   Alter      or    Amend

Judgment, arguing that the court made a clear error of law when

it incorrectly applied the West Virginia statute of repose.                               The

statute of repose at issue begins to run when “the improvement

to the real property, or the survey of the real property in

question has been occupied or accepted by the owner of the real

property, whichever occurs first.”                      W.Va. Code § 55-2-6a (2014).

THF and Staenberg argued that because ownership of the property

was split between THF and Lowe’s, the statute of repose began to

run when Lowe’s accepted the pad from THF, and not, as the

       *
       Because the insurance policies were issued in Missouri,
Missouri law is controlling under West Virginia choice of law
rules.

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district court held, when THF accepted the pad from CTL.                            If the

statute of repose began to run when Lowe’s accepted the pad, it

had not expired at the time that the insurers were notified, and

therefore      the    insurers         would       have    been     able    to    sue    the

subcontractor.        The district court rejected this argument and

denied the Motion to Alter or Amend Judgment.

      The court held that THF owned the real property and the

building pad, noting that both parties agreed in the underlying

litigation that THF owned the real property and leased it to

Lowe’s.     Because        THF    owned    the      real     property      on    which   the

improvement was built, and the statute of repose begins to run

when an improvement is “occupied or accepted by the owner of the

real property,” the court held that it was THF’s acceptance of

the building pad that commenced the limitations period.                                  The

court further held that, because THF would not have delivered

the building pad to Lowe’s without first accepting it from CTL,

THF   accepted       the    building       pad       when    it     tendered      the    pad

certification to Lowe’s on April 9, 2002.                         The insurers were not

notified until more than ten years after this acceptance date,

and were thus barred by the statute of repose from asserting a

claim against CTL.           The insurers were therefore prejudiced by

THF’s failure to provide timely notice.

      Having    reviewed         the   record       and     the    applicable     law,    we

affirm the judgment based substantially on the reasoning of the

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district    court.     We     dispense    with   oral   argument   because     the

facts   and   legal    contentions       are   adequately   presented     in   the

materials     before   this    court     and   argument   would    not   aid   the

decisional process.

                                                                         AFFIRMED

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