Court Opinion

ID: 3192926
Source: CourtListenerOpinion
Date Created: 2016-04-12 03:06:52.324102+00
Date Added: 2024-06-11T07:39:08.294244
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

LTL ACRES LIMITED                       §
PARTNERSHIP,                            §
                                        §     No. 468, 2015
      Plaintiff Below-                  §
      Appellant,                        §     Court Below: Superior Court
                                        §     of the State of Delaware
v.                                      §
                                        §     CA No. S13C-07-025
BUTLER MANUFACTURING                    §
COMPANY, a Delaware corporation,        §
and DRYVIT SYSTEMS, INC.,               §
a Rhode Island corporation,             §
                                        §
      Defendants Below-                 §
      Appellee.                         §

                           Submitted: March 9, 2016
                            Decided: April 11, 2016

Before VALIHURA, VAUGHN, and SEITZ, Justices.

Upon appeal from the Superior Court. AFFIRMED in part, REVERSED in part,
and REMANDED.

Bernard G. Conaway, Esquire, Cohen Seglias Pallas Greenhall & Furman, PC,
Wilmington, Delaware, for Appellant.

Paul Cottrell, Esquire, Tighe & Cottrell, P.A., Wilmington, Delaware, Ryan C.
Phillips, Esquire (Argued), Wright Fulford Moorhead & Brown, P.A., Altamonte
Springs, Florida, for Appellee Butler Manufacturing Company.

Somers S. Price, Jr., Esquire (Argued), Jesse L. Noa, Esquire, Potter Anderson &
Corroon LLP, Wilmington, Delaware, for Appellee Dryvit Systems, Inc.

VAUGHN, Justice:
                                I. INTRODUCTION

      This litigation arises from the construction of a Johnny Janosik furniture store

(the “Janosik Building”) in Laurel, Delaware. The Plaintiff-Below/Appellant LTL

Acres Limited Partnership (“LTL”) is the owner of the Janosik Building. Defendant-

Below/Appellee Butler Manufacturing Company (“Butler”) provided pre-engineered

components which were used to build the roof and exterior walls. Defendant-

Below/Appellee Dryvit Systems, Inc. (“Dryvit”) supplied a product used to protect

and seal the Butler walls from the exterior environment. In other words, the Dryvit

product was used for the exterior finish. The building was completed in 2006. LTL

initiated this action in the Superior Court on July 17, 2013. It alleged breach of

warranty, breach of contract, and negligence claims against Butler; and breach of

warranty and breach of contract claims against Dryvit.

      The Superior Court granted summary judgment to both Butler and Dryvit on

the grounds that the actions against both were barred by the applicable statute of

limitations. It held that the action against Butler was barred by 10 Del. C. § 8127,

which is a six year statute of limitations relating to alleged defective construction of

an improvement to real property. As discussed below, we have concluded that

summary judgment in favor of Butler should be affirmed for the reasons assigned by

the Superior Court in its order dated July 30, 2015.

                                           1
          The Superior Court ruled that LTL’s action against Dryvit was barred by the

four year statute of limitations set forth in 6 Del. C. § 2-725. That statute provides,

in part, that a “breach of warranty occurs when tender of delivery is made, except that

where a warranty explicitly extends to future performance of the goods and discovery

of the breach must await the time of such performance the cause of action accrues

when the breach is or should have been discovered.”1 Dryvit gave LTL a ten year

express warranty. The Superior Court described the warranty as a “repair and

replacement warranty” and reasoned that such a warranty cannot be one that extends

to future performance. It therefore concluded that the statute of limitations for an

action on the warranty expired not later than four years after the Dryvit product was

tendered and applied to the building; that is, not later than four years after 2006.

          For the reasons which follow, we have concluded that the Dryvit warranty was

one explicitly extending to future performance under which discovery of the breach

must await the time of such performance. LTL’s action accrued, therefore, when the

breach was or should have been discovered, not when the product was tendered.

Since the Superior Court found that any alleged breach of the Dryvit warranty

occurred when the product was tendered, it made no factual findings as to when the

breach was or should have been discovered. Therefore, the grant of summary

1
    6 Del. C. § 2-725(2).

                                            2
judgment in favor of Dryvit must be reversed and the case remanded for further

proceedings.

                   II. FACTS AND PROCEDURAL HISTORY

               A. Facts

      In 2004, LTL hired the Whayland Company, Inc. (“Whayland”) as construction

manager for the Janosik Building project. Whayland, an authorized purchaser and

installer of Butler building systems, requested that Butler generate a quote for the

Janosik Building, which needed to be two stories tall and approximately 180,000

square feet. Because Butler’s building systems were custom tailored to the client’s

specific needs and location, Whayland also provided Butler with the architectural and

design plans.

      Butler provided a quote, which was accepted on September 20, 2004, and the

building components were delivered between March and August 2005. Whayland

hired Merit Builders to erect the Butler building system.

      Once the building was erected, Advanced Wall Systems was hired to apply an

exterior insulation and finish system (“EIFS”), which entailed coating the building’s

exterior with a plastic, stucco-looking cladding manufactured by Dryvit. The Dryvit

cladding came with a ten year limited warranty which, in pertinent part, stated:

                                         3
           DRYVIT . . . hereby warrants for a period of ten (10) years from
           the date of substantial completion of the project that the Exterior
           Insulation and, Finish System materials manufacture and sold by
           Dryvit, including the insulation board, adhesive, basecoat, mesh
           and finish shall be free from defects in the manufacture of the
           materials and will not, as a result of such defects, when installed
           in accordance with the current published Dryvit Specifications,
           within said period of 10 years, under normal weather conditions
           and excluding unusual air pollution, lose their bond, peel, flake
           or chip, and further that the finish will be fade resistant, except
           for specially produced colors, and will be water resistant so long
           as the surface integrity is retained . . . .

           ...

           The sole responsibility and liability of Dryvit under this warranty
           shall be to provide labor and materials necessary to repair or
           replace the Dryvit materials described herein shown to be
           defective during the warranty period, and only for the materials
           warranted hereunder.2

       The Janosik Building was completed in September 2006, and the retail store

opened in late October 2006. Unfortunately, the building had issues with water

infiltration from the beginning. By February 2012, the EIFS cladding began to crack

and buckle. The water infiltration and delamination persisted through 2013 despite

attempts to remedy the issues.

2
  Appellee’s Ans. Br. App. at B181-82. Although the warranty includes a choice of law provision
stating that Rhode Island law applies, the parties stipulated at oral argument that the same law
applies in Delaware. Thus, we decline to address the choice of law issue.

                                               4
               B. Procedural History

       As mentioned, LTL filed suit against Butler and Dryvit on July 17, 2013. After

conducting discovery, Butler and Dryvit filed motions for summary judgment in early

September 2014. Butler argued that LTL’s claims were barred under the six year

statute of limitations set forth in 10 Del. C. § 8127.3 Dryvit argued that LTL’s claims

were barred under the four year statute of limitations set forth in 6 Del. C. § 2-725,4

which it contended began to run at the time the materials were delivered.5

       LTL filed a joint response in March 2015. LTL argued that § 8127 was

inapplicable because Butler did not “furnish construction” of the Janosik Building but

merely supplied the building materials. Alternatively, LTL argued Butler should be

equitably estopped from relying on the six year statute of limitations. As to Dryvit,

LTL argued that the Dryvit warranty was one of future performance, and thus, LTL’s

warranty claim did not accrue until the breach was, or should have been, discovered.6

Dryvit and Butler filed replies on March 26, 2015.

3
  10 Del. C. § 8127(b).
4
  6 Del. C. § 2-725(1) (“An action for breach of any contract for sale must be commenced within 4
years after the cause of action has accrued.”).
5
  6 Del. C. § 2-725(2) (“A cause of action accrues when the breach occurs . . . . A breach of warranty
occurs when tender of delivery is made . . . .”).
6
  6 Del. C. § 2-725(2) (“[W]here a warranty explicitly extends to future performance of the goods
and discovery of the breach must await the time of such performance the cause of action accrues
when the breach is or should have been discovered.”).

                                                  5
       On July 30, 2015, the Superior Court issued a letter opinion granting both

motions for summary judgment.7 The Court addressed Butler’s motion first. It

explained that the applicability of 10 Del. C. § 8127’s six year statute of limitations

was determined by whether Butler “furnished construction” of an improvement to real

property. Further, the Court explained that to determine if Butler “furnished

construction” of an improvement to real property, it had to determine whether

Butler’s building system was generally available or specially engineered for the

Janosik Building. If the building system was generally available, Butler could not

avail itself of the six year statute of limitations. Conversely, if the building system

was specially engineered, Butler’s motion for summary judgment would be granted.

       In deciding that Butler had “furnished construction” of an improvement to real

property, the Court first discussed Butler’s business structure, where an authorized

contractor, such as Whayland, orders a metal building system from Butler based on

the specific needs of the contractor’s client, which included design criteria, design

loads, architectural drawings, and local regulations.8 More specifically, the Court

found that Butler had specially engineered and fabricated the following components

of the Janosik Building: (1) end and interior frames; (2) structural support materials

7
  See LTL Acres L.P. v. Butler Mfg. Co., 2015 WL 4738554, at *1 (Del. Super. July 30, 2015).
8
  This included floor plans, geometric requirements, mechanical specifications, roof top unit
information, and roof top unit cut sheets.

                                             6
to meet the specifics of the project; (3) nuts and bolts to put the system together; (4)

an exterior roof; and (5) the Koreteck/R-Steel wall panels. In support of this finding,

the Court discussed how Butler would mark each component with a specific number

because each component had a specific location and was not interchangeable with

another component. Further, the Court discussed Butler’s policy on returned systems;

that the returned materials are typically scrapped due to the cost of modifying or

implementing the materials with another client’s system. Based on this, the Court

determined that Butler had “furnished construction” pursuant to § 8127.

          Next, the Court addressed LTL’s contention that Butler could not satisfy the

“improvement to real property” portion of § 8127 because another company actually

constructed the building. The Court dismissed this argument due to precedent

establishing that a defendant’s work does not have to be on-site.9 The Court then

dismissed LTL’s equitable estoppel contention because Whayland had no authority

to speak on Butler’s behalf and neither party promised to fix the leaks. Based on

these findings, the Court granted summary judgment in favor of Butler.

          Next, the Court addressed Dryvit’s motion for summary judgment. It held that

LTL’s claims were barred under 6 Del. C. § 2-725’s four year limitations period

because Dryvit’s warranty did not explicitly extend to the future performance of the

9
    See, e.g., City of Dover v. Inter’l Tel. and Tel. Corp., 514 A.2d 1086, 1089 (Del. 1986).

                                                   7
Dryvit cladding but merely promised to “repair or replace” any defective materials.

In support of this conclusion, the Court reasoned that the exclusive remedy under the

warranty was to repair or replace defective materials, and thus, the warranty could not

be a warranty of future performance. Based on this reasoning, the Court held that

LTL’s claims against Dryvit accrued at the time of delivery, and because LTL’s

complaint was filed outside of the four year time period, summary judgment should

be granted in LTL’s favor. This appeal followed.

                                   III. DISCUSSION

       As mentioned above, we agree with the Superior Court’s reasoning in granting

summary judgment to Butler and affirm for the reasons assigned by the Superior

Court without further analysis.10 We review the Superior Court’s grant of summary

judgment in favor of Dryvit de novo.11

       Under Delaware’s Uniform Commercial Code, “[a]n action for breach of any

contract for sale must be commenced within 4 years after the cause of action has

accrued.”12 By agreement, the four year limitation may be reduced to as low as one

year, but may not be extended.13 As mentioned, a “breach of warranty occurs when

tender of delivery is made, except that where a warranty explicitly extends to future
10
   See LTL Acres L.P., 2015 WL 4739554, at *2-4.
11
   Lank v. Moyed, 909 A.2d 106, 108 (Del. 2006).
12
   6 Del. C. § 2-725(1).
13
   Id.

                                             8
performance of the goods and discovery of the breach must await the time of such

performance the cause of action accrues when the breach is or should have been

discovered.”14

       The only issue before the Court is whether Dryvit’s ten year warranty explicitly

extends to the future performance of the materials supplied or merely promises to

repair or replace defective materials. Although this Court has not determined what

constitutes an explicit extension to “future performance” under 6 Del. C. § 2-725,

many jurisdictions have under their respective versions of the Uniform Commercial

Code’s statute of limitations. Unfortunately, those interpretations have been less than

uniform.

        In matters analogous to the case at bar, some jurisdictions have held that when

a warranty limits the remedy available to repair or replacement, the warranty cannot

be one for future performance.15 On the other hand, some jurisdictions have

determined that a limitation on remedy is not dispositive on the issue of whether a

warranty is a promise to repair or replace; or a warranty of future performance.16

14
   Id. § 2-725(2).
15
   See, e.g., Joswick v. Chesapeake Mobile Homes, Inc., 747 A.2d 214, 220 (Md. Ct. Spec. App.
2000) (finding that the limited remedy of repair or replace in a mobile home warranty rendered the
warranty one for repair or replacement despite language warranting that the mobile home would be
free from defects for a period of twelve months).
16
   See, e.g., R.W. Murray Co. v. Shatterproof Glass Corp., 697 F.2d 818, 823 (8th Cir. 1983) (finding
that language limiting the remedy to repair or replacement of a defective product was not
determinative of the warranty’s exact nature) .

                                                 9
          We agree with the latter authorities. There is no inconsistency within a

warranty where it explicitly extends to future performance but limits the remedy for

a breach of warranty to repair or replacement of the defective product. The language

of the warranty must be examined to determine if it explicitly, that is, plainly,

warrants future performance. To be explicit, the warranty must be unambiguous, and

will normally “indicate that the manufacturer is warranting the future performance of

the goods for a specified period of time.”17 A provision limiting the remedy to repair

or replacement is not dispositive, by itself, in determining whether the warranty

extends to future performance.

          With these principles in mind, we find that the Dryvit warranty clearly extends

to the future performance of the cladding used in constructing the Janosik Building.

The Dryvit warranty explicitly states:

             [M]aterials manufactured and sold by Dryvit . . . shall be free
             from defects in the manufacture of the materials and will not, as
             a result of such defects, . . . within said period of 10 years, . . .
             lose their bond, peel, flake or chip, and further that the finish will
             be fade resistant, . . . and will be water resistant so long as the
             surface integrity is retained . . . .18

17
     R.W. Murray Co., 697 F.2d at 823.
18
     Appellee’s Ans. Br. App. at B73 (emphasis added).

                                                10
The word “will,” as used in the warranty, refers to the future and creates an explicit

warranty that the Dryvit materials will perform for the ten year period.19 We do not

mean to imply that the word “will” must be used to make a warranty one extending

to future performance, but in this case we need not look beyond the use of the phrases

“will not . . . lose their bond,” “will be fade resistant,” and “will be water resistant”

to conclude that this warranty explicitly extends to future performance and that

discovery of a breach must await future performance.

       Therefore, the Superior Court erred in rejecting LTL’s contention that the

Dryvit warranty explicitly extended to future performance and finding that any

alleged breach occurred when the product was delivered. Any alleged breach

occurred when it was or should have been discovered.

19
  “Will” is commonly used as an auxiliary verb to denote future tense of a main verb. In the context
of the Dryvit warranty, we see no other possible purpose for including this language.

                                                11
                               IV. CONCLUSION

      We affirm the Superior Court’s grant of summary judgment to Butler on the

basis of the Superior Court’s reasoning. For the foregoing reasons, we reverse the

Superior Court’s grant of summary judgment in favor of Dryvit and remand the case

to the Superior Court for further proceedings consistent with this opinion.

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