Young Radiator Co. v. Celotex Corp.
Opinion of the Court
This is a diversity action involving a leaky roof. Plaintiff Young Radiator Company (“Young”) brought suit against the Celotex Corporation (“Celotex”), the manufacturer of the roofing system at issue, alleging negligent manufacture and defective design of the roof, breach of contract, and breach of warranty. The district court granted summary judgment in favor of Cel-otex, finding that Young’s tort claims were time-barred under the applicable Wisconsin statute of limitations and that there had been no breach of contract or warranty. Young appeals the district court’s ruling on the tort and contract claims but does not appeal the warranty ruling. For the reasons stated in this opinion, we reverse the grant of summary judgment on the tort claims, affirm the dismissal of the contract claim, and remand for further proceedings.
In addition, this appeal raises a jurisdictional issue under Fed.R.App.P. 4(a)(3). After being sued by Young, Celotex joined
I.
The parties are in agreement as to the following facts. In 1972, Young undertook to construct a new plant at its facilities in Racine, Wisconsin. Cooley & Boore & Associates (“Cooley”) served as the architect; Korndoerfer Construction Co., Inc. (“Korn-doerfer”) was hired as the general contractor; and F.J.A. Christiansen Roofing Co., Inc. (“Christiansen”) was the roofing subcontractor. The parties selected for the plant a “Philip Carey” roofing system, manufactured by Celotex.
Christiansen began construction of the roof in June 1973. During the first two years of construction, various problems occurred, such as leaks and “vapor pockets.”
On July 29, 1975, Christiansen's president, Donald McNamara, inspected the roof and found that there were over a hundred openings in the roof where heating and cooling equipment was to be installed. On that day, McNamara wrote to Mr. Young (president of Young Radiator) and informed him that the equipment had not been inserted and flashed and that water was freely flowing into the building through the openings. He also advised Young that Korndoerfer had ignored Chris-tiansen’s quotations for roof flashing,
The permanent roof flashing and curbing were completed by Carlson Roofing of Racine (“Carlson”), and, after some additional remedial work by Korndoerfer, the roof was accepted by Celotex and Young (through Cooley) on November 5, 1975. With the exception of some minor follow-up flashing and curbing work by Carlson in 1976 (invoiced at $27.56 and $426.40), the construction was essentially completed as of that date. On November 13, 1975, Young Radiator was issued the Philip Carey Inspection and Service Contract which was Celotex’s repair service agreement.
Celotex authorized Carlson to make additional repairs in 1980 and 1981, and by letters dated January 16 and October 21, 1981, continued to assure Young that the roof could and would be made watertight. On November 17, 1981, Celotex informed Young by letter that before the repairs could be completed four additional roof drains were needed and that those installations would be at Young’s expense as they were not covered by the service agreement. The letter also offered to provide Young with materials to overlay the roof of Young’s separate office building. The letter stated that Celotex “must receive a signed release from claims prior to the shipment of materials.” Young never responded to this letter.
From 1980 through July 2, 1984, Young spent more than $11,000 on repairs to the plant roof. Thereafter, in 1984, the entire roof was replaced. Young filed this action against Celotex on January 2, 1986, alleging that the roof was negligently manufactured and defectively designed and that Celotex had breached the service agreement.
II.
Tort Claims/Statute of Limitations
Wisconsin law provides a six-year limitation period for property injury claims. Wis.Stat. § 893.52 (formerly Wis.Stat. § 893.19(5)).
We hold that a cause of action accrues and the statute of limitations (sec. 893.-19(5), Stats.) begins to run when the evidence of injury to property, resulting from the negligent act upon which the action is based, is sufficiently significant to alert the injured party to the possibility of a defect. The injury need not, however, be of such magnitude as to identify the causal factor.
Id. 272 N.W.2d at 405. Applying this standard, the district court found that the evidence of injury to the roof was significantly sufficient before 1980 (the suit was filed on January 2, 1986) to begin the running of the limitation period.
Our independent research revealed, however, that this standard is no longer applicable and has been replaced by the discovery rule announced in Hansen v. A.H. Robins, Inc., 113 Wis.2d 550, 335 N.W.2d 578 (1983). We are perplexed by the omission of the Hansen line of cases. To avoid any further confusion, we will trace the development of the law on this issue. We note, however, and as will be discussed below, that even under the Tallmadge standard summary judgment was inappropriate.
Prior to the Wisconsin Supreme Court’s 1983 decision in Hansen, Wisconsin law held that a cause of action in tort accrued on the date of injury. See, e.g., Boehm v. Wheeler, 65 Wis.2d 668, 223 N.W.2d 536 (1974) (legal malpractice action accrued on the date plaintiff lost the right to obtain a patent, not on the date plaintiff discovered attorney had failed to file application); Abramowski v. Kilps Sons Realty, Inc., 80 Wis.2d 468, 259 N.W.2d 306 (1977) (negli
Although the court purported that the standard was not a discovery rule but merely a test for identifying an event as an injury, 272 N.W.2d at 405, in practice the standard operated to some degree as a discovery rule. In fact, the Hansen Court later referred to the standard, as it was applied in Wisconsin Natural Gas Co. v. Ford, Bacon & Davis Construction Corp., 96 Wis.2d 314, 291 N.W.2d 825 (1980), as a “step in [the] direction” of the discovery rule. 335 N.W.2d at 581. Three cases illustrate the application of Tallmadge. In Wisconsin Natural Gas Co., the Wisconsin Supreme Court held that the discovery of one electrical short in an underground pipeline was not sufficiently significant evidence of injury to alert the plaintiff of the possibility of a defect in the pipeline. The court held that the cause of action accrued when a survey disclosed numerous shorts and sections of buckled pipe requiring excavation of the pipeline. In Kohl v. F.J.A. Christiansen Roofing Co., 95 Wis.2d 27, 289 N.W.2d 329 (App. 1980), a roof construction case, the court reversed a summary judgment and held that it was up to the factfinder to determine whether wind uplift damage to 12,000 square feet of a 300,000 square foot roof followed by complaints of rain leakage was sufficiently significant evidence of injury so as to initiate the limitation period. And in State of Wisconsin v. Holland Plastics Co., 111 Wis.2d 497, 331 N.W.2d 320 (1983), another roof construction case, the Wisconsin Supreme Court reversed a grant of summary judgment on statute of limitation grounds, stating that “[t]he determination of when a cause of action accrues under [§ 893.19(5) ] is a factual one.” The court found that it could not say as a matter of law that documented roof leakage during construction was sufficient to begin the limitation period.
On appeal, Celotex argues that under the Tallmadge standard the evidence of roof leakage both during construction (1973-75) and during the late 1970’s was so great that Young’s cause of action must have accrued prior to 1980. Celotex relies on Holy Family Catholic Congregation v. Stubenrauch Associates, Inc., 136 Wis.2d 515, 402 N.W.2d 382 (App. 1987), a roof construction case in which the court held that evidence of leaks occurring one month after construction was completed was sufficient to begin the limitation period. We disagree. First, Holy Family was decided under a different statute of limitation which specifically provided that the limitation period would begin to run upon “substantial completion of construction.” Wis. Stat. § 893.89.
We have taken the time to analyze the facts under Tallmadge because discovery of the nature of the injury is a component in the Hansen discovery rule. In Hansen, a personal injury action involving the Dai-kon Shield intrauterine device, the Wisconsin Supreme Court overruled the “date of injury” standard and held that “tort claims shall accrue on the date the injury is discovered or with reasonable diligence should be discovered.” 335 N.W.2d at 583. The court subsequently, in Borello v. U.S. Oil Co., 130 Wis.2d 397, 388 N.W.2d 140 (1986), fully articulated the rule as follows:
[UJnder Wisconsin law, a cause of action will not accrue until the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, not only the fact of injury but also that the injury was probably caused by the defendant’s conduct or product.
[Djiscovery does not occur until there is information available to the claimant of the nature of her injury, the cause of her injury, and the defendant’s part in that cause.
Id. 388 N.W.2d at 146 and 147. Application of the rule was further explained in Hammer v. Hammer, 142 Wis.2d 257, 418 N.W.2d 23 (App. 1987), and Ford Farms, Ltd. v. Wisconsin Electric Power Co., 145 Wis.2d 650, 430 N.W.2d 94 (App. 1988). Hammer explained that the discovery rule is an objective standard to be applied in terms of a reasonable person under the circumstances. 418 N.W.2d at 26 n. 6. And Ford Farms made clear that the discovery rule replaced the Tallmadge test. 430 N.W.2d at 97. As we have already found that on this record summary judgment was inappropriate under the Tall-madge standard, summary judgment would certainly be inappropiate under the more expansive discovery rule.
Finally, we suspect that the discovery rule may have been overlooked because it was thought either that the rule did not apply to property injury claims or that Hansen could not be applied retroactively. If so, we wish to make clear that property as well as personal injury claims are subject to the discovery rule, see Hansen, 335 N.W.2d at 583 (“we adopt the discovery rule for all tort actions other than those already governed by a legislatively created discovery rule”) (emphasis added); Ford Farms, 430 N.W.2d at 97 (discovery rule applied to action for negligent design of electrical system causing financial loss to plaintiff dairy farm); Milwaukee Area Vocational Technical and
III.
Contract Claim
The contract question requires less discussion. Young premised its breach of contract claim on the November 17, 1981, letter, wherein Celotex: (1) conditioned the shipment of materials for the office building roof on Young’s release of all claims against Celotex for past, present, and future problems with that roof; and (2) requested Young to install four roof drains on the plant roof before Celotex proceeded with repairs. Young alleged that those two points constituted an anticipatory breach of the service agreement on the plant roof, and asserts on appeal that whether there was a breach is a question of fact for a jury. Young’s argument is without merit.
As to the first point, both the letter and the attached “General Release” clearly stated that the release of claims pertained only to the office building roof. The letter is divided into two captioned sections — “A. Plant Roof” and “B. Office Roof.” The release of claims is mentioned only in the office roof section and refers only to the shipment of materials for that roof. Lest there be any doubt, the release itself states that Young will hold harmless Celotex for any claims “arising out of, or in connection with ... the roof of the Racine Facility Office Building,” specifically, obligations arising under “Roofing Bond No. 22299.” The service agreement on the plant roof was Roofing Bond No. PC 4077.
As to the second point, the contract states:
In the event leaks from any cause should occur, owner shall notify Celotex promptly, confirming such notice in writing. Celotex will inspect the roof, and if cause of leak is within the coverage as stated above, Celotex will arrange for repairs to be made at no cost to owner. If cause of leak is not covered, Celotex will not be responsible for cost of any repairs.
The record shows that it was not uncommon for Celotex to determine that certain items were not covered by the service agreement. For example, on September 14, 1979, Celotex informed Young that expansion joint repairs would have to be made at Young’s expense. Apparently, Young made those repairs, and Celotex proceeded with the covered repairs. Young did not respond to the November 17, 1981, letter and did not challenge Celotex’s determination that roof drains were not covered by the contract. Indeed, it appears from our reading of the contract that installation of additional roof drains would not be covered. In any event, however, Young never claimed that roof drains were covered. Young simply stopped calling Celotex and, four years later, filed a suit for anticipatory breach.
It is well settled under Wisconsin law that “in order to constitute an anticipatory breach of contract (repudiation), there must be a definite and unequivocal manifestation
IV.
Rule 4(a)(3)
Because we have reversed the dismissal of Young’s tort claims, we must determine whether, in the absence of a Rule 4(a)(3) notice of appeal, Celotex may challenge the judgment entered for the third-party defendants. Rule 4(a)(3) gives parties fourteen days within which to file a notice of cross appeal after an initial notice of appeal has been filed. The rule was created to address a problem exemplified in Whitehead v. American Security & Trust Co., 285 F.2d 282 (D.C.Cir. 1960). In Whitehead, as here, the district court entered judgment for the defendant and for the third-party defendants because they could be liable only if the defendant was liable to the plaintiff. The plaintiff filed a notice of appeal on the day before the expiration of the time period allowed for taking an appeal. Three days later, the defendant filed a notice of appeal from the judgment in favor of the third-party defendants. The court of appeals held that the defendant’s notice of appeal was untimely and, therefore, the court was without jurisdiction to review the judgment in favor of the third-party defendants. Rule 4(a)(3) was created to avert this dilemma by providing additional time for the filing of a notice of appeal once the initial notice is filed.
Despite the holding in Whitehead, that absent a timely notice of appeal the court was without jurisdiction to review the challenged judgment, there has been a longstanding split in authority among the circuits on whether a Rule 4(a)(3) notice of appeal is a jurisdictional requirement or a rule of practice which can, in appropriate cases, be suspended. Authority for the rule of practice position has its source in the grants of jurisdiction found in Article III and 28 U.S.C. § 1291, both of which speak in terms of whole cases. Rule 1(b) underscores the point by providing that “[tjhese rules shall not be construed to extend or limit the jurisdiction of the courts of appeals as established by law.” Thus, the rules of appellate procedure do not, in a strict sense, affect the subject matter jurisdiction of the courts of appeals.
However, the rules of appellate procedure have the force of law, 28 U.S.C. § 2072, and Rules 3 and 4 state conditions precedent for the exercise of the appellate jurisdiction granted by Article III and 28 U.S.C. § 1291. Although these conditions precedent are spoken of as “mandatory and jurisdictional,” see, e.g., Browder v. Director, Dept. of Corrections of Illinois, 434 U.S. 257, 265, 98 S.Ct. 556, 561, 54 L.Ed.2d 521 (1978), the more precise effect of the rules is to state the conditions which invoke the jurisdiction of the court. Sanchez v. Board of Regents of Texas Southern University, 625 F.2d 521, 522 n. 1 (5th Cir. 1980); see also 9 J. Moore & B. Ward, Moore’s Federal Practice ¶¶ 204.02[2] at 4-14, 204.11[5] at 4-59 (2d ed. 1989).
Against this backdrop, several circuits have held that while a timely Rule 4(a)(1) initial notice of appeal is mandatory and jurisdictional, Rule 4(a)(3), which provides additional time for filing cross or other separate appeals, is a rule of practice which can be suspended. Although the reasoning in specific cases varies, the basic rationale is that the initial notice of appeal invokes jurisdiction over the whole case so that the appellate court has the power to overlook the absence of a 4(a)(3) notice and to reverse or otherwise modify a non-appealed judgment or ruling in order to fully adjudicate the appeal before it. The Third, Fourth, Fifth, Eighth, Ninth, and District of Columbia Circuits have followed or recognized this approach. See Scott v. University of Delaware, 601 F.2d 76, 82-84 (3d
On the other hand, the Second, Sixth, Seventh, and Tenth Circuits have, for the most part, adhered to the view that Rule 4(a)(3) is a mandatory, jurisdictional requirement. See Brotherhood of Maintenance of Way Employees v. St. Johnsbury & Lamoille County R.R., 806 F.2d 14, 15 (2d Cir. 1986); Zapico v. Bucyrus-Erie Co., 579 F.2d 714, 725 (2d Cir. 1978); Akron Center for Reproductive Health v. Slaby, 854 F.2d 852, 869 (6th Cir. 1988), prob. jur-is. noted, — U.S. -, 109 S.Ct. 3239, 106 L.Ed.2d 586; Securities and Exchange Commission v. Youmans, 729 F.2d 413, 415 (6th Cir. 1984); Ford Motor Credit Co. v. Aetna Casualty and Surety Co., 717 F.2d 959, 962 (6th Cir. 1983); Illinois Bell Telephone Co. v. F.C.C., 740 F.2d 465, 477 (7th Cir. 1984); Martin v. Hamil, 608 F.2d 725, 730-31 (7th Cir. 1979); Haffa v. Cooper, 516 F.2d 931, 933 n. 3 (7th Cir. 1975); Savage v. Cache Valley Dairy Association, 737 F.2d 887, 888-89 (10th Cir. 1984). There are, however, some cross currents in these circuits. See In re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195, 203 (2d Cir. 1987) (dicta recognizing rule of practice approach); United Optical Workers Union Local 408 v. Sterling Optical Co., 500 F.2d 220, 224 (2d Cir. 1974) (older authority); In re Barnett, 124 F.2d 1005 (2d Cir. 1942) (older authority); Pistas v. New England Mutual Life Insurance Co., 843 F.2d 1038, 1041 (7th Cir. 1988) (dicta suggesting that the question might be open for debate in this circuit); Daniels v. Gilbreath, 668 F.2d 477, 480 (10th Cir. 1982) (older authority).
Last year, the Supreme Court addressed a related issue. In Torres v. Oakland Scavenger Co., — U.S. -, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988), a notice of appeal was filed on behalf of sixteen plaintiffs whose complaint had been dismissed under Fed.R.Civ.P. 12(b)(6). Due to a clerical error, the name of one of the sixteen plaintiffs had been omitted from the notice. The Ninth Circuit held that under Fed.R. App.P. 3(c), which provides that a notice of appeal “shall specify the party or parties taking the appeal,” the failure to name a party in the notice constitutes a jurisdictional bar to appellate review as to that party. The Supreme Court granted certio-rari to resolve a conflict among the circuits, similar to the conflict here, on whether the failure to name a party presents a jurisdictional bar to the appeal or whether the appeal may be permitted in limited instances. See 108 S.Ct. at 2407 n. 1. The Court held that the requirements of Rules 3 and 4 are mandatory and jurisdictional and that although the courts of appeals may liberally construe those rules to determine whether they have been complied with, the courts may not waive noncompliance. Id. at 2409.
We believe Torres controls the issue in this case. While one could argue that the case dealt only with the specificity requirement as applied to an initial notice of appeal, we find the broad language in Torres to encompass Rule 4(a)(3) as well. Indeed, it could have been argued in Torres that the notice of appeal naming fifteen of the sixteen plaintiffs invoked the jurisdiction of the court over the whole case, so that a separate appeal by the sixteenth plaintiff would not be jurisdictionally required. Yet the Court’s holding made clear that the requirements of Rules 3 and 4 must be satisfied as to each party, and precludes the argument in this case that Celotex’s noncompliance with Rule 4(a)(3) can be waived.
Finally, we wish to note that while the Torres rule is harsh, even under a rule of
V.
Accordingly, the judgment of the district court is affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. The third-party defendants’ motions to dismiss are granted.
.The Philip Carey Company is a subdivision of Celotex. The composition (and perhaps complexity) of the roofing system is illustrated by the following excerpt from Christiansen’s proposal:
We propose to furnish a roofing system consisting of two one inch layers of Celot-herm or Fesco perlite type rigid roof insulation together with a three ply built-up roofing system, in accordance with Philip Carey specification # 300. The first layer of roof insulation will be applied to the deck in ribbons of steep asphalt with mechanical fastening of the outside four foot perimeter. The second layer of insulation will be applied in solid mop-pings of steep asphalt. We will apply the base sheet and two #30 organic felts in steep asphalt and flood coat with 60 pounds of dead level asphalt and embed therein gravel at the rate of 400 pounds per square.
. A vapor pocket is a blister in which air or other chemical substances are contained.
. Flashing is sheet metal or other material used to cover and seal joints and angles in a roof, such as where a roof comes in contact with a wall.
. In its motion for summary judgment, Celotex asserted that the current § 893.52 was the applicable statute. On appeal the parties have agreed that the former statute, § 893.19(5), governs this case. Because the statutes are substantially identical, both prescribing a six-year limitation period, the question is academic. However, we note that whether the current or former statute applies is determined by the date on which the cause of action accrued, not, as the parties believed, the date on which construction was completed. See Wis.Stat. §§ 990.06, 991.07.
. The Wisconsin Supreme Court subsequently held this statute to be unconstitutional on equal protection grounds finding that the statute irrationally protected architects and builders but denied protection to owners, occupants, and tenants. Funk v. Wollin Silo & Equipment, Inc., 148 Wis.2d 59, 435 N.W.2d 244 (1989). The court also recognized a potential problem posed by the statute, i.e., that a litigant might be deprived of a cause of action before it had even accrued. The court found it unnecessary to explore that question, however, because of its decision on equal protection grounds. Id. 435 N.W.2d at 252.
. At oral-argument, the parties vigorously disputed the role of "cause” under the Tallmadge test. We note the relevant language: “evidence of injury to property, resulting from the negligent act upon which the action is based ... The injury need not, however, be of such magnitude as to identify the causal factor.” 272 N.W.2d at 405 (emphasis added). Young asserted that while discovery of the cause was not relevant under the test, the first underlined clause indicates that cause in fact is a necessary component of the standard. Celotex essentially argued that cause was irrelevant. We agree with Young. A hypothetical illustrates the point. Suppose the materials used in a roof are designed so as to disintegrate after 10 years but not before. During construction, leaks caused by poor workmanship are discovered and repaired. The leaks are not evidence of the later disintegration and, thus, would not be evidence of injury “resulting from the negligent act upon which the action is based.”
. In Milwaukee Area Vo. Tech., the plaintiff alleged that the "Cor-Ten weathering steel” used in the construction of the roofs and exterior walls of its buildings became rusted and stained after construction. This court affirmed a summary judgment on statute of limitation grounds, stating that "[i]t does not take a specialist to conclude that, once the problem with the rusting of the CorTen steel was discovered, a significant possibility exists that the problem may be with the steel itself." 847 F.2d at 439. We also stated, referring to Holy Family, that "a leaking roof ... will certainly put a plaintiff on notice that it has suffered an injury and of the identity of the allegedly responsible defendant." Id. at 439 n. 4. We note that the rusting of the steel panels in that case did, indeed, point to a problem with the steel itself, whereas in the instant case, given the complexity of the roofing system, the problems during construction, the relatively small expenditures for repairs in the 1970's, and the assurances from Celotex that the roof would and could be made watertight, the evidence of injury did not necessarily point to a fundamental design defect. Further, our reference to Holy Family was a reference to a negligent construction case which, as discussed above in the text, is distinguishable from the negligent manufacture/defective design action in this case.
. Celotex makes an ancillary argument in support of its failure to file a notice of appeal. Celotex asserts that the district court did not dismiss its action against the third-party defendants but merely dismissed its third-party complaint. Relying on Benjamin v. United States, 833 F.2d 669, 671 (7th Cir. 1987), Celotex contends that the dismissal did not constitute a final, appealable order. The argument is without merit. Benjamin held that the mere dismissal of a complaint does not constitute a final, appealable order unless it is clear that the district court found that the complaint could not be saved by amendment. Here, not only is there no question that the complaint was not amendable, the district court, upon motions based on statute of limitation grounds, granted summary judgment to the third-party defendants.
Reference
- Full Case Name
- YOUNG RADIATOR COMPANY v. The CELOTEX CORPORATION, and Third-Party v. COOLEY AND BORRE & ASSOCIATES, INC., Korndoerfer Construction Company, F.J.A. Christiansen Roofing, Co., Inc., Third-Party
- Cited By
- 36 cases
- Status
- Published