Bryan v. City of Cotter
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Cite as 2009 Ark. 457
SUPREME COURT OF ARKANSAS
No.
08-811
JUSTIN BRYAN; J&L CONSTRUCTION
APPELLANTS,
VS.
CITY OF COTTER; CITY OF
GASSVILLE; GARVER, INC.; GRUBBS,
HOSKYN, BARTON & WYATT, INC.
APPELLEES,
Opinion Delivered
October 1, 2009
APPEAL FROM THE PULASKI
COUNTY CIRCUIT COURT,
SECOND DIVISION
NO. CV 2005-7521
HON. CHRIS PIAZZA, JUDGE
AFFIRMED IN PART, REVERSED
AND REMANDED IN PART.
ANNABELLE CLINTON IMBER, Associate Justice
This case involves the interpretation of exculpatory clauses in a construction contract
and the determination of when the statute of limitations begins to run on a contractor’s
professional malpractice claim against an engineering firm. Jurisdiction is in this court pursuant
to Ark. Sup. Ct. R. 1-2(b)(5).
In 2002, the City of Cotter and the City of Gassville (the Cities) retained the services
of Garver, Inc. (Garver), to act as the design and supervision engineer on the expansion of a
wastewater treatment facility in Baxter County, Arkansas. Garver contracted with Grubbs,
Hoskyn, Barton, & Wyatt, Inc. (GHBW), to conduct soil tests at the proposed construction
site. GHBW completed and prepared a report on its findings on September 30, 2001. The
soils report became part of the materials disseminated by the Cities in soliciting bids for the
construction of the wastewater facility at the proposed site. Appellant Justin Bryan, doing
Cite as 2009 Ark. 457
business as J&L Construction (Bryan), was the successful bidder on the project and entered
into a contract with the Cities on June 7, 2002. The contract made reference to several
documents that were to be considered as part of the agreement, one of which was a “Special
Conditions” document. That document included a clause setting forth limitations on liability
for information contained in the soils report. It also contained a clause addressing the
affirmative duty of a contractor to inspect the proposed site and inform himself about the
conditions at the proposed site. Because the project would involve financing through the
Arkansas Soil and Water Conservation Commission Revolving Loan Fund, the contract
contained a federally mandated “Differing Site Conditions” clause.
Once construction of the water facility began, the contractor encountered dolomite
rock. That discovery meant that Bryan would have to use blasting techniques to remove the
dolomite rock, as well as a backfill process to compensate for the excavation, both of which
were not anticipated or included in the original bid. Bryan requested additional time and
compensation for these additional construction methods, but the Cities denied the request.
Bryan filed suit on May 24, 2005, asserting negligence against GHBW and Garver, and
breach of contract, breach of warranties, equitable modification of contract, and quantum
meruit against the Cities. GHBW initially filed a motion to dismiss, claiming that Bryan’s
complaint was barred by the statute of limitations. After a hearing, the circuit court granted
GHBW’s motion. Garver then filed a motion to dismiss, asserting that the contract between
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Bryan and the Cities contained clauses releasing it from any claims for negligence. The court
dismissed the claims against Garver by summary judgment.
The Cities also filed a motion for summary judgment, arguing that any claims
regarding extra work were waived by the same contractual provisions that Garver relied upon
in its earlier motion to dismiss. The circuit court granted partial summary judgment on all
claims against the Cities except for one claim arising out of the Cities’ denial of Bryan’s
request to substitute a pump. Bryan’s initial appeal was dismissed by the Arkansas Court of
Appeals for lack of a final order. Formal Order, CA 08-00307, June 4, 2008. Upon the circuit
court’s entry of a final order dismissing the remaining claim with prejudice, Bryan filed a
notice of appeal seeking review of the court’s summary-judgment orders of dismissal.
The law is well settled regarding the standard of review used by this court in reviewing
a grant of summary judgment. Brock v. Townsell, 2009 Ark. 224, — S.W.3d —. A trial court
will grant summary judgment only when it is apparent that no genuine issues of material fact
exist requiring litigation and that the moving party is entitled to judgment as a matter of law.
Id. The burden of proof shifts to the opposing party once the moving party establishes a prima
facie entitlement to summary judgment; the opposing party must demonstrate the existence
of a material issue of fact. Id. After reviewing the undisputed facts, the trial court should deny
summary judgment if, under the evidence, reasonable minds might reach different conclusions
from the same undisputed facts. Id. On appeal, this court determines if summary judgment
was appropriate based on whether the evidentiary items presented by the moving party leave
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a material question of fact unanswered. Id. This court views the evidence in a light most
favorable to the party against whom the motion was filed, resolving all doubts and inferences
against the moving party. Id. This review is not limited to the pleadings but also includes the
affidavits and other documents filed by the parties. Id.
I. Statute of Limitations
For his first point on appeal, Bryan contends that the circuit court erred in ruling that
Bryan’s professional malpractice claim against GHBW was barred by the statute of limitations
period. The circuit court determined that the statute of limitations period began to run on
September 30, 2001, the date GHBW prepared its soils report. Thus, the statute of limitations
had already expired when Bryan filed his complaint on May 24, 2005. Bryan asserts on appeal,
as he did below, that the statute of limitations period did not begin to run until June 7, 2002,
the date Bryan signed the construction contract with the Cities. In support of this assertion,
Bryan posits that the necessary elements for the cause of action were not present before June
7, 2002, because Bryan could not have been injured until the construction contract was
signed. Thus, according to Bryan, his malpractice action against GHBW did not accrue until
June 7, 2002.
The statute of limitations period for an action based on negligence is three years. Ark.
Code Ann. § 16-56-105 (Repl. 2005). In determining when the statute of limitations begins
to run in an action for professional malpractice, this court has consistently followed the
occurrence rule, meaning that, in the absence of concealment of the wrong, the applicable
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period begins when the negligent act occurred, not when it was discovered. Moix-McNutt v.
Brown, 348 Ark. 518, 521, 74 S.W.3d 612, 613 (2002); Ragar v. Brown, 332 Ark 214, 964
S.W.2d 372 (1998); Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991). The alleged
negligent act in the instant case occurred when GHBW prepared the soils report on
September 30, 2001.
Notwithstanding this court’s consistent refusal to retreat from the occurrence rule,
Bryan argues that his cause of action for professional malpractice against GHBW was not
complete until he signed the contract and began excavation. He asserts that the errors in the
soils report could not have been discovered until he began to excavate. For authority on this
point, Bryan cites to our holding in State v. Diamond Lakes Oil Co., 347 Ark. 618, 66 S.W.3d
613 (2000). The Diamond Lakes case, however, involved a property owner’s action for
trespass, not an action for professional malpractice. Thus, Bryan’s reliance on that case is
misplaced. Likewise, our court’s decisions in Martin v. Arthur, 339 Ark. 149, 3 S.W.3d 684
(1999) (products-liability action); McEntire v. Malloy, 288 Ark. 582, 707 S.W.2d 773 (1986)
(action for battery); and the court of appeals’s decision in Shelter Ins. Co. v. Arnold, 57 Ark.
App. 8, 940 S.W.2d 505 (1997) (action for indemnification), are inapposite.
Although this Court has acknowledged that the “discovery rule” and the “date of
injury rule” have some appeal in determining when the statute of limitations period begins
to run, we have adhered to the “occurrence rule” in professional malpractice actions. Our
reasons for doing so are stated succinctly in the Chapman v. Alexander case:
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We have made it clear that we are not going to retroactively change our rule
and that, if it is to be changed, the change must come from the General
Assembly. It would be incongruous for us, rather than the legislature, to now
change it. More importantly, the issue is one of statutory construction and,
since 1877, we have construed our statute under the “traditional rule.”
Legislative silence after such a long period gives rise to an arguable inference of
acquiescence or passive approval of our construction of the statute.
....
Many abstractors, accountants, architects, attorneys, and other similar professionals
surely have relied on our traditional and longstanding rule. In doing so, they had no
reason to keep records for longer than three (3) years. As a consequence, if we
retroactively changed the rule, they might easily have no materials to use in
their defense . . . . The General Assembly is best suited to hold hearings on
such issues and determine whether a change, if any, should be made and
whether it should be made retroactively, prospectively from the date of the
change, or prospectively from some future date . . . .
Chapman, 307 Ark. at 90-91, 817 S.W.2d at 427 (emphasis added); see also Ford’s Inc. v. Russell
Brown & Co., 299 Ark. 426, 429, 773 S.W.2d 90, 92 (1989) (“Our decisions have settled this
limitation question in professional malpractice actions . . . .”). Based on our well-settled case
law, we affirm the circuit court’s ruling that Bryan’s professional malpractice claim against
GHBW was barred by the statute of limitations.
II. Interpretation of Exculpatory Clauses
The contractual provisions at issue, which are set forth in a Special Conditions
document that is part of the contract, provide in relevant parts as follows:
SC.26 Test Borings.
Contactor may rely upon the general accuracy of the test pit or soil boring data
contained in the reports or drawings, but such reports and drawings are not Contract
documents. Contractor may not rely upon or make any claim against Owner, Engineer,
or Engineer’s Consultant’s with respect to (1) the completeness of such reports and
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drawings for Contractor’s purposes, including, but not limited to, any aspects
of the means, methods, techniques, sequences and procedures of construction
to be employed by the Contractor and safety precautions and programs incident
thereto, (2) other data, interpretations, opinions and information contained in such
reports or shown or indicated in such drawings, (3) any Contractor
interpretation of or conclusion drawn from any data or any such data,
interpretations, opinions or information. (Emphasis added.)
SC.7 Knowledge of Conditions
The Contractor states that he has examined all the available records and
has made a field examination of the site and right-of-way and that he has
informed himself about the character, quality and quantity of surface and
subsurface materials and other conditions to be encountered; the quantities in
various sections of the work; the character of equipment and facilities needed
for the prosecution of the work; the location and suitability of all construction
materials; the local labor conditions; and all other matters in connection with
the work and services to be performed under this contract.
These two clauses address Bryan’s affirmative duty to inform himself about conditions at the
site, as well as the extent to which Bryan can rely on the soils report. The threshold question
is whether these two provisions are exculpatory clauses that clearly absolve the Garver
engineering firm from any liability due to any alleged negligent actions on its part in
connection with GHBW’s preparation of the soils report.
An exculpatory clause is a provision in a contract that serves to absolve a party in
advance for any consequences of its own negligence. Finagin v. Ark. Dev. Fin. Auth., 355 Ark.
440, 139 S.W.3d 797 (2003). Contracts that exempt a party from liability for negligence are
not favored by the law. Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889 (2001). Thus,
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exculpatory clauses are strictly construed against the party relying on them, and the contract
must clearly set out what negligent liability is to be avoided. Id. In addition to these two rules
of construction, we have stated that we are not restricted to the literal language of the contract
but “we will also consider the facts and circumstances surrounding the execution of the
release in order to determine the intent of the parties.” Finagin, 355 Ark. at 440, 139 S.W.3d
at 797. Furthermore, in our review of exculpatory clauses, we consider three factors. An
exculpatory clause will be enforced “(1) when the party is knowledgeable of the potential
liability that is released; (2) when the party is benefitting from the activity which may lead to
the potential liability that is released; and (3) when the contract that contains the clause was
fairly entered into.” Id. at 458, 139 S.W.3d at 808.
Under the foregoing authority, we must strictly construe the provisions set forth in
sections SC.26 (Test Borings) and SC.7 (Knowledge of Conditions) of the contract. The first
sentence in SC.26 provides that Bryan may rely upon the general accuracy of the test pit or soil
boring data contained in the reports. The sentence then concludes by stating that the reports
are not part of the contract documents. The next sentence states that Bryan may not rely upon
the completeness of those reports or other information contained in the reports. We cannot
say, as a matter of law, that the language of SC.26 is clear and unambiguous. The clause
provides that the reports are not contract documents, but at the same time it allows the
contractor to rely upon the general accuracy of the data contained in the reports. The
meaning of the terms “general accuracy” and “completeness” is also not plain and evident.
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Likewise, we cannot say, as a matter of law, that the language in SC.7 clearly sets forth what
Bryan must do to inform himself about the conditions at the site.
Garver maintains that similar contractual disclaimers have been upheld and enforced
by courts in other jurisdictions. However, the contractual provisions at issue in those cases are
distinguishable. See Millgard Corp. v. McKee/Mays, 49 F.3d 1070 (5th Cir. 1995) (soils report
not a warranty of subsurface conditions; bidder should perform own investigation); Green
Constr. Co. v. Kan. Power & Light Co., 1 F.3d 1005 (10th Cir. 1993) (no subsequent financial
adjustment for differing conditions); Michels Pipe Line Constr., Inc. v. City of Elgin, 1998 WL
246476 (N.D. Ill. 1998) (exculpatory clauses and change of conditions clause ambiguous);
Berkel & Co. Contractors, Inc. v. Providence Hosp., 454 So.2d 496 (Ala. 1984) (no warranty
regarding adequacy or content of soils report; bidder to obtain, at its own expense,
information necessary to determine existing site and subsoil conditions); Empire Paving, Inc.
v. City of Milford, 747 A.2d 1063 (Conn. App. 2000) (no warranty for accuracy of information
relating to subsurface conditions); H & S Corp. v. U. S. Fid. & Guar. Co., 667 So. 2d 393
(Fla. App. 1995) (bidder responsible for obtaining its own geotechnical assessment); Jahncke
Serv. Inc. v. Dep’t of Transp., 322 S.E.2d 505 (Ga. App. 1984) (no warranty for accuracy of
soils report); Billota Constr. Corp. v. Village of Mamaroneck, 604 N.Y.S.2d 966, 199 A.2d 230
(1993) (data concerning elevations is approximate, with no guarantee of accuracy); Air Cooling
& Energy Inc. v. Midwestern Constr. Co. of Mo., Inc., 602. S.W.2d 926 (Mo. App. 1980)
(engineer and owner not responsible for the completeness or accuracy of the data furnished;
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bidder expected to obtain additional data); Mooney’s Inc. v. S. D. Dep’t of Transp., 482
N.W.2d 43 (S.D. 1992). (“THIS IS NOT A SPECIAL PROVISION FOR INFORMATION ONLY”);
Frontier Founds., Inc. v. Layton Const. Co. Inc., 818 P.2d 1040 (Utah App. 1991) (soils report
is not a warranty of subsurface conditions; the contractor shall make every effort to familiarize
himself with the prevailing work conditions).
Based upon our summary-judgment standard of review, we conclude that material
issues of fact exist regarding the interpretation of the exculpatory clauses set forth in SC. 26
and SC.7 of the contract. Thus, the circuit court erred in granting summary judgment in favor
of Garver.
III. Interpretation of differing sites conditions clause
Bryan contends that the federally mandated “Differing Sites Conditions” clause
contained in the Supplemental Conditions supersedes any conflicting clauses in the contract.
He relies upon a provision which provides that “the Supplemental conditions supersede any
conflicting provisions of the Contract Documents.” The Cities counter that this clause is not
applicable because the soil conditions encountered were not “materially different” from those
shown in the soils report.
The relevant portions of the clause provide as follows:
Differing Site Conditions. The contractor shall promptly, and before such
conditions are disturbed, notify the owner in writing of:
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A.
Subsurface or latent physical conditions at the site differing materially
from those indicated in this agreement, or
B.
Unknown physical conditions at the site, of an unusual nature,
differing materially from those ordinarily encountered and generally
recognized as inherent in work of the character provided for in this
agreement.
The Owner shall promptly investigate the conditions and if found that conditions
materially differ, the Owner will cause and increase or decrease in the Contractor’s
cost or the time required to perform any part of the work under this agreement as
applicable.
(Emphasis added.)
In view of the material issues of fact that exist regarding the interpretation of the
exculpatory clauses set forth in SC. 26 and SC.7 of the contract, we must also conclude that
material issues of fact exist regarding (a) whether the conditions at the site materially differed
from those indicated in the contract and (b) whether there were unusual conditions at the site
that differed materially from those ordinarily encountered. Accordingly, the circuit court erred
in granting summary judgment in favor of the Cities.
Affirmed in part; reversed and remanded in part.
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