STEVEN M. SCHULTZ v. J.D. COOPER f/k/a J.D. COOPER BUILDER, INC.; WEBER & WEBER ARCHITECTS; STO CORPORATION; and JEN-CAR, INC.
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RENDERED:
JUNE 6, 2003; 2:00 P.M.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-001303-MR
STEVEN M. SCHULTZ
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE THOMAS J. KNOPF, JUDGE
ACTION NO. 01-CI-006351
v.
J.D. COOPER f/k/a J.D. COOPER
BUILDER, INC.; WEBER & WEBER
ARCHITECTS; STO CORPORATION;
and JEN-CAR, INC.
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, GUIDUGLI, and SCHRODER, Judges.
COMBS, JUDGE.
Steven M. Schultz appeals the judgment of the
Jefferson Circuit Court dismissing his claim against Weber &
Weber Architects ("Weber") as time-barred.
We affirm.
On appeal, we are asked to decide whether our decision
in Old Mason's Home of Kentucky, Inc. v. Mitchell, Ky. App., 892
S.W.2d 304 (1995), is dispositive of the parties' controversy
and, if so, whether that decision violates public policy and
should be reversed.
The material facts are not in dispute.
On
July 12, 1986, Schultz retained Weber to design a new residence
for him.
The design plan provided for the exterior of the home
to be finished with an "STO" Exterior Insulation and Finishing
System (EIF System).
On January 10, 1987, Schultz entered into
a construction contract for the home with J.D. Cooper f/k/a J.D.
Cooper Builder, Inc. ("Cooper").
Cooper subcontracted with Jen-
Car, Inc., to apply the "STO" EIF System to the home's exterior.
On September 14, 2001, some thirteen years after the
home was completed, Schultz filed this action against Weber,
Cooper, Jen-Car, Inc., and STO Corporation (the manufacturer of
the EIF System).
In his complaint, Schultz alleged breach of
contract, breach of warranty, breach of warranty of
merchantability, and negligence.
Schultz's allegations against
Weber involve only the counts of breach of contract and breach
of warranty of merchantability.
Contending that the claims were time-barred, Weber
filed a motion to dismiss Schultz's complaint on December 28,
2001.
Schultz responded in February 2002.
Weber was permitted
to file a reply in April 2002.
On May 15, 2002, the trial court entered its opinion
and order dismissing the complaint and concluded as follows:
Both parties agree that the applicable
statute of limitations is set forth in KRS
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413.245, which reads, in relevant part, as
follows:
Notwithstanding any other
prescribed limitation of actions
which might otherwise appear
applicable . . . a civil action,
whether brought in tort or
contract, arising out of any act
or omission in rendering, or
failing to render, professional
services for others shall be
brought within one (1) year from
the date of the occurrence or from
the date when the cause of action
was, or reasonably should have
been, discovered by the party
injured.
See Old Mason's Home of Kentucky, Inc. v.
Mitchell, Ky. App., 892 S.W.2d 304 (1995)
(professional services in KRS 413.245
include those of an architect).
Weber argues that the house was
substantially completed and Schultz took up
residence therein prior to July of 1988,
approximately thirteen years prior to filing
this action. Schultz contends that he did
not discover the problems with the "STO" EIF
System on the house until the summer of
2001, when he began noticing failures
associated with the system, and he brought
suit within one year thereof. When Schultz
discovered or reasonably should have
discovered the problems with the system
would be a question of fact. Weber,
however, argues that the discovery rule of
KRS 413.245 is inapplicable because of the
following provision in Article 8 of the
parties' July 12, 1986 contract:
8.2 As between the parties to
this Agreement: as to all acts or
failures to act by either party to
this Agreement, any applicable
statute of limitations shall
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commence to run and any alleged
cause of action shall be deemed to
have accrued in any and all events
not later than the relevant Date
of Substantial Completion of the
Work, and as to any acts or
failures to act occurring after
the relevant Date of Substantial
Completion, not later than the
date of issuance of the final
Certificate of Payment.
Schultz does not dispute that his complaint
was filed after the expiration of one year
from either the date of substantial
completion or the issuance of the final
certificate for payment. He contends that
said provision varying the accrual date is
against public policy and is unenforceable.
Weber disagrees, arguing that Schultz could
have consulted with counsel; he voluntarily
entered into the contract; and provision 8.2
of the contract is set out in clear and
unambiguous language.
The same contractual accrual date provision
as found in the contract between Weber and
Schultz was enforced by the Court of Appeals
in Old Mason's Home of Kentucky, Inc. v.
Mitchell, 892 S.W.2d at 307. In Mitchell,
the court concluded that KRS 413.245 was the
applicable statute of limitations in an
action against an architect for negligent
design and for failure to provide quality
work and properly supervise the project.
Id. at 306. The court then set out the
provision of the parties' contract which
fixed the accrual date of any civil action
to the date the work was substantially
completed or to the date of the issuance of
the final certificate of payment. As the
date of substantial completion was May 21,
1982 and the date of the issuance of the
final certificate was June 29, 1982,
"following the mandate of KRS 413.245
together with the applicable provision of
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the contract between the parties," the court
found that the suit against the architect
was barred after June 29, 1983. Id. at 307.
Based upon KRS 413.245 and Mitchell (and
cases from other jurisdictions which uphold
contractual provisions varying the rule of
accrual: Entous v. Viacom International,
Inc., 151 F.Supp.2d 1150 (C.D. Cal. 2001);
College of Notre Dame of Maryland, Inc. v.
Morabito Consultants, Md. App., 752 A.2d 265
(2000); Harbor Court Associates v. Leo A.
Daly Company, 179 F.3d 147 (4th Cir. 1999 );
Oriskany Central School District v. Edmund
J. Booth Architects, N.Y. App., 206 A.2d 896
(1994); Keiting v. Skauge, Wis. App., 543
N.W.2d 565 (1995)), the Court finds that
Schultz's complaint against Weber is timebarred.
In his appeal, Schultz contends that the trial court
erred by relying on the precedent of Mitchell.
He argues that
the facts of that case are readily distinguishable from those of
his case and that the distinctions are significant enough to
negate the precedential authority of Mitchell.
We disagree.
The appellee is correct in observing that the material
facts of this case are identical to those in Mitchell.
In both
cases, the plaintiff filed an action against the architect more
than one year after substantial completion of the construction
project.
In both cases, the contract between the owner and the
architect consisted of a standard form AIA contract, which
included a clearly drafted provision requiring that the
limitations period of all claims arising out of the contract
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commence upon substantial completion of the work.
In Mitchell,
we concluded that the requirements of KRS1 413.245, read in
conjunction with the applicable contract provision, barred any
action based on errors or omissions filed after the expiration
of one year following substantial completion at the earliest or
In Mitchell, we affirmed the trial
final payment at the latest.
court's conclusion that the contract was valid and that the
plaintiff's action was time-barred as a matter of law pursuant
to its accrual provision.
Our decision in Mitchell also
included a discussion of the discovery rule of KRS 413.245, but
that discussion clearly constituted dicta and did not serve as
the foundation of our holding.
Instead of relying upon the
statute, we focused on the contract itself, deciding
unequivocally and as a matter of law that a contractual clause
setting the accrual date of the cause of action is enforceable
under these circumstances.
Notwithstanding the Mitchell precedent, Schultz
contends that the contract provision establishing the date of
accrual should not be enforced because it violates public
policy.
Therefore, he urges in essence that we overrule
Mitchell.
Kentucky case law has long upheld the validity of
contractual terms that deliberately depart from statutory limits
1
Kentucky Revised Statutes.
6
and instead provide for shorter limitation periods.
See Webb v.
Kentucky Farm Bureau Ins. Co., Ky. App., 577 S.W.2d 17 (1978).
A reasonable shortening of the statutory period of limitations
does not ordinarily offend public policy.
Id.
We agree with Weber that the abbreviated period of
limitations provided for under the terms of the parties= contract
was reasonable under the circumstances.
The contract was agreed
upon by parties enjoying equal bargaining power, and courts
traditionally honor the ability of private parties on equal
footing to structure their own affairs through contract.
They
are properly reluctant to interfere with clear contractual terms
by re-writing them in the subsequent context of litigation.
As a consumer of competitive professional services,
Schultz was wholly at liberty to bargain for the removal or
amendment of the contract=s accrual date provision.
If
negotiations had failed on this point, he could have hired
another architect for the project.
While Schultz emphasizes
that he was unrepresented during the time that the contract was
executed, the size and nature of the project reasonably
indicated that consultation with an attorney regarding the terms
of the proposed contract might be prudent.
However, he elected
to proceed on his own -- with no evidence of any duress
affecting that choice.
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The discovery rule contained in KRS 413.245 is a
clearly worded default rule governing the date upon which a
period of limitations begins.
The parties in this case made a
deliberate election to replace that date with a date certain for
the accrual of any action.
Neither the courts nor the
legislature have found such private deviations from the statute
to be unconscionable or violative of public policy.
On the
contrary, the courts have specifically sanctioned the validity
of such provisions as part and parcel of the freedom of parties
to fashion their own agreements.
Mitchell is the controlling
authority, and we do not find any justification or compelling
circumstances in this case to depart from its holding.
For the foregoing reasons, we conclude that the trial
court did not err in dismissing Schultz's complaint against
Weber.
Accordingly, the judgment of the Jefferson Circuit Court
is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
Kenneth L. Sales
Jason A. Kron
Louisville, Kentucky
BRIEF AND ORAL ARGUMENT FOR
APPELLEE WEBER & WEBER
ARCHITECTS:
Gerald L. Stovall
Louisville, Kentucky
ORAL ARGUMENT FOR APPELLANT:
Kenneth L. Sales
Louisville, Kentucky
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