Garden City Osteopathic Hospital v. HBE Corp.

55 F.3d 1126
CourtCourt of Appeals for the Sixth Circuit
DecidedJune 1, 1995
DocketNo. 94-1202
StatusPublished
Cited by10 cases

This text of 55 F.3d 1126 (Garden City Osteopathic Hospital v. HBE Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Garden City Osteopathic Hospital v. HBE Corp., 55 F.3d 1126 (6th Cir. 1995).

Opinion

RYAN, Circuit Judge.

In this diversity action under Michigan law, the plaintiff, Garden City Osteopathic Hospital (GCOH), seeks damages allegedly arising from construction work performed by the defendants, HBE Corporation and Hospital Designers, Inc. (HDI). The district court granted summary judgment to the defendants, reasoning that a Michigan statute of repose, Mich.Comp.Laws Ann. § 600.5839, barred the plaintiffs claims. We find the statute of repose inapplicable, and REVERSE the entry of summary judgment.

I.

Garden City Osteopathic Hospital is located in Garden City, Michigan. Sometime in the Fall of 1970, GCOH entered into a contract with Kummer Construction Co., the predecessor of HBE, to build some additions to the hospital. GCOH cannot now locate a signed copy of the contract; to prove the contract’s terms, GCOH relies on a photocopy of a document that appears to be a contract between GCOH and Kummer, but is signed only by Kummer. Under the “contract,” HBE served as the contractor for the construction work, and HDI served as the [1129]*1129project’s architect. The contract also incorporated several drawings and documents, including “Specifications dated September 2, 1970, Section 1 through 36,” and “General Conditions Document A201,” a standard form published by the American Institute of Architects. Section 12 of the Specifications, entitled “Lathing and Plastering,” provided, in part:

Before beginning the work, this contractor shall examine all surfaces that are to be plastered and report to the Architect if these are found to be out of plumb, true or insecure, and shall be held strictly to a straight job throughout.

Furthermore, the General Conditions form included a warranty:

The Contractor warrants to the Owner ... that ... all Work will be of good quality, free from faults and defects and in conformance with the Contract Documents. All Work not so conforming to these standards may be considered defective.

General Conditions art. 4.5.1.

The work began in September 1970. In a letter dated February 23, 1971, an HDI architect, Fred Petry, warned Kiunmer that a west basement wall was experiencing “lateral movement” because the wall was built near a “frozen inclined plane.” Petry also described a construction method that might prevent the other walls from similarly moving. Ultimately, the east basement foundation wall was built three inches out of plumb; that is, if one were facing the wall, the top of the wall would be three inches further away than the base of the wall. The basement foundation wall supported the walls of the first and second stories of the hospital, also built by HBE under the contract. In fact, the basement wall eventually supported a third-story wall built in 1980 by HBE and HDI under another contract with GCOH.

The basement wall's out-of-plumb condition was discovered years later. In 1990, GCOH decided to expand the hospital by constructing an addition adjacent to the building’s east side. The project called for replacing the first floor’s east wall with five columns. Before beginning the project, the new contractor visually inspected the basement wall, but did not detect the out-of-plumb problem. Apparently, a coat of plaster had been applied to the basement wall so that it appeared straight. In 1991, the new contractor discovered the oub-of-plumb state when the contractor drilled a hole in the first floor. The contractor determined that the basement wall could not alone support the five columns. GCOH and the contractor decided to retain the five-column design, but added reinforcements around the basement wall.

In February 1992, GCOH sued HBE in Michigan state court. HBE removed the case to the United States District Court for the Eastern District of Michigan. GCOH amended its complaint by adding HDI as a defendant and alleging that HDI was owned by HBE as a corporate vehicle to provide architectural services. GCOH asserted five counts against both defendants with respect to the 1970 contract: (1) breach of contract; (2) negligent performance of a contract, (3) breach of express warranties of fitness, (4) silent fraud, and (5) fraud. GCOH claimed that the defendants had concealed the basement wall’s out-of-plumb condition by plastering the wall so that it appeared straight.

On the defendants’ motion for summary judgment, the district court held that Mich. Comp.Laws Ann. § 600.5839, a Michigan statute of repose, barred GCOH’s claims. As to HDI, the district court applied the original, 1967 version of section 600.5839(1). Relying upon a Michigan appellate court decision, the district court found that the original version of section 600.5839 applied to suits against architects by owners based on improvements to real property. Because section 600.5839 provides for a six-year repose period after the date of occupancy, the district court held that GCOH’s claims against HDI expired six years after 1971, well before GCOH filed suit in 1992. As to HBE, the district court applied a different part of section 600.5839(1), and held that a ten-year repose period, running from the date of occupancy, applied to claims against HBE. Thus, the statute of repose barred GCOH’s claims against HBE because the repose period expired ten years after 1971, again well before [1130]*1130the plaintiff filed suit in 1992. The plaintiff timely appealed.

II.

a. Standard of Review

We review a grant of summary judgment de novo and apply the same test as used by the district court. Brooks v. American Broadcasting Cos., 932 F.2d 495, 500 (6th Cir.1991). In reviewing summary judgment motions, courts must view the evidence in the light most favorable to the nonmoving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Under Federal Rule of Civil Procedure 56(c), summary judgment is proper if all the evidence before the district court “ ‘show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to [a] judgment as a matter of law.’ ” Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir.1988) (quoting Fed.R.Civ.P. 56(c)).

b. Choice of Law

The parties have assumed that Michigan law governs, and because the contract was presumably executed and performed in Michigan, and any other alleged basis for recovery occurred in Michigan, it does appear that Michigan law governs. When deciding a diversity case under state law, a federal court must apply the law of the state’s highest court. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). If, however, the state’s highest court has not decided the applicable law, then the federal court must ascertain the state law from “all relevant data.” Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir.1985).

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Garden City Osteopathic Hospital v. Hbe Corporation
55 F.3d 1126 (Sixth Circuit, 1995)

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55 F.3d 1126, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garden-city-osteopathic-hospital-v-hbe-corp-ca6-1995.