Sears, Roebuck & Co. v. Enco Associates, Inc.

OPINION OF THE COURT

We hold that, inasmuch as the relationship between

On the present motion to dismiss the complaint we accept the factual allegations set forth in the complaint as amplified by the bill of particulars. It is alleged that on May 15, 1967 Sears, Roebuck, owner, and Enco Associates, Inc., a firm of architects, entered into a contract under which the architects were to design and to supervise the construction of a system of ramps to provide ingress and egress for a parking deck to be constructed over Sears, Roebuck’s White Plains store. The contract contemplated an elaborate system of exposed ramps with snow-melting pipes to assure ease of snow removal. Defendant corporation held itself out to have architects and engineers qualified to design and to supervise the construction of the ramps and to provide appropriate design, mechanical and electrical engineering services. The architect-engineers prepared the plans and specifications and supervised the construction of the ramp system. Work on the project was commenced in 1967 and was completed in the spring of 1968.

In early May, 1970 cracks appeared in the ramps that endangered the structural integrity of the ramp system. It was alleged that the cracks were due to improper design of the snow-melting pipes contained in the ramps in that the architects had failed to include expansion joints and had provided for monolithic pouring of concrete for the ramps.

The complaint sets forth three separately stated causes of action. In the first liability is grounded on allegations of "the carelessness and negligence of defendant in preparing the design and engineering, plans and specifications of the said ramps”. It is alleged that the cost of removal of the existing ramps and the cost of construction of proper ramps will be $1,000,000, and that in the course of removal of the defective ramps the owner will lose the business of customers resulting in loss of anticipated profits of $350,000.

The second cause of action contains a claim for breach of

The third cause of action, with prior allegations incorporated by reference, alleges that the architects contracted to provide design; normal structural, mechanical and electrical engineering services and that they breached the contract by neglect or lack of professional care and in improperly designing the ramps, all to the owner’s damage in the sum of $1,350,000.

The action was commenced in June, 1972. After service of the answer and the bill of particulars, defendant architects moved under CPLR 3211 (subd [a], pars 5, 7) to dismiss the complaint on the grounds that the action was barred by the applicable three-year Statute of Limitations and that the second cause of action for breach of implied warranty failed to state a cause of action. Special Term granted the motion, concluding that, while the first cause of action was for professional malpractice, the second for breach of implied warranty and the third for breach of contract, in essence Sears, Roebuck’s claim was one for professional malpractice and as such was barred by the applicable three-year Statute of Limitations. Additionally Special Term dismissed the second cause of action on the ground that no cause of action lies against an architect for breach of implied warranty. The Appellate Division affirmed and we granted leave to appeal. We conclude that the order of the Appellate Division should be modified to the extent of denying the motion to dismiss as to the first and third causes of action.

The disposition in this case is governed by our recent decision in Matter of Paver & Wildfoerster (Catholic High School Assn.) ( 38 NY2d 669 ). We had previously held in Sosnow v Paul ( 36 NY2d 780 ) that owners’ claims against architects arising out of alleged defective construction of buildings, however verbally classified, accrue for purposes of all Statutes of Limitations on completion of construction. Thus, here any claims Sears, Roebuck has against Enco Associates accrued in 1968. Although the issues in Paver were presented in the context of arbitration, we expressly recognized the command of CPLR 7502 (subd [b]) that the Statute of Limitations to be applied by the courts in arbitration is the same as that in judicial proceedings ( 38 NY2d 669 , 672, 673-674).

As we observed in Paver; the choice of applicable

As a consequence, the range of proof to be adduced to establish liability will be correspondingly broad. That is to say, not only will evidence be admissible, as in the normal contracts case, which might tend to establish breach of a particular term of the contract between the parties; it will also be open to plaintiff owner to introduce evidence, including expert testimony, which might demonstrate that the architects failed to use due and reasonable care in the performance of their obligations under the contract or that their performance fell short of the applicable professional standards—in effect the same scope of admissibility as in the instance of what has in the past been referred to as a claim for professional malpractice.

Inasmuch as the selection of the applicable Statute of Limitations is related to the remedy sought, we turn to consideration of the relief requested by Sears, Roebuck. In the first cause of action (as amplified in the bill of particulars), plaintiff owner seeks to recover damages of two sorts—first, for cost of correction incident to the removal of the allegedly defective ramps and their replacement by properly constructed ramps (fixed at a figure of $1,000,000), and second, for loss of anticipated profits in consequence of business interruption while the defective ramps are being replaced (fixed at a figure of approximately $350,000). In principle, because this action was not commenced within three years after accrual of the owner’s claims, proof on the issue of damages should be limited to that admissible under the law of damages for contract liability. Had the action been commenced within the three-year period applicable to tort claims, the owner would

There is also a choice of law issue in this case which must be addressed. The parties provided in their agreement that it was to "be governed by the law of the [State of Michigan].” Michigan provides a six-year Statute of Limitations for actions against architects arising out of defective improvements to real property (Mich Comp Laws Ann, § 600.5839). Because we conclude that the applicable New York State Statute of Limitations is also six years, it might appear that no practical purpose would be served in this case by determining which six-year statute should be applied. We should, however, dispose of one theoretical argument which might be advanced by Sears, Roebuck. In effect we are here applying both our State’s six-year and its three-year statutes, in combination; the claim is not barred because the six-year statute is applicable, but damages that may be recovered are limited because the three-year statute is also applicable. Under the Michigan law there would be but a single, six-year statute, without restriction as to damages provable. Thus, on the issue of damages different consequences might turn on whether we are to apply the New York or the Michigan Statute of Limitations. We conclude, however, that there would be no merit here to any contention constructed on such an analysis. The contract provision that the agreement was to be governed by Michigan law operated only to import the substantive law of Michigan (Doríf v Taya, 200 App Div 894 , affd 234 NY 525 ; Siegelman v Cunard White Star, 221 F2d