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Carulli v. North Versailles Township Sanitary Authority

Commonwealth Court of Pennsylvania

August 13, 2019

Carmen Carulli and Barbara Carulli, husband and wife
North Versailles Township Sanitary Authority
Port Vue Plumbing, Inc., Appellant

          Argued: October 17, 2018




         Port Vue Plumbing, Inc. (Port Vue) appeals a judgment of the Allegheny County Court of Common Pleas (trial court) entered against Port Vue and in favor of North Versailles Township Sanitary Authority (Authority), awarding damages in the amount of $39, 033.69 in a breach of contract action. In doing so, the trial court rejected Port Vue's claim that the four-year statute of limitations applicable to contract actions barred the Authority from bringing its claim. The trial court applied the discovery rule, reasoning that the Authority had no reason to know of the breach until it received a complaint from residents alleging damage to their residence approximately 10 years later. We vacate and remand.

         I. Background

         In December 2002, the Authority contracted with Port Vue to replace terra cotta sewer pipes along Bevan Road in North Versailles Township. Port Vue agreed to replace the pipes using the "pipe bursting" method, which bursts the existing pipe while simultaneously pulling through a new pipe. Notes of Testimony 11/21/2016 (N.T.) at 75, Reproduced Record (R.R.) at 138a. The portion of sewer line to be replaced stretched from manhole 755 to manhole 767. Port Vue also contracted to excavate the new line to reconnect all residential sewer laterals to the new line. In July 2003, Port Vue notified the Authority that it had completed work on the project and requested final payment, which was approved by the Authority's engineer. Trial Court Opinion at 1.[1] In accordance with the contract, the Authority paid Port Vue for completion of the project. Id. at 1-2.

         In March 2012, the Authority was notified that the basement of a house along Bevan Road belonging to Carmen and Barbara Carulli (together, Carullis) had flooded with raw sewage. Trial Court Opinion at 2. The Authority also discovered that manhole 767 was surcharged[2] to within several feet of its top. Id. The Authority inspected the sewage lines with a camera and discovered that 112.71 lineal feet of piping between manhole 766 and manhole 767 had not been replaced in accordance with the contract. Id. The Authority requested that Port Vue replace the sewer line between manhole 766 and manhole 767. Id. When Port Vue refused, the Authority retained another contractor, State Pipe Services, to replace the old sewer line. Id.

         In September 2012, the Carullis filed a complaint for damages against the Authority. In response, on or about November 20, 2012, the Authority filed a complaint to join Port Vue as an additional defendant arising from Port Vue's alleged failure to fulfill its obligations under the contract. Trial Court Opinion at 2. The Carullis settled their claims, and the Authority and Port Vue proceeded to a non-jury trial.

         Before the trial court, Port Vue argued that the statute of limitations bars the Authority's claims. Trial Court Opinion at 2. The parties did not dispute that Pennsylvania's statute of limitations for a breach of contract claim of this nature is four years. Id. (citing 42 Pa.C.S. § 5525(1)). The parties also did not dispute that Port Vue was not made a party to the lawsuit until nearly 10 years after it completed work on the project. Id. The Authority, however, claimed it was unaware that a section of the project was unfinished until those pipes caused the damage to the Carullis' home, and therefore, the discovery rule tolled the running of the statute of limitations. See id. at 2-3.

         At trial, the Authority presented the testimony of Donald Glenn (Glenn), an engineer from the Authority's engineering firm, Glenn Engineering and Associates Ltd. N.T. at 10-11, R.R. at 73a-74a. Glenn testified that he designed the project for the Authority, which consisted of replacing the sewer lines, reconnecting the house laterals to the new line and installing additional manholes. N.T. at 11, R.R. at 74a. The project was to be completed in two phases. N.T. at 12, R.R. at 75a. Phase 1 started at manhole 755 and ended at manhole 764. Id. Phase 2 started at manhole 764 and ended at manhole 767. Id. Port Vue contracted to do the work for both phases of the project. See N.T. at 13, R.R. at 76a.

         Glenn testified that he was not at the site every day to inspect the work in progress. His colleague, Joseph Dursa (Dursa), and the Authority's representative, Jack Gaffney (Gaffney), were on-site. When asked if an individual could visibly inspect the new sewer line between manholes 764 and 767, Glenn testified that "you can't physically inspect" the pipe because there was no excavation of the pipe line. N.T. at 25-26, R.R. at 88a-89a. Further, the Authority did not have the physical equipment to do a camera inspection of the sewer line. N.T. at 59, R.R. at 122a. Glenn testified that Port Vue forwarded an invoice to him representing that the project had been completed, including bursting the entire line, and that based on such representation, Glenn authorized payment in full to Port Vue. N.T. at 24-25, R.R. at 87a-88a.

         Glenn also testified about the incident that caused the damage to the Carullis' property. Glenn testified that after the incident, it was determined that the pipe bursting had not been done for the entire length as specified in the contract. N.T. at 27, R.R. at 90a. Glenn stated that this caused a backup in the sewer line and a surcharge at manhole 767. Id. Glenn testified that, after the incident, the Authority determined the line had collapsed using two methods: physical observation (climbing down a ladder in the manhole and shining a flashlight up and down the sewer) and inserting a camera. N.T. at 28-29, R.R. at 91a-92a. The inspection revealed that the old terra cotta pipe had collapsed and that a new liner had never been installed. N.T. at 27-29, R.R. at 90a-92a. Glenn testified that the backup in the sewer line and the surcharge at manhole 767, and the resulting photographs from the inspection, were the first indication that the sewer line had not been completed all the way to manhole 767. See N.T. at 26-27, 31 & 81, R.R. at 89a-90a, 94a & 144a. Despite Port Vue's assertions to the contrary, Glenn testified that he never had a conversation with anyone at Port Vue, including owner Richard Perkoski (Perkoski), about doing other work instead of replacing the sewer line between manhole 764 and manhole 767. N.T. at 33, R.R. at 96a.

         Glenn testified that under the contract, Port Vue was to furnish as-built drawings. N.T. at 32, R.R. at 95a. He stated he did not personally request that Port Vue submit as-built drawings after the contract was completed but that the request "would have come from one of my other people at the office." Id. Glenn testified that, to his knowledge, Port Vue did not supply Glenn Engineering or the Authority with as-built drawings. N.T. at 32-33, R.R. at 95a-96a.

         Glenn also testified that after it was determined the terra cotta pipe collapsed, he told Port Vue it had to complete the project, but it refused, so the Authority contracted with, and paid, State Pipe Services to complete the work. N.T. at 29 & 32, R.R. at 92a & 95a.

         On cross-examination, Glenn stated that the contract defines the scope of the work to be performed. N.T. at 36, R.R. at 99a. Glenn also acknowledged that the terms of the contract provided that the engineer could inspect the contractor's work at any time. N.T. at 38, R.R. at 101a. Glenn also testified that Glenn Engineering had assigned an inspector to the project, although not a full-time inspector, and that Gaffney, who worked for the Authority, was also an inspector. Id. Glenn acknowledged that the contract provided that the Authority's engineer was to perform a final inspection to determine whether the job was completed. Id. Glenn acknowledged that he certified that the work had been completed even though neither he nor anyone from his office did any type of inspection. N.T. at 53, R.R. at 116a. Glenn also reconfirmed that the Authority had determined that a portion of the line was not bursted when the Authority looked into manhole 767. N.T. at 56a, R.R. at 119a. Glenn also conceded that the work could have been visually inspected at any time without the aid of any type of camera, although he stated "[i]t would take of lot of effort to do that," explaining that "[y]ou would have to climb down, get a flashlight, [and] shine it[.]" Id. Glenn stated he "had no idea" whether that was done at any time between Port Vue completing its work in 2003 and when the backup incident occurred in 2012, "but obviously not." Id.

         The Authority also presented Dursa's testimony; Dursa was a project representative from Glenn Engineering who inspected the work performed by Port Vue. N.T. at 103, R.R. at 166a. He explained that, at the beginning of the construction period, Port Vue laid out the new sections of pipe and fused the pipes together so that they could be pulled through the old terra cotta pipe during the bursting process. N.T. at 105, R.R. at 168a. Dursa explained that during the installation of the pipe,

[y]ou really can't view [the actual bursting of the line], but you can just see the machines working, and it's pulling the pipe through that they had on site already put together behind the area [that] was dug out.

N.T. at 104, R.R. at 167a.

         Dursa stated that in January 2003, when he arrived at the site, the machine that was used for pipe bursting had stopped working in the vicinity of manhole 766. See N.T. at 105, R.R. at 168a. He understood that Port Vue was evaluating the problem and attempting to get the machine working again. N.T. at 105-06, R.R. at 168a-69a. Thereafter, Dursa went on vacation, and upon his return, the equipment was no longer at the same location. N.T. at 107, R.R. at 170a. Dursa testified that he never spoke to Perkoski about not completing the line replacement to manhole 767 and, instead, doing other work. N.T. at 108 & 110-11, R.R. at 171a & 173a-74a. On cross-examination, Dursa stated that he reviewed the contract documents before he started his inspections and that he had the contract documents on site, although he did not "have a copy on me[.]" N.T at 116-17, R.R. at 179a-80a. He acknowledged that he understood what Port Vue was supposed to do. N.T. at 119, R.R. at 182a.

         John McDonald (McDonald) also testified for the Authority. McDonald was a foreman for State Pipe Services, which replaced the broken sewer line in 2012. N.T. at 85, R.R. at 148a. Initially, State Pipe Services performed a pre-inspection of the site using a camera. N.T. at 86, R.R. at 149a. After determining that the old terra cotta pipe had not been completely replaced, State Pipe Services continued the pipe bursting process to the top of manhole 767, thereby completing the project. N.T. at 88, R.R. at 151a.

         Gaffney, a former foreman for the Authority at the time of the project, also testified for the Authority. N.T. at 191-92, R.R. at 254a-55a. Gaffney testified that he was instructed by the office manager and the Board of the Authority to check in daily if there was going to be any problems but it was not his position to inspect anything, and he did not, nor was he at the site daily. N.T. at 192-93, R.R. at 255a-56a. He confirmed that he never had a conversation with Perkoski about not completing the bursting of the line between manholes 766 and 767. N.T. at 193, R.R. at 256a. Regarding the visual inspection of a new sewer line, Gaffney explained:

If it's an open cut, in other words, if they excavate and put the pipe in, both the engineer and myself if I'm in the area, make sure that it's cemented out correctly with stone, make sure that there's good flow on it.
However, if the inspectors work by themselves, you don't go down into a sewer by yourself. It's a safety issue. By [Occupational Safety and Health Administration] standard, there should be three people on site.
I have never been there where it's just myself and/or Joe [Dursa]. So we don't make it a habit or standard to go down any sewers, manholes themselves because of safety issues.

N.T. at 199-200, R.R. at 262a-63a.

         In its case, Port Vue called its President, Perkoski. N.T. at 127-28, R.R. at 190a-91a. Perkoski testified that throughout the duration of the project, his communications had been with Glenn Engineering. N.T. at 129-30, R.R. at 192a-93a. Perkoski explained that during phase 2 of the project, from manhole 764 to manhole 767, his workers encountered problems connecting some of the homes to the new sewer line. See N.T. at 140-41, R.R. at 203a-04a. They had to enter the basements of these houses, cut the basement floors to find the sewer, install a new eight-inch pipe, and then clean up the basements. N.T. at 141, R.R. at 204a. This work exceeded the scope of the work set forth in Port Vue's contract with the Authority. Id. Perkoski testified that Glenn Engineering was aware of this extra work and agreed that it would be "traded for the other pipe bursting," which was scheduled to be done for a payment of $14, 000. N.T. at 143, R.R. at 206a. Perkoski explained:

[t]he remaining pipe bursting that had to be done, which amounted to, if you looking [sic] at the schedule, [$]14, 000, and I did eight houses or seven houses, and it had to cost me five to eight thousand at that time.
So I did $35, 000 worth of work for $14, 000, because [Glenn] is a friend of [mine]. N.T. at 143-44, R.R. 206a-07a.[3] When asked if he completed the 112 feet of sewer line between manholes 766 and 767, Perkoski stated:
No. I guess if that's what we say, but that's what we figured that we were going to get extras for the inside, and they didn't have the money for the inside. So we said, okay, we'll leave that existing sewer in and take that money and apply it to each house.

N.T. at 156, R.R. at 219a.

         When questioned as to whether Port Vue ever supplied the Authority or Glenn with as-built drawings after Port Vue completed the project, Perkoski stated:

A. Yeah, I drew it with Joe [Dursa] and them on the job the way it was. They knew the way it was. That's how these come up and they're still wrong.
Q. Did you bring a copy of the as-builts with you?
A. No. We draw it on paper up at the job.
Q. You took a piece of paper at the site and said, This is what I did?
A. Well, they could see what I did, but then they put it wrong. It ain't even right on here.
Q. Well, they couldn't see that you did not complete the 121 feet that was underground.
A. Well, we agreed to eliminate it to save money.

N.T. at 165, R.R. at 228a. Perkoski acknowledged that the payment application that his company submitted to the Authority indicated that Port Vue had completed 100% of the bursting of the lines from manhole 764 to manhole 767. N.T. at 171, R.R. at 234a.

         Following the one-day trial, the trial court entered a verdict in favor of the Authority and awarded it $39, 033.69 in damages. Trial Court Opinion at 6. The trial court concluded that "the discovery rule applie[d] to toll the statute of limitations until March of 2012 when the Authority became aware that [Port Vue] failed to complete the work as required by the contract." Id. at 4. The trial court also concluded that a 2008 consent order signed by the Authority in a separate case did not bar the instant case. Id. at 4-5. Finally, the trial court rejected Port Vue's argument that it could only be held liable for the cost of the work it did not complete in the original contract, which was $14, 351.00. Id. at 5. Port Vue sought post-trial relief, which was denied. R.R. at 61a. The present appeal followed.

         II. Arguments and Analysis

         On appeal, [4] Port Vue raises three arguments. First, it contends that the four-year statute of limitations applicable to breach of contract claims bars the Authority's claims. Second, Port Vue contends that a 2008 consent order between the parties released it from any future claims related to the project. Third, Port Vue contends that the amount of damages awarded to the Authority exceeded what it would have been paid under the contract and, therefore, exceeded those allowed by law.

         In response, the Authority argues that the trial court did not err or abuse its discretion in concluding that the Authority's claim was not barred by the statute of limitations. Next, the Authority argues that this matter is not barred by the consent order because that order involved a separate nucleus of facts and did not release Port Vue from the present claim. Finally, the Authority responds that the trial court did not award damages in excess of those allowed by law because the Authority is entitled to compensation for all damages resulting from Port Vue's failure to fulfill the contract.

         This case was originally argued before a panel of three judges of this Court. Subsequently, the Court issued an order directing the parties to file supplemental briefs addressing: (1) "[w]hether a sewer authority may invoke the doctrine of nullum tempus occurit Regi ["time does not run against the king"] to defeat an otherwise applicable statute of limitations defense . . ." and whether the Authority "acted in its governmental capacity to enforce an obligation imposed by law[]"; and (2) "[w]hether the statute of limitations begins to run upon occurrence of a breach of contract or upon the discovery of the breach in all types of contracts." Cmwlth. Ct. Order 8/7/18. The matter was then argued before the Court en banc.

         We will begin by addressing Port Vue's argument that the consent order bars this action because it released Port Vue from any future claims related to the project.

         A. Consent Order

         By way of background, in 2005, two property owners along Bevan Road, William Roney and Gina Buzzard, filed suit against multiple parties including Port Vue and the Authority, following land subsidence events behind their homes in 2002 and 2003 related to the sewer line replacement. See Trial Court Opinion at 4- 5; Consent Order ¶¶ 1 & 3, R.R. at 23a-24a. The lawsuit was resolved by a settlement agreement, wherein the Authority agreed to release Port Vue from any claim or cause of action related to the litigation. See R.R. at 23a-24a. Port Vue contends that, "[b]ut for the contract between [it] and the Authority to perform pipe bursting on the hillside below Bevan Road [it] would not have been involved in the above litigation." Port Vue's Brief at 13.

         "In Pennsylvania, a consent decree in an equity action is not considered a legal determination by the courts but is an agreement between the parties." Penn Township v. Watts, 618 A.2d 1244, 1247 (Pa. Cmwlth. 1992). "'It is in essence a contract binding the parties thereto.'" Cecil Township v. Klements, 821 A.2d 670, 674 (Pa. Cmwlth. 2003) (quoting Commonwealth v. Rozman, 309 A.2d 197 (Pa. Cmwlth. 1973)).

         The consent order provided that the parties to the agreement, including Port Vue and the Authority, agreed to release and discharge one another from all claims or damages "arising from the slide or land subsidence occurring behind the Roney and Buzzard residences in 2002 and 2003 and including, but not limited to, any claim or cause of action arising out of, or related to, these consolidated litigation matters and it is so ORDERED." Consent Order ¶ 5, R.R. at 24a-25a. Based on ...

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