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AMC East Communities, LLC v. Sundt Companies, Inc.

United States District Court, D. Maryland

February 14, 2019

AMC EAST COMMUNITIES, LLC, Plaintiff,
v.
SUNDT CONSTRUCTION, INC., Defendant.

          MEMORANDUM OPINION

          THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE

         Plaintiff AMC East Communities, LLC ("AMC") has filed suit against Defendant Sundt Construction, Inc. ("Sundt") alleging claims for breach of contract and breach of warranty stemming from alleged construction defects in a home manufactured by Sundt. Sundt has filed a Motion for Summary Judgment in which it asserts that AMC's breach of contract claim fails because AMC was not a party to the original construction contract, and its breach of warranty claim fails because it was filed outside the statute of limitations period. AMC opposes the Motion. Having reviewed the submitted materials, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the reasons set forth below, Sundt's Motion for Summary Judgment will be GRANTED, and AMC's claims will be DISMISSED WITH PREJUDICE.

         BACKGROUD

         In 2002, Sundt entered into a contract with the United States Government through the United States Department of the Air Force ("Government" or "Air Force") for the construction of houses on various Air Force bases ("the Sundt Contract"). The Sundt Contract, No. F41622-02-D-0001, is signed by a representative of the Air Force and a representative of Sundt. It contains no provision relating to the potential assignment of the contract. The Sundt Contract incorporates a number of provisions of the Federal Acquisition Regulations ("FAR"), 48 C.F.R. SS 1.000-53.300 (2018), including a standard provision on Warranty of Construction, which provides that a contractor warrants that its work "is free from any defect in equipment, material, or design furnished, or workmanship performed," and that the warranty "shall continue for a period of 1 year from the date of final acceptance of the work," or, "if the Government takes possession of any part of the work before final acceptance," for one year from the date the Government takes possession. 48C.F.R.S52.246-21(a), (b).

         In December 2003, as part of the Sundt Contract, planning began for home construction on Andrews Air Force Base ("Andrews AFB") in Maryland. One portion of that project was to build homes on Columbus Circle, a street within Andrews AFB. The Columbus Circle construction was designated project TG-21. On June 19, 2007, after the completion of construction, Sundt provided the Air Force with a letter constituting its final inspection report for the Columbus Circle homes. That letter reiterated that Sundt warrantied its work for a period of one year. As relevant here, the letter stated that the warranty for the home located at 1114 Columbus Circle ("the Property") began on June 19, 2007 and would expire on June 19, 2008. In its Complaint, AMC asserts that the Property was "transferred and accepted by the U.S. on August 28, 2007," which would result in a warranty period ending one year after that date. Compl. ¶ 6, ECF No.2.

         On November 20, 2007, AMC East LLC ("AMC East") and the Government created AMC East Communities, LLC, the Plaintiff in this action, by executing a Limited Liability Company Operating Agreement ("Operating Agreement"). The Operating Agreement states that AMC was created for the purpose of transferring residential properties on certain Air Force bases, including the Property, to a private entity which would develop, manage, maintain, and operate the properties as rental units for military personnel and other eligible tenants. By the terms of the Operating Agreement, the Government and AMC East are each 50 percent members of AMC, with equal voting rights. The Operating Agreement makes no mention of Sundt or the Sundt Contract.

         AMC was to undertake these management functions in accordance with the terms of a Lease of Property ("the Lease"), also dated November 20, 2007, between the Government and AMC. The Lease states that, in order to privatize the management of base housing, the Government was granting to AMC a lease to various land on certain Air Force bases, and certain improvements to that land were to be conveyed to AMC by quitclaim deed. The Lease states that premises are conveyed to AMC in an "AS IS, WHERE IS" condition. Lease ¶ 3.1, Sundt Mot. Summ. J. Ex. D, ECF No. 37-7. The Lease references the Sundt Contract, in the context of a different project, TG-26, which had not been completed at the time the Lease was executed. The Lease provides that "[e]ach time the Government accepts completed MILCON Units in accordance with the terms of the Sundt Contract," the Government will provide written notice to AMC that the unit is "ready to be conveyed 'as is, where is' to [AMC]." Id. at 4.

         On November 20, 2007, consistent with the Lease, the Government conveyed the Columbus Circle homes to AMC by quitclaim deed ("the Deed"). The Deed reiterates that the properties were conveyed in an '"AS IS' and 'WHERE IS' condition without representation, warranty, or guarantee as to quality, quantity, character, condition, size or kind or that the same is in a condition or fit to be used for the purpose for which intended." Deed at 1, AMC Opp'n Mot. Summ. J. Ex. 7, ECF No. 49-2.

         Also on November 20, 2007, the Air Force and AMC executed an Assignment and Assumption of Guaranties and Warranties ("Warranty Assignment"). The Warranty Assignment states that the Air Force has entered into certain construction contracts with Sundt for the building of military housing, and that those contracts "include provisions for certain warranties, guaranties and indemnities to be issued thereunder." Warranty Assignment at 1, Sundt Mot. Summ. J. Ex. E, ECF No. 37-8. The Warranty Assignment further states that "the Air Force intends to convey the family housing units at Andrews to AMC, and in connection therewith the Air Force desires to assign, and AMC desires to assume, all rights under the warranties and guaranties" under the contracts. Id. Warranties is defined to include "all guaranties and warranties now existing or to come into existence hereafter" related to the Sundt Contract. Id. Pursuant to that assignment, AMC became "solely responsible for enforcing the terms of the Warranties directly against Sundt." Id. at 2. However, the Air Force retained "all applicable obligations to Sundt" under the Sundt Contract. Id. at 1. Sundt expressly consented to the Warranty Assignment in an addendum stating that "with respect to all Warranties issued by, through, or under [Sundt], AMC shall be permitted to make claims directly against [Sundt]." Id. at 5. The warranties covered by the Warranty Assignment consist of the Warranty of Construction pursuant to 48 C.F.R. S 52.246-21 and the manufacturer warranties for mechanical,, interior-electric, plumbing, and lock fixtures; the insulation; the roof; the flooring; the appliances; and termite treatment.

         On October 15, 2015, while a contractor was performing maintenance on the Property, his foot fell through the floor. Later investigation revealed extensive water damage to the substructure of the home, including the joists on which the home rests. AMC asserts that this water damage was the result of improper construction methods, specifically the failure to install a rim joist. Because the area where the rim joist should have been installed was covered by vinyl siding, AMC contends that the construction error could not have been discovered earlier.

         On August 25, 2017, AMC filed suit against Sundt and the Sundt Companies, Inc. in the Circuit Court for Prince George's County, Maryland, alleging claims for breach of contract and breach of warranty. The case was removed to this Court on December 4, 2017 on the basis of diversity jurisdiction, 28 U.S.C. S 1332 (2012). The claims against the Sundt Companies, Inc. have since been dismissed, so the sole remaining Defendant is Sundt.

         DISCUSSION

         In its Motion for Summary Judgment, Sundt contends that AMC cannot, as a matter of law, succeed on either of its two claims. As to the breach of contract claim, Sundt asserts that AMC is not a party to the Sundt Contract and thus cannot show that it is in privity with the Government for purposes of that contract, such that it lacks standing to sue for breach of contract. As to the breach of warranty claim, Sundt asserts that AMC's claims have been filed outside the warranty period and the statute of limitations. In opposing the Motion, AMC asserts that it may assert a breach of contract claim because it is in privity with the Government for purposes of the Sundt Contract or that, at a minimum, there are disputed issues of material fact as to its right to sue under the contract. As to its breach of warranty claim, AMC asserts that its claim is not time-barred because the time period for filing suit did not begin unitl the date it discovered the breach.

         I. ...


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