In Ascot Corporation, LLC v. I&R Waterproofing, Inc.,
the Court of Appeals of North Carolina recently held that a subcontractor responsible
for waterproofing could properly pursue the manufacturer of the waterproofing
system for breach of the implied warranty of merchantability, but not for breach
of express warranty, contribution, or negligence-based indemnity. Additionally,
the Court held the subcontractor could pursue a subcontractor responsible for
landscaping for negligence-based indemnity and contribution. No. COA22-19, 2022 WL 16937546, at *1 (Nov 15,
2022).
Ascot Corporation, LLC (“Ascot”) contracted with I&R
Waterproofing, Inc. (“I&R”) to provide waterproofing services in the
basement of a residence owned by Heronsbrook, LLC (“Heronsbrook”). These services included installing a
TUFF-N-DRI waterproofing system manufactured by Tremco Barrier Solutions, Inc.
(“Tremco”). Ascot separately contracted
with Tanglewood Landscape, LLC (“Tanglewood”) to landscape the surrounding
property.
In 2018, water intrusion and water damage was discovered in
the basement of the residence. Ascot independently
resolved the issue and then initiated a lawsuit against I&R to recover
their damages, alleging defective installation of the waterproofing
system. I&R filed a third-party
complaint against Tremco for breach of express warranty, breach of implied
warranty of merchantability, contribution, and common-law indemnity. I&R also filed a third-party complaint
against Tanglewood for negligence and contribution. The trial court dismissed I&R’s claims
against both third-party defendants for failure to state a claim upon which
relief could be granted.
On appeal, the Court concluded I&R could not pursue its
claim for breach of express warranty against Tremco because the warranty only benefited
homeowners, not installers of the product. However, the Court held I&R
could properly assert a claim for breach of implied warranty of merchantability
because I&R purchased and installed the Tremco waterproofing system. The Court found I&R sufficiently alleged Tremco
had warranted the system to be of merchantable quality, I&R had installed
in a workmanlike manner and the Tremco system malfunctioned after being put to
its ordinary use. Finally, the Court
held I&R’s common-law indemnity and contribution claims against Tremco were
deficient because I&R had not sufficiently alleged Tremco’s negligence.
Conversely, the Court held that I&R had sufficiently pled
its causes of action for negligence, common law indemnity, and contribution
against Tanglewood. I&R pled
Tanglewood had a contractual duty to perform its landscaping work with
reasonable care, but had breached its duty by failing to properly install drainage
components, resulting in the basement water intrusion. Thus, the Court held I&R
had sufficiently pled it would be held liable for damages caused by Tanglewood’s
negligence and was, therefore, entitled to pursue its common law indemnity and
contribution claims.
