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Village of Doniphan v. Starostka Group Unlimited, Inc.

Court of Appeals of Nebraska

October 21, 2014

VILLAGE OF DONIPHAN, A MUNICIPAL CORPORATION, APPELLANT,
v.
STAROSTKA GROUP UNLIMITED, INC., A NEBRASKA CORPORATION, APPELLEE

Page 599

Appeal from the District Court for Hall County: Teresa K. Luther, Judge.

Austin L. McKillip, of Cline, Williams, Wright, Johnson & Oldfather, L.L.P., and James H. Truell, of Truell, Murray & Associates, for appellant.

Larry E. Welch, Jr., of Welch Law Firm, P.C., for appellee.

IRWIN, MOORE, and PIRTLE, Judges.

OPINION

Page 600

[22 Neb.App. 465] Pirtle, Judge.

INTRODUCTION

The Village of Doniphan, a municipal corporation, appeals from an order of the district court for Hall County, which entered judgment upon the verdict of the jury finding that Doniphan's breach of contract claim against Starostka Group Unlimited, Inc. (Starostka Group), a Nebraska corporation, was barred by the statute of limitations. Doniphan contends that the trial court erred in failing to grant its motion for directed verdict and erred in failing to grant its motion for judgment notwithstanding the verdict or, in the alternative, a motion for new trial. Based on the reasons that follow, we affirm the judgment of the district court.

BACKGROUND

This action arises from a breach of contract claim brought by Doniphan against Starostka Group. Specifically, in August 2005, Starostka Group entered into an agreement with Doniphan to construct a sanitary sewer system and water lines according to prescribed specifications for a new residential development known as Hoffman subdivision. In the spring of 2006, the subdivision experienced significant drainage and standing water problems which caused sinking and damage to [22 Neb.App. 466] the paving above the sanitary sewer system and water lines constructed by Starostka Group.

On February 11, 2010, Doniphan commenced this action to recover damages, alleging that Starostka Group breached the construction contract by failing to comply with the specifications for the design and construction of the project. In its amended answer filed October 21, Starostka Group raised the affirmative defense that Doniphan's claims were barred by the applicable statute of limitations.

Starostka Group filed a motion for summary judgment, which the trial court overruled. The court found that the substantial completion date of the project presented a genuine issue of material fact.

The case proceeded to a jury trial on the issue of when substantial completion of the project occurred, thereby determining whether Doniphan's claim against Starostka Group was barred by the statute of limitations. The evidence presented showed that Doniphan and Starostka Group entered into a written construction contract whereby Starostka Group agreed to complete the work necessary for " [t]he installation of water and sewer mains for the proposed [s]ubdivision as well as the earthwork needed to bring the site to the proposed elevations." The contract listed a start date in August 2005, listed the total price for Starostka Group's work on the project as $197,475.34, and provided for progress payments of the total contract price as the work was completed. The contract named JEO Consulting Group, Inc. (JEO Consulting), as the project engineer and authorized it to act as Doniphan's

Page 601

representative. The contract specifically stated that JEO Consulting would act as the initial interpreter of the requirements of the contract and the judge of the acceptability of the work thereunder. As such, upon receipt of an application for progress payment from Starostka Group, JEO Consulting inspected the work completed by Starostka Group before it recommended that Doniphan make partial payments under the contract.

The contract also addressed the specifications for disinfection of the water distribution system and required that Starostka Group disinfect the water lines and document that the lines had passed two consecutive bacteriological tests. The [22 Neb.App. 467] contract further provided that separate payment for disinfection and bacteriological testing of the water lines would not be made and that such work is considered subsidiary to the work indicated in the project.

On or about August 29, 2005, Starostka Group was given a notice to proceed by Doniphan to construct the project's sewer system and water lines. At the end of September, Starostka Group submitted its first " Contractor Application for Payment" to JEO Consulting requesting payment in the amount of $142,144.63 for work on the project completed through September 29.

At the October 2005 meeting of Doniphan's board of trustees (the Board), Dale Sall, who served as the project engineer for JEO Consulting, presented Starostka Group's payment request for approval by the Board. Upon unanimous approval by the Board, Doniphan issued to Starostka Group a check in the amount requested.

On October 31, 2005, Starostka Group submitted its second " Contractor Application for Payment" to JEO Consulting requesting payment in the amount of $46,163.84 for work on the project completed through October 28. At the Board's November 2005 meeting, Sall presented Starostka Group's second payment request for approval. The Board decided to postpone payment of the second payment request until Starostka Group could sanitize the water system and provide passing bacteriological tests.

On December 5, 2005, Starostka Group submitted its third and final " Contractor Application for Payment" to JEO Consulting requesting payment in the amount of $13,324.10 for work completed on the project through December 5. At the Board's December 12 meeting, Sall presented Starostka Group's third and final pay request for approval. According to the Board's meeting minutes, Sall also reported that the water lines constructed by Starostka Group had now successfully passed the water tests. The Board unanimously approved payment of Starostka Group's second payment request, in the amount of $46,163.84, which had been postponed the previous month. The Board also agreed to approve final payment of all but $2,000 of the total contract price. The $2,000 was [22 Neb.App. 468] withheld to ensure that Starostka Group finished two items on the final " punch list," which included the valve boxes and sealing of the electrical and the lift station. The money withheld did not have anything to do with sanitizing the water or water testing.

In addition to submitting Starostka Group's third and final partial payment application for approval at the Board's December 12, 2005, meeting, Sall also submitted a " Recommendation of Acceptance" of Starostka Group's completed work on the project. Sall testified that he did not prepare a separate certificate of substantial completion for the Board's approval, because when Starostka Group submitted its third and final payment request, it was for 100 percent of all the ...


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