Peters v. Mindell

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.

                                 No. 91-478

 Michael Peters and Margaret Peters           Supreme Court

                                              On Appeal from
      v.                                      Chittenden Superior Court

 Richard Mindell and Leslie Mindell           November Term, 1992

      v.

 G. Norman Schreib and General Products, Inc.


 Stephen B. Martin, J.

 Craig Weatherly of Gravel and Shea, Burlington, for defendants-appellants,
      Richard and Leslie Mindell

 John T. Leddy of McNeil & Murray, Burlington, for third-party defendants-
      appellees, G. Norman Schreib and General Products, Inc.


 PRESENT:  Gibson, Dooley, Morse and Johnson, JJ.


      GIBSON, J.   Third-party plaintiffs, Richard and Leslie Mindell, appeal
 from a decision granting summary judgment in favor of third-party defend-
 ants, G. Norman Schreib and General Products, Inc.  The Mindells claim that
 the court erred in finding that there were no material facts in dispute and
 in concluding that third-party plaintiffs had no right to indemnification as
 a matter of law.  We reverse.
      In September 1987, plaintiffs Michael and Margaret Peters purchased
 from defendants Richard and Leslie Mindell a house defendants had
 constructed.  In June 1988, the Peters filed a complaint against the
 Mindells alleging various defects in the home, including that (1) the septic
 system did not conform to the approved design on file with the town zoning
 office, (2) the system's mound had broken out of the toe, (3) the mound was
 too close to the foundation drain, (4) the mound was partially on the
 adjoining neighbor's lot, (5) the septic system did not perform satis-
 factorily, and (6) no certificate of occupancy had been issued by the town
 because the engineer had not approved the septic system.
      In April 1989, the Mindells filed a third-party complaint against
 third-party defendants, engineer G. Norman Schreib and General Products,
 Inc., alleging that the Mindells had engaged the services of Schreib and
 General Products to design and certify construction of a mound septic system
 on the lot later sold to the Peters, that the Mindells had constructed the
 mound septic system in accordance with the design, and that Schreib had
 certified that it had been completed according to the design.  The Mindells
 claim that to the extent the Peters are entitled to recover from them for
 defects in the septic system, it is because of the negligence in the design
 or certification of the system by Schreib and General Products.  The
 Mindells request that Schreib and General Products indemnify them for any
 sum due to the Peters as a result of defects in the mound septic system.
      On March 29, 1990, the Chittenden Superior Court entered summary
 judgment for third-party defendants, Schreib and General Products, on the
 ground that the relationship between the Mindells and General Products was
 not one that implied a right of indemnification.  On March 8, 1991, the
 Mindells moved for reconsideration of the court's summary judgment decision.
 The court denied the request for reconsideration because the motion was
 filed "substantially out of time" and, thus, reconsideration would be "very
 prejudicial" to Schreib and General Products.  The court also concluded that
 the motion did not raise any new facts or points of law that were not
 considered in the previous order.
      Schreib and General Products then moved for entry of final judgment
 pursuant to V.R.C.P. 54(b).  The court granted the motion, and the Mindells
 took this appeal.
      Before reaching the merits of the appeal, we briefly address the
 procedural issue raised by Schreib and General Products.  They claim that
 this Court should affirm the superior court's order denying reconsideration
 because the court did not abuse its discretion in determining that the
 motion was untimely, was prejudicial to third-party defendants, and failed
 to raise any points not previously addressed.  We agree that it was within
 the court's discretion to deny the motion for reconsideration on these
 grounds.  This is not dispositive of the appeal, however, because the
 Mindells have not appealed from the denial of reconsideration but rather
 from the final judgment.  The final judgment was based on the findings and
 conclusions of the original summary judgment order, which was not appealable
 until entry of final judgment under V.R.C.P. 54(b).  Accordingly, on appeal
 we consider the merits of the summary judgment order.
      We apply the standard enunciated in V.R.C.P. 56(c) in reviewing a
 decision to grant summary judgment.  Thus, the moving party has the burden
 of establishing that there is no genuine issue of material fact and that it
 is entitled to judgment as a matter of law.  See Kelly v. Town of Barnard,
 155 Vt. 296, 299, 583 A.2d 614, 616 (1990).  Moreover, we regard all
 allegations made in opposition to summary judgment as true, if supported by
 affidavits or other evidence.  Messier v. Metropolitan Life Ins. Co., 154
 Vt. 406, 409, 578 A.2d 98, 99-100 (1990).
      In reviewing the summary judgment decision, we therefore accept the
 facts as advanced by Richard Mindell in his affidavit dated March 8, 1990.
 According to Mindell, he engaged the services of third-party defendants on
 the basis of representations by Schreib that he was a licensed professional
 engineer with the competence required to design and certify construction of
 a mound septic system.  The town septic permit was granted solely on the
 condition that it be constructed in accordance with Schreib's design, and
 inspected during and after construction.  Moreover, the town required
 written certification that the system was in compliance with the design.  On
 October 15, 1987, after a site inspection, Schreib wrote to the town
 stating that the system was installed in accordance with the design plan
 submitted to the town and that it operated satisfactorily. (FN1)
      Mindell supervised construction of the mound, which was installed
 substantially in accordance with the plans and specifications of Schreib.
 In preparing the ground for construction, Mindell followed oral
 instructions given by Schreib, and the mound was located precisely as shown
 on the site plan prepared by third-party defendants.
      During construction, Mindell repeatedly requested inspections by
 Schreib, who declined to make a site visit until the final inspection of the
 completed system because he did not have the time.  The alleged deficiencies
 in the system would have been visible to Schreib had he made an inspection,
 and Mindell could then have corrected any failure to comply with the design
 during construction.  The Mindells relied on the design and certification by
 Schreib when they sold the home to the Peters.  In sum, the Mindells argue
 that any defect in the mound septic system is due to negligence in design,
 location or certification, for which they contracted with third-party
 defendants, and that Schreib and General Products must indemnify them to the
 extent that they are held liable to the Peters for defects in the septic
 system.
      Vermont law precludes contribution among joint tortfeasors but
 recognizes a right of indemnity if (1) there is an express agreement by one
 party to indemnify the other, or (2) the circumstances are such that the law
 will imply such an undertaking.  Bardwell Motor Inn, Inc. v. Accavallo, 135
 Vt. 571, 572, 381 A.2d 571, 1061, 1062 (1977).  There is no express
 indemnity agreement in this case, and third-party defendants maintain that
 the superior court was correct in concluding that there were no
 circumstances based on which the law would imply a right to indemnification.
 We disagree.
      "[I]ndemnity is a right accruing to a party who, without active fault,
 has been compelled by some legal obligation, such as a finding of vicarious
 liability, to pay damages occasioned by the negligence of another."  Morris
 v. American Motors Corp., 142 Vt. 566, 576, 459 A.2d 968, 974 (1983).
 Unlike contribution in which liability is shared by joint tortfeasors, the
 right of indemnity shifts the entire loss upon the real wrongdoer.  Viens v.
 Anthony Co., 282 F. Supp. 983, 985 n.2 (D. Vt. 1968).  The obligation of
 indemnity, however, is only imposed where there is a legal relationship
 between indemnitor and indemnitee.  See id.; Hiltz v. John Deere Indus.
 Equip. Co., 146 Vt. 12, 14-15, 497 A.2d 748, 751 (1985).
      Such a relationship can be found in various circumstances.  We have
 found that an automobile manufacturer held strictly liable was entitled to
 indemnity from the manufacturer of the defective part.  Morris, 142 Vt. at
 576, 459 A.2d  at 974.  Similarly, we concluded that a hotel owner with a
 nondelegable duty to keep the premises reasonably safe was entitled to
 indemnity from the contractor who created a hazard in repairing a hotel
 door.  Bardwell, 135 Vt. at 572, 381 A.2d  at 1062.
      In Bardwell, we adopted the rule stated in the Restatement of
 Restitution { 95 (1937) as follows:
           Where a person has become liable with another for harm
         caused to a third person because of his negligent fail-
         ure to make safe a dangerous condition of land or
         chattels, which was created by the misconduct of the
         other or which, as between the two, it was the other's
         duty to make safe, he is entitled to restitution from
         the other for expenditures properly made in the dis-
         charge of such liability, unless after discovery of the
         danger, he acquiesced in the continuation of the
         condition.
 135 Vt. at 573, 381 A.2d  at 1062.
      We applied the Bardwell rule in Goulette v. Babcock, 153 Vt. 650, 651,
 571 A.2d 74, 75 (1990) (mem.), in which the owner and manager of an
 apartment complex sought indemnification from the architect, who had
 designed the complex, after two children fell through the ice on the pond.
 The issue was who was primarily responsible for the lack of a fence around
 the pond.  We upheld the trial court's decision to dismiss the indemnity
 action against the architect because the owner and manager had acquiesced in
 the design, allowing the pond to remain unfenced for nine years prior to the
 accident.  The expertise of an architect was not necessary to conclude that
 the pond posed a danger to children.
      The instant case is analogous to  Bardwell.  Schreib and General
 Products contracted with the Mindells to design and certify the septic
 system.  This contract created a legal relationship sufficient to impose an
 obligation of indemnity.  See Bardwell, 135 Vt. at 573, 381 A.2d  at 1062.
 "[A]ccompanying every contract is an implied duty to perform with care,
 skill, reasonable expedience and faithfulness."  South Burlington School
 Dist. V. Calcagni-Frazier-Zajchowski Architects, Inc., 138 Vt. 33, 44, 410 A.2d 1359, 1364 (1980).  Thus, Schreib and General Products had an implied
 duty to carry out their obligations with a certain degree of care.  If the
 Mindells are held liable for the defects in the mound septic system, but the
 defects were created by the negligence of Schreib and General Products, then
 the Mindells are entitled to indemnification.  See Chirco Constr. Co. v.
 Stewart Title and Trust of Tucson, 629 P.2d 1023, 1025 (Ariz. Ct. App. 1981)
 (if builder-vendor establishes that only liability to purchaser is for
 breach of warranty of habitability, then builder-vender is entitled to
 indemnity from developer shown to be at fault for soil condition causing
 damages).  The Goulette exception to the Bardwell rule does not apply here.
 Unlike the situation in Goulette, there is no  indication that the Mindells
 knowingly acquiesced in the continuation of the condition.
      Finally, third-party defendants argue that the superior court correctly
 relied on Powers v. Parallax, Inc., No. 81-16 (D. Vt. Jan. 13, 1983), in
 concluding that no right to indemnification can be implied in this case
 because there is no warranty for design services.  In Powers, a home owner
 brought suit against the architect who designed her home, alleging breach of
 contract, negligence, and breach of express and implied warranties.  The
 architect moved for summary judgment on the contract and warranty claims
 only.  The court denied summary judgment on the contract count but granted
 summary judgment in favor of the architect on the warranty claims because it
 saw "no reason to conclude that Vermont would imply a warranty of fitness by
 the architect."  Id. at 5.
      We do not decide whether summary judgment on the warranty claim was
 proper in Powers because we conclude that Powers is not on point.  The
 Mindells have made no claim against Schreib and General Products based on an
 implied warranty of fitness.  Rather, they seek indemnification based on a
 theory of negligence: that Schreib and General Products failed to carry out
 their contractual obligation with the requisite degree of care.  The Powers
 court did not decide the negligence issue because the defendant did not move
 for summary judgment on the negligence count.
      Powers also decided a motion for summary judgment brought by a third-
 party defendant against the architect, claiming there was no right to
 contribution among joint tortfeasors.  The court denied the motion because
 the bar against contribution would not apply if the architect were
 ultimately found liable on the contract claim.  The court noted, however,
 that if the architect were found liable based on active negligence -- i.e.
 negligently designing the heating system -- then the bar against
 contribution would preclude a third-party claim for negligence.
      In the instant case, the original action brought by the Peters is based
 on a warranty.  See Rothberg v. Olenik, 128 Vt. 295, 305, 262 A.2d 461, 467
 (1970) (law implies warranty against structural defects by builder-vendor of
 newly constructed house).  The third-party claim is based on negligence.
 Just as liability based on the contract claim in Powers would permit a
 third-party indemnity claim, the Mindells may be liable to the Peters based
 on a warranty theory absent any negligence on their part.  In that
 situation, the Mindells would be entitled to indemnification by the real
 wrongdoers, the negligent third-party defendants.
      We conclude that, if the facts alleged by the Mindells are established
 at trial, they are entitled to indemnification from Schreib and General
 Products.  There are, however, material facts in dispute that must be
 resolved, and, therefore, the trial court erred in granting summary
 judgment.
      Reversed and remanded.

                                        FOR THE COURT:



                                         __________________________________
                                         Associate Justice


FN1.   According to a later affidavit by Schreib, he revoked the October
 15th certification on January 12, 1988, on the ground that a recent
 inspection had revealed that verbal instructions given to the contractor
 were not performed.