In Penzel Construction Company, Inc. v. Jackson R-2 School District et al., No. ED103878, 2017 WL 582663 Mo. Ct. App. Feb. 14, 2017), the Missouri Court of Appeals, Eastern District, Division Two, recognized for the first time in the state of Missouri that an implied warranty under the Spearin Doctrine constitutes an actionable theory of recovery.
Will other states, including Wisconsin, follow Missouri’s lead?
What is the Spearin Doctrine?
The Spearin Doctrine arises from the case of U.S. v. Spearin, 248 U.S. 132 (1918), in which the United States Supreme Court held that a government entity offers an implied warranty to a contractor that the plans prepared for that project will be free from defects, and thus, the owner is responsible for the consequences of the defective plans. Spearin, 248 U.S. at 136. As stated in Spearin, “This implied warranty is not overcome by the general clauses requiring the contractor, to examine the site, to check up the plans, and to assume responsibility for the work until completion and acceptance.” Id. at 137. The Spearin Doctrine will not apply, however, if the contractor fails to follow the plans provided by the owner.
The Spearin Doctrine in Wisconsin
Only three Wisconsin appellate cases have cited to Spearin since it was published in 1918. Of those three cases, only two contain more than a passing cite to Spearin.
In the first case, Thomsen-Abbott Construction Co. v. Wausau, 9 Wis. 2d 225, 100 N.W.2d 921 (1960), the Wisconsin Supreme Court used Spearin in support of the statement that “a contractor bidding on a public-work project has the right to rely on the express representation contained in the plans even in the presence of a contract clause similar to the one in the instant contract, which places a duty of investigation upon the contractor.” Thomsen-Abbott Constr. Co., 9 Wis 2d at 233. However, the plaintiff in this case had not expressly asserted the Spearin doctrine nor sought recovery under it.
In the second case, Morgan v. Midwest Manufacturing, 168 Wis. 2d 776, 486 N.W.2d 37 (Ct. App. 1992), an unpublished decision from the Second District of the Court of Appeals, the defendant asserted the Spearin Doctrine as a defense, but the court said that it did not apply because the defendant did not follow the plans and specifications supplied by the plaintiff. Morgan, 168 Wis. 2d at *4.
Besides these cases, Wisconsin appellate courts have remained silent on the Spearin Doctrine, leaving open the question: how will our courts respond to a claim for recovery under this theory?
Facts of the Case: Penzel Construction Company, Inc. v. Jackson R-2 School District et al.
Penzel Construction Company, Inc. sued Jackson R-2 School District and others for breach of implied warranty for furnishing “deficient and inadequate plans and specifications” for a construction project for which Penzel was engaged.
During the bidding process, neither Penzel nor its electrical subcontractor, Total Electric, identified any defects in the plans, which had been prepared by an architect for the School District. However, after construction commenced, Total Electric identified that the plans were deficient in a number of ways. Total Electric claimed it was delayed 16 months due to the defective plans and the School District’s slow response time in addressing the problems encountered.
Penzel and Total Electric entered into a liquidating agreement whereby Total Electric authorized Penzel to prosecute its claim for damages caused by the defective plans. Penzel brought suit against the School District and its architect “under the theory that the District made an implied warranty that the Plans for the Contract were adequate and complete, pursuant to the Spearin Doctrine.”
The Missouri Court of Appeals recognized that an action for breach of implied warranty under the Spearin Doctrine had “not previously been expressly accepted or rejected in our State.” The Court of Appeals went on to determine that it believed that “Spearin claims are acceptable vehicles for bringing causes of actions based on deficient plans and specifications in construction projects involving a governmental entity-owner.”
In reaching this determination, the court examined Missouri precedent and determined that the Spearin Doctrine aligns with the principles established previously by the state’s courts. Thus, the Missouri Court of Appeals determined that it was “expressly adopt[ing] the use of Spearin when all of the following circumstances are present:
- there is a dispute between a contractor (or subcontractor with a valid liquidating or ‘pass through’ agreement) and a government entity;
- arising from a construction contract;
- where the governmental entity furnishes inadequate or deficient plans and specifications for work to be performed by the contractor under the parties’ agreement; and
- these deficiencies cause additional costs for the contractor.”
The court remanded the matter back to the trial court for further proceedings.
What Does Penzel Mean for Wisconsin?
Penzel demonstrates that the nearly 100-year-old Spearin Doctrine is alive and well. In a decade with so many public construction projects, it is just a matter of time before a Spearin case makes its way to the Wisconsin Court of Appeals or Supreme Court. Penzel provides construction attorneys guidance as to the possible methods of evaluation that Wisconsin courts might use when faced with the same question.
If you or your colleagues represent contractors who frequently contract with public entities, it is worth keeping the Spearin Doctrine in mind as a theory of recovery in future disputes.