Statute of Limitations--repose--tolling--synthetic stucco--repairs
The trial court did not err by granting a motion to dismiss claims arising from synthetic
stucco on a home and replacement windows and doors. A duty to complete performance may
occur after the date of substantial completion; however, a “repair” does not qualify as a “last act”
under N.C.G.S. § 1-50(5) unless it is required under an improvement contract by agreement of
the parties. To allow the statute of repose to toll or start running anew each time a repair is
made would subject a defendant to potential open-ended liability for an indefinite period of time,
defeating the very purpose of statutes of repose.
Judge GREENE dissenting.
Appeal by defendant and third-party plaintiff Paramount
Homes, Inc., from judgment entered 15 January 1998 by Judge
Ronald L. Stephens in Durham County Superior Court. Heard in the
Court of Appeals 5 January 1999.
Brown, Todd & Heyburn, P.L.L.C., by Julie M. Goodman, and
Smith Helms Mulliss & Moore, L.L.P., by Gary R. Govert, for
defendant and third-party plaintiff-appellant.
Hunton & Williams, by Steven B. Epstein for third-party
defendant-appellee Carolina Builders Corporation.
HUNTER, Judge.
In August 1990, general contractor defendant Paramount
Homes, Inc. (“Paramount”) completed the house at issue in this
case. Paramount sold the home to the original owner, who
subsequently sold the house to plaintiff in 1993. On 29 August
1996, plaintiff filed suit against Paramount for defective
construction of the house. Plaintiff alleged use of defective
materials and improper installation of windows, doors, and
exterior insulation and finish systems (“EIFS”) cladding, also
known as synthetic stucco. Paramount, in turn, sought indemnityand contribution from Simplex Products Division of K2inc.
(“Simplex”), the manufacturer of the EIFS installed at
plaintiff's house, by third-party complaint filed 20 December
1996. During discovery, Paramount learned that Carolina Builders
Corporation (“CBC”) had made repairs and replacements to the
windows and doors at the house at plaintiff's request in 1994.
CBC had manufactured and sold the materials to Paramount during
original construction of the house. Paramount filed a motion on
16 October 1997 to add CBC as a second third-party defendant,
which was granted on 23 October 1997. Paramount filed its
amended third-party complaint on 29 October 1997 alleging causes
of action against CBC for breach of contract, breach of express
and implied warranties, and negligence. CBC moved to dismiss,
pursuant to Rules 12(b)(1) and 12(b)(6) of the North Carolina
Rules of Civil Procedure. CBC's motion was granted on the
grounds that Paramount's claims were filed after the applicable
statute of repose had expired. On 28 April 1998, plaintiff filed
a voluntary dismissal with prejudice of his lawsuit. On 29 May
1998, Paramount filed a voluntary dismissal with prejudice of its
third-party claims against Simplex. Paramount appeals the
dismissal of CBC as a third-party defendant.
The parties acknowledge that the applicable statute of
repose in the present case is the real property improvement
statute which states:
No action to recover damages based upon or
arising out of the defective or unsafe
condition of an improvement to real property
shall be brought more than six years from the
later of the specific last act or omission of
the defendant giving rise to the cause ofaction or substantial completion of the
improvement.
N.C. Gen. Stat. § 1-50(5)(a) (1996) (emphasis added). While the
statute does not clarify the meaning of “last act or omission”
any further, “substantial completion” means
that degree of completion of a project,
improvement or specified area or portion
thereof (in accordance with the contract, as
modified by any change orders agreed to by
the parties) upon attainment of which the
owner can use the same for the purpose for
which it was intended. The date of
substantial completion may be established by
written agreement.
N.C. Gen. Stat. § 1-50(5)(c) (1996). N.C. Gen. Stat. § 1-50(5)
applies to defective improvements to real property by a
materialman, meaning one who furnishes or supplies materials used
in building construction, renovation or repair. Forsyth Memorial
Hospital v. Armstrong World Industries, 336 N.C. 438, 444 S.E.2d
423 (1994). Thus, N.C. Gen. Stat. § 1-50(5) applies to CBC in
the present case.
Paramount contends the court erred in granting CBC summary
judgment because its “last act or omission” giving rise to the
relevant claims was the repairs completed by CBC in 1994;
therefore, the claim is valid since it was filed in 1997, well
within the six year statute of repose. Paramount supports its
position by citing New Bern Assoc. v. The Celotex Corp., 87 N.C.
App. 65, 359 S.E.2d 481, disc. review denied, 321 N.C. 297, 362
S.E.2d 782 (1987).
In New Bern, plaintiff New Bern Associates brought suit
against the Celotex Corporation (“Celotex”) alleging breach of
warranties in connection with roofing materials manufactured byCelotex and installed on plaintiff's building. Construction of
the building, including the installation of Celotex's roofing
materials, had been substantially completed on or prior to 18
March 1975. On 28 April 1986, Celotex asserted third-party
claims for indemnity and contribution against T.A. Loving Company
(“Loving”), the general contractor responsible for constructing
the building and installing the roofing materials. In regards to
when the statute of repose began to run, the Court held that the
1963 version of the statute applicable in New Bern is the same as
the 1981 version, stating: “We think it means nothing different
from the language of the 1981 version in which the statute runs
'from the later of the specific last act or omission of the
defendant giving rise to the cause of action or substantial
completion of the improvement.'” Id. at 70-71, 359 S.E.2d at
485. Therefore, the Court found that the claim against Loving
would be valid, under the statute of repose, only if the
substantial completion date or last act or omission of Loving
occurred on or after 28 April 1980.
The evidence in New Bern indicated that the completion date
was 18 March 1975; however, one of Loving's employees was
involved in continuous efforts to repair the property from the 18
March 1975 completion date until after 28 April 1980. This Court
found that the dispute over whether the individual was actually
Loving's agent after 28 April 1980 was a genuine issue of
material fact as to whether Loving's “last act or omissionalleged to give rise to plaintiff's injury occurred within six
years of the date Celotex filed its third-party complaint,” and
remanded the case in order for this determination to be made.
Id. at 71, 359 S.E.2d at 485. The Court did not hold that the
individual's acts, if he were Loving's agent after 28 April 1980,
would qualify as Loving's “last act or omission” under the
statute of repose. Therefore, New Bern is persuasive, but not
controlling in the case sub judice. The dispositive issue in the
present case is whether a repair qualifies as the “last act or
omission” under N.C. Gen. Stat. § 1-50(5).
While the Court in New Bern referred to the repairs in
question as continuous efforts after the completion date, it gave
no indication whether these repairs were pursuant to the original
improvement contract, a warranty, or new and separate contracts.
In the present case, Paramount alleges in its third-party
complaint that CBC, pursuant to contract, supplied Paramount with
windows, doors, and associated materials for use in construction
of the house in 1990. Paramount further alleges that, pursuant
to the plaintiff's dissatisfaction with the materials:
CBC returned to the House [sic] in
approximately the spring or summer of 1994 to
inspect, repair, and replace the windows
about which the plaintiff had complained.
Upon information and belief, CBC performed
this repair and replacement work pursuant to
a warranty and did not charge the plaintiff
for replacement parts provided.
While alleging in its third-party complaint that the repairs were
completed pursuant to a warranty given in 1990, Paramount also
attempts, in its brief, to classify the 1994 repairs as duties
under the original 1990 improvement contract. The allegations ofthe third-party complaint must be treated as true, as the court
is ruling on a motion to dismiss for failure to state a claim
upon which relief can be granted. Hickman v. McKoin, 337 N.C.
460, 462, 446 S.E.2d 80, 82 (1994). Paramount never alleges in
its third-party complaint, or in its brief, that CBC failed to
complete performance and finish the improvement in 1990. The
record reveals, and both parties concede, that the plaintiff's
house was completed in 1990. Thus, CBC had completed its duties
under its contract with Paramount in 1990 and the statute of
repose began to run.
Paramount has not contended that the 1994 repair should be
classified as a new and separate improvement, thus starting the
running of a second statute of repose. Therefore, this issue is
not addressed. Paramount, however, does contend that the statute
of repose did not begin running or was “reset” in 1994 because
CBC “must have believed that it had a duty to do those [1994]
repairs, and any such duty could only have been created pursuant
to its contract with Paramount and the warranties provided in
connection with that contract.” While Paramount opines as to why
CBC made the repairs, it presents no evidence that CBC had a
continuing duty to complete any repairs under the original 1990
improvement contract. Also, there is no evidence in the record
indicating that CBC had a continuing duty to repair under any
implied or express warranty.
Assuming arguendo that a continuing duty of repair existed
pursuant to a warranty, no evidence indicates that CBC had a
continuing duty to repair under the improvement contract withParamount. A warranty is unique in that it anticipates future
performance; therefore, this Court has held that a statute of
limitations is tolled during the time the seller endeavors to
make repairs to enable the product to comply with a warranty.
Haywood Street Redevelopment Corp. v. Peterson Co., 120 N.C. App.
832, 463 S.E.2d 564 (1995). In that case, the defendant gave a
written express warranty on a waterproofing surface on
plaintiff's parking lot on 15 June 1988 and agreed to correct
deficiencies in the work until 15 March 1993. The Court stated
that the warranty “is in the nature of a prospective warranty, in
that it guarantees the future performance of the waterproofing
for a stated period of time.” Id. at 836, 463 S.E.2d at 566
(citations omitted). Therefore, on each day the waterproofing
was not free of defects, there was a new breach of the warranty.
With the occurrence of each breach, a new cause of action
accrued. Id. at 837, 463 S.E.2d at 567. The case was reversed
and remanded because the statute of limitations was tolled during
the repair period, and because the breach of warranty claim was
filed within three years pursuant to N.C. Gen. Stat. § 1-52(1)
(1983) -- the statute of limitations applicable to breach of
warranty and contract claims.
Haywood is distinguishable from the present case.
Paramount, while alleging breach of implied and express
warranties, does not rely on the statute of limitations found in
N.C. Gen. Stat. § 1-52(1), which applies to breach of warranty.
However, the holding in Haywood does indicate that once the
improvement to which the warranty applied was completed, theapplicable statute of limitations began running. A subsequent
repair, pursuant to a warranty, tolled the running of the statute
of limitations, but it did not “reset” the running of the statute
of limitations. Likewise, Paramount presents no precedent for
the proposition that the statute of repose, once it begins
running upon completion of the improvement, can be “reset” or
“tolled” during a repair. The holding of New Bern never
determined affirmatively that the statute of repose began running
at a certain date, thus the issues of “tolling” or “resetting”
were never addressed.
In another similar case, Cascade Gardens v. McKellar &
Assoc., 240 Cal. Rptr. 113 (4th Dist. 1987), the defendant
developed the Cascade Gardens Condominiums from 1972 to 1973 and
filed its notice of completion on 13 July 1973. Soon after the
homeowners moved into the condominiums, they notified defendant
developer of roof leaks, as well as other defects. Defendant
contracted with a roofing company to reroof the condominiums,
which took from December 1973 to March 1974. The Court did not
find that the repair reset the applicable statute of limitations
which began at the date of completion, however, the statute was
tolled during the four month period of repairs. Cascade, 240
Cal. Rptr. at 116-17. While equitable doctrines may toll
statutes of limitation, they do not toll substantive rights
created by statutes of repose. Stallings v. Gunter, 99 N.C. App.
710, 716, 394 S.E.2d 212, 216 (citing Restatement (Second) of
Torts § 899, Comment (g) (1979)), disc. review denied, 327 N.C.
638, 399 S.E.2d 125 (1990). The statute of repose codified asN.C. Gen. Stat. § 1-50(5) is “designed to limit the potential
liability of architects, contractors, and perhaps others in the
construction industry for improvements made to real property.”
Lamb v. Wedgewood South Corp., 308 N.C. 419, 427-28, 302 S.E.2d
868, 873 (1983). To allow the statute of repose to toll or start
running anew each time a repair is made would subject a defendant
to potential open-ended liability for an indefinite period of
time, defeating the very purpose of statutes of repose such as
N.C. Gen. Stat. § 1-50(5). See, e.g., Tetterton v. Long
Manufacturing Co., 314 N.C. 44, 56, 332 S.E.2d 67, 74 (1985). A
statute of repose “serves as an unyielding and absolute barrier
that prevents a plaintiff's right of action even before his cause
of action may accrue,” Black v. Littlejohn, 312 N.C. 626, 633,
325 S.E.2d 469, 475 (1985), and functions to give a defendant a
vested right not to be sued if the plaintiff fails to file within
the prescribed period. Colony Hill Condominium I Assoc. v.
Colony Co., 70 N.C. App. 390, 320 S.E.2d 273 (1984). In short, a
statute of repose bars an action a specified number of years
after a defendant has completed an act, even if the plaintiff has
not yet suffered injury . Our Supreme Court has stated:
Statutes of limitation are generally seen as
running from the time of injury, or discovery
of the injury in cases where that is
difficult to detect. They serve to limit the
time within which an action may be commenced
after the cause of action has accrued.
Statutes of repose, on the other hand, create
time limitations which are not measured from
the date of injury. These time limitations
often run from defendant's last act giving
rise to the claim or from substantial
completion of some service rendered by
defendant.
Trustees of Rowan Tech. v. Hammond Assoc., 313 N.C. 230, 234 n.3,
328 S.E.2d 274, 276-77 n.3 (1985); see Boudreau v. Baughman, 322
N.C. 331, 368 S.E.2d 849 (1988) (statute of repose sets a fixed
time limit beyond which plaintiff's claim will not be
recognized); Lamb v. Wedgewood South Corp., 308 N.C. 419, 440,
302 S.E.2d 868, 880 (“unless the injury occurs within the
six-year period, there is no cognizable claim”).
According to N.C. Gen. Stat. § 1-50(5), the statute of
repose begins running at the later of the last act or omission or
date of substantial completion. Other courts have held that
since all liability has its genesis in the contractual
relationship of the parties, an owner's claim arising out of
defective construction accrues on completion of performance “no
matter how a claim is characterized in the complaint--negligence,
malpractice, breach of contract.” SC. Dist. of Newburgh v.
Stubbins & Assocs., 626 N.Y.S.2d 741, 742-43, 650 N.E.2d 399,
400-01 (1995). We agree with this reasoning. The logical
interpretation of our statute includes classifying the later of
the last act or omission or date of substantial completion as the
date at which time the party (contractor, builder, etc.) has
completed performance of the improvement contract. Accordingly,
the last omission may occur when the party fails to perform or
does not complete performance. A duty to complete performance
may occur after the date of substantial completion, however, a
“repair” does not qualify as a “last act” under N.C. Gen. Stat. §
1-50(5) unless it is required under the improvement contract by
agreement of the parties. Our holding coincides with the public policy encouraging
repairs and subsequent remedial measures, codified in Rule 407 of
the North Carolina Rule of Evidence. Rule 407 provides, in part:
“When, after an event, measures are taken which, if taken
previously, would have made the event less likely to occur,
evidence of subsequent measures is not admissible to prove
negligence or culpable conduct in connection with the event.”
N.C.R. Evid. 407. The commentary to this rule makes its purpose
clear:
The . . . more impressive, ground for
exclusion rests on a social policy of
encouraging people to take, or at least not
discouraging them from taking, steps in
furtherance of added safety. The courts have
applied this principle to exclude evidence of
subsequent repairs . . . and the language of
the present rule is broad enough to encompass
[such application].
Id. (Commentary). The rationale behind this policy is that a
party might avoid repairing work it had earlier performed, or a
product it had earlier manufactured and sold, if it believed that
such repairs might later be construed as an admission that the
original work was improper or defective. See 2 Weinstein's
Federal Evidence § 407.03 [1](1999). To allow subsequent
repairs to restart the statute of repose would defeat the policy
underpinning both Rule 407 and N.C. Gen. Stat. § 1-50(5).
Based on the foregoing, we hold that the last act or
omission by CBC in completing the improvement at issue -- in this
case supplying materials for original construction of plaintiff's
house -- occurred on or prior to August 1990, the date of
substantial completion. At that point, performance was completedby CBC and in accordance with N.C. Gen. Stat. § 1-50(5), the
statute of repose began to run. The repairs in 1994 did not
reset the running of the statute of repose. Therefore, the
claims of Paramount against CBC are time-barred under N.C. Gen.
Stat. § 1-50(5), as they were not filed until after August 1996,
more than six years after the last act and date of substantial
completion. The trial court did not err when it granted CBC's
motion to dismiss.
Affirmed.
Judge JOHN concurs.
Judge GREENE dissents.
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