October 19, 2012 Articles

Oregon Court Clarifies Statute of Limitations in Real Property Cases

Courts confront difficult issues regarding when the statute is triggered and how to handle apportionment problems

by Alexander X. Saunders

Practically all states have a statute of repose limiting actions based on improvements to realty. Statutes of repose extinguish any liability after the passing of a certain number of years regardless of whether a cause of action has accrued and, therefore, they act as outer limits for actions against contractors, engineers, and architects. Companies in the construction industry are afforded a measure of finality for any potential claims arising out of construction projects completed long ago by operation of the statutes of repose.

Some of the most challenging issues that arise in connection with the statute of repose are determining when the statute of repose begins to run and resolving apportionment issues when some but not all potentially liable parties are protected by the statute of repose. The New Jersey Superior Court, Appellate Division, has recently issued a pair of rulings on these precise issues. Both of these cases have been appealed to the New Jersey Supreme Court and practitioners should pay close attention to the way these thorny issues are handled by the court.

Multi-Phase Projects Present Unique Statute-of-Repose Issues

In State v. Perini Corp., 39 A.3d 918 (N.J. Super. App. Div. 2012), cert. granted, 210 N.J. 476 (N.J. June 8, 2012), the Appellate Division held that where there are multiple certificates of substantial completion on a multi-phase project, the statute of repose is not triggered with respect to a particular component until the end of all phases of the project if the component is not specifically referenced in an earlier certificate of completion. The dispute in Perini arose out of the construction of the South Woods State Prison. The State of New Jersey sued its contractor, construction manager, and two subcontractors for leaks and other damages caused by faulty pipes and valves in the underground heating-and-hot-water system at the prison. The trial court granted summary judgment to these parties on the basis that the state’s complaint had not been filed within the 10-year statute of repose.

The Appellate Division partially reversed and found that although a substantial part of the project was completed and in use more than 10 years prior to the commencement of the action, the underground heating-and-hot-water system at the prison was not substantially completed until completion of all the buildings that were connected to the system. The Appellate Division concluded that because the heating-and-hot-water system was not specifically listed in the certificates of substantial completion for the early phases of the project, it was not intended by the parties to be treated as a separate improvement. Therefore, although several buildings in the prison complex were functioning and were connected to the system, the Appellate Division concluded that the statute of repose with respect to claims arising out of the failure of the heating-and-hot-water system did not begin to run until all buildings in the prison complex were completed.

Court Addresses Interaction Between Statute and Apportionment Rules

In Town of Kearny v. Brandt, No. A-3612-08T2, 2011 WL 2535286 (N.J. Super. App. Div. 2011), cert. granted, 209 N.J. 98 (N.J. Jan. 13, 2012), the Appellate Division held that if defendants are dismissed pursuant to the statute of repose, any remaining defendant may nevertheless seek apportionment of liability with the dismissed parties. The dispute arose out of the structural damages to the town’s police and fire facility. The town filed suit against the soils engineer, the architect, and the structural engineer. The trial court concluded that the soils engineer and the structural engineer completed their services more than 10 years before the commencement of the action and granted their motions to dismiss under the statute of repose. However, the trial court concluded that the complaint was timely filed with respect to the architect’s services. Additionally, the trial court rejected the architect’s request for apportionment of liability between it and the dismissed engineers, and a jury ultimately awarded damages solely against the architect.

The Appellate Division reversed and determined that apportionment was available despite the dismissal of the engineers on the basis of the statute of repose. The Appellate Division held that a jury may assess the comparative fault of all the defendants and hold the architect liable only for the portion of the damages attributed to it. However, the engineers were nevertheless protected by the statute of repose and the town would have to suffer the consequences of a potentially uncollectable judgment against the dismissed parties. The Appellate Division’s reasoning sought to balance the legislative goal of the statute of repose, which is to provide “fairness” to defendants, and the goals of the Joint Tortfeasors Contribution Law and the Comparative Negligence Act, which seek to fairly assign liability based on the fault of the individual defendant.

Keywords: construction litigation, New Jersey Appellate Division, multi-phase projects, apportionment rules

Alexander X. Saunders is an associate with Peckar & Abramson in River Edge, New Jersey.

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