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Construction Industry News

California's 10-Year Statute of Repose Extended When Contractor Attempts Repairs


June 17, 2002


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By Keith L. Slenkovich
Thelen Reid Brown Raysman & Steiner LLP

In holdings of significance to developers, design professionals, contractors and their insurers, the California Court of Appeal has determined that Code of Civil Procedure §337.15's 10-year cutoff of suits for latent construction defects may be extended if the contractor that performed the defective work attempts repairs.

Section 337.15, a statute of repose, provides that developers, designers and contractors may not be sued for latent construction defects (those not apparent by reasonable inspection) more than 10 years after substantial completion of a project. Section 337.15 generally has been recognized as the outside statute of limitations applicable to construction projects. In contrast, suits for patent construction defects -- those that can be discovered by reasonable inspection -- must be brought no later than four years after substantial completion under Code of Civil Procedure §337.1, the statute of repose for patent defects. (The right to sue for patent defects can be cut off in less than four years by other statutes of limitation, such as for personal injury or property damage.)

Many times a construction defect will be latent because it is hidden behind walls, is within inaccessible portions of the roof or ceiling, or is otherwise unobservable to the owner. Because of §337.15, developers, contractors and design professionals generally had understood that 10 years after substantial completion of a project, they were safe from construction defect claims relating to it.

However, the Court of Appeal held that the 10-year statute of limitations is not absolute but may be equitably extended if the developer or contractor that performed the defective work takes any action to correct the defect(s) during the 10-year period. Jackson Plaza Homeowners Association v. Alcal Roofing and Insulation, 2002 Cal. App. LEXIS 4041, 2002 Cal. App. LEXIS 4177 (2002).

There, the developer filed a notice of completion for the condominium project on October 26, 1985. In 1995, the homeowner association discovered that there were serious water intrusion problems throughout the project. On June 12, 1996, more than 10 years after the notice of completion was recorded, the homeowner association sued the project's developer, general contractor and several subcontractors. The general contractor moved for summary judgment, citing the 10-year statute of limitations in §337.15.

The homeowner association argued that the general contractor had engaged in significant repair work after the notice of completion and through 1986 relating to the same water leakage problems that re-emerged in 1995. The homeowner association argued that the 10-year statute of limitations in §337.15 should be equitably tolled during the repairs and should resume running only after the repair efforts ended in 1986.

The trial court rejected the homeowner association's argument and granted the general contractor's summary judgment motion. However, the Court of Appeal reversed, holding that the 10-year statute of limitations in §337.15 was equitably tolled while repairs were being made. The court reasoned that equitable tolling is similar to estoppel, i.e., the plaintiff relied on the words or actions of the defendant that the defects were being repaired. Significantly, the court held that equitable tolling would not apply if a third party, rather than the original contractor, had attempted the repairs. The court also made clear that for the doctrine to apply, the attempted repairs must have been to the same defect that later re-emerged. Thus, if the general contractor repaired an electrical problem and water infiltration problems later developed, the 10-year statute would not be equitably tolled.

The Jackson Plaza holding is contrary to a 1999 decision from the 3rd District Court of Appeal, which rejected equitable tolling for repairs. FNB Mortgage Corp. v. Pacific General Group, 76 Cal.App.4th 1116, 1134 (1999). In FNB Mortgage, the court reasoned that §337.15 is supposed to protect contractors and other professionals in the construction industry from perpetual exposure to liability for their work and that equitable tolling for repairs would defeat this purpose. In Jackson Plaza, the 1st District Court of Appeal declined to follow the FNB Mortgage decision. The California Supreme Court may decide this issue. In Lantzy v. Centex Homes, 89 Cal. App. 4th 1059 (2001), review granted August 22, 2001, the Supreme Court granted a petition for review in a case involving equitable tolling.


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For more information about the issues covered in this report, please contact Keith L. Slenkovich in our Silicon Valley office at 408-282-1821 or at kslenkovich@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.





©2002 Thelen Reid Brown Raysman & Steiner LLP

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