Statutes of Limitations and Repose in Construction Defect Cases-part Ii

• Publication year: 2004
• Pages: 67
• Citation: Vol. 33 No. 6 Pg. 67

33 Colo.Law. 67 Colorado Lawyer 2004.

2004, June, Pg. 67. Statutes of Limitations and Repose in Construction Defect Cases-Part II

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67

Vol. 33, No. 6, Pg. 67

The Colorado Lawyer
June 2004
Vol. 33, No. 6 [Page 67]

Specialty Law Columns
Construction Law Forum
Statutes of Limitations and Repose in Construction Defect Cases - Part II
by Ronald M. Sandgrund, Scott F. Sullan

This column is sponsored by the CBA Construction Law Forum Committee. The column addresses various construction-related issues in both public and private areas. The column editor and Committee encourage the submission of substantive law articles addressing issues of interest to practitioners in the field of construction law

Ronald M. Sangrund Scott F. Sullan

Column Editor

James W. Bain of Benjamin, Bain & Howard, L.L.C Greenwood Village - (303) 290-6600,
jamesbain@bbhlegal.com

About The Authors:

This month's article was written by Ronald M. Sandgrund and Scott F. Sullan, Greenwood Village, principals with Vanatta, Sullan, Sandgrund & Sullan, P.C. - (303) 779-0077. The firm often represents property owners in construction, development, and building materials defect litigation. The authors thank attorney Joseph F. Smith and legal assistant Dinae Hoem for their help on this article, and column editor Jim Bain for his expert editing.

This two-part article discusses Colorado's statutes of limitations and repose in connection with construction and materials defect litigation.

Part I of this article introduced CRS § 13-80-104, Colorado's statutes of limitations and repose relating to claims arising from the construction and sale of improvements to real property.1 It also discussed the Construction Defect Action Reform Acts of 2001 and 2003 ("CDARA I" and "CDARA II," respectively). This second part of the article discusses various circumstances that may serve to "toll" (extend) the running of a particular statute of limitations or repose. For example, such tolling may occur if a construction professional promises to make repairs or represents that repairs will be made.2

This Part II discusses the "repair doctrine" and principles of waiver and equitable and promissory estoppel, as well as potential constitutional challenges to certain statutes of limitations and repose. Finally, this article offers suggestions on how to craft jury instructions that successfully integrate the affirmative defense of the statute of limitations and various doctrines that may serve to toll or estop a defendant from defeating a claim based on the running of the limitations period before suit is filed. Examples of such jury instructions appear in the Appendix.

Effect of Repairs on Statutes of Limitations And Repose

Damages arising from the negligent repair of a structure lead to difficult questions about the application of statutes of limitations and repose. In a 1999 case, Highline Village Associates v. Hersh Cos., Inc. ("Highline Village Assocs."),3 the Colorado Court of Appeals suggested that negligent repairs might fall within the real property improvement statute of limitations (CRS § 13-80-104).4

In Hersh Cos., Inc. v. Highline Village Associates ("Hersh Cos., Inc."),5 the Colorado Supreme Court affirmed Highline Village Assocs. in part on other grounds, and reversed in part, holding that a breach of warranty to repair is subject to the limitations period provided by CRS § 13-80-101(1)(a), not by CRS § 13-80-104. To date, the Colorado Supreme Court has not squarely determined whether claims arising from negligent repair of a real property improvement are subject to the: (1) real property improvement statute of limitations (CRS § 13-80-104), which does not mention "repair"; or (2) general negligence statute of limitations (CRS § 13-80-102(1)(a)).6

In Highline Village Assocs., the Court of Appeals acknowledged that it was not reaching the question whether "routine repairs to real property, although resulting in some physical alteration to that property, would . . . constitute an improvement to that property within the meaning of the contractors' statute."7 Nonetheless, the court held that

the activity engaged in by defendant here consisted of more than routine repair [because the] defendant was required to prepare the surface to receive the new paint by removing the old paint and by sanding and caulking that surface; it then repainted the entire exterior of two large apartment complexes. . . . If, then, we are to focus upon defendant's activities, we must conclude that the nature of its activities here did not differ substantially from the services it would have performed had the two complexes been newly constructed.8

On appeal, in explaining why claims for breach of a warranty of repair did not fall within the real property improvement statute of limitations, the Supreme Court stated:

While the breach of contract claims allege a deficiency in the original workmanship, the warranty claims seek relief for the defendant's failure to provide its "repair-or-replace" remedy for defects appearing during the term of the guarantee. Because the latter claims seek recovery for the breach of a subsequent contractual duty to repair or replace rather than recovery for a deficiency in the original work, they do not fall within the class of actions governed by section 13-80-104.9 (Emphasis added.)

Thus, property owner counsel may reasonably argue that some claims arising from negligent repair similarly "seek recovery for the breach of a subsequent [tort] duty to repair or replace rather than recovery for a deficiency in the original work." In such a case, the owner would not be subject to the limitations period set forth in CRS § 13-80-104.

A few courts have analyzed this issue from the standpoint that a statute of limitations that applies to making "improvements" to real property does not include within its scope work performed to effect repairs.10 Colorado has adopted the "continuing negligence" doctrine in the context of medical malpractice claims. However, Colorado courts have not addressed whether: (1) the doctrine of continuing negligence has any application to a related series of construction errors (such as a combination of original construction and later repair errors); and (2) the policies supporting adoption of this doctrine render the doctrine amenable to negligent repair claims in the proper case.11

Colorado recognizes a warranty of "future performance" under its commercial code.12 The existence and effect of such a warranty in the context of construction defect disputes has not been fully explored by the courts. Adoption of such an implied warranty in light of CDARA II's statutory "notice of claim and right to offer repair" process awaits case law development.13

In Hersh Cos., Inc.,14 the Colorado Supreme Court held that the real property improvement statute of limitations does not apply to a breach of express warranty claim to repair or replace defective work. Instead, CRS § 13-80-101, the statute of limitations for contract actions, applies.

The Court found that analogous repair warranty cases under the Uniform Commercial Code hold that a cause of action does not accrue until the "plaintiff discovers or should have discovered the defendant's refusal or inability to comply" with the warranty. Thus, there was no reason to define the breach of warranties to repair or replace differently for the sale of goods than for the performance of services.15 The Court concluded:

[W]hen a contract contains both an express warranty as to future performance, like the five-year warranty against defect contained in Hersh's contracts, and a repair-or-replace warranty fixing the remedy in the event of a defect, a claim for breach of warranty does not accrue until the plaintiff discovers or should have discovered the defendant's refusal or inability to comply with the warranties made.16

In an important 2003 Court of Appeals case, Stiff v. BilDen Homes, Inc.,17 the plaintiff claimed that, in contrast to a structural flooring system,18 a slab-on-grade flooring system was improperly used. The plaintiff in BilDen Homes, Inc. knew that the soils report cautioned that "alternative specifications" for a slab-on-grade floor "will not prevent movement, but would reduce damage if movement occurred," and that if a structural floor was not used, the owner must be "willing to accept the risk of slab movement."19 The court concluded:

Here, the builder installed slab-on-grade flooring and took action to accommodate a certain amount of movement. As a result, a certain amount of movement of the slab-on-grade floor was to be expected. It was not until the movement became greater than expected that any damage that was caused by the allegedly negligent act would permit plaintiff to maintain a cause of action. Accordingly, under the facts here, damage would arise to permit a successful cause of action only when the movement of the slab-on-grade flooring became excessive and the accommodations were no longer sufficient to control the damage.20

As to the breach of contract and warranty claims, the BilDen Homes, Inc. court held that a cause of action accrues under the real property improvement statute of limitations on the builder's failure to remedy the defect pursuant to the contract or warranty, not when the discovery of the defect occurs.21

Tolling, Estoppel, and
Repair Doctrines

Courts may ameliorate harsh results dictated by statutes of limitations by tolling the limitation period when warranted by the facts and where the legislative purpose of the statute will not be undermined.22 Tolling principles have been adopted by statute as well.23 In general, courts resort to two...