What Shelter Remains for Builder/vendors Under Washington's Statute of Repose for Construction After Pfeifer v. Bellingham?

• Publication year: 1990
• Citation: Vol. 14 No. 01

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 14, No. 1FALL 1990

What Shelter Remains for Builder/Vendors Under Washington's Statute of Repose for Construction After

Pfeifer v. Bellingham(fn1)

Those who make improvements to real property occupy a working environment that provides a variety of unique situations. They design, assemble, and adapt raw materials in varied settings. Each finished product is an amalgam of past practice and experiment. Although they must use a standard of care based on experience, each improvement includes novel and untested aspects. This process can create long-term and unforeseeable risks. The legislature determined that those who make improvements to real property should not be liable in tort within the discovery rule as it is applied generally and enacted a statute of repose that places a six-year limit on the rule for claims arising out of the construction process.(fn2)

The discovery rule protects injured plaintiffs when the negligent acts of others are not discovered until the harm occurs,(fn3) which can be a substantial time after the original tortious act. If not for the discovery rule, the statute of limitations would commence at the time of the tortious act and expire long before the injury actually occurs. The rule simply shifts the onset of the statute of limitations from the date of the tortious act to the date of the harm's discovery.

This protection is appropriate in situations where the intervening acts of others do not affect the original act, or where the original harm is easily proven and foreseen. However, in the case of improvements to real property, the longer the improvement has been out of the control of its creator, it becomes more likely that the cause of the damage was the present owner's fault or the fault of natural forces. As a result, the original risk grows much more difficult to assess and allegations of fault more difficult to defend.

Statutes of repose are a legislative solution to the effect of the discovery rule on potentially long-term liability. In contrast to statutes of limitation, which begin to operate when the harm arises, statutes of repose commence operation at a neutral point in time and cut off the plaintiff's right to sue for harm that occurs after a specified period of time has passed. They create a window of insurable risk of definite duration in which a potential defendant is exposed to the threat of liability. As applied to real property improvements, statutes of repose promote the social policy of encouraging such improvements by lowering insurance costs to builders.(fn4)

In Washington, Wash. Rev. Code §§ 4.16.300-.320 impose a six-year limitation period on the accrual of causes of action that arise from making improvements to real property.(fn5) The statute operates by establishing a six-year time limit after the improvement is substantially completed(fn6) within which the cause of action must arise. If damage occurs after this time limit has passed, regardless of the cause, any action is barred by operation of law.

Pfeifer v. Bellingham(fn7) is the latest in a series of Washington State cases to analyze and apply Wash. Rev. Code §§ 4.16.300-.320. The case involves a novel and successful attempt to circumvent the operation of the statute. The Pfeifer decision removes the protection of the statute from builders who purchase unimproved property and build "spec" houses(fn8) for subsequent sale. Clearly, claims brought against these builders couched in terms negligence and falling outside the statute's window period are barred by the statute of repose. The Pfeifer decision, however, allows such plaintiffs to recast claims as misrepresentation claims against builders as vendors of land under § 353 of the Restatement (Second) of Torts for failure to disclose dangerous concealed defects to their vendees.(fn9) Now, the builder's posture as a vendor leaves him potentially open to attack for an indefinite period of time under a tort theory developed specifically for an entirely different group of defendants-those who transfer possessory interests in land. Holding that the Restatement theory should be applied to builders as well as other vendors of real property, the Pfeifer court reversed a summary judgment in favor of a builder-defendant and remanded the case for trial on its facts.(fn10)

In reaching its holding, the court faced an apparent conflict between the statute of repose which protects builders and the Restatement theory which does not, and determined that one need not preempt the other. The court held that the two rules do not conflict.(fn11) The court's reasoning suggests that exempting vendors from § 353 because they happened to have built the improvement would be unfair.(fn12) Asserting that greater proof is required for § 353 actions than for negligence claims, the court claimed that its holding did not defeat the purpose of the Statute of Repose.(fn13) The court's attempt to synchronize the rules, however, left their underlying policies in hopeless conflict. In so doing, the court has opened the door to suits that the statute of repose was intended to prevent. In suits couched in terms of misrepresentation, the holding leaves unresolved the conflict between the Restatement theory as it applies to builder/vendors and the statute of repose which seemingly protects the builder persona of the defendant. While the statute of repose protects a builder who intentionally creates a dangerous condition, the Restatement theory imposes liability on one who passively fails to disclose a dangerous condition to his buyer.

In a Pfeifer scenario the rules cannot be synchronized because the policies behind them are directly opposed. The statute of repose operates to foreclose liability in order to protect defendants and encourage the activity of construction. By contrast, the Restatement theory extends liability to protect plaintiffs by allowing suits that previously had been barred by the principle of caveat emptor and the requirement of privity. During the six-year window of the statute of repose, one who makes improvements to real property is exposed to all liability, including that imposed by § 353. The Pfeifer decision allows § 353 liability to continue indefinitely, even after the statute of repose closes the window of liability on negligence claims.

Section 353 was not created as a substitute for claims time-barred by legislative mandate; moreover, it is awkward to apply where the gravamen of the complaint is an action rather than a failure to act. In addition, since the exposure to liability for stale claims which vendors of real property face in § 353 actions is similar to the exposure from which builders of improvements are protected by Wash. Rev. Code §§ 4.16.300-.320, a policy that encourages transfers of real property may be as valuable as the policy encouraging construction of improvements thereon. Thus, when faced with the choice of curtailing liability to vendors or increasing it to builders, the court should have opted to limit liability to vendors to conform to legislative intent.

This Note criticizes Pfeifer's incomplete resolution of the apparent conflict between Wash. Rev. Code §§ 4.16.300-.320 and § 353 of the Restatement (Second) of Torts and calls for a reconsideration of the case. The Note is premised on the general validity of statutes of repose and the merit of the policies that they promote.(fn14) The Note first reviews briefly the development of statutes of repose generally, how they operate, and how courts in Washington and in other jurisdictions have applied them. It then analyzes the development of the Restatements § 353 and its policy. Next, it examines the Pfeifer court's resolution of the rules conflict, its rationale, and the possible effects of applying the Pfeifer holding to the building industry.

This Note asserts that the Washington Supreme Court could have resolved Pfeifer's issues in a manner more consistent with the purpose of the statute. It suggests that the statute be reworded to include expressly the sale of an improvement, or, alternatively, that the court or legislature place a six-year limit on causes of action for injuries arising from the transfer of land. This Note proposes that courts addressing this issue rule that § 353 claims be dismissed when they accrue six years after the transfer of the improvement, at least in those cases in which construction liability against the builder of the concealed condition would be barred under the statute of repose.

I. The Development of the Statute

At common law, privity of contract was required to impose liability in tort for damages arising under a contract.(fn15) In the 1842 case of Winterbottom v. Wright,(fn16) the defendant's nonperformance of a contract resulted in physical injury to a stranger to the contract. Although the court was sympathetic to the need for a remedy, it held that no matter how dire the need might be, any relaxation of the strict privity standard would create an endless chain of liability for the original parties to the contract. Baron Rolfe warned: "Hard cases, it has been frequently observed, are apt to introduce bad law."(fn17) Thus, the common law limited the liability of architects, builders, and others who make improvements to real property to the original parties to the contract.(fn18)

The privity limitation met its demise in the 1916 case of MacPherson v....