The Court of Appeals of
Maryland held that Maryland’s ten year statute of repose precluded a
suit for construction defects from being filed against a contractor
twelve years after completion of an eleven-story building, even though
the defects were not discovered during the first ten years the
building was occupied.Hagerstown Elderly
Associates Limited Partnership is the owner of a public housing
facility in Hagerstown, Maryland. The building was completed in
December of 1983. In 1995, during a severe storm, a portion of an
exterior wall of the eleven-story building fell to the ground. On
October 16, 1996, the partnership filed suit in the Circuit Court for
Washington County against Hagerstown Elderly Building Associates (HEBA),
the contractor that erected the building, and Seaboard Surety Company
(Seaboard), the surety on the performance bond filed by HEBA. The
owner sued to recover the expense of repairing the building.
The Circuit Court for Washington County granted
summary judgment to HEBA on the grounds that the action against the
builder was barred by the ten-year "statute of repose" codified in
Maryland Code, § 5-108 (b) of the Courts and Judicial Proceedings
Article.
A statute of repose extinguishes a cause of action
after a fixed period of time, usually measured from the delivery of
the product or the completion of the work, regardless of when the
defect became apparent or when cause of action accrued. By contrast,
the time constraint imposed by a "statute of limitations" generally
does not begin run until after the cause of action accrues.
Section 5-108 (b) imposes a ten-year period of
repose on actions against any architect, professional engineer, or
contractor. It provides:
"Except as
provided by this section, a cause of action for damages does not
accrue and a person may not seek contribution or indemnity from any
architect, professional engineer, or contractor for damages incurred
when wrongful death, personal injury, or injury to real or personal
property, resulting from the defective and unsafe conditions of an
improvement to real property, occurs more than 10 years after the date
the entire improvement first became available for its intended use."
In this case, the building first became available
for its intended use in December, 1983, when the final inspection was
completed, a certificate of occupancy was issued, permission to occupy
all units was issued, and the first occupancy by a tenant occurred.
Accordingly, the Circuit Court ruled that any claim against the
contractor more than 10 years after December 1983 was precluded by
Section 5-108(b).
On appeal, the partnership argued that Section
5-108(b) did not apply to its action for breach of contract and breach
of warranty, but applied only to tort actions. The Court of Appeals
rejected that argument and held that the Section 5-108(a) was
applicable not only to tort actions asserting claims for negligence
and strict liability, but to breach of contract and breach of warranty
claims as well.
The Court of Appeals explained that the statute of
repose was "intended to protect architects, engineers, contractors,
and others involved in the construction industry from being hauled
into court by reason of latent defects that did not become manifest
until years after the completion of construction.... That protection
would be fragile, indeed, if it depended on how a plaintiff chooses to
frame and plead its cause of action." The Court of Appeals upheld the
lower court’s summary judgment in favor of the contractor.
The Circuit Court also granted summary judgment to
Seaboard, the bonding company, on the grounds that the action against
it was barred by the 12 year statute of limitations codified in Courts
and Judicial Proceedings Article, § 5-102(a)(2), concluding that the
suit was filed twelve years and six days after that cause of action
accrued, i.e., after the final payment was due. Both parties
agreed that the 12 year statute of limitations applied, but they
disagreed about when the final payment was "due" under the
construction contract. That date was important because it started the
12 year period running. Seaboard argued that final payment was due
October 10, 1984, and that the suit filed on October 16, 1996, was six
days too late. The Court of Appeals, however, found that pursuant to
the construction contract, the final payment was not due until the
final loan closing, which occurred on November 1, 1984, and that suit
had therefore been timely filed against Seaboard. The lower court’s
summary judgment in favor of Seaboard was reversed, and the case was
remanded for further proceedings.
