Statutes of Limitation on Claims for Construction Defects

Most legal claims or lawsuits must be bought or filed within some limited time period after the legal “claim” has arisen or the victim’s legal damages or injuries are discovered, to avoid clogging the courts with old claims, where witnesses and documents concerning the claims have disappeared, memories have faded, and the evidence to support or defend those claims may no longer be available.

These limitations periods are referred to as Statutes of Limitations and Statutes of Repose, as they are time limits created by the Legislature.

As a matter of Law, the time limits in various Statutes of Limitation don’t start to run until a Cause of Action has “accrued” or ripened into a legal right to sue for damages or other relief.

Claims for Negligent Construction

And a legal claim (or “Cause of Action”) for Negligent Construction doesn’t accrue until the Construction work has caused actual physical damage to other property, and until such resulting property damage is discovered by the Plaintiff.

“ ‘Generally, a cause of action accrues and the statute of limitation begins to run when a suit may be maintained. ... “Ordinarily this is when the wrongful act is done and the obligation or the liability arises, but it does not ‘accrue until the party owning it is entitled to begin and prosecute an action thereon.’ ” ... In other words, “[a] cause of action accrues ‘upon the occurrence of the last element essential to the cause of action.’ ” ’ ” (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 815 [107 Cal. Rptr. 2d 369, 23 P.3d 601], citations omitted, italics added.) A tort cause of action accrues only when “appreciable and actual harm” is caused by the wrongful conduct. (Budd v. Nixen (1971) 6 Cal.3d 195, 201 [98 Cal. Rptr. 849, 491 P.2d 433].) “If the [wrongful] conduct does not cause damage, it generates no cause of action in tort.” (Budd, at p. 200.) “But the limitations period does not begin to run until the plaintiff discovers or should have discovered the cause of action. “The discovery rule provides that the accrual date of a cause of action is delayed until the plaintiff is aware of her injury and its negligent cause. ....” “Since a cause of action accrues when the elements of the cause of action, including damage, occur(Howard Jarvis Taxpayers Assn. v. City of La Habra, supra, 25 Cal.4th 809, 815), the “appreciable and actual harm” that results in accrual must be harm of the specific type that is recoverable as damages on that type of cause of action. (Zamora v. Shell Oil Co. (1997) 55 Cal.App.4th 204, 209–210 [63 Cal. Rptr. 2d 762].)
....
The elements of a negligence cause of action are duty, breach, causation and damages. (Artiglio v. Corning Inc.....” (All emphasis added)

County of Santa Clara v. Atlantic Richfield Co. (6th Dist. 2006) 137 Cal.App.4th 292, 316-318.

In the County of Santa Clara case the Plaintiffs sued, inter alia, for negligence, and contended that the presence of lead in their building paint was a “defect” for which they were entitled to damages in the amount of the costs of removing the lead from their buildings.
In overruling summary judgment, the Court concluded that Plaintiffs had NOT stated a Negligence Cause of Action, because the mere presence of the lead in the building - the alleged defective condition or wrong - was not sufficient to state a Negligence Cause of Action, because the Plaintiffs had not alleged that this defective condition had caused physical harm to the buildings themselves.

“Plaintiffs' allegations of damage to their property do not include any allegations of physical injury (as that term has been construed), and therefore their causes of action for negligence and strict products liability, as alleged in the third amended complaint, have never accrued” (All emphasis added)

County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th at 318.

In so holding, the Sixth District relied on the landmark 2000 Supreme Court decision in Aas v. Superior Court (2000) 24 Cal.4th 627, as to the application of the “economic loss rule” to Construction Defect cases.

“The California Supreme Court began with the proposition that “[i]n actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone.” (Id. at p. 636.) It cited Seely v. White Motor Co. (1965) 63 Cal.2d 9 [45 Cal. Rptr. 17, 403 P.2d 145] in support of this proposition. . . .” (All emphasis added)

County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th at 319.

When the defect and the damage are one and the same, the defect may not be considered to have caused physical injury. [Citation.] The expenses of repair plaintiff has incurred, and will incur in the future, are purely economic damages.” . . . (Sacramento Regional Transit Dist. v. Grumman Flxible (1984) 158 Cal. App. 3d 289, 294 [204 Cal. Rptr. 736].) Plaintiffs' damages allegations can only be characterized as seeking the cost of repairing plaintiffs' buildings. Plaintiffs have simply failed to allege that lead or lead paint physically injured their buildings. As Aas held, only physical injury can support a negligence or strict liability cause of action, and cost of repair does not constitute physical injury.” (All emphasis added)

County of Santa Clara v. Atlantic Richfield Co. , supra, 137 Cal.App.4th at 321.

Physical property damages are an essential element of any construction negligence cause of action: “[D]eviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. . . .” (All emphasis added)

Aas v. Superior Court (2000) 24 Cal. 4th 627, 636.

Thus, a property owner cannot sue for negligent construction - which is typically covered by contractor’s liability insurance - unless the Negligent Construction work has caused damage to other property other than the contractor’s own work.

If there is just bad construction work, but no physical damages to other property has occurred or been discovered yet, there is normally no right to sue contractors or subcontractors etc for Defective Construction!

Thus, “"a home with no resultant damages at all, but everybody agrees that the flashing's not lapped properly under the industry standards, the [Uniform Building Code], whatever, but it hasn't resulted in any leaks; everybody agrees that the tile is overextended, that is, it doesn't have the overlap of three inches that's called for by the manufacturer; that you have a nailing pattern on the shear walls which does not comply with the applicable provision in the [Uniform Building Code], but the house is still standing and hasn't started swaying . . . ."’ don’t state a Cause of Action for Negligent Construction. Aas v. Superior Court, supra, 24 Cal.4th at 634, 636.

This holding in Aas v. Superior Court and its requirement for physical damage to other property for any tort negligence claim to accrue was elaborated upon in a recent California U.S. District Court decision.

“Both parties agree that "negligent performance of a construction contract, without more, [does not] justif[y] an award of tort damages." Erlich v. Menezes, 21 Cal. 4th 543, 551, 550-554, 87 Cal. Rptr. 2d 886, 981 P.2d 978 (1999). "[C]onduct amounting to a breach of contract [only] becomes tortious when it also violates a duty independent of the contract arising from principles of tort law. Aas v. Superior Court of San Diego, 24 Cal. 4th 627, 636, 101 Cal. Rptr. 2d 718, 12 P.3d 1125 (2000) (superseded by statute on other grounds). Tort damages were initially permitted in contract cases where a breach of duty directly caused physical injury. Erlich, 21 Cal. 4th at 552-552 (citing Fuentes v. Perez, 66 Cal.App.3d 163, 168, fn. 2, 136 Cal. Rptr. 275 (1977)). Recovery for negligence has since been expanded to include construction defects that cause property damage. Aas, 24 Cal. 4th at 637 (citing Stewart v. Cox, 55 Cal. 2d 857, 13 Cal. Rptr. 521, 362 P.2d 345 (1961) as the first case to allow recovery in negligence for construction defects which caused property damage, and extensively analyzing cases which have allowed recovery for property damage since Stewart).”
Property damage does not include mere economic loss, such as repair and replacement costs. Aas, 24 Cal.4th at 635-636. "[T]he difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone." Id. . . . This principle is known as the economic loss rule. Aas, 24 Cal.4th at 635-636; see e.g., Zamora v. Shell Oil Co. 55 Cal.App.4th 204, 208-211, 63 Cal. Rptr. 2d 762 (1997) (finding homeowners were not allowed to recover in negligence for the cost of replacing water pipes known to be defective, but which had not yet leaked); Fieldstone v. Briggs Plumbing Products, Inc. 54 Cal.App.4th 357, 363-367, 62 Cal. Rptr. 2d 701 (1997) (finding that a general contractor could not be awarded the cost of replacing installed sinks that rusted and chipped prematurely, because no other property had been damaged); San Francisco Unified School Dist. v. W.R. Grace & Co., 37 Cal.App.4th 1318, 1327-1330, 44 Cal. Rptr. 2d 305 (1995) (finding that a public school district could not state a cause of action in negligence or strict liability based on the presence of asbestos products in its buildings, when the products had not contaminated the buildings by releasing friable asbestos).

Accordingly, if a complainant alleges property damage, i.e., a defect which causes harm to other portions of the property, as a result of a contractor's negligence, the complainant has alleged a duty independent of the contract. Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 989, 22 Cal. Rptr. 3d 352, 102 P.3d 268 (2004) (citing Jimenez v. Superior Court, 29 Cal.4th 473, 482-483, 127 Cal. Rptr. 2d 614, 58 P.3d 450 (2002)).

1. Duty Independent of The Contract.

a. Similarity of MID's Contractual Claims and Negligence Claim. “[U]nder California law "the same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts." Erlich, 21 Cal.4th at 551 (emphasis added). A plaintiff is permitted to pursue remedies in both contract and tort law provided that the actions that constitute the breach "violate a duty independent of the contract arising from principles in tort law." Id. (conduct amounting to a breach of contract becomes tortious when "it also violates a duty independent of the contract."); Aas, 24 Cal.4th at 643; see also Robinson Helicopter Co., Inc., 34 Cal.4th at 990. Accordingly, the same conduct alleged in a contractual claim may be alleged to constitute a negligence claim so long as the conduct also violates a tortious duty.

b. Property Damage.

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"[T]he economic loss rule allows a plaintiff to recover in. . . tort when a product defect causes damage to 'other property,' that is, property other than the product itself." Robinson Helicopter Co., 34 Cal. 4th at 989 (citing Jimenez, 29 Cal.4th at 482-483). Several California courts have found that a defectively constructed building is not a single defective product, but is comprised of multiple products. See, e.g., Stearman v. Centex Homes, 78 Cal. App. 4th 611, 613, 92 Cal. Rptr. 2d 761 (2000) (plaintiff suffered property damage when defective foundations damaged walls and ceilings of newly constructed home ); Jimenez, 29 Cal.4th at 483 ("the economic loss rule does not necessarily bar recovery in tort for damage that a defective product (e.g., a window) causes to other portions of a larger product (e.g., a house) into which the former has been incorporated"); Huang v. Garner, 157 Cal.App.3d 404, 411, 203 Cal. Rptr. 800 (1984) [ (allowing a negligence claim based on physical damage to the structure of the plaintiffs property caused by "defected and cracked beams and dry rot damages.") (disapproved on other grounds). "[P]hysical damage to plaintiffs' real property caused by defective construction. . . is [not solely] 'an injury to the product itself,' and [not] barred by the economic loss rule." Stearman, 78 Cal. App. 4th at 617.” (All emphasis added)

Black & Veatch Corp. v. Modesto Irrigation Dist. (E.D.Cal. 2011) 827 F.Supp.2d 1130, 1137-1139.

As noted above, Aas, was followed by the Sixth District California Court of Appeal in County of Santa Clara v. Atlantic Richfield , supra, 137 Cal.App.4th at 318-321, where the Court held that the presence of lead - although a construction defect - was not actionable in tort because it had not yet caused physical damages to the plaintiffs’ buildings.

As also established above, a Cause of Action for Negligence does not accrue - and the Statute of Limitations thereon is tolled - until the “discovery” by the Plaintiff of all elements of its cause of action, including - in construction defect cases - the discovery of resulting physical damage or injury to the building itself or to other property caused by the “defective” or negligent items of construction work.

The statute of limitations usually commences when a cause of action "accrues," and it is generally said that "an action accrues on the date of injury." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109 [245 Cal.Rptr. 658, 751 P.2d 923].) Alternatively, it is often stated that the statute commences "upon the occurrence of the last element essential to the cause of action." (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 187 [98 Cal.Rptr. 837, 491 P.2d 421]; Gutierrez v. Mofid (1985) 39 Cal.3d 892, 899 [218 Cal.Rptr. 313, 705 P.2d 886].) These general principles have been significantly modified by the common law "discovery rule," which provides that the accrual date may be "delayed until the plaintiff is aware of her injury and its negligent cause." (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at p. 1109.)” (Emphasis added)

Bernson v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 931; Davies v. Krasna (1975) 14 Cal.3d 502, 512-513. See also, 3 Witkin, California Procedure (5th Ed. 2008) Actions, § 498(b), §§ 608-611.

Thus, the Statute of Limitations for negligence in construction begins only after the property owner discovers or reasonably should have discovered resulting property damage to his building caused by the negligent or “defective” construction.

As noted, the limitations periods of [Code Civil Proc.] sections 337 and 338 [for breach of contract and real property damages] start to run upon “discovery.” Discovery occurs when the plaintiff suspects, or reasonably should suspect, that someone has done something wrong to the plaintiff, causing the injury (here, “wrong” is not used in a technical sense, but in a lay one). (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397–398 [87 Cal. Rptr. 2d 453, 981 P.2d 79]; Landale, supra, 155 Cal.App.4th at p. 1407; Mills, supra, 108 Cal.App.4th at pp. 643–644.) “A plaintiff has reason to suspect when he has notice or information of circumstances to put a reasonable person on inquiry.” (Landale, supra, 155 Cal.App.4th at pp. 1407–1408; see Norgart, supra, 21 Cal.4th at p. 398.) In other words, “sections 337 and 338 begin to run only after the damage is sufficiently appreciable to give a reasonable man notice that he has a duty to pursue his remedies.” (North Coast, supra, 17 Cal.App.4th at p. 27, italics added; see Mills, supra, 108 Cal.App.4th at p. 646.)” (Emphasis added)

Creekridge Townhome Owners Assn., Inc. v. C. Scott Whitten, Inc. (2009) 177 Cal.App.4th 251, 257-258.

Only when the consequential [resulting real property] damage is sufficiently appreciable to a reasonable man may we hold an owner to a duty of expeditiously pursuing his remedies.' " (Ibid., citing Oakes v. McCarthy Co. (1968) 267 Cal. App. 2d 231, 255 [73 Cal. Rptr. 127].

Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 649-650.

Thus, the Statute of Limitations on a claim or Cause of Action for Negligent Construction work does NOT start to run unless and until the property owner knows or discovers - or should have known or should have discovered - that the defective work of the contractor has caused physical damages to other property.

Thus, such a claim might not need to be brought until years after the work was completed!

However, Code Civil Procedure § 337.15 creates a “Statute of Repose” , or outside limit, on the time within which suit must be filed, which is within ten (10) years after “Substantial Completion” of the construction project as a whole.

Additionally, even if one single “defect” or “problem”, or item of bad workmanship or building code violation on a complex construction project is detected - such as “ponding” on the roof edge, or “steel fastners are improperly used to secure copper panels”, or “roof membrane is left exposed to ultraviolet light” - that the Statute of Limitations does NOT begin to run for ALL defects on that same construction job, regardless of the size of the project or when - if ever - those other defects, or the consequential physical property damages resulting therefrom, are discovered.

In the real world, there may be several dates when causes of action, and the statutes of limitation, begin to accrue on the same job, depending on when such other defects or property damages are discovered. These discoveries of resulting property damages to the home from different various “latent” “defects” can be up to ten (10) years after completion of the construction of the home! Code Civil Proc. § 337.15(a).

“Centex also believes this case is analogous to cases where courts have allowed separate causes of action when the harm is progressively developing, or continuing. (See Anderson v. Brouwer (1979) 99 Cal.App.3d 176, 181 [160 Cal.Rptr. 65]; Avner v. Longridge Estates (1969) 272 Cal.App.2d 607, 616 [77 Cal.Rptr. 633].) In such cases, a new limitations period begins to run with each manifestation of the defect, unless reasonable inspection and further inquiry after discovery of the initial defect would have shown the extent of the deficiencies. (Ibid.)”
....
“[T]hough Winston Square's pleading was sufficient, applying the definition of "cause ofaction" strictly, one could probably set forth three causes of action -- one for drainage defects, one for defects causing water intrusion in the townhouse units, and one for defective balcony.” (All emphasis added)

Winston Square Homeowner's Ass'n v. Centex W. (1989) 213 Cal. App. 3d 282, 289; Mills v. Forestex Co., (2003) 108 Cal. App. 4th 625, 649-50 and fn. 15.

Additionally, it is not the discovery of a construction “defect” (such as “ponding” and those listed by Plaintiffs in the prior complaints) which causes the Cause of Action or Statutes of Limitations to accrue.

Physical property damages are an essential element of any construction negligence cause of action:
[D]eviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. . . .” (All emphasis added)

Aas v. Superior Court , supra, 24 Cal. 4th at 636.

It is the discovery of “property damage” which causes the claim and limitations period to accrue.“In other words, “sections 337 and 338 begin to run only after the damage is sufficiently appreciable to give a reasonable man notice that he has a duty to pursue his remedies.” (North Coast, supra, 17 Cal.App.4th at p. 27, italics added; see Mills, supra, 108 Cal.App.4th at p. 646.)” (All emphasis added)

Creekridge Townhome Owners Assn., Inc. v. C. Scott Whitten, Inc., supra, 177 Cal. App. 4th at 258; Mills v. Forestex Co. , supra, 108 Cal. App. 4th at 646.

Thus, even though a few “defects” or poor quality construction work may be discovered, that doesn’t mean that a Cause of Action or the limitation period has accrued on a negligent property damage Cause of Action.

However, once discovered, a lawsuit must usually be filed on those claims withing three years or less of the “discovery” of the property damage Cause of Action for negligent construction or construction defects.

Statutes of Limitations on Breach of Contract Causes of Action

Where the property owner has contracted directly with a contractor to perform construction work on the property, or where a developer has hired a contractor to build a project later purchased by a new owner, those property owners may also have a Breach of Contract claim or cause of action against the contractor or subcontractor, either directly or as an intended “Third Party Beneficiary” of those contracts or subcontracts etc.

Building Contractors and Subcontractors, and all other parties to contracts have a duty implied by the law to perform their work under the contract in a competent and non-negligent manner, so as to avoid causing injuries to the other parties to that contract.

“‘Accompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract.’ The rule which imposes this duty is of universal application as to all persons who by contract undertake professional or other business engagements requiring the exercise of care, skill and knowledge; the obligation is implied by law and need not be stated in the agreement [citation].” (Roscoe Moss Co. v. Jenkins (1942) 55 Cal.App.2d 369, 376 [130 P.2d 477]; see North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774 [69 Cal. Rptr. 2d 466].)” (Emphasis added)

Holguin v. Dish Network LLC (2014) 229 Cal. App. 4th 1310, 1324.

This duty or obligation need not be expressly written into the formal terms of the contract, and instead is implied and inserted into the contract by the Common Law.

Breach of this implied-at-law duty can give rise to a claim or Cause of Action in the other party to sue for Breach of Contract, even if the contract is verbal, and not written.

In that case, different Statutes of Limitation may govern the timeliness of an owner’s Court Complaint.

As the Supreme Court also held in Aas v. Superior Court, one can recover “economic losses” - such as the cost to repair defective substandard construction work - on a Breach of Contract Cause of Action.

[D]eviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. . . .” (All emphasis added)

Aas v. Superior Court , supra, 24 Cal. 4th at 636.

The “Discovery Rule” also applies to toll the running of Statutes of Limitations on Breach of Contract causes of action, until the breaches of contract and damages therefrom are discovered by the Plaintiffs.

Indeed, the delayed discovery rule has most often been described as an equitable doctrine designed to achieve substantial justice in situations where one party has an unfair advantage and it would be inequitable to deprive “ ‘an “otherwise diligent” plaintiff in discovering his cause of action.’ [Citations.]” . . . It is normally applied in situations where there is a . . . privileged relationship”—basically, where individuals hold “themselves out as having a special skill, or are required by statute to possess a certain level of skill” and it is manifestly unfair to deprive the plaintiffs of their cause of action before they are aware that they have been injured. . . . .” (All emphasis added)

Brisbane Lodging, L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249, 1261-1262; 3 Witkin, California Procedure , supra, Actions, § 529(d).

“ As noted, the limitations periods of sections 337 [for breach of contract] and 338 start to run upon “discovery.” Discovery occurs when the plaintiff suspects, or reasonably should suspect, that someone has done something wrong to the plaintiff, causing the injury (here, “wrong” is not used in a technical sense, but in a lay one). . . . In other words, “sections 337 and 338 begin to run only after the damage is sufficiently appreciable to give a reasonable man notice that he has a duty to pursue his remedies.” . . . .” (Emphasis added)

Creekridge Townhome Owners Assn., Inc. v. C. Scott Whitten, Inc. , supra. 177 Cal.App.4th at 257-258.

N.B. The contents of this Article do not constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular, unique situation from a competent Construction Lawyer or Construction Defects attorney. Please also note that factual situations vary, and statutes, regulations and case law are frequently changing and evolving, and these materials thus also may now be or may become outdated or incorrect. For further information on this topic and how the current law may apply to your particular contract, project or issues, Contact Us via email, phone (415)788-1881 or visit our website at www.wolfflaw.com for other contract information.