Oregon Court of Appeals Rules on Statutes of Limitations and Ultimate Repose

Construction Law Report Spring 2013

05/01/2013

Robert W. Wilkinson

The Oregon Court of Appeals issued a decision in favor of Ball Janik’s client, the Sunset Presbyterian Church, that provides guidance on the time period allowed to bring a claim where an AIA contract is used. This case serves as a reminder that, in Oregon, the project completion date is of paramount importance.

The Sunset Presbyterian Church hired a contractor to construct the first phase of its new church facility. The parties used an AIA contract that included a claim-accrual provision defining “substantial completion” of the project as the date that the project architect certified the project was substantially complete. The church held services in the new facility in February 1999, and held a dedication event the weekend of March 13-14, 1999. After that weekend, construction work continued, including changes to the electrical system, fire-alarm system, and landscaping. In 2009, after discovering construction deficiencies, the church filed an action against the contractor and its subcontractors. The contractor and its subcontractors filed for summary judgment on the ground that the church’s claims were time-barred.

Relying on the AIA contract definition of “substantial completion,” the contractor argued that “substantial completion” occurred when the church actually started to use the facility in 1999. The subcontractors had a different argument: they argued that the claims against them were time-barred by the ten-year statute of ultimate repose which began when each separate subcontractor’s work was completed and accepted by the contractor. The trial court agreed, and dismissed the church’s claims. Ball Janik appealed the dismissals.

As to the contractor’s argument, the Court of Appeals determined that the contractor had failed to present any architect certification as required by the AIA contract. Without evidence of the architect certification of “substantial completion,” the Court of Appeals refused to enforce the contract provision at issue.

As to the subcontractor arguments, the Court of Appeals determined that the ten-year statute of repose does not start when the general contractor accepts the work of the subcontractors, because that would lead to different ten-year deadlines depending entirely on the completion dates of each subcontractor’s work. Instead, the Court of Appeals ruled that the ten-year period of repose should start to run for all claims on one date: when the owner or developer, for whom the project is constructed, either (1) states in writing that the project is complete; or (2) accepts the project as complete and takes over responsibility for maintenance, alteration, or repair of the project. In the case at hand, there was no evidence that the church provided a written acceptance of the work. What was key, then, was the date when the church actually accepted responsibility for the completed project. The Court of Appeals noted the evidence that after March 14, 1999, construction work actually continued, including changes to the electrical system, fire-alarm system, and landscaping. Therefore, the Court of Appeals concluded that a genuine issue of material fact remained as to whether the church accepted the project as complete more than 10 years before the church filed its claims. As a result, the Court of Appeals reversed the trial court’s dismissal, and reinstated the church’s claims.

The Sunset Presbyterian decision provides guidance to all parties on the statutes of limitations and ultimate repose. Analysis of whether a claim is timely or not is still tricky, and experienced legal counsel should be consulted for advice.

Read The Daily Journal of Commerce article by Reed Jackson, AIA contract at center of ruling.