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A recent decision by the Tennessee Court of Appeals in The Counts Co. v. Praters, Inc., E2011-01624-COA-R3-CV, 392 S.W.3d 80 (filed June 22, 2012) discussed the Statute of Repose for construction defect cases. This opinion can be found at http://www.tsc.state.tn.us/sites/default/files/countscoopn.pdf. In this case, a contractor, Praters, Inc., installed hardwood flooring at the request of the plaintiff. A certificate of occupancy was issued on May 15, 2006. Praters Inc. completed this work and issued a warranty on May 28, 2006. The hardwood flooring started to show warping soon after the flooring was installed Approximately one year after the installation (in April or May of 2007) Praters, Inc. resurfaced the floor to try to correct the condition. Praters, Inc. continued to provide additional advice about the flooring from 2007 through 2010. This included the assertion by Praters, Inc. that the floor problem would correct itself once the moisture problem was resolved. Apparently the problem did not resolve.
A lawsuit was not filed against Praters, Inc. until March 21, 2011, almost five years after the installation. As a result, the issue before the Court was whether the four year Statute of Repose found T.C.A. § 28-3-202 barred this construction defect claim. The Statute of Repose in T.C.A. § 28-3-202 provides:
All actions to recover damages for any deficiency in the design, planning, supervision, observation of construction, or construction of an improvement to real property, for injury to property, real or personal, arising out of any such deficiency, or for injury to the person or for wrongful death arising out of any such deficiency, shall be brought against any person performing or furnishing the design, planning, supervision, observation of construction, construction of, or land surveying in connection with, such an improvement within four (4) years after substantial completion of such an improvement.
(emphasis added). The key dispute between the parties was when the four years, referred to in this statute, begins to run (i.e. the date of substantial completion). The Appellate Court agreed with the trial court decision and decided the floor installation was “substantially complete” by, at the latest, May 28, 2006. The fact resurfacing of the floor was completed approximately one year after the installation did not extend the Statute of Repose. Further, the fact there were continued attempts to correct the floor for several years following the installation also did not extend the Statute of Repose. The court found that the date of the discovery of the defect and the fact ongoing repairs occurred do not change the date of “substantial completion."
The term "substantial completion" is a defined term found in T.C.A. § 28-3-201. It is defined as follows:
(2) “Substantial completion” means that degree of completion of a project, improvement, or a specified area or portion thereof (in accordance with the contract documents, as modified by any change orders agreed to by the parties) upon attainment of which the owner can use the same for the purpose for which it was intended; the date of substantial completion may be established by written agreement between the contractor and the owner.
The Tennessee Court of Appeals addressed several prior cases that dealt with similar issues. The Court once again reaffirmed that the Statute of Repose bars claims that are filed greater then four years after the “substantial completion” of an improvement. There is a savings provision found in T.C.A. § 28-3-203 when the injury does not take place until the fourth year after substantial completion. In that circumstance, the plaintiff has one year from the date “such injury occurred” to file suit.
The Tennessee Court of Appeals also held that plaintiffs other claims for indemnity and breach of implied warranty are still subject to the Statute of Repose limitation found in T.C.A. § 28-3-202. Further, plaintiff tried to argue the defendant was guilty of "fraudulent misrepresentation/concealment" sufficient to toll T.C.A. § 28-3-202 due to the exception to the Statute of Repose for fraudulent concealment. However, the Court found the plaintiffs did not sufficiently plead the allegation of fraudulent concealment under Tennessee Rule of Civil Procedure 9.02.
The implications of this case are that the Tennessee Court of Appeals has once again reaffirmed the strength of the construction defect Statute of Repose found in T.C.A. § 28-3-202. The plain language of the statute is interpreted strictly. Vague allegations about fraudulent concealment or disputes pertaining to the repair work or modifications of the final work do not change the date of “substantial completion” as defined in the statute.
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