A recent decision out of Ohio’s 3rd District Court of Appeals reinforces the seemingly well-settled Ohio law that the construction statute of repose applies only to tort actions and does not operate to preclude actions based upon a breach of contract. See New Riegel Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng. Inc., 2017-Ohio-8521 (Nov. 13, 2017). However, the decision does raise a question about whether this application should be re-visited to include any claim for property damage to a constructed facility.
Construction statutes of repose, such as Ohio Revised Code section 2305.131 that was at issue in the New Riegel case, were enacted by a number of states in the late 1950s and early 1960s in response to the expansion of common-law liability of architects and builders to third parties who lacked “privity of contract.” These statutes of repose place a time limit on which claims may be brought for damage to property or personal injury related to accidents involving a constructed facility. They serve to forever bar claims for such injuries after a set period of time after the construction project at issue was substantially completed. They are different from statutes of limitation which bar lawsuits if a claim is not brought within a certain period of time after an injury occurs or is discovered.
Over the past 30 years, the Ohio Supreme Court has addressed the statute of repose on a handful of occasions. Each time, the court has held that the statute of repose only applies to tort actions, that is, to claims for personal injury or property damages where a duty is owed to the injured party as a matter of law, regardless of whether there was a contract between the injured party and the defendant. The court’s reasoning is grounded in the specific language of the statute chosen by the General Assembly, which conspicuously does not include breach of contract claims. On the other hand, in states such as Kentucky and New Jersey, the language of the respective statutes of repose specifically includes contract claims.
In holding that Ohio’s former version of R.C. 2305.131 applied only to tort actions and that it did not govern breach of contract actions, the Ohio Supreme Court explained that:
“ * * * The language selected by the General Assembly is uniformly used to describe tortious conduct. For example, the statute's use of the terms ‘defective’ and ‘unsafe’ to describe the improvements at issue distinguish the actions contemplated within the statute from warranty or other contractual claims. * * * [Emphasis sic.]
“ * * * Torts arise from the breach of certain duties of conduct that are imposed by law for the protection of all persons within range of the harm or injury proximately resulting from such breach. Contractual duties, on the other hand, arise from the specific agreement of the parties to the contract.”
New Riegel, the most recent case involving Ohio’s statute of repose, the 3rd District Court of Appeals grudgingly followed the Ohio Supreme Court’s prior holding. New Riegel involves claims arising from a contract for the construction of new K-12 facility in Seneca County, Ohio, which was completed in March 2004. Over time, the school board began having issues with the facility, including condensation and moisture intrusion allegedly caused by the contractor’s and architect’s defective work. The school board brought suit against the general contractor and the architect for breach of contract in April 2015, 11 years after the construction project was completed. They alleged that the contractor and architect failed to perform their duties under their contracts in a workmanlike manner. The contractor and architect moved to have the case dismissed arguing that the statute of repose barred the school board from asserting their claims since the claims were brought more than 10 years after the project had been completed. The trial court agreed and granted judgment in favor of the contractor and architect. The school board appealed.
On appeal, the 3rd District, following the prior holdings of the Ohio Supreme Court, reversed the trial court’s decision and held that the statute of repose does not apply to breach of contract actions. However, the court clearly believed that breach of contract claims are within the statute of repose’s reach, but nevertheless surrendered to the precedent set forth by the Ohio Supreme Court. The 3rd District was clear in its disagreement with the higher court’s former conclusion that the statute of repose does not apply to breach of contract actions, stating as follows:
A clear reading of the statute does not support this conclusion. The statute specifies that NO cause of action for damages to real property, resulting from the improvement to that real property, can be brought after 10 years from the time the improvements were substantially completed. R.C. 2305.131. The statute does not limit it to claims for torts only. Regardless of what the School labels this claim, the School is trying to collect damages resulting from an improvement, i.e. the Project, to real property. The statute specifically prohibits this. Thus, it would appear that the statute specifically denies the claims in this case.While the 3rd District’s decision upholds a long-standing rule of law, the court’s discussion of the statute of repose and criticism of the Ohio Supreme Court’s prior holdings indicates that this issue may be ripe for review by the Ohio Supreme Court. However, until then, the rule remains that the statute of repose applies only to tort actions and that breach of contract claims remain governed by the statute of limitations contained in R.C. 2305.06 at the time the contract was executed.
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