The Superior Court of Pennsylvania in Johnson v. Toll Brothers, Inc., No. 2119 EDA 2022 found that homeowners did not qualify for a two-year extension under the Statute of Repose when a defect of the property was known to them and existed prior to the tenth year after a Certificate of Completion had been issued. The Superior Court also held that where a governing body signed off on the Certificate of Completion, the homeowner cannot later claim that the contractor’s building practices were unlawful. This case is a significant victory for builders and developers who fear homeowners bringing suits for defects that existed years before the Statute of Repose expired and later claiming that their building methods utilized were deficient even though they constituted best practices at the time of the construction.

Facts of the Case

Lee and Victoria Johnson purchased a home originally built and designed by Toll Brothers, Inc. On October 18, 2004, Toll Brothers obtained a Certificate of Completion for the subject property, which was immediately conveyed to the original purchasers. The home was later sold to the second purchasers who, on September 13, 2016, sold the home to the Johnsons. On August 21, 2018 (more than thirteen years after the original Certificate of Completion was issued), the Johnsons brought this action against Toll Brothers. In 2020 the Johnsons added a claim against Toll Brothers for violations of the Unfair Trade Practices and Consumer Protection Law, civil conspiracy, fraud, and negligence.

The Johnsons alleged that Toll Brothers violated building codes in the installation of door frames, brick façade and windows resulting in significant water damage in the home. The Johnsons’ experts opined that the water damage was continuous for at least the five years prior to the commencement of the lawsuit.

In an Amended Complaint, the Johnsons acknowledged that the Statute of Repose required their suit to be filed within 12 years of the date of completion (i.e., within 12 years of October 18, 2004) but argued that as the damages were continuous and ongoing in the “tenth, eleventh, and twelfth year following the completion of construction,” they fell within an exception to the Statute of Repose which permitted them an additional two years to assert their claim.

The trial court granted Toll Brothers’ Motion for Summary Judgment and held that the Johnsons’ suit was barred because they did not file it within the twelve years Statute of Repose. The trial court did not consider whether the Johnsons qualified for the two-year exception set forth in the Statute of Repose. The Johnsons appealed and also asserted that their claim should not be barred by operation of the Statute of Repose because the construction of their home was unlawful, and even if the Statute of Repose applied, they should qualify for the two year extension based on the particular circumstances of their situation.

Toll Brothers asserted that construction was lawful as it was “authorized by the governing body with jurisdiction over the project, regardless of any technical violations of the applicable building code.” Toll Brothers also argued that the exception to the Statute of Repose did not apply because the injuries the Johnsons suffered were present at the time the house was constructed.

How is a Statute of Repose Different From a Statute of Limitations?

“Statutes of repose differ from statute of limitation in that statutes of repose potentially bar a plaintiff’s suit before the cause of action arises, whereas statutes of limitation limit the time in which a plaintiff may bring suit after the cause of action accrues.” McConnaughey v. Building Components, Inc. 637 A.2d 1331, 1132 (Pa. 1994).

The genesis of the law at issue is found at 42 Pa.C.S.§5536(a) which states, “A civil action or proceeding brought against any person lawfully performing or furnishing the design, planning, supervision or observation of construction, or construction of any improvement to real property must be commenced within 12 years after completion of construction of such improvement to recover damages.”

A party claiming that the Statute of Repose bars the other party’s claim must show that:

  • The project involved a lawful improvement to real property;
  • Over 12 years have elapsed from the completion of the improvement to commencement of the action; and
  • The party is in the statute’s protected class.

Noll v. Harrisburg Area YMCA, 643 A.2d 81, 84 (Pa. 1994).

The repose period commences upon “completion of such improvement at the point when third parties are first exposed to defects in the design, planning, or construction.” Catanzaro v. Wasco Products, Inc., 489 A.2d 262, 266 (Pa. Super. 1985).

The Definition of “Lawful” in the Context of a Statute of Repose

The meaning of “lawful” was previously tackled by the Superior Court in Branton v. Nicholas Meat, LLC, 159 A.3d 540 (Pa. Super. 2017). In Branton, a slaughterhouse farm was sued for the raucous smells that emitted from the farm. The slaughterhouse had also been cited several times by the Pennsylvania Department of Environmental Protection for violations of state and federal law as well as local regulations. The defendants in Branton argued that they were shielded from Plaintiff’s nuisance claim by the Statute of Repose contained in the Pennsylvania Right to Farm Act, which prohibited nuisance actions “against an agricultural operation which has lawfully been in operation for one year or more prior to the date of bringing such action.” 3 P.S. §951-957. The Superior Court agreed with the defendant slaughterhouse and found that as it was in substantial compliance with the law and had made every reasonable effort to comply with the law, it was protected by the Statute of Repose. Thus, the nuisance claims brought by the neighboring property were barred.

In a more recent case, the Superior Court delved into this issue in the context of a construction claim. In Evangelical Lutheran Church of the Atonement at Wyomissing, PA. v. Horst Constr., 602 MDA 2020 (Pa. Super., March 21, 2021), the Superior Court was asked to determine whether a builders’ work on a new wing of a church was lawful despite water filtration problems arising out of alleged violations of the building codes and local ordinances. The Superior Court ruled that because the jurisdiction responsible for overseeing the project issued a Certificate of Occupancy that “constituted evidence of record to indicate that the builders performed the construction lawfully.”

In Johnson, Toll Brothers was issued a Certificate of Completion from the applicable jurisdictional body and argued that it operated within the bounds of all codes and ordinances in the construction of the residence. The Superior Court agreed with Toll Brothers and rejected the Johnsons’ argument that Toll Brothers acted unlawfully in the construction of the property.

Did the Claim Fall Within an Exception to the Statute of Repose?

With regard to the Statute of Repose, the Johnsons argued that even if the Statute of Repose applied here, their claim qualified for a two-year extension for the filing of their claim. Although the Statute of Repose requires that a construction defect claim be filed within 12 years of the completion of construction, it also provides for a two-year extension if “an injury or wrongful death shall occur more than ten and within twelve years after completion of the improvement.” 42 Pa. C.S.§5536(b)(1). The injuries sustained may be either to persons or property as a result of a construction defect.

The Johnsons assert that the alleged design and construction defects were effectively a continuing injury that became increasingly worse over the years and therefore, qualified for the exception to the statute of repose time limit to bring a claim. Although lacking a plethora of case law to support their argument, the Johnsons relied on Kowalski v. TOA PA V, L.P., 206 A.3d 1148 (Pa. Super. 2019) which held that, “[w]hen there are continuing or repeated wrongs that are capable of being terminated, a claim accrues every day the wrong continues or is repeated, the result being that the plaintiff only barred from recovering those damages that were ascertainable prior to the statutory period.” Kowalski, 206 A.3d at 1168. The Superior Court found Kowalski unpersuasive and commented that in Kowalski, the injuries resulted from multiple trespassing occurrences, whereas here, the injuries resulted from a single act. The Superior Court also found that the Kowalski decision did not address the Statute of Repose.

Generally, the Statute of Repose limits liability for builders if the claims are filed more than 12 years after the date of completion. The Superior Court in Johnson held that the definition of injuries was intended to mean those “that first arise from a defect in the tenth, eleventh, or twelfth year after the construction of a structure is completed.”

The Superior Court also held that, if adopted, Johnsons’ “liberal interpretation” of the term “injuries” in the statute would undermine the intent of the Legislature and would open the floodgates for exceptions to the Statute of Repose and claims potentially arising from application of the two-year exception. Thus, the Superior Court concluded that “it is clear that the injury contemplated in the exception in part (b) was meant to be one that shall occur or arise for the first time no earlier than the tenth year of the filing period. It was not meant to refer to a recurring or continuous injury that began years prior to that three-year range.” Due to the fact that the Johnsons’ alleged injury began at least several years before the tenth year, the Superior Court affirmed the trial court’s granting of summary judgment in favor of Toll Brothers.

The Superior Court’s decision in Johnson is important for builders (and their insurers) in that it provides a level of certainty relative to the temporal limitations imposed by the Statute of Repose. Further, the decision rejected a potential “end run” around the Statute of Repose which would have been based on assertions of alleged violations of older building codes which, at the time, constituted the standards against which the builders’ actions were to be measured. This level of certainty cannot be underestimated in a field such as home construction where the commodity being sold is one which is intended to last for a considerable time and which, over time, may require repair.

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