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The Narrow Exceptions to the Statute of Repose

05.11.2022

The Narrow Exceptions to the Statute of Repose 

By Sydney Koby, Associate

Introduction

The Texas statute of repose requires plaintiffs to file claims against a contractor that arise “out of a defective or unsafe condition of the real property or a deficiency in the construction or repair of the improvement” during the first 10 years after substantial completion of the project or improvement. See Tex. Civ. Prac. & Rem. Code Ann. § 16.009.

The causes of action covered under the statute include injury, damage, or loss to real or personal property, personal injury, wrongful death, contribution, and indemnity. Id. The purpose of the statute is to protect those who design, install, or construct an improvement from facing never-ending potential liability based on that work. Kerr v. Harris County, 177 S.W.3d 290, 295 (Tex. App.—Houston [1st Dist.] 2005, no pet.); see also Trinity River Auth. v. URS Consultants, Inc.-Tex., 889 S.W.2d 259, 263–64 (Tex. 1994) (rejecting plaintiff’s contention that the statute of repose violated substantive due process, stating that the statute serves a legitimate public function in protecting defendants from stale claims).

Unlike traditional limitations provisions, which begin running upon the accrual of a cause of action, the statute of repose creates a statutory deadline for filing a lawsuit based simply upon the passage of time. Dallas Mkt. Ctr. Dev. Co. v. Beran & Shelmire, 824 S.W.2d 218, 221 (Tex. App.—Dallas 1991, writ denied). The statute of repose period begins upon the occurrence of a particular event, such as the substantial completion of a construction project. Vega v. United States, 512 F. Supp. 2d 853, 860 (W.D. Tex. 2007).

Courts have found that an architect’s signature on certificates of substantial completion is generally the sufficient point at which the statute of repose clock begins. In re Endeavour Highrise, L.P., 432 B.R. 583 (Bankr. S.D. Tex. 2010).

Exceptions to the Statute of Repose

Unlike the statute of limitations, the discovery rule does not apply to the statute of repose. Dallas Mkt. Ctr. Dev. Co., 824 S.W.2d at 221. Thus, a statute of repose can cut off a right of action before an injured party discovers or reasonably should have discovered the defect or injury. Id.

However, the state of repose does not bar an action (1) on a written warranty, guaranty, or other contract that expressly provides for a longer effective period; (2) against a person in actual possession or control of the real property at the time that the damage, injury, or death occurs; or (3) based on willful misconduct or fraudulent concealment in connection with the performance of the construction or repair. Tex. Civ. Prac. & Rem. Code Ann. § 16.009(e).

Once a defendant establishes that the statute of repose applies, the plaintiff has the burden to prove the existence of a fact question on one of the exceptions under Section 16.009(e) to defeat summary judgment. See Preston Oaks Crossing Condo. Ass’n, Inc. v. Preston Oaks Crossing Joint Venture, No. 05-96-00631-CV, 1998 WL 102973, at *5 (Tex. App.—Dallas Mar. 11, 1998, no pet.) (discussing the non-movant’s burden of proof when asserting an exception to the statute of repose as a defense to summary judgment).

Willful Misconduct or Fraudulent Concealment

The most litigated exception is an action “based on willful misconduct or fraudulent concealment in connection with the performance of the construction or repair.” Tex. Civ. Prac. & Rem. Code Ann. § 16.009(e)(3). A plaintiff alleging fraudulent concealment must show that the defendant had actual knowledge of the facts he is alleged to have concealed and that the defendant had a fixed purpose to conceal the wrong. Baskin v. Mortg. & Tr., Inc., 837 S.W.2d 743 (Tex. App. 1992), writ denied (Feb. 3, 1993).

Although “willful misconduct” is not defined in Section 16.009, courts discussing the exception have described it as including the element of intent or actual knowledge. See Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (willful misconduct under section 16.009(e)(3) requires proof of actual knowledge of the alleged deficiency).

Further, the court in Brooks v. CalAtlantic, concluded that because “willful misconduct” has been frequently equated to “gross negligence” in other contexts, a showing of gross negligence may be sufficient to establish willful misconduct under Section 16.009(e)(3). No. 05-16-01203-CV, 2017 WL 4479651, at *4 (Tex. App. Oct. 9, 2017).

In Marshall Indep. Sch. Dist. v. U.S. Gypsum Co., a public school district alleged that defendant had manufactured and sold acoustical spray-on ceiling materials containing asbestos, which were incorporated into various school buildings. 790 F. Supp. 1291, 1292 (E.D. Tex. 1992).

In response, defendant filed a motion for summary judgment, arguing that because the materials were sold over ten years prior to plaintiff filing suit, the statute of repose barred all of plaintiff’s claims. Id. at 1293. The school district argued that defendant was barred from taking advantage of the statute of repose because defendant had fraudulently concealed the dangers of asbestos and had committed willful misconduct in manufacturing and selling the products to the school district. Id. at 1296.

The court concluded that because there was a genuine issue of material fact regarding whether defendant fraudulently concealed the hazards of asbestos or committed willful misconduct in hiding the dangers of it, defendants could not prevail on their summary judgment motion. Id. at 1297.

Written Claim for Damages

In addition to the three exceptions under Section 16.009(e), Section 16.009(c) allows potential plaintiffs to extend the repose period by providing a written claim for damages, contribution, and indemnification to the potential defendant within the ten-year period. Bunch v. Woodlands Land Dev. Co., LP, No. 09-16-00136-CV, 2017 WL 3081095, at *7 (Tex. App.—Beaumont July 20, 2017, pet. denied).

Providing a written claim will extend the period for two years from the date the claim is presented. Id. Further, if the damage, injury, or death occurs during the tenth year of the limitations period, the plaintiff may bring suit within two years after the day the cause of action accrued. Tex. Civ. Prac. & Rem. Code Ann. § 16.009(d).

Successive Sections of a Larger Project

Determining when the ten-year period begins is a fact-specific inquiry. When a construction project involves several sections of a larger project, the point of substantial completion is when the project as a whole is substantially completed. See Kerr v. Harris Cty., 177 S.W.3d 290, 296 (Tex. App. 2005) (finding that certificates of substantial completion indicated that the last of the projects involved in the development of a subdivision established the point at which the statute of repose period began).

For example, in Sanchez v. Mica Corp., the children of a pedestrian who was electrocuted when she stepped on an electrical box sued a subcontractor that had been involved in a previous street-widening project. 107 S.W.3d 13, 20–21 (Tex. App.—San Antonio 2002, pet. granted), vacated in part (Mar. 27, 2003).

The subcontractor asserted that the claims against it were barred by the statute of repose because the subcontractor had finished it’s work on the street where the injury occurred more than ten years before plaintiffs filed suit. Id. at 32. The court disagreed, concluding that the statute of repose did not begin to run until the subcontractor completed all of its work on the road-widening project, not when the subcontractor completed an isolated portion of the project. Id. The court reasoned that it would be overly burdensome to decipher when individual portions of a subcontractor’s overall project are completed for the purposes of the statute of repose. Id.

On the other hand, courts have found that where different subcontractors were responsible for different parts of a larger construction project, the ten-year statute of repose applies to each individual subcontractor and begins to run when each subcontractor substantially completes his share of the project. Gordon v. W. Steel Co., 950 S.W.2d 743, 748 (Tex. App. 1997), writ denied (Feb. 13, 1998).

In Gordon, the plaintiff sued a general contractor for alleged defects in the construction of condominiums. Id. at 744. In turn, the general contractor filed claims against two of its subcontractors who had delivered and erected the structural steel for the project. Id.

The subcontractors asserted the statute of repose as a defense, arguing that they had completed their work more than ten years before they were sued. Id. at 744. In response, the general contractor argued that the claims were timely because the condominiums, as a whole, were finished within nine years of the filing of the lawsuit. Id.

The court agreed with the subcontractors, concluding that when different persons are responsible for distinct parts of the construction work, the statutory period begins upon the substantial completion of each person’s portion of such work. Id. at 748. The court reasoned that “[s]tarting the statute of repose when each [person] finishes its improvement conforms with the legislative intent of preventing indefinite liability for those who construct or repair improvements to real property.” Id.

Conclusion

The protections provided by the statute of repose are substantial. Subject to a few narrow exceptions, the statute applies broadly to any person who constructs or repairs any improvement to real property. Further, the statute provides a complete defense to any claim filed beyond the statute’s inflexible ten-year deadline, even in extraordinary circumstances beyond a plaintiff’s control. Thus, property owner’s must be diligent in inspecting their properties regularly to avoid allowing any defects from going unnoticed for long periods of time.


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Sydney E. Koby

Associate

Contact: 713.255.3558

Sydney is a litigation associate for West Mermis PLLC. She represents clients in a variety of complex litigation matters with a focus on construction disputes. Sydney assists companies in handling commercial and residential construction disputes, contract drafting and review, and worksite accidents. She routinely represents contractors, independent business owners, and insurance companies.

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