CONTRACTORS RECEIVE SETBACK
IN STATUTE OF LIMITATION DEFENSES

A "hot" area of California litigation pertains to the interpretation of the state's ten-year statute of limitations for defects in improvements to real property. A major issue that has arisen relates to "equitable tolling" when the contractor undertakes to make repairs during the ten-year period after construction has been completed.

In a 1999 case, an Appellate Level Court in the case of FNB Mortgage Corp. v. Pacific General Group found that there is no equitable tolling for any period of repair insofar as the ten-year limitations period is concerned. The Court specifically found that because the California statute prescribed an "outside limitations" period, case law which equitably tolled other statutes of limitations would not apply. This decision stood in contrast to a 1987 decision in the case of Cascade Gardens Homeowners Association v. McKellar & Associates, which found that undertaking repair would equitably toll the ten year statute of limitations. But the Court in the FNB matter reasoned that the earlier case had simply misinterpreted the effect of the ten-year limitations period.

However, another recent case, Jackson Plaza Homeowners Association v. Alcal Roofing & Insulation found that allegations of repair within the ten year statute of limitation period could equitably control at least for the scope of the repair which was undertaken by the contractor. This decision is at odds with the FNB decision and appears to be contrary to the intent of the statute.

This issue has been the subject of prior articles by this author. What can be said is that this is an emerging area of California law and developers and contractors need to be wary of extending the statute of limitations period for construction defect cases. The moral of the story is that, if your buyer calls you nine years and eight months after the house was sold (assuming improvements were made at the time of sale), one had better be wary.