All claims have an outside time limit. That is typically called a statute of limitations. That means that if a plaintiff does not file suit within the appropriate period of time, that person loses his or her right to file.

In the construction industry, typically one has three and/or four years to file suit, depending on the theory of the case. However, because some defects in construction may not be visible (such as a defect being hidden behind a wall), there may be a longer time limit, generally 10 years. This is called the statute of limitations for filing suit on latent defects.

Latent defects are generally defined as those that are not discoverable by normal inspection.

Construction Defect Suit

In Lantzy v. Centex Homes, Lantzy sued Centex Homes alleging latent defects in construction. The case had other matters dealing with class action, etc. However, that is not relevant to this article's discussion. We will assume that Lantzy sued on behalf of him or herself only.

Lantzy claimed there was a flaw in the design and manufacturing of the homes built by Centex. Although these defects were not discovered within three years, the lawsuit was not filed for more than 10 years after substantial completion. As problems were discovered, Centex represented to Lantzy that it would correct them. At various times, Centex attempted to make repairs but problems in the construction remained.

In that all parties admitted that the lawsuit was filed more than 10 years after substantial completion, the trial court ruled that the lawsuit must be dismissed as it was filed beyond the applicable statute of limitations. The case was appealed and the Court of Appeal reversed the decision of the trial court. Two theories were discussed by the court. Both of them were equitable in nature.

One of the theories was called "equitable tolling." A judge made a ruling and it extends the statute of limitations to ensure "fundamental practicality and fairness." Courts would apply this theory to keep one from losing the case on a mere technicality, where there would be no prejudice to the other side by ruling that the limitations period should be extended for the tolling period.

The court did not agree. The California Supreme Court stated that equitable tolling should apply when it would not be inconsistent with the text of the statute that established the limitation period.

With respect to latent construction defects, the purpose of the lengthy 10-year period is to give property owners a liberal time for bringing suit while still protecting contractors and construction tradespeople from perpetual exposure to liability for their work.

Equitable tolling for repairs would be inconsistent to the statute. The court also stated that it is unnecessary for fundamental fairness.

Ten years is a long enough time for a plaintiff to discover defects and sue. Even if the defendant promises to repair and fails to do so, the exceptionally long period of time should be sufficient for plaintiffs to go to court if necessary. Equitable tolling is more appropriate when the limitations period is especially short.

Equitable Estoppel

Although equitable tolling would not work in this context, the Supreme Court stated that another theory, called "equitable estoppel," could prevent a defendant from relying on the 10-year statute of limitations under some circumstances.

Equitable estoppel deals with circumstances in which a party will be prevented from using the statute of limitations as a defense because his own conduct induced another into waiting before bringing suit. Equitable estoppel is used to prevent one from benefiting from his own injustice. For example, a builder who pretends to make repairs simply to buy time until the statute of limitations runs out will be estopped in court from asserting that defense.

The court found in this case, however, that there was insufficient evidence that the defendants had induced the plaintiff to forebear in bringing suit, so equitable estoppel was not appropriate.

Sam Abdulaziz is a partner in Abdulaziz & Grossbart, a North Hollywood, Calif., law firm specializing in construction law. Abdulaziz has over 30 years of experience representing contractors in his practice. He is also a popular lecturer on construction law topics. The firm's Web site is www.aglaw.net.

Note: This feature is intended only as a forum for information and general discussion. Any information provided is not in the nature of legal representation and is not intended to establish any attorney-client relationship. Any information provided should not be relied on without consulting an attorney.

Publication date: 10/04/2004