Consolidated Grain v. Structural Systems

• Decision Date: 03 March 2009
• Docket Number: No. 105,918.,105,918.
• Citation: 212 P.3d 1168,2009 OK 14
• Parties: CONSOLIDATED GRAIN & BARGE COMPANY, Plaintiff, v. STRUCTURAL SYSTEMS, INC., Defendant.
• Court: Oklahoma Supreme Court

212 P.3d 1168

2009 OK 14

CONSOLIDATED GRAIN & BARGE COMPANY, Plaintiff, v. STRUCTURAL SYSTEMS, INC., Defendant.

No. 105,918.

Supreme Court of Oklahoma.

March 3, 2009.

FEDERAL CERTIFIED QUESTION

¶ 0 Pursuant to Oklahoma's Revised Uniform Certification of Questions of Law Act, 20 O.S.2001, §§ 1601-1611, the United States Court of Appeals for the Tenth Circuit asks this Court whether the phrase "period of limitation" as used in 12 O.S.2001, § 105 includes the time limitation on construction tort claims prescribed in 12 O.S.2001, § 109. We answer in the negative.

CERTIFIED QUESTION ANSWERED.

William D. Mahoney, Irving, TX, and Marc L. Bovos, Poteau, OK, for plaintiff.

Gerald P. Green, Andrea D.W. Moates, Larry G. Cassil, Jr., Oklahoma City, OK, for defendant.

TAYLOR, V.C.J.

¶ 1 Pursuant to the Revised Uniform Certification of Questions of Law Act, 20 O.S.2001, §§ 1601-1611, the United States Court of Appeals for the Tenth Circuit certified the following question of law to this Court:

Oklahoma's borrowing statute provides that "[t]he period of limitation applicable to a claim accruing outside of this state shall be that prescribed either by the law of the place where the claim accrued or by the law of this state, whichever last bars the claim." Okla. Stat. tit. 12, § 105. Should "period of limitation" in Okla. Stat. tit. 12, § 105 be interpreted to include statutes of repose, including Oklahoma's statute of repose for construction tort claims, id. § 109?

We answer the question narrowly. We hold that the phrase "period of limitation" as used in 12 O.S.2001, § 105 does not include the ten-year time period specified in 12 O.S.2001, § 109.

I. Facts and Procedural Background

¶ 2 The following basic facts in this case are gleaned from the summary judgment record submitted with the certification order, the summary judgment order of the United States District Court for the Eastern District of Oklahoma dated July 30, 2007, as corrected July 31, 2007, and the certification order. Consolidated Grain & Barge Co. (CGB), a Missouri corporation with its principle place of business in Wayne City, Illinois, contracted with Structural Systems, Inc. (SSI), a corporation¹ with its principle place of business in Fort Smith, Arkansas, to perform work on CGB's grain conveyor system at its grain terminal in Van Buren, Arkansas. CGB and SSI entered into the contract in Arkansas and all work thereunder was performed in Arkansas. SSI started the work on the grain conveyor system in May of 2000. The work was substantially completed in June of 2000, with the latest final call back completed in September of 2000. On November 3, 2003, a fire occurred at the grain terminal causing damages to real and personal property.

¶ 3 On October 31, 2005, CGB's insurer, Nationwide Agribusiness Insurance Company,² filed a subrogation action³ in the name of CGB against SSI in the circuit court in Crawford County, Arkansas, alleging negligence in the performance of the contract which caused the fire and resulting damages.⁴ SSI moved for summary judgment on the basis that the suit was barred by Arkansas' five-year statutory limitation on actions for injury to real and personal property caused by construction or repair deficiency.⁵ Before the Arkansas court ruled on the summary judgment motion, CGB voluntarily dismissed the action.

¶ 4 On October 26, 2006, CGB's insurer filed a subrogation action⁶ in the name of CGB against SSI in the district court in LeFlore County, Oklahoma, for negligent performance of the contract which caused the fire and resulting damages. The petition alleged that SSI improperly installed a bearing that overheated on one of the tank conveyor belts and ignited grain dust in the conveyor system which caused damages to CGB's real and personal property and a loss of business, totaling $825,671.81.

¶ 5 SSI removed the action to the federal district court for the eastern district of Oklahoma on the basis of diversity in citizenship. SSI moved for summary judgment, asserting the suit is barred by Arkansas' five-year statute of repose.⁷ CGB responded that Oklahoma's borrowing statute, 12 O.S.2001, § 105, requires the Oklahoma court to apply Oklahoma's ten-year statute of repose on construction torts.

¶ 6 The federal district court determined that Oklahoma's borrowing statute did not apply "as the question was one of whether to apply Arkansas' or Oklahoma's substantive statute of repose." It also determined that under Oklahoma's common-law choice-of-law rules, Arkansas' substantive five-year statute of repose on construction claims governs the action. Accordingly, the federal district court found the action is time-barred and dismissed the petition.

¶ 7 On appeal, the United States Court of Appeals for the Tenth Circuit found no controlling Oklahoma authority on the question of whether Oklahoma's borrowing statute applies to statutes of repose. In certifying the question, the federal appellate court noted that Wisconsin has interpreted the phrase "period of limitation" in the Wisconsin borrowing statute to include both procedural statutes of limitations and substantive statutes of repose, citing Wenke v. Gehl Co., 274 Wis.2d 220, 682 N.W.2d 405 (2004).

II. Statutory Time Bars

¶ 8 Oklahoma recognizes two categories of statutory time bars. If the time period operates to bar the right to a cause of action, the statute falls into the substantive-law category and is referred to as a statute of repose. Reynolds v. Porter, 1988 OK 88, 760 P.2d 816. If the time period operates to bar the right to maintain the cause of action or remedy, the statute falls into the procedural-law category and is referred to as a statute of limitation. Id.

¶ 9 A statute of limitation prescribes a time period within which an action may be initiated, and that time period begins to run when the cause of action accrues. 12 O.S.2001, § 92 (providing that civil actions can only be commenced within the statutory time periods "after the cause of action shall have accrued"). A cause of action accrues when the action can first be maintained.⁸ A statute of limitation operates procedurally to bar the remedy after the substantive right has accrued. Reynolds, 1988 OK 88 at ¶ 6, 760 P.2d at 819-820. A statute of limitation does not act upon the right to a cause of action so as to deprive the court of jurisdiction if it is not timely filed; rather it is an affirmative defense to the action that may be waived. Reddell v. Johnson, 1997 OK 86, ¶ 8, 942 P.2d 200, 202-203. A statute of limitation is a procedural law that operates only on the remedy.

¶ 10 On the other hand, a statute of repose prescribes a time period within which an action may be initiated and that time period begins to run from a specific act or event, such as substantial completion of construction. Reynolds, 1988 OK 88 at ¶ 6, 760 P.2d at 819-820; 12 O.S.2001, § 109 (providing no action shall be brought more than ten years after substantial completion of an improvement to real property). The time limitation in a statute of repose may or may not allow for the plaintiff's discovery of the injuries caused by the negligent act and accrual of the action. Samuel Roberts Noble Foundation v. Vick, 1992 OK 140, ¶¶ 19-20, 840 P.2d 619, 624. A statute of repose operates upon the substantive right to recover damages and will extinguish that right even if the action has not yet accrued. Smith v. Westinghouse Elec. Corp., 1987 OK 3, ¶ 6, n. 11, 732 P.2d 466, 469, n. 11. That is, the right to a cause of action to recover damages will expire even though there has not been an injury leading to the discovery of the negligent act that caused the damages.

¶ 11 In practical terms, a statute of repose marks the boundary of a substantive right, while a statute of limitation operates procedurally to bar the remedy after a substantive right has vested. Reynolds, 1988 OK 88 at ¶ 6, 760 P.2d at 819-820. The Tenth Circuit Court of Appeals, in its certification order, referred us to Wenke v. Gehl Co., 682 N.W.2d at 408-409, wherein the Wisconsin court found Wisconsin's borrowing statute reaches statutes of limitations and statutes of repose.⁹ In its review of the procedural/substantive law dichotomy of statutory time limits, the Wisconsin Supreme Court relied on this Court's explanation:

Before the contemporary concept of "statutes of repose" became popular, the term "statute of repose" was commonly used to refer to general limitations periods that simply provided peace, or "repose," to potential litigants, taking away the remedy for an otherwise valid claim. A modern court has aptly explained how this understanding evolved:

Early treatise writers and judges considered time bars created by statutes of limitations, escheat and adverse possession as periods of repose. As the courts began to modify statutory limitations by applying the "discovery rule," legislatures responded by enacting absolute statutes of repose. Modern limitations and statutes of repose are similar because they both provide repose for the defendant. Yet, they are significantly different since a statute of limitation merely extinguishes the plaintiff's remedy while a statute of repose bars a cause of action before it arises.

Reynolds v. Porter, 760 P.2d 816, 819-820 (Okla.1988) (footnotes omitted)(emphasis added).

Id., 2004 WI 103, ¶ 54, 274 Wis.2d 220, 257, 682 N.W.2d 405, 423.

The Wisconsin Supreme Court proceeded to reject the procedural/substantive law dichotomy:

This explanation is helpful. To repeat, in most states, "a statute of limitation merely extinguishes the plaintiff's remedy." Id. This, however, was not and is not the law in Wisconsin. In Wisconsin, we adopted the minority proposition that "the limitation of actions is a right as well as a remedy, extinguishing the right on one side and creating a right on the other." ... Under Wisconsin law, "statutes of limitation [are viewed as] substantive statutes because they create and destroy rights."....