Palisades At Fort Lee Condo. Ass'n, Inc. v. 100 Old Palisade, LLC

• Court: New Jersey Supreme Court
• Writing for the Court: JUSTICE ALBIN delivered the opinion of the Court.
• Citation: Palisades At Fort Lee Condo. Ass'n, Inc. v. 100 Old Palisade, LLC, 230 N.J. 427, 169 A.3d 473 (N.J. 2017)
• Decision Date: 14 September 2017
• Parties: THE PALISADES AT FORT LEE CONDOMINIUM ASSOCIATION, INC., Plaintiff–Respondent, v. 100 OLD PALISADE, LLC, Crescent Heights of America, Inc., Crescent Heights Acquisitions, LLC, 100 Old Palisade Holdings, LLC, 100 Old Palisade Holdings II, LLC, 100 Old Palisade Holdings III, LLC, Erez Bashari, Peiru Wen, Lenny Warshaw, Nissim Lanciano, Sharon Christenbury, Joseph Zdon, Pablo De Almagro, Ephraim Bashari, Sonny Kahn, individually and as Trustee of the Sk Business Trust, Sk Business Trust, Russell W. Galbut, individually and as Trustee of the Rf Business Trust, Rf Business Trust, Bruce A. Menin, individually and as Trustee of the Menin 1998 Family Trust, Menin 1998 Family Trust, F & G Mechanical Corp., Mannix Exterior Wall Systems, Inc., South Shore Contracting, Inc., Patwood Contracting Co., Inc., d/b/a Patwood Roofing, MTA Corp., Maarv Waterproofing, B & B Iron Works, Inc., Ray Engineering, Inc., Steven W. Ray, P.E., Metro Glass, Inc., and Romitch Co., Defendants–Appellants, and AJD Construction Co., Inc., Luxury Floors, Inc., Benfatto Masonry, Inc., and Forsa Construction, Inc., Defendants–Appellants. 100 Old Palisade, LLC, Crescent Heights of America, Inc., Crescent Heights Acquisitions, LLC, 100 Old Palisade Holdings, LLC, 100 Old Palisade Holdings II, LLC, 100 Old Palisade Holdings III, LLC, Erez Bashari, Peiru Wen, Lenny Warshaw, Nissim Lanciano, Sharon Christenbury, Joseph Zdon, Pablo De Almagro, Ephraim Bashari, Sonny Kahn, individually and as Trustee of the Sk Business Trust, Sk Business Trust, Russell W. Galbut, individually and as Trustee of the Rf Business Trust, Rf Business Trust, Bruce A. Menin, individually and as Trustee of the Menin 1998 Family Trust, Menin 1998 Family Trust, Defendants/Third–Party Plaintiffs, v. Applied Property Management Co., Inc., a/k/a Applied Development Company, Ironstate Development Company, a/k/a Ironstate Development, LLC, Ironstate Holdings, LLC, Costas Kondylis & Associates, P.C., Costas Kondylis & Partners, LLP, Constantine A. Kondylis, a/k/a Costas Kondylis, Goldstein Associates Consulting Engineers, P.C., Defendants/Third–Party Defendants. AJD Construction Co., Inc., Third–Party Plaintiff, v. Patwood Contracting Co., Inc., d/b/a Patwood Roofing, MTA Corp., Maarv Waterproofing, Inc., Benfatto Construction Corp., B & B Iron Works, Inc., Third–Party Defendants. Southshore Contracting, Inc., Third–Party Plaintiff, v. ARQ Painting & Contracting, Inc., Third–Party Defendant. Applied Property Management Co., Inc., The Palisades A/V Company, LLC, Applied Palisades, LLC, Applied Development Company, Inc., improperly pleaded as d/b/a Applied Development Company, Ironstate Development, LLC, Ironstate Holdings, LLC, Fourth–Party Plaintiffs, v. Wentworth Property Management Corporation, Worthmore Construction & Maintenance Co., Inc., Fourth–Party Defendants.

230 N.J. 427

169 A.3d 473

THE PALISADES AT FORT LEE CONDOMINIUM ASSOCIATION, INC., Plaintiff–Respondent,

v.100 OLD PALISADE, LLC, Crescent Heights of America, Inc., Crescent Heights Acquisitions, LLC, 100 Old Palisade Holdings, LLC, 100 Old Palisade Holdings II, LLC, 100 Old Palisade Holdings III, LLC, Erez Bashari, Peiru Wen, Lenny Warshaw, Nissim Lanciano, Sharon Christenbury, Joseph Zdon, Pablo De Almagro, Ephraim Bashari, Sonny Kahn, individually and as Trustee of the Sk Business Trust, Sk Business Trust, Russell W. Galbut, individually and as Trustee of the Rf Business Trust, Rf Business Trust, Bruce A. Menin, individually and as Trustee of the Menin 1998 Family Trust, Menin 1998 Family Trust, F & G Mechanical Corp., Mannix Exterior Wall Systems, Inc., South Shore Contracting, Inc., Patwood Contracting Co., Inc., d/b/a Patwood Roofing, MTA Corp., Maarv Waterproofing, B & B Iron Works, Inc., Ray Engineering, Inc., Steven W. Ray, P.E., Metro Glass, Inc., and Romitch Co., Defendants–Appellants,andAJD Construction Co., Inc., Luxury Floors, Inc., Benfatto Masonry, Inc., and Forsa Construction, Inc., Defendants–Appellants.

100 Old Palisade, LLC, Crescent Heights of America, Inc., Crescent Heights Acquisitions, LLC, 100 Old Palisade Holdings, LLC, 100 Old Palisade Holdings II, LLC, 100 Old Palisade Holdings III, LLC, Erez Bashari, Peiru Wen, Lenny Warshaw, Nissim Lanciano, Sharon Christenbury, Joseph Zdon, Pablo De Almagro, Ephraim Bashari, Sonny Kahn, individually and as Trustee of the Sk Business Trust, Sk Business Trust, Russell W. Galbut, individually and as Trustee of the Rf Business Trust, Rf Business Trust, Bruce A. Menin, individually and as Trustee of the Menin 1998 Family Trust, Menin 1998 Family Trust, Defendants/Third–Party Plaintiffs,

v.Applied Property Management Co., Inc., a/k/a Applied Development Company, Ironstate Development Company, a/k/a Ironstate Development, LLC, Ironstate Holdings, LLC, Costas Kondylis & Associates, P.C., Costas Kondylis & Partners, LLP, Constantine A. Kondylis, a/k/a Costas Kondylis, Goldstein Associates Consulting Engineers, P.C., Defendants/Third–Party Defendants.

AJD Construction Co., Inc., Third–Party Plaintiff,

v.Patwood Contracting Co., Inc., d/b/a Patwood Roofing, MTA Corp., Maarv Waterproofing, Inc., Benfatto Construction Corp., B & B Iron Works, Inc., Third–Party Defendants.

Southshore Contracting, Inc., Third–Party Plaintiff,

v.ARQ Painting & Contracting, Inc., Third–Party Defendant.

Applied Property Management Co., Inc., The Palisades A/V Company, LLC, Applied Palisades, LLC, Applied Development Company, Inc., improperly pleaded as d/b/a Applied Development Company, Ironstate Development, LLC, Ironstate Holdings, LLC, Fourth–Party Plaintiffs,

v.Wentworth Property Management Corporation, Worthmore Construction & Maintenance Co., Inc., Fourth–Party Defendants.

Supreme Court of New Jersey.

Argued April 25, 2017

Decided September 14, 2017

Eric S. Schlesinger argued the cause for appellant Forsa Construction (Golden, Rothschild, Spagnola, Lundell, Boylan & Garubo, attorneys; Eric S. Schlesinger and Russ M. Patane, of counsel and on the briefs, and Francesca E. Cheli, on the briefs).

Stephen C. Cahir argued the cause for appellant Luxury Floors, Inc. (Law Office of William E. Staehle, attorneys; Stephen C. Cahir, on the brief).

Mark D. Shifton argued the cause for appellant Benfatto Construction Corp. (Seiger Gfeller Laurie, attorneys; Mark D. Shifton of counsel and on the briefs, and Chester D. Ostrowski, on the brief).

John H. Osorio argued the cause for appellant AJD Construction Co., Inc. (Marshall Dennehey Warner Coleman & Goggin, attorneys; John H. Osorio, Walter F. Kawalec, III, and Pauline E. Tutelo on the briefs).

Raymond A. Garciaof the Connecticut bar, admitted pro hac vice, argued the cause for respondent (Lum, Drasco & Positanand Garcia & Milas, attorneys; Paul A. Sandars, III, of counsel and on the brief, and Raymond A. Garcia, and Nicole Liguori Micklich, of the Connecticut and Rhode Island bars, on the brief).

Gene Markin argued the cause for amicus curiae Community Association Institute (Stark & Stark, attorneys; Gene Markin and John Randy Sawyer, on the brief).

Michael S. Zicherman submitted a brief on behalf of amicus curiae Associated Construction Contractors of New Jersey (Peckar & Abramson, attorneys; Charles F. Kenny, of counsel, and Michael S. Zicherman, of counsel and on the brief).

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ–VINA, SOLOMON, and TIMPONE join in JUSTICE ALBIN's opinion.

JUSTICE ALBIN delivered the opinion of the Court.

Plaintiff, The Palisades at Fort Lee Condominium Association, Inc., filed lawsuits alleging that defendants, the general contractor and three subcontractors, defectively constructed a building complex that is now under the Condominium Association's control. The issue before us is whether plaintiff filed the lawsuits before the expiration of the statute of limitations.

N.J.S.A. 2A:14–1 is a statute of limitations generally governing tort-based property-damage claims. Under that statute, a construction-defect action must be commenced within six years "after the cause of any such action shall have accrued." Ibid. The heart of the controversy in this case is the point at which plaintiff's causes of action "accrued."

The trial court determined that the six-year statute of limitations began to run in May 2002, when the building was substantially complete. Applying its conception of the discovery rule, the court found that the building's owners knew or reasonably should have known of any defects within the six-year period and therefore should have filed the lawsuits by May 2008. Because the Condominium Association did not initiate the first lawsuit until after that date, the court dismissed the actions against all defendants.

The Appellate Division reversed, concluding that the Condominium Association's claims accrued in June 2007, when it undertook full unit-owner control of the building and became "reasonably aware" of actionable claims of construction defects based on the report of a construction expert it had retained. The Condominium Association filed all complaints against defendants within six years of that date.

We now hold that neither the trial court nor the Appellate Division applied the correct legal standard for determining when the construction-defect actions accrued pursuant to N.J.S.A. 2A:14–1. Although N.J.S.A. 2A:14–1's six-year statute of limitations typically commences upon substantial completion of a structure, the discovery rule applies to the accrual of a claim under N.J.S.A. 2A:14–1. Under that rule, the limitations clock does not commence until a plaintiff is able to discover, through the exercise of reasonable diligence, the facts that form the basis for an actionable claim against an identifiable defendant. Caravaggio v. D'Agostini , 166 N.J. 237, 246, 765 A. 2d 182 (2001).

Over time, as in this case, ownership of a building may change hands. A construction-defect lawsuit must be filed within six years from the time that the building's original or subsequent owners first knew or, through the exercise of reasonable diligence, should have known of the basis for a cause of action. A subsequent owner stands in no better position than a prior owner in calculating the limitations period. If a prior owner knew or reasonably should have known of a basis for a construction-defect action, the limitations period began at that point.

In light of the legal paradigm just articulated, we cannot determine when the accrual clock commenced for each defendant based on the record before us. Accordingly, we remand to the trial court to conduct a Lopez¹ hearing and to make findings of fact to settle that issue.

I.

A.

The Palisades is a residential building complex located in Fort Lee, New Jersey. The centerpiece of The Palisades is a forty-one story high-rise consisting of a thirty-story residential tower set atop an eleven-story parking garage. Within The Palisades complex are mid-rise apartments, townhomes, and various recreational facilities.

Palisades A/V Acquisitions Co., LLC (A/V Acquisitions) developed The Palisades project on property that it had acquired. In December 1999, A/V Acquisitions retained AJD Construction Co., Inc. (AJD) to serve as the general contractor on the project. AJD then hired various subcontractors, including Forsa Construction, Inc., Benfatto Masonry, Inc., and Luxury Floors, Inc., to perform specialized work on the project. Forsa Construction built the high-rise tower and garage, Benfatto Masonry constructed the exterior walls, and Luxury Floors installed flooring throughout the common areas. The chief architect on the project certified that The Palisades was "substantially complete" as of May 1, 2002, the date on which certificates of occupancy had been issued for various floors and units.

For the next two years, A/V Acquisitions rented apartments and units in The Palisades complex. In June 2004, A/V Acquisitions sold The Palisades to 100 Old Palisade, LLC (Old Palisade),² which converted the rental apartments and units into condominiums pursuant to the Condominium Act, N.J.S.A. 46:8B–1 to –38. As part of the condominium conversion process, Old Palisade retained Ray Engineering, Inc. to inspect the common elements of the property. Ray Engineering issued a report dated October 1, 2004 (the Ray Report), stating: "Generally, the structure of the building, townhomes and parking deck appeared to be in good condition." The report noted the presence of "some spalling of concrete" and "some sporadic cracking of the concrete" in the parking deck. The spalling and cracking, however, did "not appear to be a structural concern at the present time."

In converting The Palisades to a condominium form of ownership, Old Palisade attached the Ray Report to its public offering statement on January 27, 2005, and to the master deed. According to the master deed, the condominium association would be...