Securities-Intermountain, Inc. v. Sunset Fuel Co., SECURITIES-INTERMOUNTAI

Citation611 P.2d 1158,289 Or. 243
Decision Date03 June 1980
Docket NumberINC,SECURITIES-INTERMOUNTAI
Parties, Petitioner, v. SUNSET FUEL COMPANY and Cy Stadsvold, Respondents. TC A7605 06171; CA 11004; SC 26291.
CourtSupreme Court of Oregon

Rudy R. Lachenmeier, of Vergeer, Roehr & Sweek, Portland, argued the cause and filed briefs for petitioner.

Donald J. Friedman, of Black, Kendall, Tremaine, Boothe & Higgins, Portland, argued the cause and filed briefs for respondent Sunset Fuel Co.

Elizabeth K. Reeve, of Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland, argued the cause for respondent Stadsvold. With her on the briefs were Ridgway K. Foley, Jr., and Kenneth E. Roberts, Portland.

Before DENECKE, C. J., and HOLMAN, * HOWELL, LENT, LINDE and PETERSON, JJ.

LINDE, Justice.

The question before us concerns the application of the proper statute of limitations to an action for damages brought by plaintiff, as assignee of a general contractor of a construction project, against an architect and a heating contractor allegedly responsible for a defective heating system. There are three possibilities: The six-year "contract" statute of limitations, ORS 12.080(1), the general two-year statute of limitations, ORS 12.110(1), and a special two-year statute relating to actions for damages "for injuries to a person or to property arising from another person having performed the construction, alteration, or repair of any improvement to real property," ORS 12.135. The choice is complex. If the special statute, ORS 12.135, covers all damage claims arising from faulty performance of the covered services in construction work, it applies to this action. If that section is limited to certain kinds of injuries or to tort claims, it then becomes necessary to determine whether plaintiff's action is properly characterized as arising from contract or tort.

The present action was initiated more than two years but less than six years after defendants completed their work and plaintiff discovered the claimed injuries. The trial court entered summary judgment for defendants on their affirmative defense that ORS 12.135 barred the action. The Court of Appeals affirmed, 40 Or.App. 291, 594 P.2d 1307 (1979), and we allowed review.

I

Before examining the parties' contentions it is necessary to review the statutory formulations. ORS 12.080(1) allows six years within which to bring an action "upon a contract or liability, express or implied," with exceptions not relevant here. 1 ORS 12.110(1) enacts a two-year limit for a list of specified intentional torts and for "any injury to the person or rights of another, not arising on contract, and not especially enumerated in this chapter." 2 Thus ORS 12.110(1) does not purport to be a statute of limitations for a general category called "torts." Rather, it covers the residual category of those actions which cannot be said to arise from contracts or from other sources of liability covered by different statutory limitations. 3

ORS 12.135 is a later addition to these statutes, enacted in 1971. It provides:

"(1) An action to recover damages for injuries to a person or to property arising from another person having performed the construction, alteration or repair of any improvement to real property or the supervision or inspection thereof, or from such other person having furnished the design, planning, surveying, architectural or engineering services for such improvement, shall be commenced within two years from the date of such injury to the person or property; provided that such action shall be commenced within 10 years from substantial completion of such construction, alteration or repair of the improvement to real property.

. . . ."

Unlike the two earlier sections, this statute does not define its coverage by the legal source or nature of the liability on which the action is founded but on the character of the injuries incurred in a specified context. Its literal elements are that the action be one to recover damages for injuries to a person or to property, and that these injuries have arisen from another person having performed certain services in the construction, alteration, or repair of real property. When the action is by the person for whom the contractual services were to be performed against persons engaged to perform them, as it is in this case, the question is whether ORS 12.135 applies to a claim of financial losses from alleged breaches of contract by the persons so engaged.

The coverage of the statute has been the subject of divided opinions in the Court of Appeals. In the first case raising the issue, the court held that an action on an express warranty to remedy defects in the repair of a building was not limited to two years but could be commenced within six years as a contract action governed by ORS 12.080(1). Housing Authority of Portland v. Ash Nat'l, 36 Or.App. 391, 584 P.2d 776 (1978). The opinion explained this conclusion by two reasons: first, that the words "injuries to a person or to property" appear to contemplate tort actions, and second, that although ORS 12.080 excepts from its six-year limitation some contract actions governed by other sections, it was not amended to include such an exception for ORS 12.135. In the present case, the Court of Appeals avoided any reference to this preceding opinion, since it held that plaintiff's action should not properly be characterized as an action upon a contract but rather as a tort action. Judge Buttler concurred on the different ground that the damages claimed here were not for injuries to a person or to property. 40 Or.App. at 301, 594 P.2d 1307. In a subsequent action on an express warranty, the court adhered to its decision in Housing Authority of Portland v. Ash Nat'l, but one member of the court who participated in all three cases concluded that he now thought that decision to have been wrong and that ORS 12.135 should properly govern actions on contract as well as tort theories. Amfac Foods v. Fred A. Snyder Roof, Inc., 43 Or.App. 107, 602 P.2d 321 (1979).

The problems of the statute's intended coverage cannot be wholly resolved by an examination of its text. Certainly the use of the terms "injuries to a person or to property" includes the kinds of harms which, when caused by substandard construction work, might give rise to a tort claim. But ORS 12.135 makes no mention of the legal theory on which a claim for damages is founded, nor must it necessarily preclude the wider reading urged by defendants that it covers such financial "injuries" from faulty performance as, for instance, a reduced value of the building or the cost of substitute performance. We therefore turn to an examination of its legislative history.

The impetus for a special limitation of actions against building contractors apparently came from the Associated General Contractors of America, Inc. (AGCA), a trade association. The original bill, introduced as HB 1259 in the 1971 legislative session, proposed that initiation of any action, "whether in contract, tort or otherwise" arising from a contractor's work on an improvement of real property be limited to six years from the completion of the project, defined as the date when the improvement either is accepted by the "contractee" or is ready for use or occupancy. However, the bill also provided that it would not extend a period of limitation provided by another statute.

It is apparent that this bill was addressed to the contractors' concern, not about the length of the limitation periods but about fixing the time from which these periods are measured, specifically about claims that might "arise" from latent defects in construction work long after a potential defendant had completed the work. The outer limit of such claims was to be six years from the date of completion, whether the claim was "in contract, tort or otherwise," and irrespective of the kind of injury claimed. However, if another statute limited the time within which to commence the action, HB 1259 would not extend that time. We understand this to have intended that an action previously subject to a two-year limitation from the date when the injury occurred; or perhaps when it was discovered, would still be subject to that limitation even short of six years from the date of completion. Thus HB 1259 did not propose to do away with the preexisting distinction between contract claims and other theories of liability; it merely proposed to subject them all to the outer limit of six years measured from the date of completion.

Evidently the absolute six-year limitation was not acceptable to the House committee that considered the bill. The committee extended the period to ten years and added a new provision addressed to "an injury to property or person or an injury causing wrongful death." If such an injury occurred after the eighth year following completion, an action "in tort" to recover damages could still be commenced within two years from the date on which the injury occurred, so that for such actions the ultimate limitation would be 12 rather than 10 years after the completion of the project. Eng. HB 1259 (April 16, 1971). Thus the reference to an "injury to property or person" first entered the bill in this proposed amendment, coupled with references to "wrongful death" and actions "in tort."

The committee amendment in turn was unsatisfactory to the original proponents. It led them to propose a new version, now phrased to apply to "(a)n action to recover damages for injuries to a person or to property," which was to be limited to two years from the date of the injury but not more than seven years from the date the work was completed. The spokesman for the AGCA explained that this proposal was patterned on the then current provision governing medical and dental malpractice actions, ORS 12.110(4) (1971). With a change in the outer limit from seven years to ten, this amendment became the basis for ...

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