Shell v. Schollander Cos.

• Citation: 358 Or. 552,369 P.3d 1101
• Decision Date: 19 February 2016
• Docket Number: SC S062791.,CC 106480CV,CA A150509
• Parties: Melissa SHELL, an individual, Petitioner on Review, v. The SCHOLLANDER COMPANIES, INC., dba Schollander Development Company, Respondent on Review. The Schollander Companies, Inc., dba Schollander Development Company, an Oregon corporation, Third–Party Plaintiff, v. Kustom Built Construction, LLC, an Oregon limited liability company; HL Stucco Systems, Inc., an Oregon corporation; Newside, Inc., an Oregon corporation; Western Cedar, Inc., an Oregon corporation; and J & R Gutter Services, Inc., an Oregon corporation, Third–Party Defendants.
• Court: Supreme Court of Oregon

358 Or. 552

369 P.3d 1101

Melissa SHELL, an individual, Petitioner on Review,

v.The SCHOLLANDER COMPANIES, INC., dba Schollander Development Company, Respondent on Review.

The Schollander Companies, Inc., dba Schollander Development Company, an Oregon corporation, Third–Party Plaintiff,

v.Kustom Built Construction, LLC, an Oregon limited liability company; HL Stucco Systems, Inc., an Oregon corporation; Newside, Inc., an Oregon corporation; Western Cedar, Inc., an Oregon corporation; and J & R Gutter Services, Inc., an Oregon corporation, Third–Party Defendants.

CC 106480CV

CA A150509

SC S062791.

Supreme Court of Oregon.

Argued and Submitted May 8, 2015.

Decided Feb. 19, 2016.

Daniel T. Goldstein, Ball Janik, LLP, Portland, argued the cause for petitioner on review. Christopher C. Grady, Aldrich Eike, P.C., Portland, filed the brief for petitioner on review. With him on the brief was Kevin A. Eike.

Paul E. Sheely, Smith Freed & Eberhard P.C., Portland, argued the cause and filed the brief for respondent on review. With him on the brief was Jakob Lutkavage–Dvorscak.

Adele J. Ridenour, Ball Janik LLP, Portland, filed the brief for amicus curiae Gerald and Melissa McKee. With her on the brief were Philip E. Joseph and James C. Pritchard.

Christine Moore, Landye Bennett Blumstein LLP, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association.

Before Balmer, Chief Justice, and Kistler, Walters, Landau, Baldwin, Brewer, and Nakamoto, Justices.^**

KISTLER

, J.

The primary question in this construction defect case is which of two statutes of repose applies when a buyer enters into a purchase and sale agreement to buy an existing home. Although each statute provides for a 10–year period of repose, the two periods of repose run from different dates. One runs from "the date of the act or omission complained of." ORS 12.115(1)

. The other runs from the date that construction is "substantial[ly] complet [e]." ORS 12.135(1)(b). In this case, the trial court found that plaintiff filed her action more than 10 years after "the date of the act or omission complained of" but less than 10 years after the construction was "substantial [ly] complet[e]." The trial court ruled that the first statute, ORS 12.115(1), applied and accordingly entered judgment in defendant's favor. The Court of Appeals affirmed. Shell v. Schollander Companies, Inc., 265 Or.App. 624, 336 P.3d 569 (2014). We allowed plaintiff's petition for review and now affirm the Court of Appeals decision and the trial court's judgment.

Defendant is a general contractor that builds "spec" houses—houses built without preexisting construction contracts in anticipation of eventual sale to the public.¹ Defendant's president explained that his company ordinarily does not sell homes to the public until the homes have been completed. In particularly strong markets, however, defendant has sold homes that are approximately 95 percent complete. On May 30, 2000, defendant and plaintiff entered into a purchase and sale agreement for a house. Although most of the construction had been completed, the agreement specified that defendant would make changes to the interior of the house. Specifically, defendant agreed to upgrade some of the flooring, install an air conditioning unit, and install a gas dryer in the laundry room. After defendant made those changes and the parties conducted a walk-through inspection, the sale closed on July 12, 2000.

More than 10 years after plaintiff entered into the purchase and sale agreement but less than 10 years after the sale closed, plaintiff filed a complaint against defendant in which she alleged that, as a result of defendant's negligence, some of the exterior elements of her house—the windows, siding, water resistant barrier, and flashing—were defective. In its answer, defendant alleged, as an affirmative defense, that the statute of repose set out in ORS 12.115(1)

barred plaintiff's negligence claims.² Defendant also filed a motion for summary judgment in which it submitted evidence that all the acts or omissions that gave rise to plaintiff's specifications of negligence occurred before plaintiff signed the purchase and sale agreement on May 30, 2000, and thus more than 10 years before she filed her complaint. It followed, defendant reasoned, that the 10–year statute of repose in ORS 12.115(1)

barred plaintiff's negligence claims.

Plaintiff responded that defendant was relying on the wrong statute of repose. In her view, ORS 12.135(1)(b)

applied and gave her 10 years from the date of "substantial completion * * * of construction" in which to bring her action. Plaintiff reasoned that, because a reasonable juror could find that the construction of her house was not substantially complete until the sale closed on July 12, 2000, her complaint came within the 10–year period of repose set out in ORS 12.135(1)(b) and thus was timely.

After considering the parties' argument, the trial court ruled that ORS 12.135(1)

applies to claims arising from contracts to construct, alter, or repair homes. The trial court concluded that, because plaintiff's claims did not arise out of a contract to construct a home, ORS 12.135(1) did not apply.³ It ruled instead that ORS 12.115(1) applied. The court also concluded that, because the alleged "acts or omissions" that gave rise to plaintiff's negligence claims occurred before plaintiff entered into the purchase and sale agreement (and thus more than 10 years before she filed her action), defendant was entitled to summary judgment. The trial court entered judgment accordingly.⁴

The Court of Appeals affirmed. It reasoned that the 10–year period of repose set out in ORS 12.135(1)(b)

runs from the date of "substantial completion" of construction. Because the date of "substantial completion" is defined as the date that the "contractee" accepts the construction as complete, the Court of Appeals adhered to its decisions holding that ORS 12.135(1) applies only to claims that "derive from a contractor-contractee relationship." See Shell, 265 Or.App. at 632, 336 P.3d 569 (following Lozano v. Schlesinger, 191 Or.App. 400, 84 P.3d 816 (2004) ). Because plaintiff's construction defect claims did not derive from such a relationship, the court agreed with the trial court that ORS 12.135(1) was inapplicable. It also agreed that ORS 12.115(1) applied and that the alleged acts or omissions that gave rise to plaintiff's negligence claims occurred more than 10 years before plaintiff filed her complaint. Id. at 633–34, 336 P.3d 569. It accordingly affirmed the trial court's judgment.

We allowed plaintiff's petition for review to consider which of the two statutes of repose applies. On that issue, plaintiff does not argue that ORS 12.115(1)

is, by its terms, inapplicable. Rather, she argues that ORS 12.135(1) is the more specific statute and, for that reason, controls. We agree with plaintiff's implicit recognition that ORS 12.115(1) potentially applies to her claims. As noted, that statute provides that "[i]n no event shall any action for negligent injury to person or property of another be commenced more than 10 years from the date of the act or omission complained of." ORS 12.115(1). As also noted, plaintiff has alleged that she sustained injuries to her property as a result of defendant's negligence. It follows that plaintiff's claims come within the terms of ORS 12.115(1), which applies to "any action for negligent injury to * * * property of another." (Emphasis added.)

As we understand plaintiff's argument, it rests on the proposition that ORS 12.135(1)(b)

governs a subset of claims to which ORS 12.115(1) otherwise would apply.

Defendant does not argue otherwise, and we assume that that proposition is correct. The issue, as the parties frame it, is whether plaintiff's claims come within the subset of claims to which ORS 12.135(1)(b)

applies.

At first blush, the text of ORS 12.135(1)(b)

appears to support plaintiff's position. That subsection provides that an "action against a person * * *, whether in contract, tort, or otherwise, arising from the person having performed the construction, alteration or repair of any improvement to real property * * * must be commenced" within "[t]en years after substantial completion * * * of the construction, alteration, or repair of * * * a residential structure[.]" ORS 12.135(1)(b)

.⁵ If we looked solely at the text of that subsection, it would appear that the statute of repose set out in ORS 12.135(1)(b) applies to negligence claims that arise out of the construction of residential structures and that ORS 12.135(1)(b), being the more specific statute, would apply in this case rather than the general statute of repose for negligent injury to person or property set out in ORS 12.115(1).

As the Court of Appeals observed, however, we cannot look solely at subsection (1) of ORS 12.135

in determining the class of claims to which that statute applies. We also have to consider subsection (4)(b) of that statute, which defines the phrase "substantial completion." See Vsetecka v. Safeway Stores, Inc., 337 Or. 502, 508–09, 98 P.3d 1116 (2004) (considering multiple subsections of a notice statute in determining whether the notice given was sufficient). That subsection provides:

" ‘Substantial completion’ means the date when the contractee accepts in writing the construction, alteration or repair of the improvement to real property or any designated portion thereof as having reached that state of completion when it may be used or occupied for its intended purpose or, if there is no such written acceptance, the date of acceptance of the completed construction, alteration or repair of such improvement by the contractee."

ORS 12.135(4)(b)

.

The 10–year statute of repose in ORS 12.135(1)(b)

runs from the date of "substantial completion" of construction, which the legislature has defined as the date that the "contractee" accepts the construction as complete, in writing or otherwise. A contractee is "a person with whom a...