Trustees of Rowan Technical College v. J. Hyatt Hammond Associates, Inc.

• Decision Date: 02 April 1985
• Docket Number: No. 376PA84,376PA84
• Citation: 328 S.E.2d 274,313 N.C. 230
• Court: North Carolina Supreme Court
• Parties: , 24 Ed. Law Rep. 549 The TRUSTEES OF ROWAN TECHNICAL COLLEGE v. J. HYATT HAMMOND ASSOCIATES, INC., Wagoner Construction Co., Inc., Wilford A. Hammond and J. Hyatt Hammond.

Page 274

328 S.E.2d 274

313 N.C. 230, 24 Ed. Law Rep. 549

The TRUSTEES OF ROWAN TECHNICAL COLLEGE v. J. HYATT HAMMOND ASSOCIATES, INC., Wagoner Construction Co Inc., Wilford A. Hammond and J. Hyatt Hammond.

No. 376PA84.

Supreme Court of North Carolina.

April 2, 1985.

Williams, Boger, Grady, Davis & Tuttle, P.A. by Samuel F. Davis, Jr., Concord, for plaintiff-appellant.

Womble, Carlyle, Sandridge & Rice by William C. Raper and Michael E. Ray, Winston-Salem, for defendant-appellees J. Hyatt Hammond Associates, Inc., Wilford A. Hammond and J. Hyatt Hammond.

EXUM, Justice.

The sole question presented by this appeal is whether the four-year statute of repose contained in N.C.G.S. § 1-15(c), a statute dealing with professional malpractice claims, operates to bar plaintiff's claim for damages against defendant architects and engineers. We conclude that it does not because N.C.G.S. § 1-50(5), a statute dealing with claims against persons, among others, who design and supervise construction of buildings with a six-year statute of repose, governs this claim. ¹ We, therefore, reverse the Court of Appeals which decided to the contrary.

Rowan Technical College is a community college located in Salisbury. Defendant J. Hyatt Hammond Associates, Inc. (Hammond) is an architectural and engineering firm. Defendant Wilford A. Hammond, a licensed architect, and defendant J. Hyatt Hammond, a licensed engineer, are both officers, stockholders and employees of the firm. Defendant Wagoner Construction Company, Inc. (Wagoner) is a general contracting firm.

According to the complaint filed 26 April 1982, plaintiff on 6 December 1973 contracted in writing with Hammond for Hammond to provide architectural and engineering services in connection with the construction of three buildings and a teaching auditorium on plaintiff's campus. Hammond agreed under section 1-13(f) of the contract to "provide general administration of the performance of construction contracts," including continuous inspection of all work "by qualified and mutually agreed upon representatives of the designer's firm not less than once per week ... and as often as necessary to insure compliance with plans and specifications." The parties entered a supplemental agreement in which, for further consideration paid by plaintiff, Hammond agreed "to provide daily and continuous supervision and inspection of the work." Following this agreement, plaintiff on 2 October 1974 contracted in writing with defendant Wagoner for the actual construction of the buildings. On 1 October 1976, Hammond certified to plaintiff that Wagoner had completed its construction contract. Plaintiff made final payment to Wagoner on 11 October 1976 based upon this certification, followed by final payment to Hammond on 27 April 1977.

The complaint further alleges: On or about 15 January 1982, plaintiff noticed a horizontal fracture and displacement between the first and second courses of concrete block in one of the buildings, creating an offset in the masonry joint and an outward bowing of the wall. Upon further inspection, plaintiff discovered similar fractures and displacements on exterior walls of each of the buildings designed by Hammond and constructed by Wagoner. These defects were not reasonably discoverable before 15 January 1982. Plaintiff suffered extensive and ongoing damage, requiring extensive repairs and replacement, proximately caused by breach of contract, breach of express and implied warranties and negligence by Hammond and Wagoner in failing to properly design and construct the buildings.

Hammond responded with a motion to dismiss under N.C.G.S. 1A-1, Rule 12(b)(6) alleging inter alia that plaintiff's claim was filed more than four years after it accrued and was therefore time barred by § 15(c) and § 52(1). Wagoner raised the same defense in an amended answer filed 20 September 1982.

The trial court granted Hammond's motion to dismiss on 17 September 1982 and Wagoner's on 7 October 1982.

On plaintiff's appeal the Court of Appeals reversed the dismissal as to Wagoner. The Court of Appeals held that plaintiff's claim against Wagoner was governed by § 52(16), which provides for a three-year period of limitation from the time "damage to property becomes apparent or ought reasonably to have become apparent, whichever first occurs." Since plaintiff discovered its damage on 15 January 1982 and brought its action within three years, plaintiff was not time barred.

The Court of Appeals affirmed the dismissal of plaintiff's claims against Hammond. It held this action was governed by § 15(c) with its "outside limit of four years [from defendant's last act] for an action for malpractice arising out of the performance or failure to perform professional services." Since plaintiff's claim was not filed until 26 April 1982, more than four years from Hammond's certification of the project, plaintiff's suit against Hammond was time barred.

We allowed plaintiff's petition for discretionary review "with review limited solely to the question of which statute ... applies to ... plaintiff's claim against ... defendant architects and engineers."

I.

At the outset we note that the present version of § 50(5), as amended effective 1 October 1981 (1981 Sess.Laws, c. 644), does not apply to this claim. Both parties concede that had plaintiff's claim accrued after the effective date of the 1981 amendments to § 50(5), it would be governed by the six-year statute of repose contained therein. ² Plaintiff's claim accrued, however, before the effective date of this statute. If plaintiff's claim was already barred when amended § 50(5) became effective, it could not be revived by the amendments. Raftery v. Construction Co., 291 N.C. 180, 230 S.E.2d 405 (1976).

The question, then, is whether plaintiff's claim was barred before the amendments to § 50(5) became effective. The answer depends upon whether plaintiff's claim is governed by § 15(c) as Hammond contends, or the 1963 version of § 50(5) as plaintiff contends. ³ If the former governs, plaintiff's claim would be barred because that statute contains a four-year statute of repose running from Hammond's last act giving rise to the claim. The parties apparently agree that Hammond's last act giving rise to the claim occurred no later than 1 October 1976, the date Hammond certified that the general contractor had completed construction. If § 50(5) applies, plaintiff's claim would not be barred since this statute contains a six-year statute of repose running from "performance or furnishing of ... services and construction." If Hammond completed its architectural and engineering services no earlier than 1 October 1976, the date of its certification, plaintiff's claim was filed within the time period prescribed by this statute. ⁴

The Court of Appeals erroneously concluded plaintiff's claim was governed by § 15(c).

That section provides:

Except where otherwise provided by statute, a cause of action for malpractice arising out of the performance of or failure to perform professional services shall be deemed to accrue at the time of the occurrence of the last act of the defendant giving rise to the cause of action: Provided that whenever there is bodily injury to the person, economic or monetary loss, or a defect in or damage to property which originates under circumstances making the injury, loss, defect or damage not readily apparent to the claimant at the time of its origin, and the injury, loss, defect or damage is discovered or should reasonably be discovered by the claimant two or more years after the occurrence of the last act of the defendant giving rise to the cause of action, suit must be commenced within one year from the date discovery is made: Provided nothing herein shall be construed to reduce the statute of limitation in any such case below three years. Provided further, that in no event shall an action be commenced more than four years from the last act of the defendant giving rise to the cause of action.... ⁵

This section was enacted on 12 May 1976. (1975 N.C.Sess.Laws, c. 977.) It was designed to change "the time of accrual" of professional malpractice actions "from the date of discovery of injury to the date of defendant's last act" giving rise to the claim. Flippin v. Jarrell, 301 N.C. 108, 112, 270 S.E.2d 482, 485 (1980). "Also, for latent claims discovered two or more years after the defendant's last negligent act, except those involving a non-therapeutic and non-diagnostic 'foreign object' left in the body, the statute established a four-year period of limitation" measured from defendant's last act. Id.

A review of this statute's legislative history reveals that it was enacted specifically in response to a so-called medical malpractice "crisis" experienced by North Carolina and many of her sister states. The Court of Appeals in Roberts v. Durham County Hospital Corp., 56 N.C.App. 533, 540-41, 289 S.E.2d 875, 879-80 (1982), provided the following analysis of the factors prompting the enactment of § 15(c):

It is generally agreed that in the early 1970's what has been termed a medical malpractice insurance crisis existed in most jurisdictions in this country. The crisis resulted from the increasing reluctance of insurance companies to write medical malpractice insurance policies and the dramatic rise in premiums demanded by those companies which continued to issue policies. The difficulty in obtaining insurance at reasonable rates forced many health-care providers to curtail or cease to render their services. The legislative response to this crisis sought to reduce the cost of medical malpractice insurance and to insure its continued availability to the providers of health care. By October 1975, 39 states had commissioned studies of the medical malpractice problem and 22 states had revised civil practice laws and rules in an attempt to remedy the problem. Redish, Legislative Response to the Medical Malpractice Insurance Crisis: ...