Case Title: Stephens v. Creel

Citation: 429 So. 2d 278

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1983-03-11T00:00:00Z

Document:
429 So. 2d 278 (1983)
Frank G. STEPHENS and Karla S. Stephens
v.
Marion J. CREEL, Individually, and Creel Construction & Realty Co., Inc., a corporation.
81-1053.

Supreme Court of Alabama.
March 11, 1983.
*279 C.R. Lewis of Lewis & Brackin, Dothan, for appellants.
Jere C. Segrest of Hardwick, Hause & Segrest, Dothan, for appellees.
TORBERT, Chief Justice.
This is an appeal by Frank G. and Karla S. Stephens from the trial court's granting of the defendants' ARCP 12(b)(6) motion on the grounds that it affirmatively appeared from the face of the complaint that the six-year statute of limitations had run on the Stephenses' claim. The ex contractu claim is based upon allegations of breach of warranty for defective workmanship in the construction of a home. The lower court entered the following order:
The record shows that in October of 1972 the parties entered into a contract by which Creel[1] agreed to construct a home for Mr. and Mrs. Stephens according to the plans and specifications provided. The allegations of the complaint reveal that the original plans and specifications, providing for concrete slab flooring, were changed by agreement of the parties to provide for wood floors to be constructed at an adequate height above the ground. Creel completed construction of the home in November of 1973. The Stephenses claim that Creel breached the agreement by failing to construct the house in a workmanlike manner, in that Creel "failed to provide for adequate ventilation and flow of air between the ground and wood joists, timbers, sills and wood floors and failed to cover the ground underneath said wood floors with adequate polyethylene or other substance to prevent moisture from the ground causing the joists, timbers, sills and wood floors to rot," and further claim that "As a proximate result of defendants' said breach of said agreement, the joists, timbers, sills and wood floors and other parts of said home were caused to rot, deteriorate and were otherwise damaged."
The Stephenses, denying any prior notice or knowledge of facts by which they could have discovered the problem earlier, allege that "about November, 1979, when they noticed that the surface of the foyer tile was becoming irregular, plaintiff, Frank G. Stephens, looked under the house and, for the first time, saw the rotting wood and damaged timbers and floors." The complaint in this action was not filed until April of 1982.
Appellees state the issue presented:
By so stating the issue, counsel for Creel focuses the Court's attention on the respective positions of the parties. Both parties concede that the statute of limitations does not commence to run with the making of the contract as the trial court said it did. Creel contends, however, that the statute *280 runs from the date of the alleged breach; and this occurred, says Creel, on the date of the completion of the contract.
The Stephenses, on the other hand, assert that their claim should not be barred before they even knew of the damage; that is, they contend for the adoption of a "discovery" doctrine with respect to the beginning of the running of the six-year statute of limitations.
We agree that the trial court erred in holding that plaintiffs' cause of action accrued when the contract was made. The statute of limitations does not begin to run upon the entering into of a contract, but when the contract is breached and a cause of action accrues. Lipscomb v. Tucker, 294 Ala. 246, 314 So. 2d 840 (1975).
We hold that in a contract action based upon a warranty to construct a house in a workmanlike manner, the cause of action accrues and the statute of limitations begins to run on the date the defendant completes performance. By its very nature it is the failure to construct the house in a workmanlike manner that constitutes the breach. Therefore, the plaintiff's cause of action is barred by the six-year statute of limitations. Code 1975, § 6-2-34.
The appellants' arguments are premised on the erroneous assumption that at the date of completion there were no damages, and that the damage only came about as the floor began to rot. We disagree.
At the date of completion, there was allegedly a failure to construct the house in a workmanlike manner. Specifically, plaintiffs say, the house was to have been built higher off the ground, or greater ventilation needed to be provided beneath the house, or plastic layers should have been placed over the ground. At that time the plaintiffs would have sustained damages measured by the difference between the fair market value of the property as it was constructed, and the fair market value of the property as it should have been constructed. At that point, the plaintiffs could have recovered an amount necessary to put the structure in the condition it would have been in if Creel had properly completed performance of the construction contract.
Counsel for both parties have argued at length case law arising from causes of action sounding in tort rather than contract. See, Payne v. Alabama Cemetery Ass'n, Inc., 413 So. 2d 1067 (Ala.1982) (tort action for trespass and negligent or wanton destruction of bodily remains); Garrett v. Raytheon Co., 368 So. 2d 516 (Ala.1979) (tort action for personal injury, based on negligence, strict liability, extended manufacturers liability); Corona Coal Co. v. Hendon, 213 Ala. 323, 104 So. 799 (1925) (tort action for negligence in permitting a basement to become filled with water); West Pratt Coal Co. v. Dorman, 161 Ala. 389, 49 So. 849 (1909) (tort action for trespass resulting in the collapse of plaintiff's land); Home Insurance Co. v. Stuart-McCorkle, Inc., 291 Ala. 601, 285 So. 2d 468 (1973) (tort action for negligence resulting in damage to a building). In the tort context the rules governing the accrual of a cause of action differ from those applied in a contract case. That is, in the tort context a showing of injury or damage is an integral part of the cause of action. In the contract context, on the other hand, even if the plaintiff could not show any actual damage, we have repeatedly allowed a recovery of at least nominal damages where the plaintiff has shown that defendant has breached the terms of the contract. See, Stephenson v. Jebeles & Colias Confectionery Co., 10 Ala. App. 431, 65 So. 314 (1914); World's Exposition Shows, Inc., v. B.P.O. Elks, 237 Ala. 329, 186 So. 721 (1939).
The secondary authorities are in accord with the distinction between contract and tort actions that we have suggested above. In a contract action:
51 Am.Jur.2d Limitation of Actions §§ 126, 146 (1970). In contrast, in a tort action:
51 Am.Jur.2d Limitation of Actions § 135 (1970).
We find several Alabama cases which support this result. Sims v. Lewis, 374 So. 2d 298 (Ala.1979), dealt in part with the question of when a defense of laches would be successful in a cause of action based upon an implied warranty. The defective condition in that case was a faulty septic system which malfunctioned within six years after completion. The opinion appears to rely on the date of completion of the house as the date on which plaintiff's cause of action for breach of an implied warranty accrued. This Court recognized our rule that, "In no event, however, would the time limitation within which to file suit for implied warranty extend beyond the period allowed for filing suit on an express warranty (six years)." 374 So. 2d  at 305.
Likewise, in Seybold v. Magnolia Land Co., 376 So. 2d 1083 (Ala.1979), the plaintiff sought to avoid the bar of the statute of limitations in a contract action. The defendant had agreed to maintain an access road for the plaintiff, but had failed to do so for a period of ten years before the action was commenced. In that case the plaintiff attempted to convince this Court that the jury should be allowed to determine what would be a "reasonable" time within which performance should commence where a contract does not specify the time of performance. The plaintiffs sought this ruling, so that the statute of limitations of six years would run from the "reasonable" time determined by the jury. This court rejected this approach, for reasons of public policy:
376 So. 2d  at 1086. The same rationale applies to the case before us. This Court also stated in Seybold:
*282 The approach taken here finds support in the case law from other jurisdictions. In Kennedy v. Johns-Manville Sales Corp., 135 Conn. 176, 62 A.2d 771 (1948), the plaintiff's cause of action was for breach of contract to construct a house in a skillful and workmanlike manner. The plaintiff complained that the insulation put in the walls in 1935 was improperly installed, resulting in an injury that did not become apparent until 1945. In that case the court stated:
Livingston v. Sims, 197 S.C. 458, 462, 15 S.E.2d 770, 772 (1941). See also, Howarth v. First National Bank of Anchorage, Alaska, 540 P.2d 486, aff'd, 551 P.2d 934 (Alaska 1975).
This same result would be reached in breach of warranty cases arising under the Alabama Uniform Commercial Code, § 7-2-725. The four-year statute runs from the date when tender of delivery is made unless explicitly extended by the parties or unless personal injury results from the defect. See, Simmons v. Clemco Industries, 368 So. 2d 509 (Ala.1979).
Finally, we must emphasize that this result is controlled by the nature of the warranty itself. We must distinguish warranties of current condition (as in the case before us) in which a breach occurs at the outset, from warranties concerning future conditions, in which case a breach might occur at a later date. This distinction was well-made in Vilord v. Jenkins, 226 So. 2d 245 (Fla.App.1969), an action based upon a contract by a physician to perform a sterilization procedure which would render the wife permanently unable to become pregnant:
226 So. 2d  at 247. The warranty to construct in a workmanlike manner is a warranty of current condition, and, therefore, the performance of the defendant must be evaluated as of the time when the structure was completed.
We are compelled to hold that the cause of action accrued and the statute of limitations began to run on the date Creel completed performance. Thus the contract claim for breach of warranty was barred by the six-year statute.
AFFIRMED.
MADDOX, ALMON, SHORES, EMBRY and BEATTY, JJ., concur.
FAULKNER, JONES and ADAMS, JJ., dissent.
JONES, Justice (dissenting).
I respectfully dissent.
The chronological sequence of events, as taken from the complaint, are:
Although the parties reach different conclusions, they both agree upon the basic premise: that the period of limitations begins to run from the date of the accrual of the cause of action.
Chief Justice Torbert, speaking for the Court in Payne v. Alabama Cemetery Association, Inc., 413 So. 2d 1067 (Ala.1982), analyzed the Alabama case law relating to the accrual of a cause of action:
Likewise, in Ramey v. Guyton, 394 So. 2d 2 (Ala.1980), interpreting the Medical Malpractice Act (§ 6-5-482), and finding that the cause of action accrued on the day Plaintiff suffered her stroke, the Court stated:
The applicable rule is relatively simple to declare: In the absence of a statute,[1] the cause of action accrues, thus commencing the running of the six-year period of limitations, when the alleged breach becomes actionable; that is, when the action is maintainable, the cause of action accrues.
The application of the rule to the peculiar facts of this case is much more difficult. Indeed, these facts do not lend themselves to the solution contended for by either of the parties. Builders' "completion of the contract" date is unacceptable, because, clearly, on that day Homeowners had suffered no actionable breach. This is the precise point spoken to in Bonomi v. Backhouse, 9 H.L.Cas. 503, quoted in West Pratt Coal Co. v. Dorman, 161 Ala. 389, 394, 49 So. 849 (1909):
While the speculative nature of prospective damages, if any, to Homeowners' new residence left Homeowners without a cause of action, for damages based on breach of warranty on the date of its completion (there being no damages at that time), Homeowners' discovery of damages seven years later comes at a time far removed from the initial loss, giving rise to a cause of action for damages. Put another way, our case law does not support either the completion-of-the-contract date or the discovery-of-the-damages date as the time for the commencement of the running of the statute of limitations. Under these facts, the former comes before the accrual of the ex contractu cause of action and the latter after its accrual.
To commence the statute's running as of the completion date of the contract flies in the face of the principles laid down in West Pratt Coal Co. and Ramey v. Guyton, supra. The newly-purchased residence manifested no damage in 1972 which would support an actionable breach of the construction contract. By the same analysis, however, to commence its running from the Homeowners' *285 first becoming aware of the extreme decay damages in November, 1979, would be violative of Garrett's rejection of the discovery rule.[2] Indeed, Homeowners do not seriously contend, apart from the invocation of the discovery rule, that the alleged damage did not constitute an actionable breach at some point in time before November 1979.
Homeowners' discovery of the advanced structural damage, as shown by the pleadings in the instant case, is not to be confused with plaintiff's discovery of the "sinking" grave in Payne. The cause of action in Payne could not have accrued until plaintiff became aware of the defendants' conduct which allegedly resulted in plaintiff's personal injury. Contrary to the facts in the instant case, where the legal damage and the discovery of that damage are separated by length of time, the legal injury and the discovery of defendant's alleged wrongful conduct concurred in Payne, thus accruing the cause of action upon the incident of plaintiff's injury.
When, then, did Homeowners' cause of action accrue? Justice Maddox, speaking for the Court in Sims v. Lewis, 374 So. 2d 298 (Ala.1979), addressed this question:
The rule of "reasonableness" by which the builders' limit of liability is governed" has two separate, but related, dimensions.
First, the scope or coverage of the warranty is subject to reasonable limitations. Implied warranties of workmanship and fitness are not intended as endless guarantees against all structural defects. The second dimension relates more specifically to the accrual of the cause of action for breach of implied warranty. We can appreciate this aspect of the reasonableness rule by first understanding what it does not mean. It does not mean, for example, that the jury is left to determine the time frame within which the homeowner must bring the suit after the cause of action accrues. That period is prescribed by law. § 6-2-34.
Instead, the jury, using the test of reasonableness, determines, under the evidence, when the actionable breach occurred. That is, the jury, having first found that the claimed breach comes within the scope of the warranty, as contemplated by the parties, must then determine, from the reasonable inferences of the evidence, when the damage, if any, occurred. If such damage results proximately from the builder's breach of contract, express or implied, and, if the damage is of such nature and extent as to support an actionable breach of warranty, a cause of action accrues and the six-year statute of limitations begins to run contemporaneously therewith.
The problem with the majority opinion is that it assumes the point in issue: that the breach of the contract and the accrual of the cause of action occurred simultaneously. Once this assumption is made, the conclusion naturally follows. But the date of breach is not necessarily the accrual date of the cause of action. If the majority holds, as a matter of law, that breach and accrual are the same thing, then the majority has just overruled West Pratt Coal Co. v. Dorman, 161 Ala. 389, 49 So. 849 (1909). It is actionable breacha breach for which an action may be maintainedthat accrues the cause of action.
As the majority opinion states: "By its very nature it is the failure to construct the house in a workmanlike manner that constitutes the breach." Rather, the question is when did the breach become actionable? *286 The majority goes on to create a distinction between tort actions and contract actions with respect to "accrual." No authority is cited for this radical departure in the context of the matter under review. Indeed, the first-quoted paragraph from 51 Am.Jur. Limitations of Actions, §§ 126, 146 (1970), emphasizes the accrual of the cause of action as determinative of the applicable period of limitations for both contract and tort. That the cause of action accrues "usually [at] the time of the breach" is illustrated by such cases as Seybold v. Magnolia Land Co., 376 So. 2d 1083 (Ala.1979). There, the claimed breach was for the failure to maintain an access road. Certainly, when the agreement sued upon is for the doing of an affirmative act, as soon as the time expires without the obligated party's performing as promised, the cause of action accrues.
That this is not one of those usual situations can be readily seen by simply posing the question: Suppose the Homeowners had filed suit the day following completion of their house for breach of warranty (failure to construct the house in a workmanlike manner)keeping in mind that the warranty was general in nature and not specific as to its details. Can there be any doubt as to the outcome of Plaintiffs' suit? The question is answered by West Pratt Coal Co.: The alleged damages are purely speculative, not just as to future compensatory loss, but as to any damages, including nominal damages; and this for the reason that no breach can be shown, to say nothing of the accrual of a cause of action.
FAULKNER and ADAMS, JJ., concur.
[1]  The defendants were an individual and a corporation controlled by him. The two defendants are referred to collectively as "Creel."
[1]  For examples of such statutes, see § 6-2-3 (providing for the accrual of the cause of action for fraud upon discovery of facts constituting the fraud); § 6-5-482 (providing for the accrual of the cause of action for medical mal-practice upon discovery of injury); and § 6-5-502 (providing for the accrual of the cause of action for product liability upon discovery of certain personal injury).
[2]  Although I have not changed my view expressed in the dissent in Garrett, my dissent herein accepts Garrett's rejection of the discovery rule.