Opinion ID: 1995721
Heading Depth: 2
Heading Rank: 1

Heading: The Repair Clause Claims

Text: Central to the Court of Special Appeals' limitations analysis of the Repair Clause claims is the allegation in ¶ 11 of the complaint that the Council had given notice of the ¶ 12 defects within one year after September 17, 1977. That meant that all ¶ 12 defects were known to the Plaintiffs no later than September 18, 1978. The action was not filed until more than three years thereafter, on September 24, 1981. Under the general statute of limitations [a] civil action at law shall be filed within three years from the date it accrues.... Md.Code (1974, 1984 Repl.Vol.), § 5-101 of the Courts and Judicial Proceedings Article. The intermediate appellate court concluded that claims based on breach of the Repair Clause and seeking damages for the ¶ 12 defects ( i.e., counts one and three) had accrued on or before September 18, 1978, and were barred. This analysis postulates that accrual for limitations purposes of the cause of action for breach of the Repair Clause cannot occur later than the time when a Plaintiff discovers a defect covered by the Repair Clause and implicitly reasons that discovery had to have occurred on or before the date of notice. [5] The Court of Special Appeals also concluded that breach of contract claims brought by Unit Owners for damage to particular units were not controlled by the allegation that notice of all ¶ 12 defects had been given to Melba by September 18, 1978. Paragraph 11 of count one, which was incorporated into all succeeding counts, additionally alleged that notice of defects had been given to Melba as late as May 6, 1980. The Court of Special Appeals interpreted this allegation, correctly in our view, to relate to defects other than the ¶ 12 defects. Under the allegation referring to May 6, 1980, one or more unspecified Unit Owners, acting in compliance with the Repair Clause, could have given notice to Melba on the last day of the one year notice period accounting from the date of settlement under that Unit Owner's sales contract. The court, working backwards from the actual date of institution of this action, then calculated in the following fashion the latest date on which a Unit Owner could have settled without having the claim barred by limitations. September 24, 1981  date action instituted. September 23, 1978  three years prior to institution of action and latest date for notice to Melba per the one year notice condition of the Repair Clause. September 22, 1977  latest day on which a Unit Owner could have settled and given one year notice by no later than September 23, 1978. The Court of Special Appeals reversed the dismissal by the circuit court of those counts in which a Unit Owner who had settled after September 22, 1977, claimed breach of the Repair Clause based on defects other than ¶ 12 defects. [6] As it had done in reviewing count one, the court equated the giving of notice by a Unit Owner with accrual for limitations purposes of a cause of action based on breach by Melba of the Repair Clause. The Plaintiffs challenge this analysis. They say Melba gave more than a warranty of compliance with plans and specifications and against certain defects; Melba also promised to repair those defects. Plaintiffs say that the action for breach of the covenant to repair does not inexorably accrue, as a matter of law, on the day by which a Unit Owner must have discovered a defect as evidenced by the giving of notice of the defect. There also must be, following notice, a reasonable time within which Melba can perform. Failure to render that performance is the breach which fixes the time of accrual and begins the running of limitations. Melba says the Repair Clause is, simply, [its] promise to sell the Condominium to [Plaintiffs] constructed in accordance with the plans and specs[,] with a limitation upon the time afforded [Plaintiffs] to discover and notice claims ... and a conditioning of [Plaintiffs'] right of action under the single contractual obligation.... Melba submits that construing the contract to contain a second promise to repair, in addition to the guarantee, is as redundant as reading a promissory note to contain a second promise to pay in the event of default. The dispute, at bottom, involves interpreting the contract. To review, the key provision reads: Seller will make any necessary repairs, adjustments or replacements to the condominium unit and item of personal property specified herein or the common elements of the condominium required as the result of faulty construction, faulty material, faulty manufacture or faulty installation, provided that notice of the defect shall be given Seller within a period of one (1) year accounting from the date of settlement under this Contract. Literally this covenant is one to repair. The scope of the covenant to repair defines the scope of the defects against which it might be said that Melba guaranteed. A provision indistinguishable from the Repair Clause involved here was interpreted in President & Directors of Georgetown College v. Madden, 505 F. Supp. 557 (D.Md. 1980), aff'd in part and appeal dismissed in part, 660 F.2d 91 (4th Cir.1981). Paragraph 40 of Georgetown College's contract in part read: The Contractor shall remedy any defects in the work and pay for any damage to other work resulting therefrom, which shall appear within a period of one year from the date of final acceptance of the work.... The general contractor's bonding company argued that this provision contractually established a one year statute of limitations. Judge Kaufman, rejecting that contention, explained the provision: Paragraph 40, however, does not embody a limitations period. Instead, that contract provision sets forth an additional promise by the contractor that should defective work be discovered within one year, the contractor would repair the same. Refusal to repair such defective work would have resulted in a separate breach of contract aside from the breach resulting from the defective work. Paragraph 40 is, therefore, an additional remedy for the owner  a right to have the defective work repaired  and not a limitations period. See Fowler v. A & A Co., 262 A.2d 344, 347-48 (D.C. 1970); see also Zellan v. Cole, 183 F.2d 139 (D.C. Cir.1950). [505 F. Supp. at 564 n. 8.] Zellan v. Cole , cited in Georgetown College, involved a contract to build a residence which provided that `the basement shall be dry and shall remain dry for a period of three years.' In light of the conduct of the parties the court construed the provision as a promise to maintain a dry basement for that length of time. Under that construction the statute of limitations began to run when the contractor abandoned his efforts to cure and not when water was discovered in the basement. Zellan, 183 F.2d at 139. The time at which limitations began to run on an action for breach of a contract like the Repair Clause also was decided in Spinoso v. Rio Rancho Estates, Inc., 96 N.M. 5, 626 P.2d 1307 (Ct.App.), cert. denied, 96 N.M. 17, 627 P.2d 412 (1981). That contract provided: Seller agrees, at its sole cost and expense, to remedy any substantial defect in workmanship or materials of the structural components of the dwelling that shall be called to its attention by notice in writing from Purchaser on or before the first anniversary of the date of closing of title. [96 N.M. at 7, 626 P.2d at 1309.] The purchasers gave notice on the date of closing and further notices four months, ten months, fourteen months, and thirty-four months after closing. The statute of limitations allowed suit to be brought within six years from the date the cause of action arose. During the three years following the first written notification of defects, the seller made various attempts at repair which were unsuccessful. Finally the seller refused to make further repairs and the purchaser sued. The court dispatched the seller's statute of limitations argument in a footnote, saying the cause of action did not arise at the time the defect was first noted, but when defendant refused to cure the defect. Id. at 9 n. 3, 626 P.2d at 1311 n. 3. We do not interpret the Repair Clause as simply a warranty of the condition of a unit or of the common elements as of the time of closing with a Unit Owner. Had Melba simply guaranteed the condition of the property as of the date of closing with a Unit Owner, any breach of that guarantee would necessarily occur at closing and, absent a special statute, the cause of action would accrue for limitations purposes when the breach was discovered. See Poffenberger v. Risser, 290 Md. 631, 431 A.2d 677 (1981). Here, however, Melba additionally promised to repair if notified timely. The breach of that covenant to repair does not occur at closing or necessarily when notice is given. Conceptually, the ways in which one who has contracted to repair could breach that contract include repudiating the obligation before any notice is given, or, after being on notice of the defect, failing to undertake the repairs within a reasonable time, expressly refusing to repair, or, after undertaking to repair, abandoning the work before completion. See generally Beaudry Motor Co. v. New Pueblo Constructors, Inc., 128 Ariz. 481, 626 P.2d 1113 (Ct.App. 1981); Fowler v. A & A Co., 262 A.2d 344 (D.C. 1970); Bulova Watch Co. v. Celotex Corp., 46 N.Y.2d 606, 389 N.E.2d 130, 415 N.Y.S.2d 817 (1979). [7] Our holding may be further explained by contrasting it to Booth Glass Co. v. Huntingfield Corp., 304 Md. 615, 500 A.2d 641 (1985). There the owner of a newly constructed building claimed that a subcontractor who had installed exterior glass in the structure had been negligent in the original installation. The owner knew for more than three years prior to suit that the glass might have been negligently installed. We held the statute of limitations had run on the claim and had not been tolled by the subcontractor's efforts to repair the defects. In Booth Glass we were careful to point out that the owner had not based the action upon negligence in the repair process. Nor was the suit in any way predicated upon a contract created by Booth's promise to Huntingfield to repair the leaks. 304 Md. at 621-22, 500 A.2d at 644. On the issue now under consideration, Plaintiffs say limitations start on accrual of their action for breach of the contract to repair and, unlike Booth Glass, Plaintiffs do not rely on Melba's efforts at repair, in and of themselves, to defer or interrupt the running of limitations on an earlier accrued action. Under our interpretation of the Repair Clause, limitations do not begin running at the time a defect is discovered. As a consequence, even though giving notice of a defect presupposes discovery of the defect, it does not follow that limitations cannot begin to run later than the date on which notice of a defect was given. After timely notice Melba was not required to repair instantly. There was a period of time during which Melba could investigate the problem and prepare to perform the actual repair work. That period affects when Plaintiffs should have discovered that Melba breached the Repair Clause. Specifically, counts one and three allege notice to Melba of the ¶ 12 defects by September 18, 1978. Suit was filed September 24, 1981, by some Plaintiffs and on November 23, 1981, by other Plaintiffs. All Plaintiffs were in court within two months beyond three years from that September 18, 1978, notice to Melba. It further appears from Melba's May 6, 1980, letter that Melba's contractor had been working on the leak problem for some time prior to the winter of 1979-80. For all the record discloses, this could have been in response to a September 1978 notice. We cannot say on the basis of the facts alleged that any of the Plaintiffs should, as a matter of law, have discovered Melba's alleged breach of the Repair Clause within two months after Melba had been asked to repair the ¶ 12 defects. The same analysis applies to the odd numbered counts wherein individual Unit Owners allege damage to their units by breach of the Repair Clause. The worst scenario for any Unit Owner involves the earliest closing which was held on September 17, 1977. That Unit Owner could have satisfied the condition of the Repair Clause by a notice given as late as September 18, 1978. That Unit Owner's claim involves the same two month period as was explained above in relation to counts one and three. It cannot be said on motion to dismiss that the Unit Owners should have discovered Melba's alleged breach of the Repair Clause more than three years prior to suit. For the foregoing reasons the claims asserted in all of the odd numbered counts are remanded.