Opinion ID: 1756224
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Heading: Liability of Architects and Contractors To Third Parties and Statutes of Repose

Text: Historically, most courts, in passing upon the question of a building or contractor's negligence resulting in injury or damage to third persons after the completion of the work and acceptance thereof by the owner, start with the assumption of what has been considered to be the general rule, namely, that the contractor is not liable for such injuries to third persons, on the theory that no privity of contract exists between the contractor and such third persons, and that no duty is owed by the contractor in performing the contract other than to the contractee. There was no liability at common law. However, as in the case of manufacturers and sellers of chattels, a long list of exceptions to the general rule grew up in an attempt to lessen the harshness of the original nonliability rule. During the last decade or two, numerous courts have repudiated the rule and have brought an end to the differentiation between manufacturers of goods and building or construction contractors. See Annotation: Contractor-Liability to Third Person, 58 A.L.R.2d 865. Therefore, liability of a contractor or architect for damages to third parties not in privity was nonexistent until less than twenty years ago. My research shows that Alabama has not considered the rule. In Beasley v. McDonald Engineering Co., 287 Ala. 189, 249 So.2d 844 (1971), this Court did consider liability of an inspector for an alleged negligent inspection which resulted in injury to a person not in privity of contract. While I do not predict what Alabama would do, I assume that Alabama would probably follow the modern trend and impose liability on a contractor even after completion and acceptance of the work. I think the possibility of liability prompted the Legislature, probably at the urging of architects and contractors, to set limitations insofar as the maintenance of such an action is concerned. In determining what the Legislature intended, I start with some basic principles. In the past, an architect or builder could not be sued for negligence by a third person, after he turned over his work to the owner. There was no privity of contract. The privity rule was being abolished. The question was, Should architects and builders be liable in perpetuity? Our Legislature and over thirty other Legislatures answered this question in the negative. Then what time should be set? [4] The statutes in each of the states vary. The proceedings of the Alabama House of Representatives where Act No. 788 originated indicate that the Legislature gave considerable attention to the question of the time within which there would be no liability. (See footnote 3.) I would leave this policy decision to the Legislature where the Constitution places it. The Legislature is bound by the Constitution also. Then, a threshold question is: Could the Legislature constitutionally pass this statute to shield contractors and others from liability after the passage of a specified period of time? I think so. I find no constitutional violation because the statute of limitations applies only to persons within a designated class or that it abolishes a right to sue after the expiration of four or seven years, as may be applicable. In Sellers v. Edwards, 289 Ala. 2, 265 So. 2d 438 (1972), (medical malpractice statute of limitations) this Court said: A state is not prohibited upon constitutional grounds from making classifications of persons and objects, or from passing laws which apply only to persons within a designated class. Classification is an inherent power of the Legislature but it must not be arbitrary or unreasonable. In order to justify interference by the courts with the wide discretion which the Legislature has in such matters, it should appear that the interests of those generally affected by the act, as distinguished from those of a particular class, require such interference. In Re: Opinion of the Justices, 252 Ala. 559, 561, 42 So.2d 56 (1949). Alabama's statute is similar to statutes passed in over thirty other states, all designed to limit liability in perpetuity of architects and contractors. I find two courts which have held such statutes unconstitutional. In Skinner v. Anderson, 38 Ill.2d 455, 231 N.E.2d 588 (1967), the Illinois court held a statute similar to Alabama's to be unconstitutional. However, I think that the Alabama Supreme Court, in Sellers v. Edwards, supra, answers this question contrary to the holding in Skinner v. Anderson. In Saylor v. Hall, 497 S.W.2d 218 (Ky.1973), the Kentucky Court of Appeals did declare their statute unconstitutional. But Kentucky also declared its guest law violative of the Kentucky Constitution. The Kentucky Court, after discussing other decisions which had upheld those statutes, noted: Kentucky has no guest-passenger automobile statute, not because of legislative inaction, but because such a statute was voided as violative of our state Constitution. In the decision, section 54 played a prominent part. In Ludwig v. Johnson et al., 243 Ky. 533, 49 S.W.2d 347 (1932), this court struck down a statute that prohibited recovery by a guest passenger in an automobile against the owner or host driver for personal injuries or death resulting from the driver's negligence. This Court, unlike Kentucky's, has upheld our guest statute. Pickett v. Matthews, 238 Ala. 542, 192 So. 261 (1939). This Court does not follow the rationale expressed in either Skinner or Saylor . The Arkansas Supreme Court, in Carter v. Hartenstein, 248 Ark. 1172, 455 S.W.2d 918 (1970), upheld an Arkansas statute similar to Alabama's against an attack on constitutional grounds. The court commented: The question raised is whether the legislature was arbitrary or capricious in granting this immunity from suit four years after substantial completion of construction to those enumerated in the statute without giving such protection to others such as materialmen and owners, whom appellant claims belong to the same class as those exempted.       . . . Further, a vital distinction, nonetheless, exists between owners or suppliers and those engaged in the professions and occupations of design and building. This is not arbitrary or unreasonable. It is a legitimate and practical exercise of the legislative function. To say that there can be no limitation in perpetuity against a designer or erector of a structure would be in effect to discriminate against professional builders and designers. Whether three years, four years or five yearsor more or less is the correct or appropriate period, should not and cannot be the concern of the judiciary. We only must determine whether the legislature has acted reasonably in respect to their mandate from the people as set out in the Constitution.       Almost every statute or law serves to work for some and against others. Here, we simply do not view this enactment as granting special privileges and immunities. Our opinion is that Act 42 is valid, reasonable, constitutional and not enacted for arbitrary or capricious reasons. We think the legislature was entirely within its constitutional right in passing such statute. See also, Josephs v. Burns, 260 Or. 493, 491 P.2d 203 (1971), (not a violation of a provision similar to Art. 1, § 13, of Alabama's Constitution); Yakima Fruit & Cold Storage Co. v. Central Heating & Plumbing Co., 81 Wash.2d 528, 503 P.2d 108 (1972), (not special class legislation); Rosenberg v. North Bergen, 61 N.J. 190, 293 A.2d 662 (1972), (not a violation of due process by barring a cause of action before it had arisen; not special class legislation); Salesian Society v. Formigli Corporation, 120 N.J.Super. 493, 295 A.2d 19 (1972), (not, in effect, an amendment to present statute of limitations without that law being fully set out in the statute under review); see also, O'Connor v. Altus, 123 N.J.Super. 379, 303 A.2d 329 (1973). Therefore, it appears that other state courts have had little difficulty finding a legislative purpose for similar statutes of repose. They have upheld them for good reason. There must be a time when, even in the absence of a statute, a builder's liability to third parties would cease. If the Legislature does not set a limit, the judiciary must. The Kentucky court recognized this principle in Saylor v. Hall, supra. The court said: Returning now to the principle that we discussed in the opening of this opinion, we conclude that it is unnecessary in this case to delineate or define the outer limits of a builder's liability in 1964 in Kentucky to a third party injured by the negligence of the builder whose work had been completed and accepted by the owner. We are satisfied that, under the precise facts of this case, the builder at that time was at the least subject to liability to third parties for negligent construction, though completed and accepted, that created a latent defect in a stone mantel and fireplace in a home where innocent third parties on the property could foreseeably be injured by such dangerous and concealed condition. Therefore, we hold that there was an existing right of action in this state for the type of negligence claimed in this lawsuit when the questioned statutes were enacted. Even in actions involving equitable causes the doctrine of laches is recognized. In fairness to a defendant, whether by statute or judicial determination, there comes a time when a defendant ought to be secure in his reasonable expectation that the slate is clean of ancient obligations, and he ought not to be called on to resist a claim when evidence has been lost, memories have faded, and witnesses have disappeared. Order of R. R. Telegraphers v. Ry. Express Agency, Inc., 321 U.S. 342, 64 S.Ct. 582, 88 L.Ed. 788 (1944); See Developments in the Law, Statute of Limitations, 63 Harv.L.Rev. 1177. Potential defendants have constitutional rights, too. Act No. 788 is a Statute of Repose Act No. 788 is a statute of repose. It applies to persons who perform or furnish the design, planning, supervision or construction of improvements on real property. It applies to all actions, in contract or tort. While the Act may not be a traditional statute of limitations in that it can bar a right of action before it accrues, it nevertheless is a limitation on the right to bring an action. The statute of repose is also different in kind in that it specifies when the time period begins to runafter final completion of the improvements, rather than when the cause of action accrues. Most limitation statutes specify that the period begins to run from the date of the accrual of the cause of action. While this statute is different, it is still a statute of repose. It does not bar a right of action which has accrued. The majority uses the words statute of limitations. The title to Act No. 788 does not read that way. It says to regulate further the time within which actions against persons. . . must be commenced. The court in Rosenberg v. Town of North Bergen, 61 N.J. 190, 293 A.2d 662 (1972), discussed the purpose and constitutionality of New Jersey's statute. The court said: We come then to a consideration of the constitutionality of this enactment. In three other jurisdictions similar acts have been subjected to constitutional challenge. In Illinois the statute was found to be unconstitutional; in Arkansas and Oregon the enactments were sustained. Skinner v. Anderson, 38 Ill.2d 455, 231 N.E.2d 588 (1967); Carter v. Hartenstein, 248 Ark. 1172, 455 S.W.2d 918 (1970), appeal dismissed, 401 U.S. 901, 91 S.Ct. 868, 27 L.Ed.2d 800 (1971); Josephs v. Burns, [260 Or. 493,] 491 P. 2d 203 (1971). It seems important, first, to examine the nature of this law. In an important respect it is unlike the typical statute of limitations. Commonly such a statute fixes a time within which an injured person must institute an action seeking redress, and generally this time span is measured from the moment the cause of action accrues. Here such is not the case. The time within which suit may be brought under this statute is entirely unrelated to the accrual of any cause of action. Where a claim for redress is based upon negligent injury to person or property, the cause of action accrues when there has been a negligent act with proximately resulting injury or damage. The careless act itself is not enough to give rise to a cause of action; there must also be consequential injury or damage. Rosenau v. City of New Brunswick, supra, 51 N.J. 130, at 137-139, 238 A.2d 169. Thus plaintiff's alleged cause of action did not arise until she fell and sustained injury. Of course this was many years after the ten-year period fixed by the statute had expired. She claims that the statute, in its application to her, amounts to a deprivation of due process, since, as she expresses it, the statute bars her cause of action before it has arisen. This formulation suggests a misconception of the effect of the statute. It does not bar a cause of action; its effect, rather, is to prevent what might otherwise be a cause of action, from ever arising. Thus injury occurring more than ten years after the negligent act allegedly responsible for the harm, forms no basis for recovery. The injured party literally has no cause of action. The harm that has been done is damnum absque injuriaa wrong for which the law affords no redress. The function of the statute is thus rather to define substantive rights than to alter or modify a remedy. The Legislature is entirely at liberty to create new rights or abolish old ones as long as no vested right is disturbed. . . . [Emphasis added.] Admittedly, the title to Act No. 788 does not contain the actual periods of limitation as does the title to the Act dealing with actions against doctors. (Act No. 766, Acts of Alabama, 1953, carried as Tit. 7, § 25(1), Code, 1940, Recomp., 1958). Admitting this, I fail to see, however, that the failure of the title to have the seven-year limitation specifically mentioned makes the title vague. The subject of a bill can be expressed in general terms. At least, this Court has been committed to that principle heretofore. Knight, supra. As I understand Mr. Justice Harwood's special concurrence, he does not think Act No. 788 contains two subjects, only that the title is not clear. Mr. Justice Jones also says the title is vague and uncertain, but goes further and says Act No. 788 contains two subjects.