Court Opinion

ID: 2763026
Source: CourtListenerOpinion
Date Created: 2014-12-19 17:07:02.655572+00
Date Added: 2024-06-11T10:44:06.261010
License: Public Domain

IN THE SUPREME COURT OF NORTH CAROLINA
                                   No. 359A13
                             Filed 19 December 2014

GEORGE CHRISTIE and DEBORAH CHRISTIE

            v.
HARTLEY CONSTRUCTION, INC.; GRAILCOAT WORLDWIDE, LLC; and
GRAILCO, INC.

      Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel

of the Court of Appeals, ___ N.C. App. ___, 745 S.E.2d 60 (2013), affirming an order

of summary judgment entered on 13 August 2012 by Judge Gary E. Trawick in

Superior Court, Orange County. On 18 December 2013, the Supreme Court allowed

plaintiffs’ petition for discretionary review of additional issues.   Heard in the

Supreme Court on 14 April 2014.

      Whitfield Bryson & Mason, LLP, by Daniel K. Bryson and Scott C. Harris, for
      plaintiff-appellants.

      Ragsdale Liggett PLLC, by William W. Pollock and Angela M. Allen, for
      defendant-appellee Hartley Construction, Inc.

      Conner Gwyn Schenck PLLC, by Andrew L. Chapin, for defendant-appellees
      GrailCoat Worldwide, LLC and GrailCo, Inc.

      Jonathan McGirt, and Law Offices of F. Bryan Brice, Jr., by Matthew D.
      Quinn, for North Carolina Advocates for Justice, amicus curiae.

      EDMUNDS, Justice.
                       CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                    Opinion of the Court

        Defendants GrailCoat Worldwide, LLC and GrailCo, Inc. (collectively,

“GrailCoat”) provided an express twenty-year warranty for its product SuperFlex,1 a

stucco-like material that plaintiffs purchased to cover the exterior of their new

home.       When the product later failed and plaintiffs brought suit for damages,

GrailCoat claimed that North Carolina’s six-year statute of repose barred plaintiffs’

attempt to enforce the warranty. We conclude that by contracting for a warranty

term that exceeded the repose period, GrailCoat waived the protections provided by

that statute and is bound by its agreement. Accordingly, we hold GrailCoat to its

promise to plaintiffs and reverse in part the decision of the Court of Appeals

affirming the trial court’s grant of summary judgment in favor of the GrailCoat

defendants.

        George and Deborah Christie (“plaintiffs”) presented evidence tending to

show the following: In 2004, plaintiffs decided to build a custom home in Orange

County.       Because they lacked experience in both architectural design and

residential construction, plaintiffs entered into an agreement with Hartley

Construction, Inc., a company that specialized in designing and building such

houses. Under the agreement, Hartley would manage all aspects of the project to

provide plaintiffs a “turnkey” home ready for occupancy. Hartley constructed the

home using structural insulated panels (“SIPs”) as the exterior walls of the

        In the record, the product is called both “SuperFlex” and “GrailCoat.” We will use
        1

the term SuperFlex to avoid confusing the product with the manufacturer.

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                  Opinion of the Court

residence. The SIPs would not only constitute the house’s load-bearing structural

support, but would also provide insulation and sheathing.           SIP construction

requires an exterior cladding system to protect the home from the elements and

moisture intrusion. During the design process, Hartley suggested that plaintiffs

consider SuperFlex, an exterior cladding system marketed by GrailCoat as being

“extremely well-suited [for] use over Structural Insulated Panels.”          Plaintiffs

conducted research by accessing GrailCoat’s website, which promised that

“[p]roperly installed over SIPs, GrailCoat is fully warranted for twenty years to not

crack, craze, fatigue or delaminate from the substrate.      If maintained properly,

GrailCoat could last forty or fifty years, even in salt air, freeze/thaw, or heavy rain

or sun exposure.” Satisfied with GrailCoat’s representations and relying on the

warranty provisions stated on its website, plaintiffs elected to use SuperFlex.

Hartley purchased the SuperFlex and hired a GrailCoat-certified installer who

applied the product to the home in the latter half of 2004. Orange County issued a

Certificate of Occupancy for the residence on 22 March 2005.

      Several years later, plaintiffs began to notice cracks and blistering in the

SuperFlex and moisture intrusion into their home. Further investigation revealed

that the moisture had caused substantial rot and delamination of the SIPs,

significantly compromising the structural integrity of the home.         After several

unsatisfactory meetings with Hartley representatives in late March of 2011,

plaintiffs notified GrailCoat of the problems and their intent to make a warranty

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                  Opinion of the Court

claim. On 18 April 2011, GrailCoat responded, stating that the problems were a

result of improper application and installation rather than any defect in the

product.    Although GrailCoat offered replacement SuperFlex, it refused to

compensate plaintiffs for labor costs for installation of the replacement product or

for any damage caused by the moisture intrusion.

      On 31 October 2011, plaintiffs filed a complaint in Superior Court, Orange

County, alleging breach of contract, breach of implied warranty, negligence and

negligence per se, gross or willful and wanton negligence, and unfair and deceptive

practices against Hartley Construction, Inc.; and alleging breach of express

warranties, breach of implied warranties of merchantability and fitness, negligence,

and unfair and deceptive practices against GrailCoat Worldwide and GrailCo, Inc.

Hartley filed its answer on 3 January 2012, asserting numerous defenses and

asking the court to dismiss the complaint. GrailCoat filed its answer on 6 January

2012, pleading affirmative defenses while also moving to dismiss and for judgment

on the pleadings.   After the trial court denied all the motions included in both

answers, each defendant moved for summary judgment. Hartley’s motion stated

that, because the Christies had failed to forecast sufficient evidence of fraudulent or

willful or wanton conduct, Hartley was entitled to summary judgment under

N.C.G.S. § 1-50(a)(5), North Carolina’s six-year statute of repose for claims arising

out of improvements to real property. GrailCoat argued that it was entitled to

summary judgment “as a matter of law, as shown by the pleadings and applicable

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                 Opinion of the Court

law.” Plaintiffs also moved for summary judgment against GrailCoat on their claim

for breach of express warranty. After conducting a hearing, the trial court entered

an order on 13 August 2012 granting defendants’ motions for summary judgment as

to all claims against them, denying plaintiffs’ motion for summary judgment on

their express warranty claim, and dismissing plaintiffs’ complaint with prejudice.

      The Court of Appeals affirmed the trial court in a divided opinion.        The

majority opinion stated that N.C.G.S. § 1-50(a)(5) applies to plaintiffs’ claims and

noted that whether a statute of repose has run is a question of law. Christie v.

Hartley Constr., Inc., ___ N.C. App. ___, ___, 745 S.E.2d 60, 62 (2013). The majority

found that, based on Orange County’s 22 March 2005 issuance of the Certificate of

Occupancy for the structure, the statute of repose had run on 22 March 2011,

several months before plaintiffs filed their complaint. Id. at ___, 745 S.E.2d at 63.

As to the effect of defendant’s express warranty on the statute of repose, the

majority cited Roemer v. Preferred Roofing, Inc., 190 N.C. App. 813, 660 S.E.2d 920

(2008), where the Court of Appeals held that N.C.G.S. § 1-50(a)(5) precluded a claim

for damages under an express lifetime warranty. Id. at ___, 745 S.E.2d at 63. The

majority compared the lifetime warranty in Roemer to the twenty-year warranty at

issue here and concluded that the statute of repose barred plaintiffs’ claims for

damages in this case. The majority added that, under Roemer, any remedy for

breach of the warranty once the statute of repose had run lay in specific

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                  Opinion of the Court

performance, not damages. Id. at ___, 745 S.E.2d at 63. Accordingly, the Court of

Appeals majority affirmed the trial court. Id. at ___, 745 S.E.2d at 63.

      Although the dissenting judge agreed with the majority as to the resolution of

all of plaintiffs’ claims against Hartley and most of plaintiffs’ claims against

GrailCoat, he dissented from the dismissal of plaintiffs’ claim for breach of express

warranties. Id. at ___, 745 S.E.2d at 63 (Hunter, Jr., Robert N., J., dissenting). The

dissenting judge noted that Roemer did not describe the terms of the warranty at

issue in that case or “provide reasoning for why specific performance would be the

sole remedy under those terms,” leading him to presume that the warranty in

Roemer limited the remedy to that particular relief. Id. at ___, 745 S.E.2d at 64. In

other words, he believed that the result in Roemer was more likely driven by the

terms of the warranty than by the statute of repose.

      The dissenting judge went on to argue that, because the warranty here is a

“full warranty,” Roemer should be limited to its facts and deemed inapplicable to

this case.   Id. at ___, 745 S.E.2d at 64.      Observing that the majority’s holding

unnecessarily impairs the freedom to contract, he would have held that “a full

warranty which exceeds the time period for the statute of repose is a waiver of the

statute for all claims.” Id. at ___, 745 S.E.2d at 64. Plaintiffs filed a notice of

appeal based on the dissent. We also allowed plaintiffs’ petition for discretionary

review of additional issues.

                                          -6-
                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                   Opinion of the Court

      We begin our analysis by reviewing the characteristics of statutes of

limitations and statutes of repose. Although both are public policy tools by which

the General Assembly has set an expiration date for certain types of civil claims,

these statutes exhibit significant differences in both form and function that have

not always proved clear in practice. See Bolick v. Am. Barmag Corp., 306 N.C. 364,

366, 293 S.E.2d 415, 417-18 (1982) (“Although the term ‘statute of repose’ has

traditionally been used to encompass statutes of limitation, in recent years it has

been used to distinguish ordinary statutes of limitation from those that begin ‘to

run at a time unrelated to the traditional accrual of the cause of action.’ ” (footnote

omitted)); see also CTS Corp. v. Waldburger, 573 U.S. ___, ___, 134 S. Ct. 2175,

2186, 189 L. Ed. 2d 62, 76 (2014) (“[I]t is apparent that general usage of the legal

terms [statutes of repose and statutes of limitation] has not always been precise . . .

.”); Francis E. McGovern, The Variety, Policy and Constitutionality of Product

Liability Statutes of Repose, 30 Am. U. L. Rev. 579, 582-87 (1981) [hereinafter

Statutes of Repose] (noting five distinct uses of the term “statute of repose”

employed at the time of the article’s publication).

      Statutes of limitation are intended “to require diligent prosecution of known

claims,” Black’s Law Dictionary 1636 (10th ed. 2014), and to prevent the problems

inherent in litigating claims in which “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, 349, 64 S. Ct. 582, 586, 88 L. Ed. 788, 792 (1944). Such statutes

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                      CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                   Opinion of the Court

achieve this goal by beginning the limitations period when the plaintiff’s cause of

action accrues, typically when the plaintiff is injured or discovers he or she has been

injured. See, e.g., CTS Corp., 573 U.S. at ___, 134 S. Ct. at 2182, 189 L. Ed. 2d at

72; Trs. of Rowan Technical Coll. v. J. Hyatt Hammond Assocs., 313 N.C. 230, 234

n.3, 328 S.E.2d 274, 276 n.3 (1985). Although statutes of limitation function as

affirmative defenses, see Solon Lodge No. 9 v. Ionic Lodge No. 72, 247 N.C. 310, 316,

101 S.E.2d 8, 13 (1957), their enforceability is subject to equitable defenses, see, e.g.,

Nowell v. Great Atl. & Pac. Tea Co., 250 N.C. 575, 579, 108 S.E.2d 889, 891 (1959)

(“[E]quity will deny the right to assert [a statute of limitations] defense when delay

has been induced by acts, representations, or conduct, the repudiation of which

would amount to a breach of good faith.”). As a result, statutes of limitation are

procedural, not substantive, and determine not whether an injury has occurred, but

whether a party can obtain a remedy for that injury. See Bolick, 306 N.C. at 366-

67, 293 S.E.2d at 418.

      In contrast, statutes of repose are intended to mitigate the risk of inherently

uncertain and potentially limitless legal exposure. See, e.g., CTS Corp., 573 U.S. at

___, 134 S. Ct. at 2183, 189 L. Ed. 2d at 73; Raithaus v. Saab—Scandia of Am., Inc.,

784 P.2d 1158, 1161 (Utah 1989); Statutes of Repose at 587. Accordingly, such a

statute’s limitation period is initiated by the defendant’s “last act or omission” that

at some later point gives rise to the plaintiff’s cause of action. See, e.g., N.C.G.S. §

1-50(a)(5)(a) (2013); Trs. of Rowan Technical, 313 N.C. at 234 n.3, 328 S.E.2d at 276

                                           -8-
                      CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                   Opinion of the Court

n.3. The time of the occurrence or discovery of the plaintiff’s injury is not a factor in

the operation of a statute of repose.

      Because an applicable repose period begins to run automatically, statutes of

repose give potential defendants a degree of certainty and control over their legal

exposure that is not possible when such exposure hinges upon the possibility of an

injury to a plaintiff that may never manifest.            Statutes of repose function as

“unyielding and absolute barrier[s]” to litigation, Black v. Littlejohn, 312 N.C. 626,

633, 325 S.E.2d 469, 475 (1985) (citations omitted), are substantive in nature, see

Boudreau v. Baughman, 322 N.C. 331, 341, 368 S.E.2d 849, 857 (1988) (“If the

action is not brought within the specified period, the plaintiff ‘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.’ ” (citation omitted)), and are not subject to

equitable doctrines, see, e.g., Monson v. Paramount Homes, Inc., 133 N.C. App. 235,

240, 515 S.E.2d 445, 449 (1999) (“While equitable doctrines may toll statutes of

limitation, they do not toll substantive rights created by statutes of repose.”

(citations omitted)). The plaintiff has the burden of proving that a statute of repose

does not defeat the claim. See Hargett v. Holland, 337 N.C. 651, 654, 447 S.E.2d
784, 787 (1994) (citing Bolick, 306 N.C. 364, 293 S.E.2d 415).

      Subdivison 1-50(a)(5), triggered by a defendant’s “last act or omission,” is a

statute of repose that provides that any claim relating to any “improvement to real

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                  Opinion of the Court

property” must be brought within six years. N.C.G.S. § 1-50(a)(5)(a). We have held

that this statute “applies exclusively to all claims based upon or arising out of the

defective or unsafe condition of an improvement to real property.” Forsyth Mem’l

Hosp., Inc. v. Armstrong World Indus., Inc., 336 N.C. 438, 446, 444 S.E.2d 423, 428

(1994).     Accordingly, we consider the effect of the statute of repose and of

defendant’s twenty-year warranty upon plaintiffs’ claims for damages to real

property.

      North Carolina has long recognized that parties generally are “free to

contract as they deem appropriate.” Hlasnick v. Federated Mut. Ins. Co., 353 N.C.
240, 244, 539 S.E.2d 274, 277 (2000). This rule also extends to warranties because

“[a] warranty, express or implied, is contractual in nature.” Wyatt v. N.C. Equip.

Co., 253 N.C. 355, 358, 117 S.E.2d 21, 24 (1960). Therefore, we are faced with a

conflict between the public policy embodied in the repose period set out in N.C.G.S.

§ 1-50(a)(5) and the right of parties to contract freely. When encountering such

conflicts in the past, this Court has held to “the broad policy of the law which

accords to contracting parties freedom to bind themselves as they see fit, subject,

however, to the qualification that contractual provisions violative of the law or

contrary to some rule of public policy are void and unenforceable.” Hall v. Sinclair

Ref. Co., 242 N.C. 707, 709-10, 89 S.E.2d 396, 397-98 (1955).

                                         -10-
                      CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                   Opinion of the Court

      The public policy underlying N.C.G.S. § 1-50(a)(5) appears straightforward.

As noted above, statutes of repose provide a bulwark against the possibility of open-

ended exposure to suits for damages. Here, where GrailCoat is a business concern

furnishing purported improvements to real property, the statute terminates the risk

of suit six years after this defendant’s last act “giving rise to the cause of action or

substantial completion of the improvement.”         N.C.G.S. § 1-50(a)(5).   A company

might well rely on such a limitation when making business decisions such as

product pricing and insurance coverage. However, we see no public policy reason

why the beneficiary of a statute of repose cannot bargain away, or even waive, that

benefit. A warranty is a seller’s indication of its confidence in, and its willingness to

stand behind, its product.     A business marketing its products may reasonably

conclude that offering a warranty giving customers protection exceeding the

limitations period will provide an edge over its competitors.            A supplier of

improvements to real property who is willing in good faith to provide a warranty

that extends beyond six years should not be forced to offer a more limited warranty.

The continuing popularity of extended warranties that allow a customer to purchase

additional protection indicates both that buyers are mindful of the duration of

warranty coverage and that sellers are aware that extended warranties provide

value. Therefore, we conclude that the six-year repose period set out in the statute

provides valuable protection to those who make improvements to real property, but

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                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                   Opinion of the Court

that the beneficiaries of the statute of repose may choose to forego that protection

without violating any rule of public policy.

      Here, GrailCoat advertised its product to plaintiffs as being “fully warranted”

for twenty year but now claims that this warranty covered only the first six years

after its product was applied and that the remaining fourteen of those twenty years

were a nullity. A warranty that a seller knows is unenforceable is a sham, useful

only to beguile the unsuspecting. Plaintiffs’ evidence indicated that they carefully

researched SuperFlex and other possible exterior cladding systems for their home

and were influenced by GrailCoat’s twenty-year warranty when making their final

decision. As a result, we conclude that GrailCoat knowingly and freely entered into

a contract of sale with plaintiffs in which GrailCoat bargained away the protections

of the statute of repose. The contract at issue provided for a warranty of twenty

years. That warranty stands in its entirety. Accordingly, we reverse the holding of

the Court of Appeals affirming the trial court’s dismissal of plaintiffs’ claim for

breach of express warranty against GrailCoat.

      We conclude that discretionary review was improvidently allowed as to the

remaining two issues.

      AFFIRMED       IN    PART;    REVERSED         IN   PART   AND   REMANDED;

DISCRETIONARY REVIEW IMPROVIDENTLY ALLOWED IN PART.

                                          -12-
                     CHRISTIE V. HARTLEY CONSTRUCTION ET AL.

                                  Opinion of the Court

        Justice HUNTER did not participate in the consideration or decision of this

case.

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