Court Opinion

ID: 9695040
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:04:47.388542+00
Date Added: 2024-06-11T18:20:07.870766
License: Public Domain

SHIRLEY S. ABRAHAMSON, J.
(dissenting). I dissent because I conclude that the discovery rule which this court has applied to tort actions applies to this breach of contract action.
Involving as it does an alleged undiscoverable breach of contract, this case typifies the policy factors that led to the adoption of the discovery rule in the tort context. According to the majority's holding, the plaintiffs in this contract action lost their right to bring a lawsuit for breach of contract before they even knew that they were injured. As we stated in Hansen v. A.H. Robins, 113 Wis. 2d 550, 559, 335 N.W.2d 578 (1983), "[although theoretically a claim is capable of enforcement as soon as the injury occurs, as a practical matter a claim cannot be enforced until the claimant discovers the injury and the accompanying right of action. In some cases the claim will be time barred before the harm is or could be discovered, making it impossible for the injured party to seek redress. Under these circumstances the statute of limitations works to punish victims who are blameless for the delay and to benefit wrongdoers by barring meritorious claims." 113 Wis. 2d at 559.
*618Courts and commentators have recognized that a single set of facts may give rise to actions both in contract and in tort, making it difficult to draw a clear distinction between the two actions.1 These overlapping actions reside in what Professor Prosser called the "shadowy borderland" between contract and tort.2
In the present case, the claims for breach of contract and negligence arise from the same source. The breach of contract claim is based on the allegation that Arrowhead Pacific failed to construct the development according to the specifications contained in the contract. The negligence claim alleges that by failing to build the development in the manner specified in the contract, Arrowhead Pacific breached a duty "to exercise a standard of care ordinarily exercised by reasonably prudent contractors in the fulfillment of construction contracts." Thus, the alleged failure to perform the contract amounted to a tort because the contract "resulted] in or accompanie[d] a relationship between the parties which the law recognizes as giving rise to a duty of affirmative care." Prosser on Torts at 662-63; 185 (professional persons and persons who undertake *619work calling for special skill are required to exercise reasonable care and to possess a standard minimum of special knowledge and ability). See also Brooks v. Hayes, 133 Wis. 2d at 246; Brown v. Ellison, 304 N.W.2d 197, 201 (Iowa 1981) (professional malpractice suits are closely similar to actions for the breach of an implied warranty in a construction contract because both arise from the breach of an implied agreement to use an expected standard of care); Erenhaft v. Malcolm Price, Inc., 483 A.2d 1192, 1200 (D.C. App. 1984) (inadequate performance of construction contracts can give rise to claims in tort).
Because the plaintiffs' negligence and breach of contract claims overlap, no satisfactory basis exists for applying the discovery rule differently to the two claims. The majority of jurisdictions that have addressed the applicability of the discovery rule to actions for breach of a construction contract through defective performance have concluded that the discovery rule is applicable.
In Erenhaft v. Malcolm Price, Inc., 483 A.2d 1192 (D.C. App. 1984), for example, the court applied the discovery rule to an action for breach of a contract for construction of a patio room. The court rejected the defendant's argument that the discovery rule was not applicable in the contract context, holding that "the factors that supported application of the rule in other contexts are equally applicable here. First, a client in appellants' position, who has arranged for the design and construction of a new room to his house, must undoubtedly rely upon the professional skills of those hired to do the work .... Second, the difficulty in recognizing a deficiency in either design or construction is even more problematical when the deficiency is latent in nature." 483 A.2d 1202. While it acknowledged that statutory limitation periods are intended to protect *620defendants and courts against stale claims, the court nevertheless concluded that "the added burden imposed upon a defendant to defend against an 'old' claim due to application of the discovery rule is not unreasonable .... Application of the discovery rule in suits based upon deficient design and construction ’does not frustrate the policies underlying the statute of limitations where the injured party does not, and in the exercise of reasonable diligence, could not have known of his claim prior to discovery.’ " 483 A.2d at 1202-03.
Similarly, in Santee Portland Cement Co. v. Daniel International Corporation, 384 S.E.2d 693 (S.C. 1989), the court applied the discovery rule to a breach of contract action for failure to build a cement plant to specification. The court concluded that the purposes of the statutes of limitations "must be balanced against a plaintiffs interest in prosecuting an action and pursuing his rights." "Plaintiffs," the court continued, "should not suffer where circumstances prevent them from knowing they have been harmed." 384 S.E.2d at 694. See, also, e.g., Brown v. Ellison, 304 N.W.2d 197 (Iowa 1981); El Paso Association v. J.R. Thurman & Co., 786 S.W.2d 17 (Tex. App. 1990); Matusik v. Dorn, 756 P.2d 346 (Ariz. App. 1988); A.G. Aberman, Inc. v. Funk Building Corp., 420 A.2d 594 (Pa. Super. 1980); Poffenberger v. Risser (Md. App. 1981); McKinley v. Willow Construction Co., Inc., 693 P.2d 1023 (Colo. App. 1984).3
*621I would join these courts in recognizing that the purposes underlying adoption of the discovery rule in the tort context are equally present in a breach of contract *622action arising from the defective performance of a construction contract.
The majority opinion raises policy considerations about the availability of liability insurance to distribute the costs of tortious losses and the degree of control possessed by contract claimants. These concerns are valid and worthy of consideration. Nonetheless, between two contracting parties, there is no reason that the party who contracted to do the work should not bear the cost of the breach. The party hired to do work will generally have more control over the quality of the work than will the purchasing party. If either party must bear a loss alone it is more equitable to impose the loss on the party which had the greater opportunity to prevent it, in this case, the contractor.4
As we explained in Hansen, statutes of limitations present two conflicting public policies: 1) discouraging stale and fraudulent claims, and 2) "allowing meritorious claimants, who have been as diligent as possible, an opportunity to seek redress for injuries sustained." 113 Wis. 2d at 558. I conclude that in the context of the contract and tort claims in this case, "the injustice of barring meritorious claims before the claimant knows of the injury outweighs the threat of stale or fraudulent actions." 113 Wis. 2d at 559.1 would remand the breach of contract claim to the circuit court for determination whether the breach could have been detected prior to the expiration of the statute of limitations.
For the reasons stated above, I dissent.
*623I am authorized to state that Chief Justice Nathan S. Heffernan and Justice William A. Bablitch join in this dissent.

 See W. Page Keeton, Dan B. Dobbs, Robert E. Keeton, David G. Owen, Prosser and Keeton on Torts 655-667 (1984); Brooks v. Hayes, 133 Wis. 2d 228, 235, 246, 395 N.W.2d 167 (1986) (failure to exercise common law duty to perform contracts with care and skill is a tort as well as a breach of contract); Matusik v. Dorn, 756 P.2d 346, 347-48 (Ariz. App. 1988) (defective construction can give rise to claims for breach of implied warranty and common law duty of care).

 See William Lloyd Prosser, The Borderland of Tort and Contract in Selected Topics on the Law of Torts: Prosser (1953). See also W. Page Keeton, Dan B. Dobbs, Robert E. Keeton, David G. Owen, Prosser and Keeton on Torts 655 (1984). See also Richard Posner, Economic Analysis of Law 98-102 (1972); Grant Gilmore, Death of Contract 87 (1974).

 The defendants-respondents contend that many jurisdictions do not apply the discovery rule to cases arising from breach of contract. A review of the cases they cite for this proposition shows that the New Hampshire Supreme Court declined, in 1973, to apply the discovery rule to a case involving the alleged breach of a construction contract. Roberts and Richards & Sons, Inc., 304 A.2d 364 (N.H. 1973).
*621The other cases they cite are inapposite because they arose in the context of disputes distinctly different from that presented in this case. In many of these cases the parties did not raise the discovery rule. See, e.g., Richardson Associates v. Lincoln Devore, 806 P.2d 790 (Wyo. 1990), breach of soil testing contract, discovery rule did not apply where question was allocation of blame for obvious problems; Ft. Oglethorp Assoc. v. Hials Construction, 396 S.E.2d 585 (N.C. App. 1990), breach of contract action accrued against roofer when roof was substantially complete, no undiscoverability alleged; Martin v. Ray Lackey Enterprises, Inc., 396 S.E.2d 327 (N.C. App. 1990), action arising from breach of lease in which the language of the lease created ambiguity about date of breach; Safeco Ins. Co. v. Barrom, 773 P.2d 56 (Wash. 1989), action against insurance company accrues on date that underinsured motorist contract is breached, not on accident date; Dupree v. Twin City Bank, 777 S.W.2d 856 (Ark. 1989), general principles governing breach of contract apply to breach of oral agreement not to contest foreclosure; Aronow Roofing Co. v. Gilban Bldg. Co., 902 F.2d 1127 (3d Cir. 1990), breach of contract for failure to pay, dispute about whether contract had been signed under seal; McGowan v. Pillsbury Co., 723 F. Supp. 530 (W.D. Wash. 1989), dispute over ice cream store franchise contract, statute of limitations would be tolled by fraud or breach of fiduciary relationship only; City of Bluefield v. Autotrol, 723 F. Supp. 362 (S.D.W. Va. 1989), breach of construction contract, no claim of undiscoverability; Jackson v. Union Nat. Bank of Macomb, 715 F. Supp. 892 (C.D. Ill. 1989), action under bank holding company act, action accrues on date of violation as in similar antitrust actions.
The case cited by amicus curiae, Kitchen Krafters v. Eastside Bank of Montana, 789 P.2d 567 (Mont. 1990), is also inapposite. It concluded that the breach of implied duty of good faith and fair dealing in contract for sale of real property accrues at the time of the breach unless fraudulently concealed.

 The majority errs in relying on sec. 402.725, Stats. 1989-90, for evidence of the legislature's intent to bar application of the discovery rule in this case. Section 402.725, Stats. 1989-90, is part of the Uniform Commercial Code and applies only to "transactions in goods." Section 402.102, Stats. 1989-90.