Oregon Supreme Court weighs in on the meaning of “substantial completion” for purposes of the statute of repose in construct

The Oregon Supreme Court issued two recent opinions that will make it more challenging for defendants in construction defect cases to obtain summary judgment on time limitation grounds. 

ORS 12.135 provides the statute of repose for construction defect cases.  It requires that such claims be commenced within 10 years from “substantial completion of such construction, alteration or repair.”  ORS 12.135(3) defines “substantial completion” as “the date when the contractee accepts in writing the construction, alteration, or repair…or, if there is no such written acceptance, the date of acceptance of the completed construction.”

In PIH Beaverton, LLC v. Super One, Inc, et al, the Supreme Court was asked to apply ORS 12.135 to a construction defect case involving the building of a hotel.  The defendant contractor filed a summary judgment motion, arguing that the owner commenced the claim more than ten years after substantial completion.  The contractor presented evidence that it had posted a “completion notice” pursuant to the Oregon construction lien statute more than ten years before the plaintiff commenced suit and that the hotel opened its doors to the public more than ten years before the suit was commenced. The plaintiff countered with evidence that some repair activity continued post-occupation.  The trial court granted the contractor’s summary judgment motion, but the Oregon Court of Appeals reversed, finding that a question of fact existed as to when the hotel was substantially complete under ORS 12.135.  The Supreme Court agreed with the Court of Appeals and reversed the grant of summary judgment. The Court first found that that the statutory notice did not serve as written notice of completion under ORS 12.135(3). In the absence of written acceptance, ORS 12.135 states that “substantial completion” occurs on the “the date of acceptance of the completed construction.” The Court gave a strict interpretation of “completed construction,” writing, “the ordinary meaning of something that has been ‘completed’ is something that has been brought into a finished or perfected state.”  Because a material dispute existed as to whether the project reached a “finished or perfected state” more than ten years before commencement of the suit, summary judgment was not appropriate. 

The Oregon Supreme Court faced a similar issue in Sunset Presbyterian v. Brockamp & Jaeger, Inc., which concerned a construction defect claim involving a church. The general contractor and subcontractor defendants argued that they were entitled to summary judgment because both the statute of limitations and statute of repose expired.  The general contractor argued that the contract between it and the plaintiff stated that the statute of limitations would accrue (and, therefore, begin to run) no later than the date of substantial completion.  The general contractor asserted that substantial completion occurred no later than the date the church held services in the building, a date more than ten years before the plaintiff filed suit.   The Court rejected this argument because the contract required the project architect to issue a Certificate of Substantial Completion, and no such certificate was in the record.  Therefore, the general contractor could not rely on the contract as setting the point of accrual for the statute of limitations.

Defendant subcontractors also argued for dismissal, but under different grounds.  The subcontractors were not parties to the contract between the plaintiff and general contractor and, therefore, argued that the claim was barred by the ten-year statute of repose in ORS 12.135.  The subcontractors argued that once the church was in use it was “substantially complete” for purposes of the statute of repose.   As in PIH Beaverton, the Court rejected this argument, finding a question of material fact about the date of substantial completion.  The plaintiff offered evidence that some construction work occurred after the date the church opened, raising a factual question about when the project was finally complete.    

These cases make an already difficult argument for the defense more challenging. Without written acceptance by the plaintiff that the work is complete, a construction defect plaintiff likely will argue that summary judgment is inappropriate if there was evidence of minor repairs or even cosmetic work within ten years of filing suit.  



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