Interpretation of “substantial completion” with respect to a statute of repose, by Hugh Anderson

Issue: Interpretation of “substantial completion” with respect to a statute of repose. Horning v. Penrose Plumbing & Heating, Inc. Supreme Court of Wyoming (2014).

Summary: Mr. and Mrs. Horning awoke confused and disoriented one January morning. Their condominium unit was extremely cold. Investigation revealed a rupture in the furnace exhaust pipe. The couple had sustained severe carbon monoxide poisoning.

The Hornings filed a negligence lawsuit against the HVAC contractor, Penrose, in November 2012, several months after the poisoning event. Among other contentions, the plaintiffs asserted that Penrose had wedged the HVAC system’s installation instructions and owner’s manual in the exhaust pipe, resulting in its eventual rupture.

Wyoming has a 10-­‐year statute of repose. A lawsuit concerning a construction project must be filed within 10 years of substantial completion. Penrose submitted evidence showing that it had completed the HVAC work in 2001. The condo unit was completed in early 2002. The developer secured a certificate of occupancy 18 months later, in 2003—the delay reportedly the result of a delay in payment of a water tap fee. Penrose argued that the Horning lawsuit was filed more than ten years after substantial completion in 2001, and thus must be dismissed under the statute of repose. The lower court agreed, and dismissed the case. This appeal to the Wyoming Supreme Court followed.

Decision: The statute of repose contains the following definition of “substantial completion”:

The   degree   of   completion   at   which   the   owner   can   utilize   the improvement for the purpose for which it was intended.

 In the court’s view, the owner could not utilize the HVAC or condo unit until the city completed its inspections and issued a certificate of occupancy, in 2003. Thus, pursuant to the “plain language” the court held that the repose period did not begin until 2003 and the Horning lawsuit was timely. The court acknowledged the persuasive appeal of Penrose’s argument that the legislature had not intended that the repose period could be extended by delays having nothing to do with the construction, but felt the actual wording of the statute was unambiguous and could not be “rewritten” by the court.

Comment: Determining the date of substantial completion can be challenging, whether for purposes of a repose statute or on the project level. The facts of this case (18-­‐month delay in paying a fee) are extreme, but often there are routine delays in arranging an inspection or issuing a certificate of substantial completion. Also, there is the question of completion of a component, as opposed to the project as a whole. For subcontractors that perform their work early in a project, the wait for substantial completion of the whole project may be years, and is almost always out of their control.

At a micro-­‐level, perhaps the HVAC contractor could have argued that there is a difference between “can utilize” and “may utilize.” “Can” suggests physical capability (you can drive through a red light) while “may” refers to permission or authorization (you may not drive through a red light). Also unexamined in  the court’s brief analysis is the import of the wording “the degree of completion….” This brings the focus on the progress of the physical construction. The condo did not achieve a greater degree of completion while the developer dragged its feet over paying the fee.

Many statutes of repose provide a short grace period for claims that arise near the end of the repose period—for example, if the claim is discovered in the last year of the period, the claimant has 18 months from discovery to file the lawsuit. The Wyoming statute did not include such a grace period.

EJCDC’s definition of substantial completion is similar to the Wyoming statute, with the notable exception that substantial completion is expressly dependent on the opinion of the Engineer. One point to consider is what EJCDC’s intent is with respect to delays in Engineer rendering that opinion, or perhaps even an unjustified failure by Engineer to acknowledge substantial completion.

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