Construction Law

Division One Court of Appeals clarifies application of discovery rule in breach of contract cases

By Brett Hill

The case, Harmony at Madrona Park Owners Assoc. v. Madison Harmony Dev., Inc., involved the construction of a 25-unit condominium complex.  Well after construction was complete, the condominium association sued the developer alleging construction defects.  The developer in turn sued the the general contractor, Ledcor Industries (USA), Inc.  The association and the developer and the developer and Ledcor settled.  This case involved a claim made by Ledcor for breach of contract and indemnification against its subcontractor, Serock Construction.

Serock argued that Ledcor's breach of contract claims were barred by the contract statute of limitations because Ledcor did not file suit against Serock until over 6 years after Serock's last day of work on the project.  Ledcor argued that the statute of limitations did not begin until substantial completion of the project or that the discovery rule applied and under both scenarios Ledcor's claims against Serock would not be barred by the 6 year statute of limitations.

The Court of Appeals held first that the 6 year contractual statute of limitations began to run (or accrued) no later than Serock's last day of work on the project.  Also, the Court of Appeals further held that the discovery rule did not apply to toll the statute of limitations because Ledcor had failed to allege in its complaint against Serock that the defects were latent (or not discoverable upon a reasonable inspection). 

At the end of the day, Ledcor did not lose entirely because the Court of Appeals held that Ledcor's indemnity claims against Serock were not barred by the statute of limitations. 

Full post as published by Construction Law Blog on March 18, 2008 (boomark / email).