Construction Law

Silence by Developer in Response to Demand to Repair Might Be Enough to Toll Statute of Limitations

By Tim Gordon

Smith v. Executive Custom Homes (Colo. App. 2009)

In this construction defects case, the plaintiff admittedly filed the complaint beyond the statute-of-limitations period.  But the plaintiff argued that the statute of limitations should be equitably tolled under the repair doctrine.  The trial court disagreed, and granted summary judgment for the developer.  The Court of Appeals reversed.

The running of a statute of limitations can be equitably tolled by a form of promissory estoppel referred to as the ?repair doctrine.? That doctrine allows tolling of a limitations period when a plaintiff can show that after a defect was noticed (1) repairs were attempted; (2) representations or promises, express or implied, were made by the defendant that the repairs would remedy the defect; (3) the plaintiff reasonably relied on the representations or promises; and (4) as a result, the plaintiff delayed filing a legal action against the defendant.  The repair doctrine protects a homeowner who has duly sought to remedy a defect but who was led ?to reasonably believe that [he or she] will receive satisfaction without resort to litigation.?

The key issue in Smith was whether or not a lack of response from the developer can lead one to reasonably believe that he or she will receive satisfaction without resort to litigation.  According to the Court, a "property owner typically is responsible for directly contracting for repairs to his or her property. In that situation, it certainly is not reasonable to infer a promise to repair from someone who has failed to act or respond to a property owner?s request to repair."  But where the owner is required to proceed through the developer's prescribed process for identifying defects, the Court held that silence on the part of the developer might suffice to toll the statute of limitations.

According to the Court, the promise of repair relied upon by a party invoking the repair doctrine need not be directly communicated to that party, but ?may be one that is reasonably implied from all of the circumstances.?  A promise implied in fact is one ?existing by inference from the circumstances or actions of the parties.?  And in the instant case, the Court held that silence could suffice.

Based on this reasoning, one could argue that the state of mind of the plaintiff is what matters in determining whether or not the statute of limitations can be equitably tolled by the repair doctrine, and not the conduct (or lack of conduct) by the defendant.

There is some practical logic to the holding.  If a homeowner follows the developer-required protocol for reporting defects, then the developer should not be rewarded for failing to respond.  Otherwise, the developer's notice requirement becomes nothing more than a trap for the homeowner by establishing a clear date by which the homeowner was aware of the alleged defect.

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Read the slip opinion.

Full post as published by Colorado Construction Law on February 05, 2009 (boomark / email).