Oaktree Condominium Assn., Inc. v. Hallmark Bldg. Co. , 139 Ohio St. 3d 264 ( 2014 )

[Cite as Oaktree Condominium Assn., Inc. v. Hallmark Bldg. Co., 139 Ohio St.3d 264, 2014-
Ohio-1937.]
OAKTREE CONDOMINIUM ASSOCIATION, INC., APPELLANT, v. HALLMARK
BUILDING COMPANY ET AL., APPELLEES.
[Cite as Oaktree Condominium Assn., Inc. v. Hallmark Bldg. Co.,
139 Ohio St.3d 264, 2014-Ohio-1937.]
Statutes of repose—R.C. 2305.131—Retroactive application to accrued cause of
action unconstitutional—Article II, Section 28—Statute of limitations
applied.
(No. 2012-1722—Submitted October 9, 2013—Decided May 14, 2014.)
APPEAL from the Court of Appeals for Lake County,
No. 2012-L-011, 2012-Ohio-3891.
____________________
SYLLABUS OF THE COURT
A cause of action that has accrued but on which no suit has been filed by the
effective date of a statute of repose, such as R.C. 2305.131, is governed by
the relevant statute of limitations for the time of filing that particular type
of cause of action.
____________________
O’NEILL, J.
{¶ 1} In this case, we are asked to decide if application of R.C.
2305.131, Ohio’s construction statute of repose, is constitutional. Thirteen years
after construction was completed, the Oaktree Condominium Association
(“Oaktree”) discovered that there was a defect in the construction of the
foundation of their condominiums. At the time of discovery of the defect, in
2003, there was no real-property-construction statute of repose in effect.
However, by the time Oaktree filed an action against the builder of the
condominiums in 2007, the General Assembly had enacted a ten-year statute of
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repose. As a result, the trial court and court of appeals ruled that Oaktree’s claims
were time-barred. Consistent with our holdings in products-liability cases and
medical-malpractice cases, we hold that R.C. 2305.131 is unconstitutional as
applied to Oaktree. Because of the constitutional prohibition on passage of
retroactive laws, Oaktree must be afforded a reasonable time in which to file its
accrued action. We conclude that reasonableness is governed by the relevant
statute of limitations, which in this case is four years from accrual of the cause of
action. R.C. 2305.09. The complaint in this matter was filed within four years of
its accrual and was therefore timely under R.C. 2305.09(D). Accordingly, we
reverse the judgment of the court of appeals and reinstate the jury verdict in favor
of Oaktree.
Facts and Procedural History
{¶ 2} Oaktree is the owners’ association for a seven-unit condominium
development in Willoughby, Ohio. Hallmark Building Company built the
condominiums and created the association. Construction was completed in 1990.
In the fall of 2003, one of the residents noticed a crack in the wall of his garage
that was a common wall with the neighboring unit. Following investigation by
structural engineers, it was learned that the footers for the foundations of the
condominiums had not been placed below the frost plane.
{¶ 3} In Ohio, local building codes require foundation footers to be
placed at a minimum depth to ensure that they are below the frost plane. This is
because soil above the frost plane freezes and expands. Consequently footers
above the frost plane will move with the expansion and contraction of the soil.
Motion in the footers causes motion in the foundation, which can result in cracks
and structural damage to the building. If footers are placed below the frost plane,
this problem is avoided because the footers are in stable soil without movement.
The building code in effect in Willoughby at the time of construction of the
condominiums required footers to be placed at least 36 inches deep, and the
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building plans that were submitted for the condominiums stated that the footers
were going to be placed at a depth of 42 inches.
{¶ 4} On October 31, 2003, Oaktree was put on notice of this defect and
was advised by a structural engineer that testing should be performed on the other
units. Testing revealed that none of the footers for the buildings had been placed
beneath the frost plane.
{¶ 5} On December 16, 2005, Oaktree filed a complaint against
Hallmark for unworkmanlike construction and to recover the cost of repairing the
defect. This suit was voluntarily dismissed and refiled on August 30, 2007.
Hallmark filed a motion for summary judgment, asserting that it was not liable to
Oaktree and that the suit was barred because it was filed outside of the ten-year
real-property-construction statute of repose. R.C. 2305.131. The trial court
denied the motion. Following a jury trial, Oaktree was awarded $210,000 in
damages.
{¶ 6} On appeal, the Eleventh District reversed. 11th Dist. Lake No.
2009-L-112, 2010-Ohio-6437. The Eleventh District remanded the matter to the
trial court to determine the constitutionality of R.C. 2305.131 as applied to
Oaktree. Id. at ¶ 52. On remand, the trial court upheld the constitutionality of the
statute both facially and as applied and held that Oaktree’s claims were time-
barred under R.C. 2305.131. This time, the Eleventh District affirmed the trial
court’s judgment. The court of appeals reasoned that although the statute of
repose was not in effect at the time that Oaktree’s action against Hallmark
accrued, the owners were nonetheless time-barred because Oaktree had failed to
file its action against Hallmark within two years of accrual, which the court
defined as a “reasonable time” from October 31, 2003, the date it was placed on
notice of the injury. Id. at ¶ 65.
Analysis
{¶ 7} R.C. 2305.131 provides:
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(A) * * * [E]xcept as otherwise provided * * *, no cause of
action to recover damages for bodily injury, an injury to real or
personal property, or wrongful death that arises out of a defective
and unsafe condition of an improvement to real property * * * shall
accrue against a person who performed services for the
improvement to real property or a person who furnished the
design, planning, supervision of construction, or construction of
the improvement to real property later than ten years from the date
of substantial completion of such improvement.
***
(F) This section shall be considered to be purely remedial
in operation and shall be applied in a remedial manner in any civil
action commenced on or after the effective date of this section, in
which this section is relevant, regardless of when the cause of
action accrued and notwithstanding any other section of the
Revised Code or prior rule of law of this state, but shall not be
construed to apply to any civil action pending prior to the effective
date of this section.
{¶ 8} By its plain language, the real-property-construction statute of
repose, which became effective on April 7, 2005, applies to civil actions
commenced after the effective date of the statute regardless of when the cause of
action accrued. In this case, Oaktree learned of the defect in its property on
October 31, 2003, and commenced this action on August 30, 2007.
{¶ 9} Article II, Section 28 of the Ohio Constitution provides, “The
General Assembly shall have no power to pass retroactive laws * * *.”
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{¶ 10} Pursuant to Article II, Section 28 of the Ohio Constitution, this
court has already determined that plaintiffs have a substantive right to bring their
accrued actions and that the constitutional prohibition on retroactive laws prevents
the Ohio General Assembly from unreasonably taking that right away by
outlawing their claims. Gregory v. Flowers, 32 Ohio St.2d 48, 54, 290 N.E.2d
181 (1972), paragraph three of the syllabus. Consequently, our first task is to
determine when this action accrued.
{¶ 11} When considering when a cause of action accrues in construction
cases, we have used the delayed-damages rule. Velotta v. Leo Petronzio
Landscaping, Inc., 69 Ohio St.2d 376, 433 N.E.2d 147 (1982). The delayed-
damages rule considers when all elements of a cause of action have come into
existence. Id. at 379. “To establish actionable negligence, one must show in
addition to the existence of a duty, a breach of that duty and injury resulting
proximately therefrom.” Mussivand v. David, 45 Ohio St.3d 314, 318, 544
N.E.2d 265 (1989).
{¶ 12} Oaktree’s board was informed of the construction problems on
October 31, 2003; thus, its cause of action against Hallmark Building Company
accrued on that date. Because its cause of action accrued and vested before the
April 7, 2005 effective date of R.C. 2305.131, the retroactive application of the
statute of repose would take away Oaktree’s substantive right and conflict with
Article II, Section 28 of the Ohio Constitution. Therefore, R.C. 2305.131 is
unconstitutional as applied to Oaktree. The question then becomes whether
Oaktree filed its action within a reasonable time of its accrual.
{¶ 13} We see no reason to look further than the enactments of the
General Assembly to find a measure of reasonableness. The Ohio General
Assembly has enacted statutes of limitations that already define a reasonable
period in which to file a complaint after a cause of action accrues. Indeed, when
asked to determine reasonableness in medical-malpractice and products-liability
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cases in which the statute of repose was not effective on the date the cause of
action accrued, this court looked to the relevant statute of limitations in each case.
Groch v. Gen. Motors Corp., 117 Ohio St.3d 192, 2008-Ohio-546, 883 N.E.2d
377; Adams v. Sherk, 4 Ohio St.3d 37, 446 N.E.2d 165 (1983).
{¶ 14} Groch and Sherk provide an analytical blueprint for how this case
should be decided. These cases are similar in that the claims accrued when there
was no statute of repose in effect but the actions were filed after the statutes of
repose became effective. In Groch, the plaintiffs’ products-liability claims
accrued on March 3, 2005. The new products-liability statute of repose (R.C.
2305.10) became effective on April 7, 2005, and thus the plaintiffs had only 34
days to file a lawsuit before the statute became effective and purported to forever
bar their claims. As it turned out, the plaintiffs filed their claims over one year
after they became vested. This court determined that the prohibition against
retroactive laws under Article II, Section 28 of the Ohio Constitution prevented
the products-liability statute of repose from applying to the specific facts of the
case and required that the plaintiffs be provided with a reasonable time to bring
their case. Groch at ¶ 193. The court decided that a reasonable time to bring a
products-liability case was two years. There was no coincidence or arbitrariness
to two years as a measure of reasonableness. Two years was the time limit in the
new products-liability statute of limitations. R.C. 2305.10(A).
{¶ 15} In Sherk, 4 Ohio St.3d 37, 446 N.E.2d 165, a metal object in the
plaintiff’s abdomen following surgery in 1967 was not discovered until 1980.
Under the foreign-object discovery rule, the statute of limitations is tolled until
the patient discovers, or should have discovered, the negligent act. Melnyk v.
Cleveland Clinic, 32 Ohio St.2d 198, 290 N.E.2d 916 (1972). Thus, the plaintiff’s
claim did not accrue until 1980. Former R.C. 2305.11(B), the relevant statute of
repose, effective on July 28, 1975, barred claims from being brought more than
four years from the date of malpractice. As in Groch, this court determined that
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the prohibition against retroactive laws under Article II, Section 28 of the Ohio
Constitution prevented the medical-malpractice statute of repose from applying to
the case and required that the plaintiff be provided with a reasonable time to bring
his case. The court determined that one year after the discovery of the
malpractice was reasonable. Again, as in Groch, there was no guesswork on the
part of the court in its determination that one year was the measure of
reasonableness. Former R.C. 2305.11(A), the medical-malpractice statute of
limitations, required claims to be brought within one year after their accrual.
{¶ 16} We have stated that “ ‘[t]ort actions for injury or damage to real
property are subject to the four-year statute of limitations set forth in R.C.
2305.09(D).’ ” Sexton v. Mason, 117 Ohio St.3d 275, 2008-Ohio-858, 883
N.E.2d 1013, ¶ 19, quoting Harris v. Liston, 86 Ohio St.3d 203, 714 N.E.2d 377(1999), paragraph one of the syllabus.
{¶ 17} Here, Oaktree was subjected to an arbitrary interpretation that took
away its access to the courts and right to be compensated for its loss. On October
31, 2003, when Oaktree’s claim accrued, there was no statute of repose in effect.
The placement of the footers in the foundations of the condominiums was
defective from the beginning, but the defect was incapable of being seen until it
caused damage above ground level 13 years later. The constitutional prohibition
on retroactive laws prevents the Ohio General Assembly from unreasonably
outlawing Oaktree’s accrued claims. Flowers, 32 Ohio St.2d at 54, 290 N.E.2d
181. And just as it does today, the statute of limitations applicable to real-
property-construction cases in effect on October 31, 2003, called for a four-year
limitation of accrued actions. R.C. 2305.09. Thus, under R.C. 2305.09, Oaktree
had four years to commence suit, which it did on December 16, 2005. Oaktree’s
voluntary dismissal under Civ.R. 41(A)(1) and refiling on August 30, 2007, did
not affect its timeliness, since the four-year statute of limitations did not run until
October 31, 2007.
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Conclusion
{¶ 18} We hold that R.C. 2305.131 is unconstitutional as applied to
Oaktree because the retroactive application of R.C. 2305.131 would bar Oaktree’s
accrued action against the Hallmark Building Company. We hold that a cause of
action that has accrued but on which no suit has been filed by the effective date of
a statute of repose, such as R.C. 2305.131, is governed by the relevant statute of
limitations for the time of filing that particular type of cause of action.
{¶ 19} The judgment of the court of appeals is reversed, and the judgment
on the jury verdict in favor of Oaktree is reinstated.
Judgment reversed.
O’CONNOR, C.J., and PFEIFER and LANZINGER, JJ., concur.
O’DONNELL, KENNEDY, and FRENCH, JJ., dissent.
____________________
KENNEDY, J., dissenting.
{¶ 20} Respectfully, I dissent. I agree with the majority’s conclusion that
Oaktree’s cause of action accrued and vested prior to the effective date of R.C.
2305.131 and that the retroactive application of the statute of repose therefore
violates its substantive right, contravening Article II, Section 28 of the Ohio
Constitution. However, I disagree with the creation of a bright-line rule that a
general statute of limitations will determine the reasonable time for the filing of
an action that accrued prior to the enactment of a statute of repose. Because I
believe that the determination of what constitutes a reasonable time in any case is
based on the facts of the particular case, I conclude that as a matter of law, that
determination rests in the sound discretion of the trial court. Therefore, I would
affirm the judgment of the court of appeals on different grounds.
Precedent Does Not Support Establishment of a Bright-Line Rule
{¶ 21} The majority asserts that “Groch and Sherk provide an analytical
blueprint for how this case should be decided.” Majority opinion, ¶ 14, citing
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Groch v. Gen. Motors Corp., 117 Ohio St.3d 192, 2008-Ohio-546, 883 N.E.2d
377, and Adams v. Sherk, 4 Ohio St.3d 37, 446 N.E.2d 165 (1983). While the
majority correctly cites the holdings in Groch and Sherk, it incorrectly advances
those holdings as this court’s pronouncement of a policy to use a general statute
of limitations to determine the reasonable time in which to file an action that
accrued prior to the enactment of a statute of repose.
{¶ 22} Groch concerned the constitutionality of the products-liability
statute of repose, R.C. 2305.10(C). Douglas Groch was injured by a trim press 34
days prior to the effective date of R.C. 2305.10(C) and former R.C. 2305.10(F).
Groch, ¶ 190. This court rejected the respondents’ position that the 34 days
provided by R.C. 2305.10(C) was a reasonable period of time for Groch to file his
action.
{¶ 23} In determining what was a reasonable period of time, Justice
O’Connor, writing for the majority, looked to the specific language of the statute
of repose:
R.C. 2305.10(C)(4) provides a two-year limitations period
for commencing a suit for injuries occurring before the expiration
of the ten-year repose period of R.C. 2305.10(C)(1), “but less than
two years prior to the expiration of that period.” * * *
Similarly, R.C. 2305.10(C)(5) provides that “[i]f a cause of
action relative to a product liability claim accrues during the ten-
year period described in division (C)(1) of this section and the
claimant cannot commence an action during that period due to a
disability described in section 2305.16 of the Revised Code [i.e.,
minority or unsound mind], an action based on the product liability
claim may be commenced within two years after the disability is
removed.”
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Both R.C. 2305.10(C)(4) and (C)(5) recognize that once a
products-liability cause of action accrues, a plaintiff should have
no less than two years in which to commence a suit. This
recognition is consistent with R.C. 2305.10(A), the general
products-liability statute of limitations, which states that, subject to
certain exceptions (including those in R.C. 2305.10(C)), such a
claim “shall be brought within two years after the cause of action
accrues.”
Id. at ¶ 193-195. The court concluded, “When we look to [R.C. 2305.10(C)(4)
and (C)(5)], we determine that a reasonable time to commence a suit in this
situation should have been two years from the date of the injury.” Id. at ¶ 198.
{¶ 24} Therefore, the Groch court’s conclusion was based upon the
products-liability statute of repose, not the products-liability statute of limitations.
The majority, however, cherry-picks the statute-of-limitations discussion from
Groch, while turning a blind eye to the true basis for the holding—the two-year
time frame in the statute of repose. Accordingly, for the majority to state that
Groch is an “analytical blueprint” is disingenuous to the analysis and holding of
Groch.
{¶ 25} Moreover, the majority’s reliance upon Adams v. Sherk, 4 Ohio
St.3d 37, 446 N.E.2d 165, accords that decision more weight in deciding the
current issue than is appropriate upon review. The Sherk court did hold that the
plaintiff “must be afforded a reasonable time in which to bring her claim, i.e., one
year after the discovery of the malpractice.” Id. at 40. But the determination that
one year constituted a reasonable time was based upon this court’s holding in
Melnyk v. Cleveland Clinic, 32 Ohio St.2d 198, 290 N.E.2d 916 (1972), that when
foreign objects are negligently left inside a patient’s body after surgery, the one-
year statute of limitations is tolled until the patient discovers, or by the exercise of
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reasonable diligence should have discovered, the negligent act. Melnyk, however,
did not involve the enactment of a statute of repose. Accordingly, like Groch,
Sherk fails to support the majority’s conclusion that the relevant statute of
limitations should control what constitutes a reasonable time.
A Bright-Line Rule Defies R.C. 2305.131(A)(2)
{¶ 26} The majority’s determination that there is “no reason to look
further than the enactments of the General Assembly to find a measure of
reasonableness,” majority opinion, ¶ 13, is confusing in light of the fact that the
majority fails to give any consideration to the General Assembly’s enactment of
R.C. 2305.131(A)(2). Similar to the products-liability statute of repose, R.C.
2305.131(A)(2) provides for an extension of the ten-year period established in
R.C. 2305.131(A)(1). Specifically, a claimant may commence a civil action to
recover damages within two years from the date of the discovery of that defective
and unsafe condition if the cause of action accrues less than two years prior to the
expiration of the ten-year period. R.C. 2305.131(A)(2). Accordingly, for litigants
affected by R.C. 2305.131(A)(2), the General Assembly has expressed the intent
that two, not four, years is a reasonable time to pursue a vested right. The
majority ignores this enactment by the General Assembly and allows Oaktree,
whose claim is significantly more stale, double the amount of time to pursue its
claim that those litigants subject to R.C. 2305.131(A)(2) have.
Legislative Intent of R.C. 2305.131
{¶ 27} Finally, the majority fails to give any consideration to the General
Assembly’s specifically stated purpose and intent in enacting R.C. 2305.131. The
General Assembly stated that R.C. 2305.131 “is a specific provision intended to
promote a greater interest than the interest underlying the general four-year statute
of limitations” of R.C. 2305.09. Am.Sub.S.B. No. 80, Section 3(B)(1), 150 Ohio
Laws, Part V, 8028. Additionally, the General Assembly recognized that once
construction professionals complete a project, they lose control over the project
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and no longer have the right to take action with respect to the project. Id. at 8029,
Section 3(B)(2). Further, the General Assembly was cognizant of the issues
involving stale litigation, such as the availability of evidence and witnesses and
the burdens associated with the maintenance of records pertaining to construction
services. Id. at Section 3(B)(3). Accordingly, in enacting R.C. 2305.131, the
General Assembly sought to “strike[ ] a rational balance between the rights of
prospective claimants and the rights of design professionals, construction
contractors, and construction subcontractors.” Id. at Section 3(B)(5).
{¶ 28} The majority’s analysis is devoid of any discussion of the General
Assembly’s specifically stated purpose and intent. By failing to discuss and
harmonize the purpose and intent of R.C. 2305.131 with its holding, the majority
is perpetuating the exact concerns that the General Assembly sought to avoid with
the enactment of R.C. 2305.131. Therefore, by decreeing that R.C. 2305.09
prescribes a “reasonable time,” the majority is advancing its own policy of the
statute, which we should not do. “[A] court has nothing to do with the policy or
wisdom of a statute. That is the exclusive concern of the legislative branch of the
government.” State ex rel. Bishop v. Mt. Orab Village School Dist. Bd. of Edn.,
139 Ohio St. 427, 438, 40 N.E.2d 913 (1942).
Conclusion
{¶ 29} In determining “reasonable time,” we must balance a party’s
vested right with the enactment of R.C. 2305.131 and its intent and purpose.
Based upon the foregoing, I believe that this would be achieved by concluding
that a reasonable time should be determined as a matter of law based on the
particular facts of each case.
{¶ 30} In this case, I would conclude that Oaktree did not seek to enforce
its vested right within a reasonable time. Oaktree was placed on notice of its
claims against Hallmark on October 31, 2003. On April 7, 2005, R.C. 2305.131
took effect. Oaktree filed its first complaint against Hallmark on December 16,
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2005. This action was voluntarily dismissed by Oaktree on August 30, 2006.
Oaktree refiled the complaint on August 30, 2007, allowing another year to pass
before seeking to enforce its vested right. The delay in seeking to enforce its
vested right more than two years after the effective date of R.C. 2305.131, almost
four years after being placed on notice of its claims, and 17 years after
construction was completed was unreasonable. Accordingly, I would affirm the
judgment of the court of appeals on other grounds.
O’DONNELL and FRENCH, JJ., concur in the foregoing opinion.
____________________
Ott & Associates Co., L.P.A., Steven M. Ott, Amanda L. Aquino, and
Nicole D. LeClair, for appellant.
Davis & Young, Patrick F. Roche, and Beverly A. Adams, for appellee
Hallmark Building Company.
Bricker & Eckler, L.L.P., Anne Marie Sferra, and Kara Herrnstein, urging
affirmance for amicus curiae, Ohio Alliance for Civil Justice.
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