State v. Perini Corporation (070558) , 221 N.J. 412 ( 2015 )

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)
State v. Perini Corporation (A-121/122/123/135-11) (070558)
Argued September 23, 2014 -- Decided April 30, 2015
CUFF, P.J.A.D. (temporarily assigned), writing for a unanimous Court.
In this appeal, the Court must determine when the ten-year limitations period of the statute of repose,
N.J.S.A. 2A:14-1.1(a), begins to run with respect to the installation of a high temperature hot water (HTHW) system
of a multi-phase construction project. In addition, the Court is asked to decide whether the statute of repose applies
to claims pertaining exclusively to allegedly defective materials supplied for the HTHW system.
In February 1995, the State executed a contract with Perini Corporation (Perini) to design and build South
Woods in Bridgeton (the Project), a twenty-six building medium- and minimum-security correctional facility. Perini
subcontracted with L. Robert Kimball & Associates, Inc. (Kimball) as the architect and engineer. Defendant Natkin
& Company (Natkin) was designated the principal contractor for heating, ventilation, and air conditioning (HVAC).
The design that Kimball provided to Perini included an underground HTHW distribution system to serve the entire
Project. It also included a central plant from which the hot water was distributed to the various buildings that
comprised the Project. Perma-Pipe, Inc. (Perma-Pipe) manufactured the underground piping used in the HTHW
system. Natkin furnished and installed the underground piping system and the boilers and heat exchangers housed
in the central plant. Defendant Jacobs Facilities, Inc. (Jacobs), formerly known as CRSS Constructors, Inc., was
retained by the State to provide construction oversight services.
The contract provided that the Project would be constructed in three phases. Phase I included the central
plant and certain inmate housing units. Certificates of substantial completion for those elements were executed on
May 16, 1997. Approximately 960 inmates occupied the Phase I housing units soon thereafter. Phase IIA included
housing units for another 960 inmates. Certificates of substantial completion for those buildings were executed
between July 15, 1997 and October 27, 1997. Phase II encompassed approximately ten buildings, including a
minimum-security unit housing more than 1000 inmates, with May 1, 1998, as the date of substantial completion.
The various buildings comprising the Project were connected to the HTHW distribution system as they were
completed. A certificate of substantial completion was not issued specifically for the HTHW system.
On April 28, 2008, the State filed a complaint against Perini, Kimball, Natkin, Jacobs, and Perma-Pipe in
which it alleged that the HTHW system failed in March 2000, and on several subsequent occasions, and that these
failures were caused by various defects including design defects, defective site preparation for the pipes, defective
pipes, and deficient system design. The State asserted breach of contract against Perini, negligence and professional
malpractice against Kimball, negligence and breach of contract against Natkin, and breach of contract against
Jacobs. Against Perma-Pipe, the State asserted a claim under the New Jersey Products Liability Act (PLA), N.J.S.A.
2A:58C-1 to -11, as well as breach of implied warranties, negligence, and strict liability in tort.
All defendants moved for summary judgment, arguing that the Project was substantially complete well
before April 28, 1998, and that, therefore, the statute of repose barred the State’s complaint. The State contended
that the date of substantial completion of the Project was not until May 1, 1998, if not December 1998. Relying
primarily on the occupancy of inmates at the facility on or before April 28, 1998, the court determined that the
HTHW system was substantially complete before April 28, 1998. Therefore, the trial court found that the State’s
complaint was barred by the ten-year statute of repose and granted summary judgment in favor of contractor-
defendants Perini, Kimball, Natkin, and Jacobs. On the other hand, the trial court denied Perma-Pipe’s motion for
summary judgment, concluding that it was a manufacturer of goods and therefore its liability was governed by the
PLA and the statute of repose did not apply to it.
The Appellate Division reversed the orders granting summary judgment in favor of defendants Perini,
Kimball, Natkin, and Jacobs. The panel held that the statute of repose was triggered when defendants substantially
completed their work on the entire project, no earlier than May 1, 1998, the date when the minimum-security unit
and garage were certified as substantially complete. The panel determined that the State’s April 28, 2008 complaint
was timely filed. In addition, the Appellate Division held that the statute of repose does not bar the State’s claims
against Perma-Pipe because it was a manufacturer of a product rather than a designer or installer of a system.
The Court granted the contractor-defendants’ motions for leave to appeal, 210 N.J. 476 (2012), and Perma-
Pipe’s cross-motion for leave to appeal, limited to the issue of whether the statute of repose applies to bar the State’s
claims against it, 211 N.J. 606 (2012).
HELD: The statute of repose does not begin to run on claims involving an improvement that serves an entire
project such as a high temperature hot water (HTHW) system -- including those parts constructed in multiple,
uninterrupted phases -- until all buildings served by the improvement have been connected to it. In addition, the
statute of repose does not apply to claims relating solely to manufacturing defects in a product used in the HTHW
system.
1. Prior to the enactment of the statute of repose, liability for deficiencies in a construction project was governed by
the common law “completed and accepted rule.” In Totten v. Gruzen, 52 N.J. 202, 210 (1968), this Court replaced
that rule with the limitations on liability derived from ordinary negligence principles. In 1967, New Jersey adopted
a statute of repose, N.J.S.A. 2A:14-1.1(a). The statute applies only to work that constitutes an “improvement to real
property.” Generally, “an improvement to real property permanently increases the property’s value.” Ebert v. S.
Jersey Gas Co., 157 N.J. 135, 139 (1999). (pp. 14-17)
2. Calculation of the ten-year limitations period for the statute of repose generally commences one day after
issuance of the certificate of substantial completion for the project. Substantial completion is “the date when
construction is sufficiently complete . . . so the owner can occupy or utilize the building.” Russo Farms, Inc. v.
Vineland Bd. of Educ., 144 N.J. 84, 117 (1996). When a designer, planner, or person participating in the
construction of an improvement to real property has continuing responsibility throughout the construction of the
project or a specific improvement, the ten-year limitations period commences when the project has been certified as
substantially complete. (pp. 17-20)
3. The HTHW system is an improvement to real property and the work performed on this system falls within the
scope of the statute of repose. The HTHW system is designed to form a unified whole that interacts with and is
connected to every structure of the prison complex. Neither the nature of the HTHW system, the course of
construction, nor defendants’ role in the construction of the Project permits the issue date of the Phase I certificates
of substantial completion to trigger the statute of repose time calculation. The record also does not support a finding
that the HTHW system was substantially complete on May 16, 1997, after the issuance of the certificate of
substantial completion for the central plant. As a system designed to supply heat and hot water to every building in
the Project, the Court is loath to embrace an application of the statute of repose that would permit separate trigger
dates for each section of the HTHW system as a building it serves comes on line. The ten-year statute of repose
limitations period commenced to run on the day after the final certificates of substantial completion issued for the
final buildings served by the HTHW system. The final certificates were issued on May 1, 1998. The State filed its
complaint on April 28, 2008. The statute of repose therefore does not bar the complaint. (pp. 20-27)
4. Manufacturers of standardized products and sellers of such products are not subject to the statute of repose, but
rather “are covered by the statute of limitations applicable to the [PLA].” Dziewiecki v. Bakula, 180 N.J. 528, 532
(2004). Perma-Pipe’s role was that of a manufacturer of a product used in the construction of the HTHW system.
While the piping for the Project served a specialized purpose to meet the specific dimensions and specifications of
the system designed by Kimball and installed by Natkin, the piping and the various fittings manufactured by Perma-
Pipe are nonetheless a product and Perma-Pipe cannot take refuge in the statute of repose. (pp. 27-30)
The judgment of the Appellate Division is AFFIRMED as MODIFIED.
CHIEF JUSTICE RABNER; JUSTICES ALBIN and SOLOMON; and JUDGE FUENTES
(temporarily assigned) join in JUDGE CUFF’s opinion. JUSTICES LaVECCHIA, PATTERSON and
FERNANDEZ-VINA did not participate.
2
SUPREME COURT OF NEW JERSEY
A-121/122/123/135
September Term 2011
070558
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
PERINI CORPORATION, L. ROBERT
KIMBALL & ASSOCIATES, INC.,
PERMA-PIPE, INC., NATKIN &
COMPANY, JACOBS FACILITIES,
INC., Successor-in-Interest
to CRSS Constructors, Inc.,
FIDELITY AND DEPOSIT CO. OF
MARYLAND, SWISS REINSURANCE
AMERICA CORPORATION,
Successor-in-Interest to
North America Reinsurance
Corporation, MUNICH
REINSURANCE AMERICA, INC.,
Successor-in-Interest to
American Re-Insurance
Company, UNITED STATES
FIDELITY AND GUARANTY
COMPANY,
Defendants-Appellants.
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
PERINI CORPORATION, L. ROBERT
KIMBALL & ASSOCIATES, INC.,
NATKIN & COMPANY, JACOBS
FACILITIES, INC., Successor-
in-Interest to CRSS
Constructors, Inc., FIDELITY
AND DEPOSIT CO. OF MARYLAND,
1
SWISS REINSURANCE AMERICA
CORPORATION, Successor-in-
Interest to North America
Reinsurance Corporation,
MUNICH REINSURANCE AMERICA,
INC., Successor-in-Interest
to American Re-Insurance
Company, UNITED STATES
FIDELITY AND GUARANTY
COMPANY,
Defendants,
and
PERMA-PIPE, INC.,
Defendant-Appellant.
Argued September 23, 2014 – Decided April 30, 2015
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at 425
N.J. Super. 62 (App. Div. 2012).
Andrew J. Carlowicz, Jr., argued the cause
for appellant L. Robert Kimball &
Associates, Inc. (Hoagland, Longo, Moran,
Dunst & Doukas, attorneys).
Peter J. Smith argued the cause for
appellants Perini Corporation, Fidelity and
Deposit Co. of Maryland, Swiss Reinsurance
America Corporation, Munich Reinsurance
America, Inc., and United States Fidelity
and Guaranty Company (Connell Foley,
attorneys; Mr. Smith and Thomas J. O’Leary,
on the briefs).
James T. Malysiak, a member of the Illinois
bar, argued the cause for appellant Jacobs
Facilities, Inc. (Margolis Edelstein,
attorneys; Bruce E. Barrett, on letter in
lieu of brief).
2
Vincent P. Tomkiewicz, a member of the
Illinois bar, argued the cause for appellant
Perma-Pipe, Inc. (McLaughlin & Cooper,
attorneys; Mr. Tomkiewicz, William F.
Hartigan, Jr., and Edward F. Ruberry, a
member of the Illinois bar, on the briefs).
Christopher A. Edwards, Deputy Attorney
General, argued the cause for respondent
(John J. Hoffman, Acting Attorney General of
New Jersey, attorney; Lewis A. Scheindlin,
Assistant Attorney General, of counsel; Mr.
Edwards, Wayne J. Martorelli, Deputy
Attorney General, on the briefs).
Patrick J. Greene, Jr., submitted a brief on
behalf of amicus curiae Building Contractors
Association of New Jersey (Peckar &
Abramson, attorneys; Mr. Greene, Charles F.
Kenny, and Frank A. Hess, on the brief).
JUDGE CUFF (temporarily assigned) delivered the opinion of
the Court.
In this appeal, the Court must determine when the ten-year
limitations period of the statute of repose, N.J.S.A. 2A:14-
1.1(a), begins to run with respect to the installation of a high
temperature hot water (HTHW) system of a multi-phase
construction project. In addition, the Court is asked to decide
whether the statute of repose applies to claims pertaining
exclusively to allegedly defective materials supplied for the
HTHW system.
The sole focus of this case is an allegedly defective HTHW
system that services the South Woods State Prison (South Woods).
Built to mitigate the “over-crowded conditions” experienced by
3
the Department of Corrections, the contract governing the design
and construction of the facility provided that housing units for
more than 3000 inmates and all accessory structures would be
constructed in three phases. These phases were designed to
allow the State to begin housing prisoners in orderly and
expeditious waves. Soon after the construction of South Woods
was completed, the HTHW system experienced a series of
widespread failures.
As a result of the failure of the HTHW system, the State of
New Jersey (State) filed suit against the entities involved in
the design and construction of South Woods and the HTHW system.
The State filed its complaint on April 28, 2008, more than ten
years after it began using the HTHW system and housing the first
group of inmates, but less than ten years after the system was
connected to all of the buildings constructed under the
contract. The issue before the Court is whether the ten-year
statute of repose commenced to run when the first inmates
occupied the correctional facility or when the final buildings,
including the 1000-plus bed minimum-security unit, were
connected to the HTHW system.
We hold that the statute of repose does not begin to run on
claims involving an improvement that serves an entire project -
- including those parts constructed in multiple, uninterrupted
phases -- until all buildings served by the improvement have
4
been connected to it. Here, the statute of repose did not bar
any of the State’s claims because the three phases proceeded
apace and the HTHW system was not complete until all buildings
were connected to it. In addition, we hold that the statute of
repose does not apply to claims relating solely to manufacturing
defects in a product used in the HTHW system.
I.
In February 1995, the State executed a contract with Perini
Corporation (Perini) to design and build South Woods in
Bridgeton (the Project), a 3176-bed medium- and minimum-security
correctional facility, at a cost of approximately $203 million.
Situated on an eighty-four-acre site, the Project consists of
twenty-six buildings, including six general housing units, one
detention unit, one minimum-security unit, and one
inpatient/extended care unit. The buildings received heat and
hot water from the underground HTHW distribution system. The
Project was designed to be constructed in three phases, with all
construction to be completed within 1095 days of issuance of the
notice to proceed (NTP).
In its contract with the State, Perini was designated the
designer/builder. It designated L. Robert Kimball & Associates,
Inc. (Kimball) as the architect, the civil engineering
consultant, the structural engineering consultant, the
mechanical engineering consultant, the electrical engineering
5
consultant, the detention equipment consultant, and the
electronic security consultant. Perini also designated various
other entities as principal contractors or main contractors for
specific portions of the work. Defendant Natkin & Company
(Natkin) was designated the principal contractor for heating,
ventilation, and air conditioning (HVAC). Defendant Jacobs
Facilities, Inc. (Jacobs), formerly known as CRSS Constructors,
Inc., was retained by the State to provide construction
oversight services.
The design that Kimball provided to Perini included an
underground HTHW distribution system to serve the entire
Project. It also included a central plant where water was
heated by a series of boilers and heat exchangers and from which
the hot water was distributed to the various buildings that
comprised the Project. The hot water flowed through a network
of underground pipes consisting of insulated black steel carrier
piping within a galvanized steel casing. Perma-Pipe, Inc.
(Perma-Pipe) manufactured the underground piping used in the
HTHW system. Pursuant to its subcontract with Perini, Natkin
furnished and installed the underground piping system and the
boilers and heat exchangers housed in the central plant.
The contract provided that the Project would be constructed
in three phases –- Phase I, Phase IIA, and Phase II -- but the
entire project was to be completed 1095 calendar days following
6
issuance of the NTP. The contract also provided that Phase I
was to be completed no later than 730 days from issuance of the
NTP, Phase IIA was to be completed no later than 910 calendar
days from issuance of the NTP, and Phase II, no later than 1095
days from issuance of the NTP.
Phase I encompassed the central plant, perimeter fencing,
site work within the perimeter, a patrol roadway, security and
fire elements of the Project, and certain inmate housing units.
The central plant contained the boilers and heat exchangers for
the HTHW system. Certificates of substantial completion for
those various elements were executed on May 16, 1997.
Approximately 960 inmates occupied the Phase I housing units
soon thereafter. Phase IIA encompassed several other buildings,
including housing units for another 960 inmates. Certificates
of substantial completion for those buildings were executed
between July 15, 1997 and October 27, 1997. Phase II
encompassed approximately ten buildings, including a minimum-
security unit housing more than 1000 inmates and a garage. The
certificates of substantial completion for the minimum-security
unit and the garage list May 1, 1998, as the date of substantial
completion. The various buildings comprising the Project were
connected to the HTHW distribution system as they were
completed. A certificate of substantial completion was not
issued specifically for the HTHW system.
7
II.
On April 28, 2008, the State filed a complaint against
Perini, Kimball, Natkin, Jacobs, and Perma-Pipe in which it
alleged that the HTHW system designed by Kimball, constructed by
Perini and Natkin, and overseen by Jacobs failed in March 2000
and on several subsequent occasions. The State alleged that
since the first failure in March 2000, “there have been a total
of ten (10) HTHW carrier pipe failures, including failures in
both the supply and return pipelines” and failures of isolation
valves. The State alleged that the system failures were caused
by various defects including design defects, defective site
preparation for the pipes, defective pipes, and deficient system
design. Due to recurrent system failures, the State concluded
that the entire system had to be replaced. The State asserted
breach of contract against Perini, negligence and professional
malpractice against Kimball, negligence and breach of contract
against Natkin, and breach of contract against Jacobs. Against
Perma-Pipe, the State asserted a claim under the New Jersey
Products Liability Act (PLA), N.J.S.A. 2A:58C-1 to -11, as well
as breach of implied warranties, negligence, and strict
liability in tort.
All defendants moved for summary judgment. Each defendant
argued that the Project was substantially complete well before
April 28, 1998; therefore, the statute of repose, N.J.S.A.
8
2A:14-1.1(a), barred the State’s complaint. The State contended
that the date of substantial completion of the Project was not
until May 1, 1998, if not December 1998. The trial court
granted summary judgment in favor of defendants Perini, Kimball,
Natkin, and Jacobs. Relying primarily on the occupancy of
inmates at the facility on or before April 28, 1998, the court
determined that the HTHW system was substantially complete
before April 28, 1998. Therefore, the trial court found that
the State’s complaint was barred by the ten-year statute of
repose. On the other hand, the trial court denied Perma-Pipe’s
motion for summary judgment. The court concluded that Perma-
Pipe was a manufacturer of goods and therefore its liability was
governed by the PLA and the statute of repose did not apply to
it.
On leave granted, the Appellate Division reversed the
orders granting summary judgment in favor of defendants Perini,
Kimball, Natkin, and Jacobs and affirmed the order denying
summary judgment to Perma-Pipe. State v. Perini Corp., 425 N.J.
Super. 62 (App. Div. 2012). The panel concluded that the
separate phases of a project can have separate trigger dates for
the statute of repose. Id. at 78. However, the panel held that
regardless of the nature of the project, the statute of repose
does not provide for separate trigger dates for components of a
project that do not qualify as discrete “improvements to real
9
property.” Ibid. The panel determined that the record did not
support a finding that the HTHW system was a separate
improvement to real property. Id. at 79. Therefore, the
statute of repose was triggered when defendants substantially
completed their work on the entire project. Ibid. Accordingly,
the panel held that the statute of repose was triggered no
earlier than May 1, 1998, the date when the minimum-security
unit and garage were certified as substantially complete, and
the State’s April 28, 2008 complaint was timely filed. Ibid.
In addition, the Appellate Division affirmed the trial court’s
holding that the statute of repose does not bar the State’s
claims against Perma-Pipe because it was a manufacturer of a
product rather than a designer or installer of a system. Id. at
80-81.
We granted the contractor-defendants’ motions for leave to
appeal, 210 N.J. 476 (2012), and Perma-Pipe’s cross-motion for
leave to appeal, limited to the issue of whether the statute of
repose applies to bar the State’s claims against it, 211 N.J.
606 (2012). We also granted amicus curiae status to Building
Contractors Association of New Jersey.
III.
A.
Perini argues that the Appellate Division erred in
concluding that the HTHW system was not a separate improvement
10
to real property within the meaning of the statute of repose.
Perini maintains that the Appellate Division contravened its
prior decisions in Port Imperial Condominium Ass’n v. K.
Hovnanian Port Imperial Urban Renewal, Inc., 419 N.J. Super. 459
(App. Div. 2011) and Brown v. Jersey Central Power & Light Co.,
163 N.J. Super. 179 (App. Div. 1978), certif. denied, 79 N.J.
489 (1979), which deemed structural improvements that are
integral to the structure itself to be “improvements to real
property.” Accordingly, Perini submits that the prison could
not function without the HTHW system, and the statute of repose
was triggered when the State began to house inmates at South
Woods more than ten years prior to the filing of the complaint
by the State.
Similarly, Kimball argues that the statute of repose was
triggered when the State took over beneficial use and operation
of the HTHW system. Kimball emphasizes that the State began
using the HTHW system and started to house inmates in May 1997,
after the substantial completion of the site work and the
central plant, which housed the boilers for the HTHW system.
Accordingly, Kimball submits that the statute of repose was
triggered in May 1997 when the State was able to use the HTHW
system, and that the trigger date is not affected by the
completion of the minimum-security unit and the garage.
B.
11
Perma-Pipe argues that it is also entitled to the
protections of the statute of repose. Perma-Pipe maintains that
it was not merely a manufacturer of the piping for the HTHW
system but was also involved in the design, planning, and
installation of the system. In addition, Perma-Pipe contends
that it did not supply a “stock item” or standardized product
for the Project, but rather a specialized system that required
several design changes during construction. Perma-Pipe also
submits that the Appellate Division erred in interpreting
Dziewiecki v. Bakula, 180 N.J. 528 (2004), as establishing a
blanket proposition that manufacturers are not subject to the
statute of repose. Accordingly, Perma-Pipe contends that the
State’s complaint is untimely because the statute of repose was
triggered in 1997 when the State began using the HTHW system and
inmates occupied buildings in the first phase of the Project.
C.
The State maintains that its complaint was timely filed.
In particular, the State argues that even though its claims
relate only to the HTHW system, the ten-year limitations period
is triggered by substantial completion of the entire Project,
not just a portion of it. It emphasizes that the HTHW system
was designed to serve the entire Project. As a result, the
State submits that the Appellate Division correctly determined
12
that the statute of repose was triggered no earlier than May 1,
1998, when the entire Project was substantially complete.
Regarding Perma-Pipe’s appeal, the State maintains that the
statute of repose does not apply to product liability claims.
Moreover, the State argues that it did not assert any claims
pertaining to Perma-Pipe’s other purported roles as designer and
planner of the HTHW system.
D.
Amicus curiae Building Contractors Association of New
Jersey (BCANJ) urges this Court to reverse the Appellate
Division’s decision. BCANJ contends that the panel failed to
give effect to the certificates of substantial completion, which
should have been interpreted as also declaring the components of
a project, such as the HTHW system, as substantially complete.
In addition, BCANJ argues that the Appellate Division
inappropriately stated in dicta that individual subcontractors
working on a component of a project would have separate trigger
dates under the statute of repose. BCANJ submits that this
statement represents an unwarranted extension of this Court’s
decision in Daidone v. Buterick Bulkheading, 191 N.J. 557
(1997). In particular, BCANJ argues that Daidone, which
involved an owner acting as general contractor, should be
confined to the facts of that case. Otherwise, Daidone’s
holding will unfairly burden the last remaining party on a
13
project with liability for the failures of the other parties to
the contract. Last, BCANJ asks this Court to hold that third-
party claims for contractual indemnification and contribution
will be deemed as having accrued on the date on which the
plaintiff originally filed the action.
IV.
A.
The first issue before the Court is whether defendants
Perini, Kimball, Natkin, and Jacobs are entitled to summary
judgment and dismissal of the complaint filed against them based
on the statute of repose. In reviewing a grant or denial of
summary judgment, an appellate court is bound by the same
standard as the trial court under Rule 4:46-2(c). Town of
Kearny v. Brandt, 214 N.J. 76, 91 (2013); Liberty Surplus Ins.
Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We
must “consider whether the competent evidential materials
presented, when viewed in the light most favorable to the non-
moving party, are sufficient to permit a rational factfinder to
resolve the alleged disputed issue in favor of the non-moving
party.” Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,
540 (1995). To the extent that the grant or denial of summary
judgment is based on an issue of law, we owe no deference to an
interpretation of law that flows from established facts.
Kearny, supra, 214 N.J. at 92. Here, the date of the
14
commencement of the limitations period of the statute of repose
is a question of law subject to plenary review. See ibid.
(citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140
N.J. 366, 378 (1995)).
B.
Prior to the enactment of the statute of repose, liability
for deficiencies in a construction project was governed by the
common law “completed and accepted rule.” E.A. Williams, Inc.
v. Russo Dev. Corp., 82 N.J. 160, 165 (1980). In Totten v.
Gruzen, 52 N.J. 202, 210 (1968), this Court repudiated the rule,
replacing it with the limitations on liability derived from
ordinary negligence principles.
In 1967, New Jersey adopted a statute of repose. N.J.S.A.
2A:14-1.1(a) provides as follows:
No action, whether in contract, in tort, or
otherwise, to recover damages for any
deficiency in the design, planning, surveying,
supervision or construction of an improvement
to real property, . . . arising out of the
defective or unsafe condition of an
improvement to real property, nor any action
for contribution or indemnity for damages
sustained on account of such injury, shall be
brought against any person performing or
furnishing the design, planning, surveying,
supervision of construction or construction of
such improvement to real property, more than
10 years after the performance or furnishing
of such services and construction.
15
As discussed in several prior opinions of the Court, the statute
of repose responded to the expanding liability of contractors,
builders, planners, and designers occasioned by the rejection of
the “completed and accepted rule,” the expanding application of
the discovery rule, and the evolving development of strict
liability in tort for injuries arising from defective conditions
in newly constructed buildings. See, e.g., Horosz v. Alp
Estates, Inc., 136 N.J. 124, 128 (1994); Newark Beth Israel Med.
Ctr. v. Gruzen, 124 N.J. 357, 362 (1991); E.A. Williams, supra,
82 N.J. at 165-66; O’Connor v. Altus, 67 N.J. 106, 117-19
(1975); Rosenberg v. Town of N. Bergen, 61 N.J. 190, 194-98
(1972). The statute of repose is construed broadly to
effectuate its purpose. Town of Kearny, supra, 214 N.J. at 93.
The statute of repose applies only to work that constitutes
an “improvement to real property.” N.J.S.A. 2A:14-1.1(a).
Generally, “an improvement to real property permanently
increases the property’s value.” Ebert v. S. Jersey Gas Co.,
157 N.J. 135, 139 (1999). When a court must determine whether
work is an improvement to real property, it should consider
“‘whether the modifications or addition enhances the use of the
property, involves the expenditure of labor or money, is more
than mere repair or replacement, adds to the value of the
property, and is permanent in nature.’” Ibid. (quoting Van Den
16
Hul v. Baltic Farmers Elevator Co., 716 F.2d 504, 508 (8th Cir.
1983)).
A service line carrying natural gas from a central main
onto a residential property is an improvement to real property,
id. at 139-40, as is an in-ground swimming pool installed at a
home, Dziewiecki, supra, 180 N.J. at 533. A structural
improvement, such as a transfer switch assembly cabinet, is an
improvement to real property when it is “required for the
structure to actually function as intended.” Brown, supra, 163
N.J. Super. at 195-96.
Calculation of the ten-year limitations period for the
statute of repose generally commences one day after issuance of
the certificate of substantial completion for the project.
Russo Farms, Inc. v. Vineland Bd. of Educ., 144 N.J. 84, 118
(1996). In Russo Farms, the Court explained that
“‘[s]ubstantial completion has a definite meaning in the
construction industry.’” Id. at 117 (quoting Perini Corp. v.
Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 500 (1992),
overruled on other grounds by In re Tretina Printing, Inc. v.
Fitzpatrick & Assocs., Inc., 135 N.J. 349 (1994)). As defined
by the American Institute of Architects and incorporated in its
model contract, it is “the date when construction is
sufficiently complete . . . so the owner can occupy or utilize
the building.” Ibid. (internal quotations marks omitted). To
17
be sure, there may be instances in which another event signals
the commencement of the limitations period. However, any
departure from the date when the certificate of substantial
completion is issued is driven by the facts of the individual
case. For example, in Town of Kearny, supra, the Court held
that the ten-year period under the statute of repose commenced
on the date the first temporary certificate of occupancy was
issued because the certificates of substantial completion bore
neither the date of issuance nor the date of project completion.
214 N.J. at 95-96.
As noted in Town of Kearny, “[o]ur caselaw distinguishes
between defendant contractors who are hired to perform limited
services and defendants with supervisory responsibilities that
span the entire project, in determining the date upon which the
ten-year period begins for purposes of the [statute of repose].”
Id. at 93. For example, in Daidone, supra, the homeowners acted
as the general contractor and subcontracted with several
professionals and contractors to perform specific tasks in the
design and construction of their home. 191 N.J. at 560-61. An
architectural firm designed the house and another contractor
installed the pilings for the home’s foundation. Ibid.
Following completion of their work, neither the architect nor
the piling contractor performed any other work on the project.
The Court concluded that the ten-year period of the statute of
18
repose commenced to run the day on which each contractor
completed all work for the project. Id. at 566. Similarly, in
Hopkins v. Fox & Lazo Realtors, 242 N.J. Super. 320, 322 (App.
Div. 1990), an architect had been retained by a residential
developer to provide plans for a prototype house. The architect
performed no other work on the house plans and did not supervise
the construction of any houses erected by the developer. Ibid.
Under these circumstances, the appellate panel concluded that
“the statute’s purpose is best served by finding that the ten-
year statutory period begins when the architect or contractor
completes its task with respect to the property involved in the
claim.” Id. at 328.
By contrast, when a designer, planner, or person
participating in the construction of an improvement to real
property has continuing responsibility throughout the
construction of the project or a specific improvement, the ten-
year limitations period commences when the project has been
certified as substantially complete. Town of Kearny, supra, 214
N.J. at 94. Thus, in Town of Kearny, the statutory ten-year
period commenced for the designer, who supervised construction
of a police/fire facility and certified substantial completion
of the work, when the first temporary certificate of occupancy
was issued. Ibid. In Welch v. Engineers, Inc., 202 N.J. Super.
387, 396 (App. Div. 1985), the Appellate Division refused to
19
segment a contractor’s responsibilities into stages for
triggering the ten-year statute of repose period because the
contractor had continuing responsibility for the project as a
designer and builder. The panel reasoned as follows:
The functions of design, planning, supervision
or construction of improvements to realty
could be treated either separately or
unitarily when a single defendant performs two
or more or indeed all of these functions, as
[Engineers, Inc.] did here, without distorting
or diluting the language used by the
Legislature. . . . [W]e think the Legislature
most likely meant that when a person rendered
any construction-related services on a
particular job, finished them and walked away
from the job-site with the work accepted, that
person could look back ten years and one day
“after the performance or furnishing of such
services and construction,” N.J.S.A. 2A:14-
1.1, and know there was repose from liability.
We do not think that the Legislature intended
to let repose turn on serial cut-off dates
accruing through various stages of the work,
turning on fact-sensitive determinations and
various analytic approaches to construction
staging.
[Ibid.]
C.
Here, the State argues that the Project must be considered
a unitary undertaking, although the work was divided into phases
and each individual building was occupied upon its completion.
It emphasizes that construction continued, uninterrupted, on
other housing units and accessory structures even after the
first wave of inmates arrived. Stated differently, the
20
completion of the Project did not experience a lull in activity
weeks, months, or years in length. Further, Perini, Natkin, and
Jacobs were involved continuously from the commencement of
construction through the completion of the Project. Kimball, as
the designer with supervision responsibilities, was involved
continuously from the very inception of the Project through
completion of construction.
The State also contends that the certificate of substantial
completion issued for the central plant, which housed the
boilers used for the HTHW system, did not encompass the entirety
of the HTHW system. Rather, the network of underground pipes
was a critical element of the HTHW system. The State insists
that the system could be considered substantially complete only
when the last of the buildings it was designed to service were
connected to the system.
Perini, Kimball, Natkin, and Jacobs emphasize that the
Project was constructed in phases; therefore, calculation of the
ten-year period should commence with the completion of each
phase of the Project. In addition, they assert that the central
plant was substantially completed on May 15, 1997, thereby
triggering commencement of the ten-year repose period on May 16,
1997, the day that the State assumed possession of the building.
Based on that calculation, the ten-year period for filing the
State’s complaint expired in May 2007, many months before the
21
April 28, 2008 filing date. Implicit in this argument is the
notion that the certificate of substantial completion for the
central plant encompassed the entire HTHW system.
Viewing the facts contained in the summary judgment record
in the light most favorable to the State, the non-moving party,
we conclude that the statute of repose does not bar the State’s
complaint against defendants Perini, Kimball, Natkin, and
Jacobs. Several factors compel this conclusion.
As a threshold matter, we conclude that the HTHW system is
an improvement to real property. Therefore, the work performed
on this system falls within the scope of the statute of repose.
We reject, however, the argument advanced by Perini and Kimball
that the statute of repose was triggered on May 16, 1997, after
the certificates of substantial completion were executed for the
central plant and the housing units for the first wave of
inmates.
There can be no serious argument that the HTHW system is
not an improvement to real property. The system provides heat
and hot water to every building in the Project. The HTHW system
does not simply enhance the use of and add value to the Project;
South Woods could not function as a correctional facility
housing more than 3000 inmates without heat and hot water.
However, having determined that the HTHW system is an
improvement to real property within the scope of the statute of
22
repose does not lead to the inexorable conclusion that
completion of the central plant and occupancy of the initial
group of inmate housing units triggered the ten-year statute of
repose limitations period. A “system” is “a regularly
interacting or interdependent group of items forming a unified
whole.” System Definition, Merriam-Webster.com,
http://www.merriam-webster.com/dictionary/system (last visited
April 17, 2015). Here, the HTHW system is designed to form a
unified whole that interacts with and is connected to every
structure of the prison complex. The central plant where the
boilers are located may be viewed as the origination point of
this system, but it is by no means independent of the
underground pipes that are connected to it to bring heat and hot
water to every facet of the prison complex. Neither the nature
of the HTHW system, the course of construction, nor defendants’
role in the construction of the Project permits the issue date
of the Phase I certificates of substantial completion to trigger
the statute of repose time calculation.
Defendants Perini, Kimball, Natkin, and Jacobs were
involved continuously throughout construction of the Project.
Defendant Perini was the general contractor for the Project.
Natkin, as the HVAC subcontractor, and Jacobs, as the
construction supervisor, oversaw compliance with plans and
specifications for every aspect of the Project. They remained
23
continuously involved in the Project much like the designer and
general contractor in Welch, and the designer/construction
supervisor in Town of Kearny. Kimball not only designed the
Project but also provided oversight and consultation services
throughout construction of the Project. Unlike the architect in
Hopkins, who submitted a prototype plan for a house and had no
further involvement in the construction of any house based on
that plan, or the designer in Daidone, who did nothing more than
submit plans for the plaintiffs’ house, Kimball not only
designed the Project but also remained continuously involved in
the execution of its design.
The record also provides no support for the position
advanced by Perini, Kimball, Natkin, and Jacobs that the HTHW
system was substantially complete on May 16, 1997, after the
issuance of the certificate of substantial completion for the
central plant. Such a position ignores the design of the HTHW
system of which the boilers are only a component part, albeit a
critical part. This argument also ignores that the HTHW system
was not designed to only serve the buildings in Phase I that
house 960 inmates.
The HTHW system was designed to serve every building in
the Project. Therefore, contrary to defendants’ assertion, it
is of no significance that the minimum-security unit is located
outside of the fenced perimeter of the Project. The minimum-
24
security unit, housing more than 1000 inmates, is a critical
element of the Project and receives all of its heat and hot
water from the HTHW system. As a system designed to supply heat
and hot water to every building in the Project, we are loath to
embrace an application of the statute of repose that would
permit separate trigger dates for each section of the HTHW
system as a building it serves comes on line. Such an approach
is inconsistent with the purpose of the statute of repose and
frustrates the ability of the owner to evaluate whether the
system, as designed and constructed, operates as intended.
The record also provides no support for the contention
advanced by Perini, Kimball, Natkin, and Jacobs that the
completion of each phase of the contract triggered the statute
of repose for all work performed for that phase. To the
contrary, the record demonstrates work on the Project flowed
virtually seamlessly from phase to phase once the NTP issued.
The record also demonstrates that the purpose of the division of
the Project into phases was to permit the Department of
Corrections to address system-wide overcrowding by moving
inmates into a portion of the facility while construction
proceeded on the balance of the Project.
It is for these reasons that defendants’ concern that
selecting the date of the certificate of substantial completion
issued for the minimum-security unit and the garage will subject
25
them and other similarly situated contractors in other cases to
endless liability is unfounded. The Project had a discrete
start and end date. The improvement at issue provides every
building in the Project with a critical service –- heat and hot
water. There were no lengthy gaps of time between one phase and
another. Under these circumstances, it is only sensible that we
focus on the issuance of the certificates of substantial
completion for the last buildings connected to the HTHW system
as the trigger for calculating the commencement of the ten-year
repose period.
Neither the contract nor the specifications require a
separate certificate of substantial completion for the HTHW
system. No certificate ever issued for only the HTHW system.
The failure to require a separate certificate for the HTHW
system supports the conclusion that neither the owner nor the
designer and builder ever contemplated that the system would be
completed on a piecemeal basis. Rather, as an improvement
designed to service every building in the facility, it was
complete only when the HTHW system was connected to every
building it was designed to serve.1
1 The parties are free to stipulate to a substantial completion
date via contract. See Town of Kearny, supra, 214 N.J. at 95;
Trinity Church v. Lawson-Bell, 394 N.J. Super. 159, 170 (App.
Div. 2007).
26
In sum, we conclude that the ten-year statute of repose
limitations period commenced to run on the day after the final
certificates of substantial completion issued for the final
buildings served by the HTHW system. The final certificates
were issued on May 1, 1998. The State filed its complaint on
April 28, 2008. The statute of repose therefore does not bar
the complaint.
V.
Finally, we address the Perma-Pipe appeal. Perma-Pipe
manufactured and supplied the piping required for the HTHW
system. It also participated in laying the pipe throughout the
site. Perma-Pipe acknowledges that the statute of repose is
normally not extended to similarly situated manufacturers of
construction materials. It maintains, however, that it was
inextricably involved in the design and fabrication of the HTHW
system and is thereby within the ambit of the statute of repose.
In its complaint, the State asserts three causes of action
against Perma-Pipe: breach of implied warranties of
merchantability and fitness for a particular purpose (Count
Five); negligence and strict liability in tort (Count Six); and
breach of its duty under the PLA (Count Seven). It is
undisputed that defendant Kimball designed the Project in its
entirety and the design included the HTHW system. Perma-Pipe
27
manufactured the insulated black steel carrier piping used in
the HTHW system.
The statute of repose applies when
(1) the injury sustained by plaintiff resulted
from a defective and unsafe condition of an
improvement to real property; (2) [the
defendant was] responsible for performing or
furnishing the design, planning, surveying,
supervision of construction, or construction
of the improvement; and (3) the injury
occurred more than ten years after the
performance or furnishing of the services.
[Dziewiecki, supra, 180 N.J. at 531-32.]
By contrast, manufacturers of standardized products and
sellers of such products are not subject to the statute of
repose, but rather “are covered by the statute of limitations
applicable to the [PLA].” Id. at 532. When a person or entity
has served as a manufacturer and an installer and thereby falls
under the coverage of the statute of repose and the PLA, and the
cause of the injury is attributable to both, the responsibility
should be allocated between the two. Id. at 533. The practical
effect of allocation may render one of the causes of the injury
actionable and the other non-actionable, if the civil action is
not commenced within ten years of substantial completion of the
improvement. Ibid.
The facts in Dziewiecki illustrate the distinction between
manufacturing/distribution and installation. In that case, the
Court held that the inground pool surrounded by a concrete apron
28
was an improvement to real property. Id. at 532. The installer
of this improvement fell within the coverage of the statute of
repose. Id. at 533. On the other hand, the seller and
distributor of a pool kit composed of galvanized steel walls, a
vinyl liner, braces behind the walls, and a coping package “did
not fall within the class of persons or entities protected by
the [statute of repose].” Id. at 531.
A review of the record, particularly the November 7, 1995
letter accompanying Perma-Pipe’s proposal and the terms and
conditions of the provision of its product, demonstrate that
Perma-Pipe’s role was that of a manufacturer of a product used
in the construction of the HTHW system. For example, the
summary of Perma-Pipe’s proposal in the November 1995 letter
states that “Perma-Pipe’s standard hot water distribution system
is a completely drainable and dryable system.” (Emphasis
added). Perma-Pipe stated that the piping and fittings would be
manufactured to job specifications using standard straight
sections of piping and “our Poly-Piping and Kits product line.”
It also proposed “to furnish our POLY-THERM product for the
chilled water distribution system for the . . . project.”
In its Terms and Conditions of Sale, Perma-Pipe also
advised the buyer that fabrication would not commence until the
buyer provided “all job dimensions and angles” and any
deviations “from the consulting engineer’s designs must be
29
counter-approved by the engineer” before fabrication would
commence. In addition, the Terms and Conditions of Sale
expressly stated that the buyer would compensate Perma-Pipe for
any costs incurred by it due to changes in drawings or
dimensions.
To be sure, the record reveals that Perma-Pipe provided
technical assistance and support during installation. The
record also demonstrates that Natkin, not Perma-Pipe, installed
the piping. In short, while the piping for the Project served a
specialized purpose to meet the specific dimensions and
specifications of the system designed by Kimball and installed
by Natkin, the piping and the various fittings manufactured by
Perma-Pipe are nonetheless a product and Perma-Pipe cannot take
refuge in the statute of repose.
VI.
In sum, we hold that the HTHW system is an improvement to
real property and falls within the scope of the statute of
repose. We reject, however, the position advanced by defendants
Perini, Kimball, Natkin, and Jacobs that the ten-year statute of
repose limitations period commenced to run when the HTHW system
began to supply heat and hot water to the buildings completed in
Phase I. The HTHW system was designed to supply heat and hot
water not to some but to all buildings in the system, including
the 1000-plus bed minimum-security unit substantially completed
30
on May 1, 1998. The statute of repose for a single improvement
that is intended to supply critical utilities, such as heat and
hot water, cannot be considered substantially complete until it
has been connected to every building it is intended to serve.
In this appeal, the multi-phase construction schedule had no
effect on when the statute of repose limitations period
commenced. This three-phase project proceeded seamlessly from
one phase to another with no substantial gaps in construction.
We need not address in this appeal the implications for statute
of repose purposes of a multi-phase project that proceeds with
substantial idle intervals between phases.
Finally, we conclude that Perma-Pipe supplied a product
that was incorporated in the HTHW system and is therefore not a
professional contractor whose services fall within the scope of
the statute of repose.
VII.
The judgment of the Appellate Division is therefore
affirmed as modified.
CHIEF JUSTICE RABNER; JUSTICES ALBIN and SOLOMON; and JUDGE
FUENTES (temporarily assigned) join in JUDGE CUFF’s opinion.
JUSTICES LaVECCHIA, PATTERSON and FERNANDEZ-VINA did not
participate.
31
SUPREME COURT OF NEW JERSEY
NO. A-121/122/123/135 SEPTEMBER TERM 2011
ON APPEAL FROM Appellate Division, Superior Court
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
PERINI CORPORATION, ET AL.,
Defendants-Appellants.
______________________________
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
PERINI CORPORATION, ET AL.,
Defendants,
and
PERMA-PIPE, INC.,
Defendant-Appellant.
DECIDED April 30, 2015
Chief Justice Rabner PRESIDING
OPINION BY Judge Cuff (temporarily assigned)
CONCURRING/DISSENTING OPINION BY
DISSENTING OPINION BY
AFFIRMED AS
CHECKLIST
MODIFIED
CHIEF JUSTICE RABNER X
JUSTICE ALBIN X
JUSTICE SOLOMON X
JUDGE CUFF (t/a) X
JUDGE FUENTES (t/a) X
TOTALS 5