Muzar v. Metro Town Houses, Inc.

82 Mich. App. 368 (1978) 266 N.W.2d 850

MUZAR
v.
METRO TOWN HOUSES, INC.

Docket Nos. 77-1434, 77-1435.

Michigan Court of Appeals.

Decided April 4, 1978.

Eli Friedman, for Dembs Building Company.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, P.C. (by WILLIAM D. BOOTH and MICHAEL T. LYNCH), for Lehner Associates, Inc.

Before: T.M. BURNS, P.J., and M.F. CAVANAGH and D.C. RILEY, JJ.

D.C. RILEY, J.

The present appeal involves a challenge to the constitutionality of MCLA 600.5839(1); MSA 27A.5839(1),^[1] the statute of limitations applicable to suits against licensed architects and engineers arising from work done in connection with improvements to real property. A short recitation of the factual and procedural history of the cases is necessary prior to our discussion of the issue.

In 1964, Metro Town Houses, Inc. contracted with Dembs Building Company for construction of a townhouse complex in Mount Clemens, Michigan. Dembs in turn contracted the design of the drainage system for the townhouse buildings to Lehner Associates, Inc., a professional engineering firm.

In 1965, three of the townhouses were sold by Metro to plaintiffs Charlotte Muzar, Carrie Ledbetter, and Agatha Malinowski. All three of the townhouses were contained within the same building. State Farm Fire and Casualty Co. insured plaintiffs against damage, including collapse, to the common building.

On January 3, 1973, the building housing the plaintiffs' townhouses collapsed, allegedly due to defects in the construction of the drainage system. In July, 1973, plaintiffs sued Metro and State Farm, jointly and severally, for breach of warranty. After Metro was discovered to be defunct, State Farm settled the plaintiffs' suit for $40,000.

In December, 1975, State Farm brought a third-party complaint against Dembs, claiming that it was subrogated to the original plaintiffs' right to seek recovery of the $40,000 from the construction company. In turn, Dembs filed a third-party action for indemnity against Lehner Associates, alleging that the collapse was caused by defective design of the drainage system.

Concurrent with these proceedings, the original plaintiffs instituted a separate lawsuit directly against Dembs, alleging a breach of warranty. Dembs again filed a third-party complaint for indemnity against Lehner.

On August 11, 1976, Lehner filed motions for accelerated judgment^[2] against Dembs in both suits, arguing that the actions were barred by MCLA 600.5839(1); MSA 27A.5839(1), since the building collapsed more than six years after completion of the work done by Lehner. In answer to the motion Dembs contended that the statute was unconstitutional as a violation of equal protection. On December 13, 1976, the trial court issued an opinion upholding the constitutionality of the statute and granting accelerated judgment to Lehner in both lawsuits. Dembs appealed the accelerated judgments to this Court, which has consolidated the matters due to the identity of the issues.

Appellant Dembs contends that the statute violates equal protection since it sets up a limited class (licensed architects and professional engineers) and exempts them from tort liability after a set time period without extending the same protections to other entities (contractors, materialmen, etc.) engaged in the construction industry and subject to related liabilities. Dembs argues that the statute arbitrarily discriminates between persons in the construction industry, claiming that none of the various justifications expressed in support of the legislation apply only to architects and engineers.

Lehner responds that the Legislature may validily limit the scope of the statute to a particular occupational class provided that there is a rational basis for the classification scheme. Lehner finds such a rational basis for this statute in the allegedly unique position of architects and engineers facing potential liability for work in connection with real property.

From the proceeding discussion it is evident that before the equal protection challenge can be reviewed and decided we must specify the standard by which we will judge the constitutionality of the statute. Under classic equal protection analysis the applicable standard depended on whether the legislation affected a "suspect" class or a fundamental right. If so, the reviewing court would apply a "strict scrutiny" test, which would require the state to show a compelling interest justifying the legislation. Manistee Bank & Trust Co v McGowan, 394 Mich. 655; 232 NW2d 636 (1975). If the legislation did not affect a suspect class or fundamental right, the burden would be on the person challenging the statute to show that there was no reasonable or rational basis for the classifications at issue. Manistee Bank, supra. In the majority of cases it appeared that the choice of the test predetermined the result, since few pieces of discriminatory legislation could withstand strict scrutiny, but some rational basis for a classification could be found.^[3]

In more recent cases many courts, apparently dissatisfied with the rigidity of the two-test approach, have adopted a third test as a middleground standard for equal protection challenges. In Manistee Bank, supra, the Michigan Supreme Court termed this test as the "fair-and-substantial-relation-to-the-object-of-the-legislation" standard. Manistee Bank, supra at 670.^[4] The Court stated:

"A commentator writes that the California Supreme Court `applied a somewhat redefined standard of equal protection — a standard requiring a "realistic", rather than merely a "legitimate", state purpose which is substantially, rather than merely rationally, supported by the classification system set up by the legislature. * * * The Court in Brown [Brown v Merlo, 8 Cal 3d 855; 106 Cal Rptr 388; 506 P2d 212 (1973)] refused to attribute to the legislature a "theoretically `conceivable', but totally unrealistic, state purpose that might support this classification scheme" * * *'. (Emphasis in original.) In short, the California Supreme Court approached its reviewing function in a manner Professor Gunther identifies as `means scrutiny' or `equal protection bite without "strict scrutiny"'.

"Whatever label is attached to the analysis * * * `the governing rule is one of reason: The Equal Protection Clause, like the Due Process Clause, is a guaranty that controls the reasonableness of governmental action'. The classification must be a reasonable one, and it must bear a reasonable relation to the object of the legislation." (Footnotes omitted.) Manistee Bank, supra at 670-671.

The Manistee Bank Court went on to state that the "reasonable relation to the object of the legislation" test should be applied where the statute creates an exception to a general rule and that exception is no longer experimental. 394 Mich. at 671-672. The Court then applied the test to hold Michigan's guest-passenger statute^[5] unconstitutional.

We believe that the Manistee Bank test should be applied in the case at bar. No argument has been, or reasonably can be, made that the statute affects a suspect class or fundamental right, thereby eliminating the "strict scrutiny" alternative. We believe further that the statute does not fit into the category of experimental legislation that would justify application of the lower standard of review provided by the "rational basis" test.^[6] Hence, we conclude that the proper test was set out in Manistee Bank, supra.

As we will discuss in the remainder of this opinion, numerous cases from other jurisdictions have dealt with equal protection challenges to statutes similar to Michigan's. In the course of those cases, the gamut of justifications expressed in support of the statutes has been analyzed and reanalyzed.

"Where a classification scheme creates a discrete exception to a general rule and has been enforced for a sufficiently long period of time that all the rationales likely to be advanced in its support have been developed, a court should fully examine those rationales and determine whether they are sound.

"It is understandable that a court reviewing what may be `experimental' legislation would say, as did this Court in Naudzius, [Naudzius v Lahr, 253 Mich. 216; 234 N.W. 581 (1931)] `[p]erhaps the legislature also had other reasons for the law'. Where, however, it can no longer be claimed that the legislation is experimental, where all possible rationales have been developed, a court should not dismiss a constitutional challenge on that hypothesis." Manistee Bank, supra at 672.

Although we note that no previous cases have challenged Michigan's law, we find that the cases construing similar statutes have removed this area of legislation from the experimental class, and thus call for application of the "reasonable relation to the object" standard.

Applying this standard, we hold that MCLA 600.5839(1); MSA 27A.5839(1) unconstitutionally violates equal protection in that it distinguishes between licensed architects and professional engineers on the one hand and other members of the construction industry on the other without a reasonable relation to the objects of the act. We find support for this conclusion in the review given by our sister states to their similar statutes.

In response to what had become a rising trend of lawsuits directed against members of the construction business resulting from allegedly defective or negligent work,^[7] a number of states passed laws seeking to limit the liability of these parties. See Comment, Limitation of Action Statutes for Architects and Builders — Blueprints for Non-action, 18 Catholic U L Rev 361 (1969). On review some of these statutes have been struck down on constitutional grounds.

In Skinner v Anderson, 38 Ill 2d 455; 231 NE2d 588 (1967), the Illinois Supreme Court found their statute to be unconstitutional because it singled out architects and contractors for protection not granted to similarly situated parties:

"The arbitrary quality of the statute clearly appears when we consider that architects and contractors are not the only persons whose negligence in the construction of a building or other improvement may cause damage to property or injury to persons. If, for example, four years after a building is completed a cornice should fall because the adhesive used was defective, the manufacturer of the adhesive is granted no immunity. And so it is with all others who furnish materials used in constructing the improvement. But if the cornice fell because of defective design or construction for which an architect or contractor was responsible, immunity is granted. It can not be said that the one event is more likely than the other to occur within four years after construction is completed." 38 Ill 2d at 460; 231 NE2d at 591.

The Skinner Court held that in order for a legislative classification to be valid, it had to be "reasonably related to the legislative purpose". Skinner, supra at 460.

Although the Skinner decision was founded on a specific section of the Illinois constitution,^[8] which forbids the state Legislature from granting any special or exclusive privileges, the analysis undertaken by the Skinner Court applies by analogy to a more general equal protection argument. This is especially so since the Skinner Court employed the "reasonably related to the purpose" test for challenges under the state constitutional provision.

The Hawaii Supreme Court reached a similar result in Fujioka v Kam, 55 Haw. 7; 514 P2d 568 (1973). The Hawaii statute limited actions against "any registered and/or duly licensed person" who furnished services in the design, planning or construction of improvements to real property to those brought within ten years of completion of the work.^[9] In Fujioka, a plaintiff injured by the collapse of a supermarket roof sued the owners of the store, who in turn brought a third-party complaint against the engineer and general contractor who had constructed the roof. The third-party defendants successfully moved for summary judgment on the basis of the statute. The owners appealed, alleging a violation of equal protection.

The Fujioka Court, citing Skinner v Anderson, supra, held the statute unconstitutional:

"It is clear that the classification does not rest upon some reasonable consideration of differences (between the classes under the same circumstances), which have a fair and substantial relation to the object of the legislation. Nor is the classification founded upon a reasonable distinction or difference necessitated by state policy. A statute making such an unsupportable classification fails to meet the requirements of the equal protection guaranty.

* * *

"As we have said, the general requirement of the principle of `the equal protection clause is that all persons shall be treated alike under like circumstances and conditions, both in privileges conferred and in the liabilities imposed.' State v Johnston, 51 Haw 195, 202, 456 P.2d 805, 809 (1969).

"Here, it is clear that the statute calls for arbitrary and capricious discrimination and must therefore be declared an invidious discrimination violative of the equal protection guaranty." 55 Haw. at 12, 13; 514 P2d at 571, 572.

In Kallas Millwork Corp v Square D Co, 66 Wis 2d 382; 225 NW2d 454 (1975), the Supreme Court of Wisconsin, employing a "rational and reasonable justification for the classification" test for equal protection, struck down their statute limiting actions against "any person performing or furnishing the design, planning, supervision of construction or construction" of improvements to real property.^[10] Relying on Skinner, supra, and Fujioka, supra, the Court in Kallas Millwork stated:

"We find the rationale of Skinner and Fujioka persuasive and applicable to the interpretation of sec. 893.155, Stats., and the facts of this case. We adopt their position and conclude that the legislative classification that gives special protection to the protected group is unreasonable. While there are public policy reasons that might justify a limitations period that takes into consideration those who are engaged in the construction business, there appears no reason why only a very restricted class of those thus occupied is protected by the statute.

"As pointed out by Mr. Justice Schaeffer, it is ludicrous to permit a recovery against a manufacturer of a negligently formulated mortar or adhesive, but to deny a recovery against an architect who negligently designed a cornice or facade so that its fall was inevitable." 66 Wis 2d at 392-393; 225 NW2d at 459.

While Skinner, Fujioka, and Kallas Millwork are certainly relevant to the present matter, they are not the only opinions on this subject. Other jurisdictions have upheld similar statutes against equal protection challenges. Not wishing to discuss at length our disagreements with those opinions, we quote with approval the language of Justice Heffernan in Kallas Millwork:

"The defendant also relies on Rosenberg v Town of North Bergen (1972), 61 N.J. 190, 293 A.2d 662, and Carter v Hartenstein (1970), 248 Ark. 1172, 455 S.W.2d 918. Those cases together with Yakima Fruit & Cold Storage Co. v. Central Heating & Plumbing Co. (1972), 81 Wash.2d 528, 503 P.2d 108, do indeed support the defendant's contention that sec. 893.155, Stats., is constitutional. None of those three cases is persuasive. Each of them recites the truism that the legislature can make reasonable classifications of persons or things and accord different treatment to different classes. None of these cases, however, justify the special immunity accorded to the protected class but denied to others similarly situated. The cases relied upon, which fail to find statutes similar to sec. 893.155 unconstitutional, do not come to grips with the real problem presented — what factors distinguish the favored class so that it requires or deserves an immunity not accorded others who appear to be similarly situated.

"The cases relied upon by the defendant to sustain the constitutionality of sec. 893.155, Stats., are not persuasive, and we reject them." 66 Wis 2d at 392-393; 225 NW2d at 460.

Applying the reasoning of the cited cases to Michigan's statute, we reach the inescapable conclusion that the classification limited to "licensed architects and professional engineers" is arbitrary and without reasonable relation to the object of the legislation. Appellee has argued a number of justifications for the time limitations of the statute, including prevention of stale claims, the burdens of keeping records concerning work done many years in the past, the probabilities that defects in construction will not appear for long periods of time, and the lack of knowledge possessed by nonoccupiers of property as to alterations and/or lack of maintenance that may have contributed to or even caused the damages. Even if we agree that the statute is intended to remedy these potential problems, we remain unconvinced that any of these rationales support the classification made in the legislation. The difficulties faced by architects and engineers suddenly subject to liability for work done a significant time in the past are equally present when contractors, materialmen, etc. face similar liability. We concur with Justice Schaeffer in Skinner, supra, by noting the arbitrary nature of legislation which allows a defendant to be held liable without recourse of indemnity against a similarly situated person who may in fact have caused the injury.

In addition, Michigan's statute is even more discriminatory than those struck down in Skinner, Fujioka, and Kallas Millwork. All of the statutes of these states included contractors, such as appellant Dembs, within the protection of their statute. While we might find some justification for the exclusion of persons in possession and control if we were squarely faced with that situation, we can conceive of no reasonable relationship to the object of this statute which allows for a distinction between contractors and materialmen on one hand and architects and engineers on the other. We hold that the grant of summary judgment in favor of appellee Lehner denied appellant Dembs equal protection of the law.

Having found the statute unconstitutional as a violation of equal protection, we are not required to reach the remaining issues raised by Dembs. However, one issue bears discussion in the event the Legislature should attempt statutory revision.

Dembs argues that the statute violates due process in that it allows the limitation period to run before the cause of action accrues (i.e., before the damages occur). The statute, it is thus argued, eliminates a claim before it can be factually asserted.

It is essential to note, however, that the Legislature may abrogate a cause of action which has not vested. Grubaugh v City of St Johns, 384 Mich. 165; 180 NW2d 778 (1970), Snow v Freeman, 55 Mich. App. 84; 222 NW2d 43 (1974). The method of accomplishing this purpose was discussed in Dyke v Richard, 390 Mich. 739, 745-747; 213 NW2d 185 (1973):

"It is helpful to keep in mind the distinction between a statute which is intended to abrogate a common-law cause of action and a statute of limitation.

"A statute which expressly extinguishes a common-law right may be regarded as a proper exercise of legislative authority. For example, 1935 PA 127; MCLA 551.301; MSA 25.191, which abolished the common law cause of action for alienation of affections, criminal conversation, seduction and breach of contract to marry was held to be constitutional in Bean v McFarland, 280 Mich. 19; 273 N.W. 332 (1937).

* * *

"Since `[i]t is of the essence of a law of limitation that it shall afford a reasonable time within which suit may be brought * * *', Price [v Hopkin, 13 Mich. 318 (1865)] a statute which extinguishes the right to bring suit cannot be enforced as a law of limitation."

If the Legislature chooses to re-enact a statute which bars claims based upon a construction or design defect in an improvement to real property which arises after a set period of time from the date the work was completed, the title of the act should clearly set forth the intent of the Legislature to abolish this right of suit, and not term the legislation to be a statute of limitations.

Reversed and remanded for reinstitution of the third-party complaints. No costs, a public question being involved.

NOTES

[1] The statute reads:

"No person may maintain any action to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained as a result of such injury against any state licensed architect or professional engineer performing or furnishing the design or supervision of construction of such improvement more than 6 years after the time of occupancy of the completed improvement, use or acceptance of such improvement. This limitation shall not apply to actions against any person in actual possession and control as owner, tenant or otherwise, of the improvement at the time the defective and unsafe condition of such improvement constitutes the proximate cause of the injury or damage for which the action is brought."

[2] GCR 1963, 116.1(5).

[3] Manistee Bank & Trust Co v McGowan, 394 Mich. 655, 669; 232 NW2d 636 (1975). See also Note, Developments in the Law: Equal Protection, 82 Harv L Rev 1065 (1969), and Gunther, Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for a Newer Equal Protection, 86 Harv L Rev 1 (1972).

[4] See Reed v Reed, 404 U.S. 71; 92 S. Ct. 251; 30 L. Ed. 2d 225 (1971).

[5] MCLA 257.401; MSA 9.2101.

[6] For an example of a situation of where a legislative experiment is afforded a greater amount of judicial deference through use of the rational basis test, see the treatment of challenges to Michigan's nofault automobile insurance law in Shavers v Attorney General, 65 Mich. App. 355, 366-368; 237 NW2d 325 (1975), lv granted 396 Mich. 869 (1976), and Schigur v Secretary of State, 73 Mich. App. 239, 248; 251 NW2d 567 (1977).

[7] This trend was prompted by two factors: (1) abolition of the privity of contract requirement, and (2) rejection of the doctrine that liability ended when the work was accepted.

[8] S.H.A. Const, art 4, § 22.

[9] HRS § 657-8.

[10] WSA 893.155.