July 10, 2008

Noncompletion is not contemplated by the Tennessee construction statute of repose


Defendant Homebuilder left plaintiff Homeowners' job site before completing construction of their residence. Homebuilder appeals the chancery court's confirmation of an adverse arbitration award, arguing that the arbitrator exceeded his authority by refusing to enforce a provision of the contract that would have rendered the plaintiff Homeowners' suit time barred. The limitation provision applied to suits for defective improvements to real estate. The gravamen of this breach of contract action was partial performance, not defective performance. Further, the arbitrator awarded to Homeowners the cost to complete the construction plus interest, attorney's fees, and arbitration costs. Finding that the limitation period does not apply to this action, we affirm.

Opinion may be found at the TBA website:

"Paragraph 14 of the contract, which addressed the builder’s limited warranty and provided for the repair of covered defects, contained the provision in question. Subparagraph (F) provided as follows:
Repairs. Upon receipt of Owner’s written report of a defect, if the defective item is covered by Builder’s Limited Warranty, Builder shall repair or replace it at no charge to Owner, within thirty (30) days, (extended for delays caused by weather conditions, labor problems or material shortages). Notwithstanding the foregoing, Builder and Owner expressly waive the statutory limitations on actions for defective improvements of real estate, as provided by Tennessee Code Section 28-3-201 et seq., and in lieu thereof covenant and agree that all actions recoverable under this statutory provision shall be brought within one (1) year after substantial completion of the House." Id.

"To determine whether this lawsuit falls within the ambit of the referenced statute of repose, thus making it subject to the one-year limitation, we look to the gravamen of the complaint and to the basis for which the damages are sought. [] Although there are some references made to inferior workmanship[] in the complaint, the suit plainly rests upon nonfeasance more so than malfeasance, or partial performance rather than defective performance. The Ponses averred, and it is undisputed, that the following items were left uncompleted by Mr. Harrison ... . Moreover, it appears that the arbitrator awarded them the cost to complete the residence." Id. (citations omitted).

"In this breach of contract case, the chief complaint was nonfeasance, not malfeasance. This distinction removes the action from the purview of Tennessee Code Annotated Section 28-3-202 because the statute applies to actions predicated upon defective improvements to real property, property damage, and personal injury or wrongful death attributable to the defective work. Because the statute does not apply, neither do the contractual waiver and one-year limitation period. We accordingly affirm the chancellor’s confirmation of the award." Id.