Daily Development for
Wednesday, March 11, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

CONSTRUCTION; DEFECTS; LIMITATION OF ACTIONS: A home builder is not equitably estopped from asserting the statute of limitations defense against the buyers' breach of contract claim for faulty construction where the buyers delayed the action in reliance upon multiple misrepresentations by the builder and the builder's failed attempts to remedy the problem.

Williams v. Karek Builders, Inc., 568 N.W.2d 313 (Wis. Ct. App. 1997).

The buyers sought to recover damages for a water problem in the basement of their new home. The buyers discovered the problem within a few months of moving into the home in 1987, and sought to have the builder correct it. Over the course of several years, the builder responded by furnishing waterproofing paint, installing a second sump pump, claiming the problem was caused by condensation common to all new homes and blaming the problem on construction activities on the adjoining lot. The basement continued to leak. In 1994, the buyers hired a contractor to inspect the property and determined that the problem was a result of faulty construction. The buyers sued the builder in 1995, eight and one half years after moving in.

The statute of limitations on both negligence claims and contract claims here was six years. The builder moved for summary judgment based on the statute of limitations. The trial court granted summary judgment.

On appeal: held: affirmed in part and reversed in part. The court affirmed the trial court's finding that the statute of limitations had run on the contract claim, but reversed its determination regarding the negligence claim.

The appeals court pointed out that the statute of limitations on a contract claim in Wisconsin is an "absolute" six years, and that it ran from the time of breach of contract, regardless of when the breach was discovered. Here, the buyers' own theory of liability was that the builder had negligently built the house in the first instance, not that the builder had negligently failed to "follow up" or to correct the problem. Six years had run since the breach of contract arose, so the claim was barred.

The buyers argued that the builder was estopped from asserting the defense because the builder induced them to refrain from taking action. There is authority in Wisconsin for equitable estoppel of a builder's asserting a statute of limitations defense. The factors to be applied are as follows:

Finding that the builder's excuses and failed attempts to remedy the problem amounted to giving the buyers the "run-around," the court held that the buyers' reliance on the builder's representations nevertheless was unreasonable and granted summary judgment in favor of the builder. The Court of Appeals held that the trial court had reason to conclude that the buyers should have initiated the action sooner instead of giving the builder as many chances to remedy the problem as they did.

The result was different on the claim for negligent construction. The trial court had granted the builder's motion for summary judgment on this claim also, based on the statute of limitations. But the Court of Appeals held that summary judgment on this claim was improper because the limitations period on such a claim runs from the time the defect was discovered or should have been discovered The trial court made no determination as to when the defect was or should have been "discovered. " The buyers may have relied reasonably on the builder's explanations for a period of time, before it became evident that the builder was insincere. Although this would not support an estoppel claim on the running of the contracts cause of action, it might have tolled the statute of limitations on the negligence action for more than two and a half years - so that the six years statute in this case would not have run.

Comment 1: Had the owners argued that the builder had been negligent in the inspection follow up or in efforts to correct the water problem, it is possible that they would have been able to fit within the contracts limitations period. But the nature of the problem as alleged by the owners had to do with decisions the builder made in choosing the backfill and in setting the elevation of the property. Apparently they already had corrected the problem by installing a new drain tile system, and were not intending to correct the backfill or elevation at this point, so they may have had other options in characterizing the builder's negligence.

Comment 2: Only a full reading of the case will permit a reader to make a judgment about the significance of the court's ruling that the buyers should have seen that they were getting a "runaround." In the editor's view, the court seems to be punishing the owners for being non-litigious folks oriented toward working problems out. After this case, Wisconsin lawyers will advise their clients to "sue first and ask questions later." It is unfortunate that lawyers often are blamed for putting an "edge" into a dispute when they are doing no more than taking reasonable steps to avoid the running of a limitations period or sacrifice of other valuable rights.

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