On certification to the Superior Court, Appellate Division.
The opinion of the court was delivered by Garibaldi, J. Chief Justice Wilentz and Justices Handler, Pollock, and O'Hern join in this opinion. Justice Clifford has filed a separate dissenting opinion in which Justice Stein joins.
This case draws our attention once more to the application of the statute of repose, N.J.S.A. 2A:14-1.1, which limits to a ten-year period the exposure to liability of designers, planners, and builders for damages to person and property arising out of the defective and unsafe condition of an improvement to real property. See E.A. Williams v. Russo Dev. Corp., 82 N.J. 160, 167 (1980). In E.A. Williams, we held that the statute applies only to "deficiencies" that involve or create "'defective and unsafe' conditions," id. at 170, and that it does not apply to a defect that "may well cause the owner dismay and economic injury" but does not "create a safety hazard or cause injury to persons or property." Id. at 172.
We must decide whether an architect's defective design that required the owner to incur substantial costs to redesign the
building so that it could be used safely for its intended purpose caused the owner merely "dismay and economic injury" or created an "unsafe and defective" condition. Ibid.
Since 1928, plaintiff, Newark Beth Israel Medical Center ("Hospital" or "Medical Center") has been expanded in phases pursuant to its Master Plan. In December 1968, the Medical Center contracted with defendant Gruzen and Partners, d/b/a Gruzen, Samton, Steinglass, Architects (Gruzen), to design Phase III of the Master Plan, which included construction of a new four-story building with a fifth-floor structural shell and a central elevator/mechanical core. According to plaintiff's complaint, Gruzen also agreed "to design Wings A and B of the new building and the central elevator/mechanical core, and to design the construction requirements thereto to provide for the expansion of said wings and elevator to ten (10) stories at a future date." The Executive Vice President of the Hospital also certified that Gruzen was charged "with the responsibility to design the foundation and structural steel supports of Wings A and B and the central elevator/mechanical core to accommodate the future expansion." The issuance of a Certificate of Occupancy on November 18, 1974 marked the completion of Gruzen's work on Phase III.
Twelve years later in 1986, when preparing to construct the remaining floors, the Medical Center's consulting engineer discovered a problem with the already-constructed five-story base--it could not safely support the planned additional stories. While preparing to proceed with the Master Plan, the engineer had discovered that the base structure's design was "structurally incapable of supporting additional floors due to inadequate provisions for wind allowances." The Hospital spent approximately $1,000,000 to ensure that "the building was safe for its entire intended function."
The Medical Center sued Gruzen in 1988 to recover costs incurred in the repair, redesign, and reconstruction of the base structure so that it could support the planned extension. The trial court granted Gruzen's motion for summary judgment, holding that N.J.S.A. 2A:14-1.1 precluded the action because more than ten years had passed since Gruzen had completed the design for Phase III. Because Gruzen's design would have made the completed ten-story building dangerously susceptible to the wind, the court held that a hazardous condition existed that rendered the building "unsafe" under the statute.
The trial court based its ruling on the impact of the defective design on the entire ten-floor structure. The court reasoned that the condition created by the design defect had to be evaluated in light of its effect on the structure's intended use -- the anticipated ten-story building. As the court stated in its oral opinion, "the original master plan, and the agreement and the intent between Beth Israel and all of the people was for a ten-story building. Since that ten stories can't be put on safely, the original problem was with the first five stories, and it doesn't matter whether the condition is now or subsequent."
The Appellate Division reversed. Taking a much more narrow approach to the issue, the panel based its decision on the impact of the defective design on the building as currently standing. The present structure, unchanged, would not cause any injuries to persons or property. The court saw "no cause to call the original structure 'defective and dangerous' merely because a million-dollar reinforcement project was necessary," even though it believed that "if the alleged defect had not been discovered until after the additional floors had been constructed, the building might have been 'defective and unsafe.'" The Appellate Division relied on the distinction we drew in E.A. Williams v. Russo Development Corp., supra, 82 N.J. at 160, between an unsafe condition and the mere functional impairment (and the accompanying economic loss) found in that case.
We granted Gruzen's petition for certification, 122 N.J. 403 (1990), and now reverse.
N.J.S.A. 2A:14-1.1, enacted in 1967, is similar to legislation enacted in thirty other states. We have discussed its history and purpose on several occasions. See E.A. Williams v. Russo Development Corp., supra, 82 N.J. at 164-65; O'Connor v. Altus, 67 N.J. 106, 117 (1975); Rosenberg v. Town of North Bergen, 61 N.J. 190, 195-98 (1972).
Although the legislative history regarding the enactment of N.J.S.A. 2A:14-1.1 is "meager and unrevealing," Rosenberg, supra, 61 N.J. at 194, we have concluded that the Legislature enacted the statute in response to the expanding application of the "discovery rule" to new types of tort litigation, the abandonment of the "completed and accepted rule" (by which contractor and architect liability for negligence ended on completion of the work and its acceptance by the property owner), and the expansion of strict liability in tort for personal injuries caused by defects in new homes to builder/sellers of those homes. O'Connor v. Altus, supra, 67 N.J. at 117-19; see also Rosenberg, supra, 61 N.J. at 194-98 (discussing the impact those developments had on the Legislature). Those judicial trends created the potential for liability for injuries occurring long after design and construction professionals had completed a project. The statute "'meant to cut back on the potential of this group to be subject to liability for life.'" Ramirez v. Amsted Indus., 86 N.J. 332, 356 (1981) (quoting County of Hudson v. Terminal Constr. Corp., 154 N.J. Super. 264, 268 (App. Div. 1977), certif. denied, 75 N.J. 605 (1978)).
Although N.J.S.A. 2A:14-1.1 is designed to limit the time during which one can sue design and construction professionals, it "is not a conventional statute of limitations. In fact, it is not really a statute of limitations at all, at least in the traditional understanding of that term." E.A. Williams v. Russo Dev. Corp., supra, 82 N.J. at 167. The statute "does not 'bar' a remedy in the sense of providing an injured person a certain time to institute suit after the 'accrual' of a 'cause of action.'" Ibid. Rather, injuries occurring more than ten years after the completion of services simply form no basis for recovery. The statute prevents what could have been a cause of action related to those services from ever arising. Ibid. ; see also Rosenberg, supra, 61 N.J. at 199 (holding that the expiration of 10 years makes the "harm that has been done * * * damnum absque injuria -- a wrong for which the law affords no redress"). Thus, N.J.S.A. 2A:14-1.1 is best described as a statute of repose. E. A. Williams v. Russo Dev. Corp., supra, 82 N.J. at 167; see also Ramirez v. Amsted Indus., supra, 86 N.J. at 355 (holding that "the statute cuts off all claims after ten years . . . irrespective of the date of injury"); O'Connor v. Altus, supra, 67 N.J. 121-122 (characterizing the statute as a "hybrid" that prevents both new actions from accruing after ten years and suits after ten years on actions accruing before the ten-year mark).
To achieve the legislative goal of providing a reasonable measure of protection against expanding liability for design and construction professionals, ...