March 28, 2008
MARC STAHL AND LISA STAHL, HUSBAND AND WIFE, PLAINTIFFS-APPELLANTS,
SYBIG C.F.S., INC., SAMBE CONSTRUCTION CO., INC., YAN GIRLYA AND SAM GIRLYA, DEFENDANTS-RESPONDENTS, AND ROMAN RESTORATION, INC., DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-6834-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 28, 2008
Before Judges Sabatino and Alvarez.
This matter involves a lawsuit by homeowners against the builders who sold them their residence. The homeowners, plaintiffs Marc and Lisa Stahl, appeal the Law Division's order of February 2, 2007 granting summary judgment to defendants. The order was predicated upon the Law Division's finding, on the written submissions, that plaintiffs' complaint was time-barred under the applicable statute of limitations. We vacate the order, and remand for an evidentiary hearing for the Law Division to reconsider whether the limitations period should be extended under the "discovery" doctrine of Lopez v. Swyer, 62 N.J. 267, 274 (1973).
Although the facts will be developed more on remand, the following chronology from the existing record is relevant to our consideration of the issues on appeal.
In May 1998, plaintiffs signed a contract to purchase a new home from defendant Sybig C.F.S., Inc. ("Sybig"), a home construction company. The contract was signed by defendant Samuel*fn1 Girlya, president of Sybig.*fn2 The house, which is located in Cherry Hill, had a purchase price of $375,000.
At the time plaintiffs first viewed the house and agreed to purchase it, its construction was substantially complete, with the exception of flooring, plumbing, and other interior fixtures. Plaintiffs contend that, at that time, the exterior of the house was represented by the seller as "100% completed." An appendix to the sales contract, entitled "[I]tems included in the construction," specified that the home was built with a "Synthetic Stucco exterior."
As part of their purchase, plaintiffs received from defendants a limited warranty for new construction through the Home Buyers Warranty program ("HBW"), N.J.S.A. 46:3B-3. This included a one-year warranty on workmanship and materials, a two-year warranty on systems, and a ten-year warranty against "major structural defects." Through the HBW program, the builders serve as the warrantors, with the contingent protection of HBW. In order to offer this type of warranty, defendants had to meet HBW's "builder approval guidelines."
Plaintiffs acquired title to the house at a closing on August 14, 1998. Shortly after moving into their new home, plaintiffs discovered various defects. Consequently, on April 11, 1999, plaintiffs sent defendant Girlya a letter, pursuant to the HBW warranty instructions, enumerating a punch list of the deficiencies that plaintiffs had found. Plaintiffs requested that Girlya repair the problems.
The April 11 letter, which was signed by Marc Stahl, enumerated eight items. Listed first among those were "[e]xterior blisters of the [o]utside 'Thorolastic'*fn3 Stucco Finish of House." In relevant part, his letter stated:
As mentioned to you verbally, there is a significant problem with blistering of the external finish of the house. These blisters are as wide as [three] inches in width and appear repeatedly along the entire back wall of the house where the frame of the house meets the foundation. This blistering is also occurring on the right wall on the front porch and the arch way around the back sliding back door.
I have talked with two different representatives from THORO[,] the manufacturer[,] as well as a local distributor of the product. All three experts have indicated this is not normal and proper application of the product never results in blisters occurring. Since these blisters do exist, it is their collective opinion that these blisters can only occur if either (1) the product was not properly applied or (2) there is negative pressure creating the blisters which usually occurs because water/moisture has gotten between the Thorolastic finish and the frame/masonry of the house. They all indicated the cause must be corrected and the finish be redone.
[I]f the above defects in workmanship are not corrected within two weeks upon receipt of this letter, I will have no choice but to file this [HBW] claim to the HBW Service Office.
Girlya responded to plaintiffs with a letter dated May 14, 1999. His reply stated in relevant part:
Regarding the Thoroseal*fn4 product applied to the exterior of the house. The advi[ce] that you received over the phone from Thoro distributors [does] not make sense. If water gets behind the product then the blistering of the product would appear above as well as below the blister. In this situation above is all fine, below is fine but this particular location is blistering. I explained to you the reasons of the [three] blisters. If you wish, we will cut out the blisters and repair the walls at locations indicated in your letter, but we can not [be] held responsible for matching the color. The product on the wall weathered and the new batch of products will not match the existing (see warranty on this issue).
Plaintiffs did not take up Girlya's invitation to remove the blisters on the exterior of their home. They also did not file a home warranty claim for the blistering. As their counsel stated at oral argument in the Law Division, plaintiffs do not contend that the blistering worsened after they raised that specific problem with Girlya in 1999.
Eventually, portions of the house's exterior allegedly became infiltrated with rot, water damage, and possible mold. These problems were revealed after areas of the exterior were cut open. The revelation prompted plaintiffs to file a claim with HBW, for what they characterized as "major" structural defects, within the ten-year warranty period. According to the handwritten portion of the claim form submitted by Marc Stahl, plaintiffs contended that "[t]he EFIS*fn5 stucco has been improperly installed. The builder used no stirfoam [sic] (as required), the physical she[a]thing is rotted, and I believe there is mold."
The HBW claim form lists the date that plaintiffs allegedly discovered these defective conditions as June 1, 2006. In a letter he included with the claim form, plaintiff Marc Stahl stated that "this claim [is] due to defective workmanship in the installation of the synthetic stucco that was used in the construction of [the] house . . . . As a result of the defective workmanship, the plywood wall sheathing beneath the stucco is all rotted and support[ing] 2x4's are most likely rotting as well."
After receiving plaintiffs' claim, HBW sent a notification to Sybig as the warranty insurer, advising that the claim had been filed. In addition to their HBW warranty claim, plaintiffs also submitted a claim to their homeowners insurer.*fn6 Meanwhile, plaintiffs hired an independent stucco contractor, who performed substantial work in repairing and replacing the home exterior.
On October 6, 2006, plaintiffs filed a six-count complaint in the Law Division against Sybig, Sambe, Sam Girlya and Yan Girlya. The complaint also named as a defendant Roman Restoration, Inc. ("Roman"), a successor company to Roman & Sons, Inc., the stucco subcontractor on their home.*fn7 The complaint alleged common-law claims for breach of contract, breach of express and implied warranties, direct negligence, and the negligent supervision of subcontractors. The complaint also sought relief under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -2.13.
As their central factual assertion, plaintiffs contend that defendants did not, in fact, apply synthetic stucco to the home's exterior walls. According to plaintiffs, defendants instead applied the BASF finishing product "directly over a thin layer of felt . . . which was applied directly to the oriented strand board (OSB) sheathing." Plaintiffs also claim that an inspector from BASF inspected their house and independently determined that the Thorolastic had been improperly applied.
Plaintiffs further alleged that National Forensic Consultants, Inc. ("NFC"), an expert firm retained through their homeowners insurer, also determined that the cause of the damage to the house "was the improper application of the Thorolastic material and failure of the builder to apply the stucco system."*fn8
According to plaintiffs, the NFC expert also concluded that there was "no way of knowing that the home was improperly constructed until sections of the siding had actually been cut for the inspection."
Plaintiffs claim that their house required an entirely new exterior, and that they have received estimates that the damage to their house has exceeded $114,000. The stucco contractor hired by plaintiffs had completed about fifty percent of the remediation work as of the time the complaint was filed.
In lieu of answering the complaint, defendants filed a motion to dismiss, invoking N.J.S.A. 2A:14-1, the six-year statute of limitations for claims of the nature pleaded in the complaint. They assert that the complaint filed in October 2006 is untimely because, in their view, any cause of action accrued at least by April 1999, when plaintiffs wrote to Girlya complaining about the exterior blistering. Hence, defendants argue that the six-year statute of limitations expired in or before April 2005.
Plaintiffs do not contest that the limitations period applicable to their claims is six years. Rather, they contend that the limitations period should be equitably tolled because they allegedly did not learn, and reasonably could not have learned, about the apparent absence of the stucco*fn9 in the home's exterior until June 2006.
To support their argument for equitable tolling, plaintiffs presented to the motion judge a certification from Marc Stahl. In his certification, Stahl maintained that plaintiffs had simply accepted the representations of Girlya in 1999 about the blistering, and that, given the circumstance, they were willing at the time to leave the blistering alone. Stahl expressed such good-faith reliance upon Girlya's assurances as follows:
At the time of [Sam] Girlya's response [in 1999], I had no reason to doubt his assurances and I was willing to live with some blisters in the finish. Had I known or even suspected a potential water infiltration problem, I would have acted. But, I relied on his statements.
It was not until years later, according to Marc Stahl, that he learned about the apparent absence of any stucco beneath the Thorolastic finish:
I did not discover and had no reason to inquire as to the absence of any stucco beneath the Thorolastic finishing coat until June 2006, when I became aware that a defective condition existed at the
[p]roperty. At that time, I discovered that damage had occurred to my home at various points along its exterior. Upon further investigation, my wife and I discovered that the damage was caused by the Defendants' failure to apply the synthetic stucco. We further learned that while our home had a "stucco" appearance, upon closer examination, rather than stucco, it was the thin layer of the Thorolastic material that had been applied.
The Law Division judge treated defendants' motion to dismiss as one for summary judgment, because the motion record included matters outside of the pleadings. R. 4:6-2; R. 4:46-2. Following the oral arguments of counsel, the motion judge found that, even under a "best case scenario," plaintiffs should have learned of the stucco deficiency by April 11, 1999, the date of their letter to Girlya. The judge determined that, by that point in time, plaintiffs had "some knowledge of what the defect was," that they "knew there was a problem," and that they "knew the third party was involved." In particular, the judge characterized the defect as arising "because . . . the [Thorolastic] finish was improperly installed."
Based upon these findings, the motion judge concluded that plaintiffs "sat on [their] rights for a significant period of time," in excess of the six-year limitations period. Consequently, the judge entered summary judgment in favor of all defendants.
On appeal, plaintiffs argue that the motion judge acted too hastily in concluding that their lawsuit is time-barred. They contend that, at a minimum, the court should have conducted an evidentiary hearing with live testimony before deciding that they could reasonably have discovered in 1999 that defendants had allegedly failed to apply the stucco called for by the purchase contract. They assert that there are genuine questions of material fact at issue here concerning the accrual of their claims, and the application of the discovery rule under Lopez v. Swyer, supra, and its progeny.
Among other things, plaintiffs contend that the motion judge improperly treated their awareness of the blistering in 1999 as a sufficient reason for them to investigate further at that time as to what, if anything, was beneath the Thorolastic finish. Plaintiffs further assert that their delay in cutting away the surface material is excused by several factors, including Girlya's assertions that the blistering problem was not a sign of water infiltration, that a fix of the blistering would result in a color variation, and that the manufacturer's contrary advice to the plaintiffs had been disparaged by Girlya as incorrect. Defendants, meanwhile, argue in response that the motion judge's ruling was sound and that there is no need for an evidentiary hearing.
We now examine those arguments.
Ordinarily, a cause of action accrues on the date upon which a wrongful act or omission producing the harm occurs. Beauchamp v. Amedio, 164 N.J. 111, 116 (2000). The pertinent statute of limitations, therefore, presumptively begins to run from the time of that wrongful conduct. Our courts have long recognized, however, that "in an appropriate case a cause of action will be held not to accrue until the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered[,] that he [or she] may have a basis for an actionable claim." Lopez, supra, 62 N.J. at 272. This equitable principle, commonly known as the discovery rule, operates to "prevent the sometimes harsh result of a mechanical application of the statute of limitations." Martinez v. Cooper Hosp.-Univ. Med. Ctr., 163 N.J. 45, 52 (2000).
The discovery rule applies not only to situations where the injury has not been discovered, but also to situations where the injury is apparent, but it is not known "that it is attributable to the fault of another." Id. at 53. The cause of action does not accrue until both of these elements are known to the plaintiff. Ibid. In determining the date of a claim's accrual under the discovery rule, the court must assess "whether the facts presented would alert a reasonable person exercising ordinary diligence that he or she was injured due to the fault of another." Id. at 52.
"The discovery rule is essentially a rule of equity. It has been said that in equity lies its genesis." Lopez, supra, 62 N.J. at 273. Courts must balance the desire to give innocent injured parties their day in court against the fairness to those who must defend stale claims. Id. at 274. With this balance in mind, the Supreme Court has held that, "[t]he decision [on accrual] requires more than a simple factual determination; it should be made by a judge . . . conscious of the equitable nature of the issue before him." Id. at 275. Among the equitable factors that may be relevant under Lopez are: (1) "the nature of the alleged injury," (2) "the availability of witnesses and . . . evidence," (3) "the length of time that has elapsed," (4) the "deliberate or intentional" nature of the delay, and (5) whether the delay "peculiarly or unusually prejudiced the defendant." Id. at 276.
As a procedural matter, the Supreme Court in Lopez instructed that trial courts should conduct an evidentiary hearing where the reasonableness of a plaintiff's failure to discover the cause of action hinges upon his or her credibility. "Generally the [tolling] issue will not be resolved on affidavits or depositions since demeanor may be an important factor where credibility is significant." Id. at 275. On the other hand, "[w]here credibility is not involved, affidavits, with or without depositions, may suffice." Ibid.
The mere "suspicion" of injury caused by a defendant is not "the touchstone for determining whether a plaintiff's cause of action accrues." Vispisiano v. Ashland Chem. Co., 107 N.J. 416, 434 (1987). The Court has recognized that tolling may be appropriate in circumstances, such as toxic tort cases, in which the nature of the injury may be "unclear," and its very existence "masked." Ibid.
Additionally, the judicial assessment of equity required under Lopez may be influenced by whether the defendant made any representations or assurances to the plaintiff before the lawsuit was filed. Such representations could have induced reliance or otherwise steered plaintiff away from conducting an investigation of potential injury.
For example, in Abboud v. Viscomi, 111 N.J. 56 (1988), the plaintiff had gone to defendant dentist for the extraction of her wisdom tooth. Id. at 58. Immediately after the surgery, plaintiff experienced substantial pain and numbness in her mouth. Id. at 59. She suspected from the start that the surgery had not been performed correctly. Ibid. When she brought these concerns to defendant, however, he assured her that it was part of the normal healing process and was not permanent. Ibid. Even though her symptoms did not abate, plaintiff believed and relied upon defendant's reassurances. Id. at 60. Eventually, she sought a second opinion from a neurologist nearly three years after her last visit with defendant and learned for the first time that she had suffered permanent damage. Id. at 60-61.
The trial court in Abboud dismissed plaintiff's ensuing lawsuit against defendant as time-barred, noting that she had admitted that she felt from the beginning that she was injured and that defendant may have been negligent. Id. at 61. The Supreme Court reversed that determination, finding that the trial judge had given too much weight to plaintiff's initial perceptions and had not adequately weighed plaintiff's claim that defendant's representations had reasonably induced her not to sue within the normal limitations period. Id. at 64. On remand, the Court directed the trial court to consider whether plaintiff's reliance on defendant's assurances was "reasonable under the circumstances." Id. at 66.
In the present case, the motion judge did not conduct an evidentiary hearing under Lopez, but instead considered plaintiff's assertion of the discovery rule purely on the basis of the written submissions. Those written submissions included plaintiff Marc Stahl's certification, attesting that he had relied upon the statements in Girlya's May 14, 1999 letter. The letter assured Stahl and his wife that the blistering observed on the home exterior could not have been the result of water damage, and that the contrary advice from the manufacturer's representatives did not, as Girlya put it, "make sense." Stahl further certified that "[h]ad I known or even suspected a potential water infiltration problem, I would have acted."
Although we do not treat plaintiffs' sworn assertions of reliance as necessarily credible or conclusive, we are persuaded that the motion judge should have conducted an evidentiary hearing under Lopez to test the sincerity of those assertions before concluding that plaintiffs' delay in filing suit was inexcusable. Because the blistering repairs proposed by Girlya would have involved cutting open the exterior of their home and, as he noted, because of weathering, the new application would not match the color of the existing surface, plaintiffs may well have reasonably hesitated to undertake such measures in April 1999.
Although the record before us is not well developed and lacks, among other things, the supporting expert reports and photographs, there is at least a plausible suggestion here that defendants' alleged omission of the contractually-required stucco was a latent defect, qualitatively distinct from the surface blistering. The damage thus may amount to a "masked" condition that plaintiffs could not reasonably have known about in April 1999 after receiving Girlya's letter. See Vispisiano, supra, 107 N.J. at 434. The record also raises a genuine factual question as to whether or not a reasonable inspection of the blistering in 1999 would have indeed revealed that the house was missing an integral layer of its exterior. The paper record is simply insufficient for a conclusive determination of these issues and the other equitable factors relevant under Lopez.*fn10
In their brief on appeal, defendants liken the present matter to the circumstances in Beauchamp, supra, 164 N.J. at 114. In that particular case, the Court held that a motorist's cause of action for personal injuries against a bus driver who had rear-ended her vehicle accrued on the date of the accident, when plaintiff first realized that she had injured her neck and back, even though plaintiff did not subsequently confirm until months later that her injuries were permanent. Id. at 119-22. The Court observed that the worsening of the injury did not extend statutory deadlines or otherwise alter plaintiff's obligation to serve a timely tort claims notice, and to file suit in a timely fashion against the bus driver and his public entity employer. Id. at 122.
Beauchamp is distinguishable from this case in several respects. First, there were no assurances or representations made by defendants in Beauchamp that could have discouraged plaintiff from investigating her bodily injuries or their causes. Second, the parts of plaintiff's body that were injured in Beauchamp were known on the date of the accident, whereas plaintiffs here have raised at least a colorable claim that the blistering visible on the surface of their home was distinct from the alleged latent omission of the stucco underneath the surface. On closer scrutiny after the record is amplified, it may turn out that the present case, unlike Beauchamp, does not involve the "worsening" of a known injury, but rather an injury that is distinct in nature and cause. Lastly, we note that the present case, unlike Beauchamp, does not involve public entity defendants, nor the special policies or provisions underlying the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 to 12-3.
For these various reasons, we deem it appropriate to remand this matter to the Law Division for a full hearing with live testimony, so that the motion judge may have the opportunity to assess the demeanor and credibility of plaintiffs, and also to evaluate all of the equitable considerations under Lopez on an amplified record.*fn11 In so doing, we do not preordain the outcome of such a remand. The court may well reach the same conclusion, that plaintiffs unreasonably delayed in bringing their cause of action. We simply hold, as a procedural matter, that a plenary hearing is necessary. To expedite this matter, the trial court should conduct a case management conference within thirty days of this opinion, at which time the necessary hearing may be scheduled, and the exchange of any discovery germane to that hearing coordinated.
The order dated February 2, 2007 is therefore vacated, and the matter is remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.