N.J. SUPERIOR COURT, APPELLATE DIVISION

State v. Perini Corporation

DAMAGES

New Jersey Law Journal

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State v. Perini Corporation, A-3268-10T4; Appellate Division; opinion by Ashrafi, J.A.D.; decided and approved for publication March 30, 2012. Before Judges A.A. Rodríguez, Sabatino and Ashrafi. On appeal from the Law Division, Mercer County, L-1144-08. DDS No. 43-2-5746 [28 pp.]

The state appeals from an order for summary judgment dismissing its civil complaint for money damages against four contractors that took part in the building of South Woods State Prison in the mid-1990s. The system that distributes hot water throughout South Woods State Prison began failing a few years after construction of the prison was completed. The state filed its lawsuit on April 28, 2008. That date was more than 10 years after most of the facilities at South Woods State Prison were put into use and prisoners were housed there, but it was three days short of 10 years from the date that the state issued the last of its certificates of substantial completion on the project. Applying the 10-year statute of repose for construction litigation, N.J.S.A. 2A:14-1.1, the trial court concluded that the state had not filed a timely complaint against the contractors.

One defendant, Perma-Pipe Inc., appeals from the denial of its motion for summary judgment pursuant to the same statute of repose. The trial court concluded that the statute did not apply to the state's claims of product defect against Perma-Pipe, the manufacturer of pipes that were used in the construction.

The primary dispute in the state's appeal is the date from which the 10-year period began to run triggering the statute of repose. Defendant contractors claimed, and the trial court agreed, that the relevant trigger date was before April 27, 1998, because the prison was occupied and in use by then. The state claimed that the relevant date was no earlier than May 1, 1998, the date that it issued certificates of substantial completion for the final phase of the construction project.

In Perma-Pipe's appeal, the primary issue is whether the statute of repose applies to its role in the project.

Held: The 10-year statute of repose did not bar the state from seeking damages under a multiphase construction contract for alleged defects of a hot water system that was connected to the entire project.

In Russo Farms Inc. v. Vineland Board of Education , the New Jersey Supreme Court held that the statutory period in N.J.S.A. 2A:14-1.1 is triggered at the date of "substantial completion," a term of art in the construction industry. In Daidone v. Buterick Bulkheading , the Court held that the statutory period was triggered when the contracted "task" was completed and not when the certificate of occupancy was issued. In Welch v. Engineers Inc. , the Appellate Division held that the statutory period ran from the final day the contractor had performed services at the site, not the date when its design tasks were completed.

From these precedents, the following principles are pertinent to applying the statute of repose. First, the trigger date is the date of substantial completion, not completion of every last task of the contractor. Second, separate trigger dates apply to subcontractors that have substantially completed their work, even if the improvement as a whole is not completed and ready for use and a certificate of occupancy has not been issued. Third, the trigger date for any single contractor runs from completion of that contractor's entire work on the "improvement," not from discrete tasks.

Here, all defendants except Perma-Pipe had continuing duties on the construction project after April 27, 1998. Therefore, the statute of repose did not begin to run as to them before that date, unless the parties' intent and mutual understanding was that a part of the entire project was to be treated as a separate "improvement," triggering its own period of repose. Because the hot water system was not identified in the contract as a separate "improvement" that was substantially completed before completion of all buildings to which it was connected, a separate trigger date for the statute of repose did not run for the hot water system. Instead, the trigger date was when each of the contractors substantially completed its work. For the four contractors in the state's appeal, the trigger date as to alleged defects of the hot water system was not earlier than May 1, 1998. Because the state's complaint was brought within 10 years of that date, the panel reverses the granting of summary judgment in their favor.

The panel finds the trial court correctly denied summary judgment to Perma-Pipe because the state's claims against it "sound in product liability" for allegedly defective pipes. Genuine issues of material fact exist as to whether Perma-Pipe manufactured defective pipes and, if so, the extent of apportionment of proven damages between its activities as manufacturer of the product and its alleged additional role as a designer of an improvement to real property.

— By Debra McLoughlin

For appellant (A­3268-10) and respondent (A-3269-10) New Jersey — Wayne J. Martorelli, Deputy Attorney General (Paula T. Dow, Attorney General; Melissa H. Raksa, Assistant Attorney General, of counsel). For respondent (A-3268-10) and appellant (A-3269-10) Perma-Pipe Inc. — Vincent P. Tomkiewicz (Bollinger, Ruberry & Garvey) of the Ill. bar, admitted pro hac vice (McLaughlin & Cooper, and Tomkiewicz; Tomkiewicz, William F. Hartigan Jr., Edward Ruberry (Bollinger, Ruberry & Garvey) of the Ill. bar, admitted pro hac vice, and Salena Becker (Bollinger, Ruberry & Garvey), of the Ill. bar, admitted pro hac vice, on the brief). For respondents: Perini Corporation et al. — Peter J. Smith (Connell Foley; Smith and Thomas J. O'Leary on the brief); L. Robert Kimball & Associates — Andrew J. Carlowicz Jr. (Hoagland, Longo, Moran, Dunst & Doukas); Natkin & Company — Mark A. Rosen (McElroy, Deutsch, Mulvaney & Carpenter); Jacobs Facilities Inc. — James T. Malysiak (Jenner & Block) of the Ill. bar, admitted pro hac vice (Margolis Edelstein and Malysiak; Bruce E. Barrett on the brief).

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