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Tennessee Appellate Court Rules Statute Of Limitations And Repose Defenses In Construction Cases Should Be Submitted To The Jury When Fraudulent Concealment Or Equitable Estoppel Is At Issue

In Joseph Riccardi v. Carl Little Construction Co., Inc., et al., 2021 WL 3137251 (Tenn. App. July 26, 2021), a Tennessee Appellate Court held that the statute of limitations and statute of repose defenses should be submitted to the jury when fraudulent concealment or equitable estoppel is at issue, even if there is no genuine dispute of material facts.

On October 26, 2007, Plaintiff Joseph Riccardi (“Plaintiff”) purchased a newly constructed residence. The residence, part of a condominium, was constructed by Defendant Carl Little Construction Co., Inc. (“Defendant”).

Shortly after Plaintiff moved in, he began to notice cracks in the interior walls of the residence, as well as doors unable to properly close. In mid-2011, when Plaintiff discovered the cracks and had issues with doors, he notified Defendant, who said it would promptly send someone out to make repairs. Defendant also assured Plaintiff not to worry, as “this is just naturally occurring settling of the home.” For most of 2012, the cracks seemed to subside, but then toward the end of 2012, “cracks began opening up all over the house.”

In October of 2013, another homebuilder inspected the residence and advised Plaintiff that his residence had “problems.” In March of 2014, Plaintiff learned for the first time that the structural integrity of the foundation was the issue. Plaintiff then hired an engineering company to inspect the residence and do a structural evaluation on April 17, 2014, which found there had been little compaction effort performed on the underlying soil. At no point did Defendant dispute that the residence was built on un-compacted fill dirt.  The trial court granted Defendant’s motion for summary judgment after finding no dispute of material facts, no affirmative action of concealment by Defendant, and that the statute of limitations and repose had run.

In Tennessee, the statute of limitations for such a claim is three (3) years from the injury—from “when the plaintiff knows or in the exercise of reasonable care and diligence should know that an injury has been sustained.” Plaintiff filed suit on September 9, 2014, almost seven years after purchasing the residence.

The Appellate Court found that Plaintiff could not have reasonably known he had an actionable claim in 2011 as a result of Defendant’s continued assurances and repairs and to hold otherwise would be to “penalize” Plaintiff for attempting to comply with the warranty of his new residence without resorting to litigation.  First, the Appellate Court determined: “when should the plaintiff[] have reasonably known that [his] cause of action existed”? The Court found that although the basic facts were not in dispute, there was a dispute as to how to interpret those facts. This included when Plaintiff knew or should have known his action existed.

Second, Plaintiff invoked the doctrine of equitable estoppel—that Defendant induced him to put off filing suit by making specific promises that Defendant knew, or reasonably should have known, would delay filing suit. The Court found that Defendant made such promises when he continuously—for over four (4) years—made repairs and gave assurances as to the structural integrity of the residence. It was held that there were genuine issues of material fact as to whether or not Defendant misled Plaintiff, and, if so, for how long.

Third, Plaintiff argued the statute of limitations should be tolled as a result of Defendant fraudulently concealing the structural defects. The Court found that a jury could reasonably conclude that Defendant’s assurances were not true and the repairs were to prevent Plaintiff from filing suit; thus, genuine issues of material facts existed for the jury.

As for the statute of repose defense, the Court analyzed it similarly to the statute of limitations defense. Under Tennessee law, the statute of repose begins to run within four (4) years after substantial completion of the project. However, this defense is not available to a Defendant who is guilty of fraud or wrongful concealment in connection with the construction defect. The Court held that the Defendant’s “knowledge and intent to defraud or wrongfully conceal” was also an issue for the jury to decide, “as is the issue of whether Plaintiff exercised reasonable care and diligence under the circumstances.”  The Appellate Court vacated the summary judgment in favor of Defendant and remanded the case for the jury to decide the above issues.