The Facts

In 1994, Trinity Church (Trinity) contracted with defendants Atkin Olshin Lawson-Bell (AOL-B or architect) and E. Allen Reeves, Inc. (general contractor), who in turn subcontracted with defendants Bruce E. Brooks & Associates (HVAC and plumbing) and Gallo Masonry, L.L.C. (mason), and third-party defendant Maria Isabel G. Beas (mason consultant). The contracts were for renovations to Trinity’s historic church located in Princeton, New Jersey, and construction of an addition to the structure.

The relevant contracts, which were also incorporated by reference in the subcontracts, contained clauses providing that the statute of limitations for any cause of action arising under the contracts would run from the date of “Substantial Completion.” The architect’s contract provided:

“Causes of action between the parties to this Agreement pertaining to acts or failures to act shall be deemed to have accrued and the applicable statutes of limitations shall commence to run not later than either the date of Substantial Completion for acts or failures to act occurring prior to Substantial Completion, or the date of issuance of the final Certificate for Payment for acts or failures to act occurring after Substantial Completion.”

By its terms, the contract pertaining to the architect was governed by Pennsylvania law, which provided a four-year statute of limitations for construction contract lawsuits. 42 Pa. Cons. Stat. 5525(a)(8) (2006).

The parties signed a certificate establishing August 1, 1997, as the date of substantial completion of the project. Trinity first noticed problems with the construction in April 2000, particularly problems with the mortar, and began communicating with AOL-B about those issues. The parties, including Reeves and Beas, held a series of meetings at which they discussed possible causes of the problems and possible solutions. Finally, AOL-B hired a consultant, 1:1:6 Technologies, Inc., which investigated and issued a lengthy report in September 2002 detailing the problems it discovered with the construction. Trinity received a copy of the report, but it neither filed suit at that time nor undertook any investigation of its own.

Two years later, on September 13, 2004, Trinity filed a two-count complaint, alleging that a defective mortar had been used in the construction and that the HVAC and plumbing work had been done in a defective manner, causing a mold problem and water damage in the building. After filing suit, Trinity hired an engineering consulting firm to evaluate the construction; this firm issued a report on August 24, 2005, and a second report on October 13, 2005. In September and October 2005, defendants filed motions for summary judgment seeking dismissal of the complaint on statute of limitations grounds. On October 18, 2005, Trinity filed a motion for leave to amend its complaint to “clarify” the existing counts of the complaint, to add defendants, and to add a count concerning defective lamination of the church doors and a count concerning “defects in the wall structure of the Church” based on Trinity’s expert reports.

The Trial Court’s Opinion

In an oral opinion placed on the record on January 6, 2006, Judge Jacobson granted summary judgment. She concluded that, in the “Substantial Completion” clauses of the contracts, Trinity bargained away its right to invoke the discovery rule as a means of avoiding the bar of the statute of limitations. Addressing Trinity’s claims for equitable relief from the bar of the statute, she reasoned that “[t]here’s no claim in this complaint for fraud. There’s no claim even for misrepresentation.” She also noted that no such claims appeared in the proposed amended complaint which was the subject of plaintiff’s motion.

Judge Jacobson found no evidence that defendants had tried to mislead Trinity or to convince plaintiff not to file a lawsuit. She reasoned that the 2002 report from 1:1:6 Technologies revealed “significant cracking” and other problems with the construction, and this should have put plaintiff on notice to investigate and/or file a lawsuit at that time. The judge rejected Trinity’s estoppel claim: “[H]ow can I estop the defendants when they were the ones providing most of the information to the plaintiff regarding problems at the church within the New Jersey statute of limitations[?]” She found that “the church had information that there were problems with the work . . . well within the statute of limitations and for whatever reason, which is not clear on the record, they did not file the lawsuit until after the statute of limitations had lapsed.” She concluded that no further discovery was warranted and that summary judgment should be granted.

The Appellate Court held that in light of the strong public policy in favor of freedom to contract, the recognized ability of parties to agree to a shorter period of limitations, and the construction by other jurisdictions of similar accrual clauses, we conclude that the provision in the parties’ contracts that alters the normal rules governing the time for accrual of causes of action is enforceable.

Based on the foregoing discussion in its opinion, the Appellate Court concluded that the clause at issue is valid under Pennsylvania law, and if the issue were before them they would be inclined to conclude that the clause is valid under New Jersey law. While they conclusion is dicta (non-binding) in the sense that plaintiff is not contesting the validity of the clause, The court deem it significant in that they found no basis to treat the clause with any less deference than they would any other provision of a private contract. Normally the court will enforce a contract freely negotiated at arms’ length and will not make a better contract for the parties than that for which they bargained.

The entire opinion of the Appellate Court can be found here:
https://law.justia.com/cases/new-jersey/appellate-division-published/2007/a3022-05-opn.html