For negligence torts, the statute of limitations has a discovery rule. The time period does not start to run until the injured party knew, or should have known upon reasonable inquiry, of the claim. But contract claims are different from negligence claims.

The statute of limitations for a contract claim, including a construction contract claim, under Oregon law is 6 years from the breach. The discovery rule that applies to negligence claims does not apply. This was decided by the Oregon Court of Appeals in a construction contract case.

Waxman v. Waxman & Associates, Oregon Court of Appeals, said:

In the mid-1990s, defendant developed and built four row houses.(1) After completing construction, defendant sold the row houses to [the original purchasers]. [One of the original purchasers] sold their row house to plaintiffs in 2001.

There were significant construction defects in the common elements of the row houses, necessitating extensive repairs. The row houses are subject to covenants, conditions, and restrictions, which give each row house owner a 25 percent ownership interest in and responsibility for the common elements. As a result, the four property owners at the time of the repairs … were each responsible for 25 percent of the repair bill.

 

The trial court held that the plaintiff would not be given an extension by the discovery rule.

The [trial] court concluded that plaintiffs’ … contract claims were barred by the statute of limitations.

We turn, then, to the question of whether, as plaintiffs contend, their contract claims may nevertheless be timely because ORS 12.080(1) incorporates a discovery rule. For the reasons explained below, we conclude that ORS 12.080(1) is not subject to a discovery rule.(7)

“Whether [a] statute contains a discovery rule is a matter of legislative intent.” Gladhart v. Oregon Vineyard Supply Co., 332 Or 226, 230, 26 P3d 817 (2001). Consequently, we first examine the text and context of ORS 12.080(1) to determine whether the legislature intended to make a discovery rule applicable.

ORS 12.080(1) provides, in pertinent part, that “[a]n action upon a contract * * * shall be commenced within six years.” A “‘discovery rule cannot be assumed, but must be found in the statute of limitations itself.'” Gladhart, 332 Or at 230 (quoting Huff v. Great Western Seed Co., 322 Or 457, 462, 909 P2d 858 (1996)). Further, when the legislature intends to subject a statute of limitations to a discovery rule, it knows how to make its intent to do so clear. See, e.g., ORS 12.135(2) (providing that specified actions “shall be commenced within two years from the date the injury or damage is first discovered or in the exercise of reasonable care should have been discovered”). Nothing in the text of ORS 12.080(1) suggests that the legislature intended to make a discovery rule applicable to actions for breach of contract.

In sum, the applicable statute of limitations for plaintiffs’ contract claims is, without a discovery rule, six years from the date of breach. Plaintiffs did not bring this action within that time. Accordingly, the trial court properly dismissed those claims.

For the text of the Court of Appeals opinion, visit http://www.publications.ojd.state.or.us/A132602.htm . The conventional wisdom is that you should file a civil action promptly if there was a breach of contract including any breach of a construction contract.

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Construction lien and amount due

by ocladmin on July 31, 2011

What if the construction lien is incorrect and does not set out the specific amount due? The old rule of law was that mixing lienable and nonlienable charges could result in loss of the entire lien. But the modern trend in the law is to allow good faith mistakes without an unnecessary penalty.

The Oregon case that illustrates this is A-C Construction, Inc. v. Bakke Corporation. The following is from the opinion in that case.

The traditional Oregon rule–known as the “rule of segregation”– is that a lien which commingles lienable and nonlienable charges is invalid if those charges can only be segregated through resort to extrinsic evidence. See, e.g., Smith v. Lichtenthaler, 206 Or 584, 586, 294 P2d 334 (1956). The purpose of the rule is “to allow the owner of the property to identify on the face of the lien the claims that are valid and those that are not so that he may discharge the valid ones before a foreclosure proceeding is commenced * * *.” Robertson, Hay & Wallace v. Kunkle, 69 Or App 99, 104, 686 P2d 399 (1984) (citing Hays, 267 Or at 148). However, as part of the trend in modern lien law “to dispense with arbitrary rules which have no demonstrable value in a particular factual situation,” Cons. Elec. v. Jepson Elec., 272 Or 376, 380, 537 P2d 80 (1975), Oregon courts, in recent years, have declined to apply the rule of segregation woodenly in cases where its application would not advance the purpose for which it was created. See Hays, 267 Or at 148-49 (creating exceptions to rule of segregation).

Relevant to this case, modern Oregon courts have declined to invalidate unsegregated liens where “the owners had sufficient knowledge with which to question the amount of the lien and thus would not have been prejudiced in settlement negotiations prior to the commencement of the suit.” Robertson, 69 Or App at 104 (citing Hays, 267 Or at 148). Further, an unsegregated lien will not be held invalid if the owner can separate lienable from nonlienable charges by asking the lienholder “a simple question.” Hays, 267 Or at 148. When the owner has such knowledge, or can acquire it through simple questioning, “the lien [will] stand with deduction of the nonlienable items.” Alley v. Erbach, 89 Or App 5, 9, 747 P2d 360 (1987).

Here, defendants had such knowledge at all times relevant to this litigation. They knew that the difference in the amount on the face of the lien and the amount they believed they were obligated to pay was the result of the parties’ disagreement concerning the terms of their contract. Given that defendants had such knowledge, we decline to hold that the parties’ good faith disagreement regarding the contract price is sufficient reason to invalidate plaintiff’s lien.

That result is consistent with our recent decisions in similar cases. In Robertson, we held that a lien was valid even though it contained a charge for over $40,000 in materials that had been purchased but never incorporated into the project. 69 Or App at 104. Because the owner knew that some materials had never been incorporated into the construction, we held that he had sufficient knowledge to question the amount of the lien. Id. In Alley, we held that a lien was valid even though it contained an unsegregated charge for 14 percent interest on the contract price. 89 Or App at 9. At trial, the court disallowed that interest charge. Id. Nevertheless, we held that the lien was valid because the lien documents indicated that the lienholder intended to charge interest, and thus the owner had sufficient knowledge to question the amount on the face of the lien. Id. There, as here, the lien was valid even though the owner had to go to court to avoid paying the invalid lien charges. Id. Most recently, we held that a lien was valid even though it included an unsegregated charge for drywall for which the owner already had paid, and for which the lienholder had signed a “lien waiver.” Knez Building Materials Co. v. Bell-Air Estates, 144 Or App 392, 398, 927 P2d 608 (1996), rev den 325 Or 247 (1997). As in Alley, the owner in Knez had to go to court to avoid paying the nonlienable charges. However, because the owner “could have obtained all pertinent information * * * by asking plaintiff a ‘simple question,'” Id. at 397, we held that the lien was valid despite the inclusion of unsegregated, nonlienable charges. Id. at 398.

We conclude that, as in those cases, defendants here had sufficient knowledge to question the amount on the face of the lien and to separate lienable from nonlienable charges. Accordingly, the lien was not invalid because it included charges that the trial court ultimately decided defendants were not obligated to pay. The trial court properly found that the lien was valid and could be foreclosed after deduction of those nonlienable charges.

Do not be careless in filing liens, and attention to detail is the best way to avoid a lawsuit over the lien. More detail can be better in setting out the work done and the price.

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New site with construction law information

June 20, 2009

Announcing the new site Oregon-Construction-Law.com with the statutory form for notice of a construction lien.

Read the full article →