Defense Digest

Real Estate Contracts: Four Or Six-Year Statute Of Limitations?
By John F. Ledwith, Esq.*

In Gustine Union Town Assocs. v. Anthony Crane Rental, et al. , decided February 17, 2004, the Supreme Court of Pennsylvania addressed the issue of what statute of limitations is to be applied in contracts involving real estate and construction.  This was the first instance that the matter was addressed by this court since legislation was enacted 22 years ago significantly changing limitation periods of statutes of limitations in Pennsylvania   Prior to 1982, a six-year limitation applied to actions upon written contracts.  Among other changes legislated, this period was reduced by the Legislature to four years.  The Legislature kept a six-year period as a "catchall" provision for actions not otherwise addressed by the legislation.

Gustine Union Town Assocs. owned the Cherry Tree Square Mall in Fayette County, Pennsylvania.  Construction of the mall began in May 1992 and was completed in September 1993.  The mall was constructed over ground where there was carbonaceous shale, which often contains sulfide materials that may expand when exposed to moisture and oxygen, which was obviously a problem.  Gustine had contracted with ASG, an architectural firm, to design the site and oversee construction.  On September 8, 1993, ASG issued certificates that each structure in the mall had  been substantially completed on a specific date between June and September of 1993.  By 1995, four slabs in the mall began to buckle and cracks appeared in sidewalks.  By 1998, movement had occurred in the floor slabs of all of the buildings, sidewalks, and parking lots.  The cost to repair these problems was high, and Gustine instituted a breach of contract claim against thirteen defendants connected with the construction on July 30, 1999.

The lower court found that the breach of contract actions were barred by the four-year statute of limitations for contract actions enacted by the Legislature in 1982.  On appeal, the Superior Court, an intermediate appellate court, reversed and said that the catchall six-year statute of limitations is the one that should apply, and thus, the Gustine law suit was timely since it had six years to file its breach of contract action.  The Superior Court based its decision on policy considerations.  These considerations include the often complex and permanent nature of real estate construction projects.  It is very difficult to ascertain quickly who is responsible for what, and thus, a six-year period would be more fair for the plaintiff. 

The Pennsylvania Supreme Court reversed the Superior Court and, in doing so, stated that if a statute is clear, it is the obligation of the courts to enforce the statute as enacted by the Legislature.  Only when there is an ambiguity should policy considerations be taken into account.  Here, the statute was clear that actions involving contracts had to be brought within four years.   The action that Gustine initiated was based on contracts and was barred by the statute of limitations controlling when law suits should be brought based on contracts.  There was no exception in the statute for contracts involving real estate and construction.  The Superior Court was wrong in using policy reasons to justify extending the time to bring suit as required by the statute of limitations.

It is refreshing that the Supreme Court took a  conservative approach to the interpretation of statutory language.   It is an appropriate approach since courts should not be legislating but only deciding justicable issues.  It is also better for the citizens of Pennsylvania, and especially claims representatives, since there are strong policy reason to have disputes litigated within a reasonable time.  The parties memories are better, documents have not disappeared, witnesses have not died or disappeared, litigants have more interest in the litigation, and so on.  Investigating a claim that arose out of events many years before is difficult, if not downright irritating.   

Thank God for carbonaceous shale.

*John, a shareholder in our Philadelphia, PA office, can be reached at (215) 575-2604 or jledwith@mdwcg.com.