Both cases in this issue come from the Ninth District Court of Appeals for Ohio. In the first case the question was when the statute of limitations began to run where a homeowner discovered a major problem with the foundation of his recently constructed home. Our second case involves Ohio’s Prompt Payment Statute. There a contractor argued that a homeowner also was a contractor because the homeowner self performed some of the work on his own house.

Statute of Limitations Doesn’t Run Until Homeowner Discovers Damage

A statute of limitations is a law that prevents a person from bringing a claim after a specified period of time has passed. An important component of any statute of limitations is when that period of time actually begins to run. In some circumstances, the statute of limitations begins to run either when a party actually discovers or when it should have discovered the damage resulting in the claim.

In Michael Martin, et al. v. Design Construction Services, Inc., 2009-Ohio-2860, the Ninth District Court of Appeals for Ohio evaluated when a home owner first discovered, or through the exercise of reasonable diligence should have discovered, damage resulting from a contractor’s failure to construct a home in a workmanlike manner. In Martin, homeowners purchased a home only to discover years later that the foundation was structurally unsound.

The home was constructed in 1998. The property owner purchased the home from the original owners in 2000. In 2003, the homeowners made minor repairs to the cracks; but, in 2004 the homeowners discovered there was a major problem with the foundation. In 2005, the homeowners filed suit against the contractor. The contractor claimed the four-year statute of limitations had run and, as a result, the homeowners could not file suit against the contractor.

At the time of the purchase, the original owners disclosed that there had been a crack in the garage wall which was repaired. The current homeowners hired an inspector to inspect the home prior to their purchase of the home. The inspector indicated that there was minor stress cracking, but the cracking appeared to be typical for the age and type of construction.

In 2004, the homeowners began to notice widening of the cracks. The homeowners attempted to repair the cracks only to discover that the walls were filled with grout that had not cured. The homeowners contacted the contractor that constructed the home and discovered that the wall was damaged by the contractor during construction.

The contractor admitted it repaired the wall after it was damaged by straightening the wall and filling the concrete blocks with grout. The contractor then claimed no responsibility for the cracked foundation wall and stated the homeowners were responsible because the homeowners caused the problem when they painted the wall and used an angle grinder to widen the cracks.

The homeowners subsequently hired a different contractor to repair the foundation. This contractor discovered that the footers were not below the frost line as was required, the grout in the foundation blocks had never cured, and that there may not have been enough concrete in the grout mixture.

The court stated that an action by a homeowner against a builder for damages proximately caused by the contractor’s failure to construct the home in a workmanlike manner is a tort action and is within the Ohio Revised Code’s four-year statute of limitations. The court also stated that the statute of limitations on such an action commences when the damage “is first discovered, or through the exercise of reasonable diligence it should have been discovered, that there is damage to the property.”

The court held that the minor stress cracking witnessed by the homeowners and documented as “typical” by the inspector was not an indication of anything unusual or of an underlying structural problem with the foundation. The court determined that the statute of limitations did not begin to run until the homeowners discovered the problem in 2004.

The contractor argued that the original owners knew of the damage and, therefore, the current homeowners must be aware of the damage. However, the contractor provided no evidence that the current homeowners knew of the damages earlier than when they attempted to repair the foundation in 2004. Even if the contractor did provide such evidence, the contractor attempted to repair the damage and the original owners believed the damage was adequately repaired.

Court Rejects Attempt to Expand Definition of “Contractor”

So what exactly is a contractor? This was the issue before the Ninth District Court of Appeals in Graves Lumber Co. v. Borkey, et al., 2009-Ohio-2786. The answer to this question could determine whether or not an unpaid builder was entitled to thousands of dollars in attorney’s fees and interest under Ohio’s Prompt Pay Statute.

In 2001, Star-Lite Building & Development Company and its owner, Michael Borkey, contracted with Valentino Camardo to build an addition onto Mr. Camardo’s home. Problems soon ensued resulting in changes to the original scope, additional costs, and claims. The lawsuit was initiated by Star-Lite’s subcontractor, Graves Lumber Company, who claimed that they were not paid on the project. Star-Lite then sued Camardo and Camardo counterclaimed against both Graves and Star-Lite, amongst others.

The appellate court closely evaluated Star-Lite’s prompt payment claim against Camardo. Ohio’s Prompt Payment Statute, found at R.C. 4113.61, requires a contractor to timely pay its subcontractors undisputed amounts under a contract and imposes penalties for the failure to do so, including interest and attorney’s fees. In this case, Star-Lite was attempting to classify Mr. Camardo as a contractor because Mr. Camardo self-performed some of the work on his house. The problem, however, is that Mr. Camardo did not fit the statutory definition of a “contractor.”

The Prompt Pay Statute defines a contractor as, “any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of a structure or improvement under a contract with an owner.”

Mr. Camardo did not have a contract with himself to perform work on his own house. Since Mr. Camardo was not a “contractor” Star-Lite could not be considered a subcontractor for purposes of the Prompt Pay Statute. The appellate court thus denied Star-Lite’s appeal seeking attorney’s fees and interest under the statute.