60 N.Y.2d 987 (1983)

In a construction defect case, the cause of action accrues upon the physical completion of the construction project, not the issuance of a final certificate, especially when the owner controls the issuance of that certificate.

Summary

The State of New York sued a general contractor and architect for allegedly defective construction and design of the Empire State Plaza. The defendants argued the statute of limitations had expired, as the lawsuit was filed more than six years after the project’s completion. The Court of Appeals affirmed the lower court’s grant of summary judgment for the defendants, holding that the cause of action accrued upon the actual physical completion of construction, not the issuance of the final certificate of acceptance. The court reasoned that the state fully occupied the building before July 31, 1973, it had assumed responsibility for building security, and it had permitted fire and liability insurance carried by the contractor to be canceled. The Court found that, despite some paperwork continuing after that date, the construction was demonstrably complete before July 31, 1973. Since the suit was filed July 31, 1979, it was time-barred.

Facts

The State of New York contracted with a general contractor and architect for the construction of the Empire State Plaza. The State later claimed the construction was defective. The State fully occupied the building, assumed responsibility for building security, and allowed the contractor’s insurance to lapse before July 31, 1973. A lawsuit was filed on July 31, 1979, alleging improper design, installation, and supervision of the marble facing on the Swan Street building.

Procedural History

The Supreme Court granted the defendants’ motions for summary judgment, concluding construction was completed before July 31, 1973. The Appellate Division affirmed this decision. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

Issue(s)

Whether the State’s cause of action for defective construction accrued more than six years before the commencement of the action, thus barring the claim under the statute of limitations.

Holding

Yes, because the cause of action for defective construction accrues upon the actual physical completion of the work, which occurred before July 31, 1973, making the lawsuit filed on July 31, 1979, time-barred.

Court’s Reasoning

The Court of Appeals held that the cause of action accrued upon the completion of the actual physical work. The Court distinguished this case from Board of Educ. of Tri-Valley Cent. School Dist. v Celotex Corp., noting that here, the owner (the State) controlled the issuance of the final certificate, unlike the architect-controlled certification in Tri-Valley. The Court found that the ongoing relationship between the State, architect, and contractor after July 31, 1973, related to post-construction price negotiations and incidental matters, not the performance of contractual duties. The Court considered the fact that the State had fully occupied the building, assumed security responsibilities, and allowed the contractor’s insurance to be canceled, all before July 31, 1973, as strong evidence that construction was complete. The Court dismissed arguments based on contractor forms indicating later payroll periods, finding they did not specify actual work done after July 31, 1973. Even a minimal amount of work done after that date couldn’t change the fact that the project was demonstrably complete before then. The Court emphasized that despite volumes of affidavits and exhibits, there was no mention of any actual ongoing construction after July 31, 1973, but only paperwork. Judge Jasen dissented, arguing the record contained sufficient evidence of work continuing after July 31, 1973, to warrant a hearing. He pointed to supplemental agreements for supervisory services, vouchers submitted by the architect, and affidavits from the contractor and subcontractors indicating work performed beyond that date. He also noted applications for payment certifying work performed after July 31, 1973. The majority dismissed the dissent’s arguments, stating the payment applications reflected equitable adjustments, supplemental agreements, and retainage, rather than work performed.