Defendants had knowledge of risky condition

10-year statute of repose did not bar claim

The Western District Court of Appeals opened a window for an additional exception to the statute of repose in construction torts

The court, in a case of first impression, reversed the trial court's decision for the defendants stating that the plaintiffs showed the defendants did not have a "sole connection" as required by Section 516.097 to a defective balcony that had collapsed and injured the plaintiffs.

"We are faced with a matter...whether a builder/vendor, who has reason to know and fails to disclose that an improvement to real property involves an unreasonable risk to person on the property, loses the protection afforded by Section 516.097," the appellate court said. "Because we find that the plaintiffs' pleadings were sufficient to show a connection of the [defendants] with the unsafe or defective condition of the building other than as a designer and builder of the balcony, we reverse."

The case was Athena Thompson et al v. Harlan Higginbotham and Gary Sherlock and O'Riley Brothers Development Company et al. (MLW No. 53338) (10 pages), handed down Jan. 10.

In 1992 the O'Rileys built an apartment complex at 1447 North Country Club Road. They deeded the domicile over to Higginbotham and Sherlock on June 1, 1993. A decade later, some ten to 15 people were crowded onto a balcony at one of the apartments and it gave way, collapsing and causing various injuries to several people. Three inadequate deck screws a subcontractor used to fasten the deck to the 4x4 supports were blamed for the collapse.

Thompson's attorney James A. Montee filled in a few more facts saying although the O'Rileys are a big builder in northwestern Missouri, Ralph built this particular building on the cheap, since he located apartments outside city limits and out from under a building inspector's eyes.

"He built eight eightplexes which are two-story apartment buildings for college students and his own testimony is he buys a blueprint that does not include balconies and he adds the balconies and he doesn't plan for their intended use and he doesn't design for the intended plan, which means he doesn't hire an architect or a designer or an engineer or anything," Montee said. "He just tells his brother, who he has hired as subcontract to stick it together with two-by-fours and four-by-eights which is what they did using deck screws which are insufficient."

In December 2004, the O'Rileys asked Nodaway County Circuit Court Judge Roger Martin Prokes for summary judgment based on the 10-year statute of repose in section 516.097 of the Missouri code.

Prokes complied and Thompson and her fellow plaintiffs appealed claiming the statute of repose does not apply when a defect has been concealed and the statute doesn't extend protection to the defendants because they were not "solely connected to the apartment through design, planning, or construction" because they had also owned the property and they were vendors with superior knowledge of the dangerous condition.

The Western District panel acknowledged that the Missouri Supreme Court partially visited these issues in Magee v. Blue Ridge Prof. Bldg. Co., 821 S.W.2nd 839, 842 (Mo. Banc 1991) but said the facts in this case are distinguishable. The court went outside the words of the statute and the common law in Magee to Section 353 of the Restatement of Torts which basically says the current owners weren't in a position to know about the dangerous condition but the O'Rileys, with their construction expertise should have.

"The Missouri courts have not specifically adopted this section of the Restatement, but it is recognized in many other states and reflects developments in the law with respect to an increased regard for human safety and the need to improve bargaining ethics. W. Page Keeton et al., Prosser and Keeton on The Law of Torts section 64, at 447 (5th ed. 1984).

"If we recognize such a duty on the part of vendors in the context of finding an exception to our statute of repose, we will foster greater openness and candor in real estate transactions. We will also, however, possibly open the door to potentially unlimited extensions of liability," opinion author Judge Thomas H. Newton wrote. "Because we believe that each case must be decided on its facts, we do not believe that this potential negative consequence outweighs the potential benefits. The facts of this case plainly illustrate why this is so and also demonstrate the significant hurdles Plaintiffs will have to overcome to impose liability on the O'Rileys."

The current owners of the apartment building are a college professor and a dentist by profession. The O'Rileys are presumably — according to the court —"sophisticated, knowledgeable and experienced builders." As such the court said they maybe should have known they created a potentially dangerous situation, especially since the building is in close proximity to a college campus and the units may be rented to students and students like to congregate in numbers on balconies.

"There are material facts in dispute as to whether the O'Rileys owed a duty to the plaintiffs as vendors who had reason to know about a risky condition and failed to disclose it to their vendee and thus did not have a sole connection to the defective balcony as designers, planners, and builders," the court concluded.

The ink was barely dry on the reversal when the O'Rileys' Kansas City attorney Wendell E. Koerner, Jr. began drafting his motion for re-hearing.

"Even under the Restatement of Torts section the court cites, that section requires actual knowledge of the defect, and there is no evidence in the record of any actual knowledge on the part of the O'Rileys," Koerner said. "I disagree with the court on two bases: I think the Magee case is conclusive and, two, even if they think the Restatement Section 353 applies, it could be an exception. It's not in this case because there is no evidence, as the Restatement section says quote, 'the vendors know of the condition and risk involved therein.'"

Koerner said if they are unsuccessful in getting the case reheard or heard by the Supreme Court they'll go back to the trial court and ask again for summary judgment showing there are no facts — evidence the O'Rileys were aware of the defect — that bring the case under the Restatement.

Montee said in the interest of fairness it would be an unconscionable injustice for the courts to find any differently than they have done.

"It's patently unfair, he is an experienced builder and he knowingly creates a defective apartment and later sells it to people without that knowledge, that the lessees or renters or invitees have no cause of action," he said. "You've got to weigh the injury caused versus the public policy that there be some time frame in which causes of action have to arise."

(the full text of the Western District court of Appeals' opinion in Athena Thompson et al v. Harlan Higginbotham and Gary Sherlock and O'Riley Brothers Development Company et al., MLW No. 53338, is available from Missouri Lawyers Weekly - 10 pages.) Call (800) 635-5297, ext. 13. Click here for the full text of the decision.

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