Low, Ball & Lynch’s
WEEKLY LAW RESUME
August
18, 2005 Issue By: Ray Coates
Statute of Limitations - Tolling
Provision
Inco Development Corp. v. Superior
Court
Court of Appeal, Fourth
District
(August 5, 2026)
The filing of a bankruptcy petition generally operates as an automatic stay
of the commencement or continuation of an action against a debtor
defendant. Under California Code of Civil Procedure section 356, a
bankruptcy stay has been held in various situations to toll the statute of
limitations period against a defendant.
In this construction defect action, Defendant Inco Development
Corporation (Inco) developed and constructed 216 homes in a subdivision that
were the subject of the litigation. Inco moved for summary judgment as to
157 of the homes on the grounds that the homeowner claims were
time-barred. Under C.C.P. section 337.15, any action against a developer
of property for latent defects must be brought within 10 years of substantial
completion of the home. Here, completion certificates as to the 157 homes
were recorded on or before May 16, 1993. Lawsuits brought by the owners
of the subject 157 homes were filed after May 16, 2003.
In opposition to the summary judgment motion, Plaintiffs contended that the
10 year statute of limitations should be tolled, because Inco had filed
bankruptcy in October 1999, and the bankruptcy action was dismissed and the
stay lifted in May 2001. Plaintiffs argued that the 10 year statute
should be tolled for the 19 month period the bankruptcy stay was in
effect. The trial court denied summary judgment on the ground that
the ten-year limitation period is subject to the tolling provisions of C.C.P.
section 356.
Inco filed a petition for writ of mandate. Inco contended that section
337.15 is a statute of repose and should not be subject to the tolling
provisions of section 356. The Fourth District Court of Appeal held that
a statute of repose has nothing to do with the date of injury, but bars all
suits after the expiration of a specified time from the manufacture or delivery
of a product. The Court of Appeal ruled that section 337.15 had the
characteristics of a statute of repose. Unlike statutes of limitations
which begin to run only when a defect was or should have been discovered;
the ten-year period in section 337.15 imposes a mandatory requirement that a
lawsuit for latent defects be brought within ten years of substantial
completion of construction. The “absolute” nature of the statute worked
against permitting tolling.
The Court of Appeal also looked to the legislative intent of section 337.15
to determine whether tolling provisions should apply. The Court
felt that the enactment of section 337.15 reflected a strong concern that
expanding concepts of liability could imperil the construction industry unless
an appropriate limitations period was adopted. Further, the plain and
strong language of section 337.15 made clear to the Court that the ten-year
period was not subject to tolling. Finally, nothing in federal
bankruptcy law compelled the Court to extend the 10 year period in section
337.15 for the 19 months Inco was in bankruptcy. The Fourth
District therefore issued a peremptory writ of mandate directing the trial
court to set aside its order denying summary judgment, and to enter a new order
determining that the ten-year statute of limitations barred the claims of the
157 homeowners. Inco’s motion for summary judgment was granted as to
those homes.
COMMENT
This case sets forth that there are limited circumstances where a bankruptcy
stay will not toll a statute of limitations. C.C.P. section 337.15, which
sets forth an absolute requirement that a lawsuit for latent construction
defects be brought within ten years of substantial completion, does not allow
for tolling.
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