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Six-Year Breach of Contract Statute of Limitations Applied to Third Party Beneficiaries (Here the Plaintiff Villages and Towns) of Contracts Between the Counties and the Defendant Sewer-Construction Companies

The Court of Appeals, with two concurring judges, determined that the causes of action alleging the faulty construction of sewers resulting in settling of the roadways within the plaintiff villages and towns was time-barred. The plaintiff villages and towns were third-party beneficiaries to the sewer-construction contracts entered into by the counties encompassing the plaintiff villages and towns. The complaints alleged a “continuing nuisance.”  The court held that the actions were time-barred whether analyzed under a contract or nuisance theory (the continuing nuisance theory was rejected on the merits).  The court further held that the six-year breach of contract statute of limitations applied to third-party beneficiaries of the contracts (here the plaintiff villages and towns):

A breach of contract action must be commenced within six years from the accrual of the cause of action (see CPLR 203 [a]; 213 [2]).  “In cases against architects or contractors, the accrual date for Statute of Limitations purposes is completion of performance” (Newburgh, 85 NY2d at 538…).  This rule applies “no matter how a claim is characterized in the complaint” because “all liability” for defective construction “has its genesis in the contractual relationship of the parties” (Newburgh, 85 NY2d at 538 …). Even if the plaintiff is not a party to the underlying construction contract, the claim may accrue upon completion of the construction where the plaintiff is not a “stranger to the contract,” and the relationship between the plaintiff and the defendant is the “functional equivalent of privity” (Newburgh, 85 NY2d at 538-539 … ). * * *

The Appellate Division properly applied Newburgh to these actions commenced by third-party beneficiaries to the construction contracts.  Newburgh extended the completion of performance accrual rule to actions against architects or contractors brought by “intended beneficiar[ies]” of construction contracts (id.).  Here, the Counties contracted with defendants to install the sewer system for the benefit of municipalities like plaintiffs, a fact which was surely “known to all parties at the time the contracts were negotiated” (id.).  Town of Oyster Bay v Lizza Industries Inc …, 214, 215, 217, 217, 218, 219, 220, 221, 222, 223, CtApp 12-17-13

 

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