Opinion
No. A06-2253.
Filed December 11, 2007.
Appeal from the District Court, Dakota County, File No. CX-05-10034.
Francis J. Rondoni, Chestnut Cambronne, P.A., Minneapolis, MN (for appellants).
Cheryl Hood Langel, Robyn N. Moschet, McCollum, Crowley, Moschet and Miller, Ltd., Minneapolis, MN (for respondent Harvey Homes, Inc.).
Thomas H. Boyd, Donald J. Brown, Winthrop Weinstine, P.A., Minneapolis, MN (for respondent Marvin Windows, Inc.).
William L. Davidson, Mark A. Fredrickson, Lind, Jensen, Sullivan, Peterson, P.A., Minneapolis, MN (for respondent Randy Gabrelcik).
Considered and decided by Peterson, Presiding Judge; Lansing, Judge; and Klaphake, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
This appeal is from a summary judgment dismissing as time-barred appellants' statutory-warranty and common-law negligence claims for damage to their home. We affirm the dismissal of the negligence claim, but because the district court applied the statute governing common-law claims to both the common-law and statutory claims, we reverse the dismissal of the warranty claim and remand.
FACTS
In 1989, appellants Herbert James Bruber and Laureen Bruber (the Brubers) contracted with respondent Harvey Homes, Inc. to build their home in Mendota Heights. The construction was completed in early 1990, and the Brubers moved into the home in June 1990. In April 1991, the City of Mendota Heights issued a certificate of occupancy for the home.
In June 2004, the Brubers noticed for the first time damage caused by moisture and water-infiltration problems on exterior walls, including areas around several windows. Soon after discovering the damage, the Brubers called Patricia Greene, who had worked at Harvey Homes, to provide notice of the damage. Greene told the Brubers that Harvey Homes was out of business. In July 2004, Greene sent the Brubers an e-mail that provided contact information for Harvey Homes' insurance agent. In September 2004, the Brubers' attorney notified Harvey Homes' former insurance agent, RJR Insurance Agency, about the discovery of water intrusion.
When the Brubers contacted Greene, she was no longer working for Harvey Homes.
In early 2005, the Brubers retained Thomas J. Irmiter of Forensic Building Science, Inc., to investigate the scope and cause of the moisture damage. In June 2005, Irmiter finished inspecting the house, and on June 28, 2005, he issued his report detailing numerous construction defects and code violations.
In October 2005, the Brubers brought a statutory-warranty claim under Minn. Stat. § 327A.05 (2004) and a common-law negligence claim against Harvey Homes, Marvin Windows, Inc. (Marvin), and various unnamed parties. The Brubers sought recovery for the moisture damage to their home. In November 2005, Harvey Homes filed its answer and a cross-claim seeking indemnity and contribution from Marvin. In December 2005, Harvey Homes filed a third-party complaint seeking indemnity and contribution from subcontractors Randy Gabrelcik, d/b/a Gabrelcik Masonry and Gabrelcik Enterprises, Inc. (Gabrelcik); Timothy E. Buffham, d/b/a Chasid Construction Company (Chasid); and David Gornick, d/b/a CDR Enterprises (Gornick). Chasid then filed a cross-claim against Marvin, Gabrelcik, and Gornick.
In August 2006, Harvey Homes moved for summary judgment on all of the Brubers' claims, arguing that the statute of repose for claims arising out of the defective and unsafe condition of an improvement to real property barred the claims. Alternatively, Harvey Homes argued that any statutory-warranty claims were barred because the Brubers failed to provide written notice of the damage to their home within six months after they discovered the damage. Gabrelcik then filed a motion for summary judgment on Harvey Homes' third-party claims and Chasid's cross-claims, arguing that Harvey Homes' third-party claims and Chasid's cross-claims were barred by the statute of repose. Marvin joined in both Harvey Homes' and Gabrelcik's summary-judgment motions.
In response to Harvey Homes' summary-judgment motion, the Brubers argued that they properly notified Harvey Homes of the damage within the statutory six-month notice period and that their claims were not time-barred because Harvey Homes fraudulently concealed the damage, which tolled the statute of repose. In a supplemental memorandum, the Brubers argued that the 2002 version of the statute of repose applied, and, therefore, their statutory-warranty claims were not time-barred.
In October 2006, the district court granted summary judgment in favor of Harvey Homes. The district court determined that the Brubers' claims were time-barred and that the Brubers did not raise a genuine issue of material fact on their fraudulent-concealment claim. The district court dismissed as moot the remaining claims of other parties. The Brubers appealed.
In a special-term order, this court limited the Brubers' direct appeal to claims against Harvey Homes because the Brubers did not serve Marvin with a notice of appeal. Therefore, the judgment on the Brubers' claims against Marvin is final.
This does not include Harvey Homes' cross-claims and Chasid's third-party claims against Marvin, which are also being appealed.
DECISION I.
Common-law claim
The Brubers argue that the district court erred in granting summary judgment on their negligence claim because Harvey Homes fraudulently concealed its negligence. On appeal from summary judgment, we review the record to "determine whether there are any genuine issues of material fact and whether a party is entitled to judgment as a matter of law." In re Collier, 726 N.W.2d 799, 803 (Minn. 2007). We view the evidence in the record "in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). A genuine issue of material fact exists if the evidence would "permit reasonable persons to draw different conclusions." Gradjelick v. Hance, 646 N.W.2d 225, 231 (Minn. 2002). No genuine issue of material fact exists if the evidence "merely creat[es] a metaphysical doubt as to a factual issue." State Farm Fired Cas. v. Aquila, Inc., 718 N.W. 2d 879, 886-87 (Minn. 2006).
The statute limiting actions arising from improvements to real property states:
Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property . . . arising out of the defective and unsafe condition of an improvement to real property . . . shall be brought against any person performing or furnishing . . . the construction of the improvement to real property . . . more than two years after discovery of the injury . . . nor, in any event shall such cause of action accrue more than ten years after substantial completion of the construction.
Minn. Stat. § 541.051, subd. 1(a) (2004) (emphasis added). The statute further provides:
Notwithstanding the provisions of subdivision 1, in the case of an action which accrues during the ninth or tenth year after substantial completion of the construction, an action to recover damages may be brought within two years after the date on which the action accrued, but in no event may an action be brought more than 12 years after substantial completion of the construction.
Minn. Stat. § 541.051, subd. 2 (2004).
Under the statute, a cause of action is barred if it accrued more than ten years after the home was substantially completed, and a cause of action may not be brought more than 12 years after the home was substantially completed. The Brubers argue that even though they brought their negligence action more than 15 years after their home was substantially completed, the action is not time-barred because there is fraud involved with the action, and the fraud tolled the statute of limitations.
The supreme court has explained that
the general rule [is] that for most causes of action fraudulent concealment of the existence of a cause of action will toll the statute of limitations, postponing the commencement of the running of the statute until discovery or reasonable opportunity for discovery of the fact by the exercise of ordinary diligence. The party claiming fraudulent concealment has the burden of showing that the concealment could not have been discovered sooner by reasonable diligence on his part and was not the result of his own negligence.
There is no categorical definition of what constitutes fraudulent concealment. . . . [T]he concealment must be fraudulent or intentional and, in the absence of a fiduciary or confidential relationship, there must be something of an affirmative nature designed to prevent, and which does prevent, discovery of the cause of action. Although mere silence or failure to disclose may not in itself constitute fraudulent concealment, any statement, word, or act which tends to the suppression of the truth renders the concealment fraudulent.
Wild v. Rarig, 302 Minn. 419, 450-51, 234 N.W.2d 775, 795 (1975) (citations and quotation omitted).
The Brubers contend that Harvey Homes fraudulently concealed the existence of a cause of action by installing siding and brick facing on their home, which hid the numerous building-code violations and construction defects in the home. They argue that installing these items was an act that "tends to the suppression of the truth." The district court determined that installing the siding and bricks was not something "of an affirmative nature designed to prevent, and which does prevent, discovery of a cause of action." We agree with the district court. Although the siding and bricks on the home hid everything inside the walls, appellants produced no evidence that installing either the siding or the bricks was intended to hide anything. There is evidence that the walls were not built correctly, but there is no evidence that the numerous defects were known at the time the siding and bricks were installed or that the siding and bricks were installed to hide the defects. Without such evidence, there is no basis for finding that the defects were fraudulently concealed, rather than simply being concealed as an incidental effect of installing the final layer of building materials.
The Brubers also assert that Harvey Homes' certification that their home would be built in accordance with the building code is a statement that concealed their cause of action. But "[t]o prove fraudulent concealment, tolling any statute of repose or limitations, a party must show (1) the defendant made a statement that concealed plaintiff's potential cause of action, (2) the statement was intentionally false, and (3) the concealment could not have been discovered by reasonable diligence." Sletto v. Wesley Constr., Inc., 733 N.W.2d 838, 846 (Minn.App. 2007). The Brubers produced no evidence that Harvey Homes knew about any code violations or that its statement was intentionally false. The Brubers argue that the sheer number of code violations and defects is evidence that there was active concealment. But while the large number of defects may be strong evidence of negligent construction, it is not by itself evidence that those who were responsible for the construction knew that it did not comply with the building code. The district court did not err when it concluded that the Brubers' negligence action was time-barred because there was no evidence of fraud that would toll the statute of limitations.
II.
Statutory-warranty claim
The Brubers argue that the district court erred when it dismissed their statutory-warranty claim. We agree. The district court dismissed all of the Brubers' claims based on the statement in Minn. Stat. § 541.051, subd. 2, that "in no event may an action be brought more than 12 years after substantial completion of the construction" and the district court's conclusion that because the home was substantially completed in 1990, "under the most generous reading of the facts, the time for bringing an action expired in 2002." But in reaching this conclusion, the district court overlooked the fact that until July 31, 2004, Minn. Stat. § 541.051, subd. 4, stated, "This section shall not apply to actions based on breach of the statutory warranties set forth in section 327A.02 . . . provided such actions shall be brought within two years of the discovery of the breach." Minn. Stat. § 541.051, subd. 4 (2002).
In 2004, the legislature amended the statute and removed the exception for statutory-warranty claims. 2004 Minn. Laws ch. 196, § 1. The amended statute provides:
For the purposes of actions based on breach of the statutory warranties set forth in section 327A.02, or to actions based on breach of an express written warranty, such actions shall be brought within two years of the discovery of the breach. In the case of an action under section 327A.05, which accrues during the ninth or tenth year after the warranty date, as defined in section 327A.01, subdivision 8, an action may be brought within two years of the discovery of the breach, but in no event may an action under section 327A.05 be brought more than 12 years after the effective warranty date.
Minn. Stat. § 541.051, subd. 4 (2004). This amendment became effective on August 1, 2004. See 2004 Minn. Laws ch. 196, § 1 (indicating a signing date of May 15, 2004); Minn. Stat. § 645.02 (2006) (setting a default effective date of August 1 following an act's final enactment).
In Sletto, this court determined that "because the amendment removed the exemption for statutory-warranty claims, the limitation on accrual in subdivision 1 of the statute applies to statutory-warranty claims." 733 N.W.2d at 842. But this court also determined in Sletto that "the amended statute can only be applied prospectively," and that "[b]ecause the limitation on accrual is not retroactive, it cannot apply to claims that accrued before its effective date." Id. at 843-44. Consequently, the limitation on accrual in the 2004 statute does not apply to the Brubers' statutory-warranty claim if the claim accrued before August 1, 2004.
This court released its opinion in Sletto after the district court granted summary judgment in this action.
A statutory-warranty claim accrues "when the homeowner discovers, or should have discovered, the builder's refusal or inability to ensure the home is free from major construction defects." Vlahos v. R I Constr. of Bloomington, Inc., 676 N.W.2d 672, 678 (Minn. 2004) (interpreting Minn. Stat. § 541.051, subd 4 (2002)). Whether a homeowner discovers, or should have discovered, the builder's refusal or inability to ensure the home is free from major construction defects is a question of fact. Id. at 679.
When the Brubers contacted Greene in July 2004, they learned that Harvey Homes was out of business. On July 20, 2004, Greene sent the Brubers an e-mail that identified who had been Harvey Homes' insurance agent and described the information that the agent would need to determine whether there was an insurance policy that applied to the Brubers' home. Although the Brubers' attorney did not notify the insurance agent until September 2004, which was after the 2004 amendment became effective, this evidence is sufficient to establish a fact issue regarding whether the Brubers should have discovered by July 31, 2004, any inability by Harvey Homes to ensure that the Brubers' home is free from major construction defects. If the Brubers should have made this discovery by July 31, 2004, their claim accrued before the 2004 amendment became effective, and under section 541.051, subd. 4, section 541.051 does not apply to their statutory-warranty claim, but their action must be brought within two years after discovery of the breach of warranty. Because this fact issue must be decided in order to determine whether section 541.051 applies to the Brubers' statutory-warranty claim, the district court erred by dismissing the claim based on Minn. Stat. § 541.051, subd. 2. Therefore, we reverse the dismissal of the statutory-warranty claim and remand that claim for further consideration by the district court. Whether to reopen the record on remand shall be discretionary with the district court.
III.
Other claims
Marvin and Gabrelcik argue that the contribution and indemnity claims that Harvey Homes asserted against them are barred by the statute of repose. Because the Brubers' negligence claim is barred by the statute of repose, the contribution and indemnity claims related to the negligence claim are moot. But because we have reversed the dismissal of the Brubers' statutory-warranty claim, the contribution and indemnity claims related to that claim are not moot, and we reverse the dismissal of those claims and remand for consideration with the Brubers' underlying statutory-warranty claim.