This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).






Peggy Rose Revocable Trust u/a

dated April 11, 2000,





Kenneth Eppich,



Smuckler Architects, Inc., et al.,



Filed January 23, 2001


Holtan, Judge*


Hennepin County District Court

File No. CT984491


John T. Trout, Foley & Mansfield, P.L.L.P., 200 Lafayette Building, 1108 Nicollet Mall, Minneapolis, MN 55403 (for respondent)


Dale M. Wagner, Charles E. Lundberg, Bassford, Lockhart, Truesdell & Briggs, P.A., 3550 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402; and


Steven K. Champlin, Dorsey & Whitney LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis, MN  55402-1498 (for appellant)


Donald D. Smith, Thomsen & Nybeck, P.A., 3300 Edinborough Way, Suite 600, Edina, MN 55435 (for amicus curiae Minnesota Association of Realtors)


Mike Hatch, Attorney General, David M. Aafedt, Assistant Attorney General, 445 Minnesota Street, Suite 1200, St. Paul, MN 55101-2130 (for amicus curiae Minnesota Attorney General)


            Considered and decided by Willis, Presiding Judge, Shumaker, Judge, and Holtan, Judge.

U N P U B L I S H E D   O P I N I O N


            Peggy Rose and her husband purchased a home from appellant-seller Kenneth Eppich.  The parties agreed that any disputes would be resolved by arbitration requested within 18 months of closing.  More than 18 months after closing, a dispute arose, the district court referred it to arbitration, the arbitrator awarded damages against seller, and the district court confirmed the award.  Seller appeals.  We reverse.  Respondent Peggy Rose Revocable Trust now represents buyers’ interest in this suit.


            Seller agreed to sell a house to buyers.  Seller stated that the house did not have water problems, and the parties entered an agreement requiring that all disputes, including fraud, to be arbitrated and that any request for arbitration be made within 18 months of closing.  More than 18 months after closing, buyers sued seller, alleging that the house had water problems and that seller’s statements to the contrary had been misrepresentations.  Seller sought summary judgment, arguing buyers’ claims were untimely.  The district court denied the motion and ruled that fact questions existed regarding whether seller concealed the defects, and whether buyers were diligent in discovering the defects.  The district court referred the matter to arbitration.  The arbitrator found that seller knowingly made false statements, and that buyers had been diligent.  The arbitrator awarded damages against seller.  The district court confirmed the arbitration award.  Seller appealed, and this court granted the requests of the Minnesota Attorney General and the Minnesota Association of Realtors to appear as amicii.




            Seller alleges that the district court erred by referring this matter to arbitration.  Arbitration agreements are treated as contracts.  County of Hennepin v. Law Enforcement Labor Servs., Inc., Local No. 19, 527 N.W.2d 821, 824 (Minn. 1995).  Here, the arbitration agreement states:

By agreeing to binding arbitration you give up your right to go to court. * * * .


* * * *


            All disputes about or relating to the physical condition of the property are subject to arbitration under the ARBITRATION AGREEMENT.  This includes claims of fraud [and] misrepresentation. * * * .


* * * *


            A request for arbitration must be filed within 18 months of the date of the closing on the property or else the claim cannot be pursued.


* * * *


            * * * Any dispute between the undersigned parties, or any of them, about or relating to the physical condition of the property * * * including claims of fraud [and] misrepresentation * * * shall be settled by binding arbitration.


(Emphasis added.)  This agreement unambiguously requires arbitration of a fraud claim to be requested within 18 months of closing.  See In re Ashman, 608 N.W.2d 853, 858 (Minn. 2000) (stating “[w]hether there is ambiguity in a contract is a legal determination”).  Therefore, what the parties intended the agreement to mean is irrelevant.  See Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 295, 135 N.W.2d 681, 686-87 (1965) (stating, when construing unambiguous contract, “it is neither necessary nor proper  * * *  to go beyond the wording of the instrument itself”).  Thus, the question becomes whether the arbitration agreement can be enforced as it is written. 


            Public policy in Minnesota favors arbitration for resolving disputes.  Freeman v. Duluth Clinic, Inc., 334 N.W.2d 626, 629 (Minn. 1983).  That policy, however, favors arbitration for resolving disputes as opposed to resolving disputes in courtCity of Brooklyn Center v. Minnesota Teamsters Pub. & Law Enforcement Emp. Union Local No. 320, 271 N.W.2d 315, 319 (Minn. 1978) (stating “public policy favors arbitration and the speedy resolution of disputes without initial resort to litigation in our courts”).  Here, given buyers’ failure to request arbitration within 18 months after closing, the question is not the forum in which the dispute will be resolved, but whether there is a viable dispute to resolve.


            Parties may agree to arbitrate fraud-related issues.  See Michael-Curry Co. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 141-42 (Minn. 1989) (stating parties may choose to “arbitrate all controversies, including fraud in the inducement”).  The statute of limitations for fraud claims requires that they be brought within six years of the date the aggrieved party discovers the fraud.  Minn. Stat. § 541.05, subd. 1(b) (2000).  Parties to a contract may agree to a shorter limitations period if no statute prohibits them from doing so, and if the agreed-on period is not “unreasonable in length.”  Henning Nelson Constr. Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 651 (Minn. 1986).  “Whether a contractual limitation is reasonable or not is to be decided on a case-by-case basis, looking at the particular facts of each case[[1]]” and, on appeal, a decision on the reasonableness of a limitation period is not altered unless clearly erroneous.  Id.[2]  Limitation periods shorter than those provided by statute “are not generally favored and are strictly construed against the party invoking them.”  Id.[3]

            Here, buyers allege that the six-year period of Minn. Stat. § 541.05, subd. 1(6), prohibits a shorter limitation period.  But the statute merely states that fraud actions are to be brought within six years of discovery of the fraud.  It does not prohibit other limits for non-court proceedings.  In addressing the limitations period, the district court stated:

If [seller] fraudulently concealed the property’s moisture problems, and if [buyers] were diligent and reasonable in discovering the problems, [seller’s] misrepresentations would toll the applicable eighteen-month limitation in the Arbitration Disclosure.


We cannot construe the district court’s reference to diligence to mean that it considered the facts of this case and hence made an implicit decision that the 18-month limitation period was unreasonable.  The district court’s statement was made in the context of denying summary judgment because fact questions existed; it would be anomalous to rule that the district court adequately considered the facts of the case when those facts were still unascertained.  Also, the district court’s memorandum stated that the rationale for tolling statutory limitations “is equally applicable to contractual limitations” and that it would be “repugnant” to allow a person’s fraud “to make him impervious to reasonable and diligently-pursued claims for damages based in that very same fraud.”  This language suggests that any implicit determination the district court made was one that the existence of fraud tolled the contractual limitation period without regard to whether the 18-month period was reasonable in this case.  Any such ruling would violate Henning’s requirement that reasonableness be addressed on a case-by-case basis.

            Having considered the parties’ arguments and reviewed the record, including Peggy Rose’s status as an attorney, we conclude, on the facts of this case, that the limitations period in this agreement between these parties was, as a matter of law, reasonable.  Thus, the question becomes whether that period should have been tolled.


            Buyers cite Keefe v. Bahama Cruise Line, Inc., 867 F.2d 1318, 1323 (11th Cir. 1989), and D.L. Lee & Sons, Inc. v. ADT Sec. Sys., 916 F. Supp. 1571, 1577 (S.D. Ga. 1995), to argue that the contractual limitations period should be tolled.  Those cases are distinguishable.  While both cases state that a party’s conduct may equitably estop that party from invoking a contractual limitations period, equitable estoppel was not addressed by the district court here.  Also, neither case involves a contractual limitation explicitly applying to fraud.  Keefe, 867 F.2d at 1320; D.L. Lee & Sons, 916 F. Supp. at 1577.

            After noting that it is a party’s good-faith lack of knowledge that allows fraud to toll a statute of limitations, the Minnesota Supreme Court stated: 

[A] person should not be permitted to shield himself behind the statute of limitations where his own fraud placed him.  He should not be permitted to profit from his own wrong, and it would strike the moral sense strangely to permit him to do so. 


Schmucking v. Mayo, 183 Minn. 37, 40, 235 N.W. 633, 634 (1931); see also Appletree Square I Ltd. Partnership v. Investmark, Inc., 494 N.W.2d 889, 893 (Minn. App. 1993) (stating, in partnership context, “where the major purpose of a contract clause is to shield wrongdoers from liability, the clause will be set aside as against public policy”), review denied (Minn. Mar. 16, 1993).  Here, however, unlike the lack of knowledge assumed by Schmucking and its progeny, buyers voluntarily signed an arbitration agreement stating that it applied to fraud and misrepresentation.  Thus, this case involves an element of waiver not contemplated in SchmuckingSee Stephenson v. Martin, 259 N.W.2d 467, 470 (Minn. 1977) (noting waiver may be inferred from party’s conduct); Smith v. Smith, 235 Minn. 412, 421, 51 N.W.2d 276, 281 (1952) (defining waiver as “voluntary relinquishment of a known right”). 

            Seller cites Ohio Co. v. Nemecek, 98 F.3d 234 (6th Cir. 1996), to argue that fraud does not toll the time limits for arbitration.  While the limitation period at issue there “[was] more generous than comparable periods allowed under either state or federal [law,]” Nemecek was based, in part, on its adoption of an analysis by the Third Circuit Court of Appeals interpreting an identical time limit.  See Nemecek, 98 F.3d at 237 (adopting analysis in Paine Webber, Inc. v. Hartmann, 921 F.2d 507 (3rd Cir. 1990)).  The Hartmann court admitted that “there is abundant precedent holding that time bar clauses in arbitration agreements are usually procedural in nature and thus should not be interpreted by courts as substantive bars to arbitration.”  921 F.2d at 512 (citations omitted).  It then distinguished arbitration time limits functioning as statutes of limitations (as procedural devices) from those functioning as substantive limits on arbitrators’ ability to hear disputes (in a manner analogous to a lack of subject-matter jurisdiction) and concluded that the Hartmann limitation was substantive and not able to be tolled.  Id. at 513-14.

            Three things contributed to the result in Hartmann.  First, that time limit stated that tardy claims were not “eligible for submission to arbitration.”  Id. at 513.  Here, the arbitration agreement states that tardy claims “cannot be pursued.”  We cannot help but construe a statement that tardy claims “cannot be pursued” as one saying that such claims are not eligible for submission to arbitration.  The other two bases for Hartmann’s ruling were that (a) the Seventh Circuit, in interpreting an identical provision, had previously reached the same result and (b) the language in question was not similar to that in cases cited by the party alleging the limitation to be a procedural/statute-of-limitations type limit.  Id. at 513-14.  Here, the parties cite no case construing the exact language at issue in this case.  That language, however, is not phrased in a manner similar to a statute of limitations.  See Minn. Stat. § 541.05, subd. 1(6) (stating action “[f]or relief on the ground of fraud, in which case the cause of action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud” shall be commenced within six years).  Applying the Nemecek/Hartmann factors here shows: (a) the agreement’s time limit does not exceed the applicable statute of limitations; (b) the effect of the agreement’s time limit is similar to that of the limits in Harmann and Nemecek, which were ruled to be non-tollable limits on the arbitrator’s ability to hear disputes; (c) there is no case law on point; and (d) the language of the agreement’s time limit does not seem to reflect a statute of limitations.  The first factor indicates that the parties explicitly agreed to a limit shorter than that provided by statute.  Similarly, the second and fourth factors weigh against tolling the limitations period.  The third factor is neutral.  Absent some authority favoring a stay of an otherwise reasonable limitations period, we must reverse the district court’s stay of that period in this case.[4] 


* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.

[1] That the time limit must be reasonable based on the facts of the case addresses seller’s claims that the parties are bound strictly (i.e., as a matter of law) by their agreement.

[2] Seller argues that affirming the district court will preclude parties from setting a definite date as of which a contractual-limitations period for claims of misrepresentation and fraud will run.  We reject that argument as inconsistent with the idea that the reasonableness of a shorter-than-statutory period is determined on a case-by-case basis.

[3] Seller alleges this court should not address the Henning test because it was not presented to the district court.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating, generally, appellate courts address only issues presented to and decided by the district court).  But the crux of the pre- and post-arbitration proceedings in district court was the limitation period.  Because Henning explains how to determine whether the period was reasonable, it cannot be ignored.  See State v. Hannuksela, 452 N.W.2d 668, 673 n.7 (Minn. 1990) (stating “it is the responsibility of appellate courts to decide cases in accordance with law, and that responsibility is not to be ‘diluted by counsel’s oversights, lack of research, failure to specify issues or to cite relevant authorities’”) (citation omitted); Greenbush State Bank v. Stephens, 463 N.W.2d 303, 306 n.1 (Minn. App. 1990) (applying Hannuksela in a civil case), review denied (Minn. Feb. 4. 1991).

[4] Buyers also allege that the time limit is an inappropriate exculpatory clause that should not be enforced.  Because this issue was not presented to the district court (directly or indirectly) and was not addressed by the district court, it is not properly before this court and we decline to address it.  Thiele, 425 N.W.2d at 582.  Moreover, when reviewing exculpatory clauses, courts examine whether there was a disparity of bargaining power between the parties and whether the services covered by the clause are public or essential services.  Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn. 1982).  Here, there is no allegation of disparate bargaining power, and it is unclear how the sale of seller’s house would constitute a public or necessary service.