This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
J&D Construction, Inc.,
Ramy International Ltd.,
Blue Earth County District Court
File No. C1991341
Peter G. VanBergen, Andrea E. Reisbord, Cousineau, McGuire & Anderson, Chartered, 600 Travelers Express Tower, 1550 Utica Avenue South, Minneapolis, MN 55416-5318; and
Stephen L. Stennes, Prindle, Maland, Sellner, Stennes & Knutsen, P.O. Box 591, Montevideo, MN 56265 (for respondent)
Kenneth R. White, Farrish Johnson Law Office, PLLP, 201 North Broad Street, Suite 107, P.O. Box 550, Mankato, MN 56002-0550 (for appellant)
Considered and decided by G. Barry Anderson, Presiding Judge, R.A. Randall, Judge and Robert Schumacher, Judge.
G. BARRY ANDERSON, Judge
Respondent performed construction work for appellant and brought an action to collect payment. Appellant counterclaimed for breach of contract and breach of warranties, alleging faulty workmanship. The district court granted respondent’s motion for partial summary judgment and dismissed appellant’s counterclaims on the ground that they were barred by the applicable statute of limitations. Appellant now challenges the ruling, arguing that defenses of recoupment and equitable estoppel overcome respondent’s limitations defense. We affirm.
On April 28, 1994, appellant Ramy International, Ltd., and respondent J&D Construction entered into a contract to construct a building as part of a seed-plant expansion. The project was completed in August 1995. After respondent billed appellant for the work in August 1995, appellant notified respondent that a standing-water problem existed in the new building. Respondent would not make repairs until appellant paid the bills, and appellant would not pay the bills until the repairs were made. The parties, however, attempted to work out their differences.
In May 1999, respondent commenced legal action to recover the amounts due on appellant’s account. Appellant answered the complaint, alleging, as an affirmative defense, that appellant was entitled to offset repair costs against the outstanding balances owed respondent. A September 28, 1999 letter from respondent to appellant restated respondent’s willingness to fix the water problems if appellant paid the bills. But, in April 2000, appellant filed an amended answer to the complaint, counterclaiming for (1) breach of contract; (2) negligent design and construction; (3) breach of express warranty; and (4) breach of implied warranty of fitness.
Respondent moved for partial summary judgment, arguing that the counterclaims were barred by the statute of limitations. The district court granted respondent’s motion. This appeal follows.
On appeal from summary judgment, reviewing courts must determine whether genuine issues of material fact exist and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). Evidence must be viewed in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). When the material facts surrounding a statute of limitations issue are not in dispute, review is limited to whether the district court erred in its application of the law. Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn. 1999).
Minn. Stat. § 541.051, subd. 1(a) (2000), provides that an action, including an action in contract or tort, to recover damages arising out of a defective and unsafe condition of an improvement to real property is barred if brought “more than two years after discovery of the injury * * * .” Id. The district court concluded that appellant’s counterclaims were based on defects discovered in August 1995, more than two years before appellant filed the April 2000 counterclaims, and were therefore barred by the statute of limitations.
Appellant argues that the district court erred by applying the statute because the counterclaims were in the nature of a recoupment and that claims of recoupment are not subject to statutes of limitation. Respondent counters that this argument was not presented to, or decided by, the district court and that this court should not consider it. See Thiele v. Stich,425 N.W.2d 580, 582 (Minn. 1988) (explaining that this court generally will not review matters not argued and considered in the court below). In the alternative, respondent argues that recoupment is a defense, not a counterclaim, and that appellant’s counterclaims, which ask for damages beyond what respondent seeks to recover, remain barred.
Recoupment is a defense asserted to minimize or eliminate a plaintiff’s recovery:
A claim for recoupment has its own unique characteristics, separate and distinct from other defenses which may be asserted: it must arise out of the same transaction that is the subject matter of the plaintiff’s action and it can only be utilized to reduce or avoid the plaintiff’s recovery.
Household Fin. Corp. v. Pugh,288 N.W.2d 701, 704 (Minn. 1980) (citation omitted). Because a common transaction between a plaintiff and a defendant, and thus mutual claims, typically arise on the same date, courts recognize that it would work an injustice to allow one to seek relief but deny the other by reason of the statute of limitations. Id. For this reason,
a defense in the nature of recoupment is generally permitted even though the applicable statute of limitations would have barred an independent action on the same claim.
Id. at 703 (citations omitted).
Recoupment is distinguished from a counterclaim, “which may arise out of a separate transaction and allows for recovery in excess of that sought by the plaintiff, or a setoff, which involves a transaction unrelated to the plaintiff’s action.” Id. at 704 n.5. The Pugh court noted that “[a]s long as two claims arise from the same transaction and can be adjusted in the same proceeding, recoupment is available.” Id. at 705 n.7 (citation omitted).
We believe that what appellant asserted as a counterclaim is in the nature of a recoupment defense. Respondent’s complaint alleges that appellant refused to pay $49,739.25, the outstanding balance for work performed under the April 28, 1994 contract. Appellant’s counterclaims alleged damages in excess of $50,000 arising from breach of that contract, breach of warranties, and negligent design and construction. The two actions arose out of the same transaction; both claims arose from alleged breaches of the April 28, 1994 construction contract.
In addition, the district court recognized that recoupment, as an affirmative defense, remains available to appellant. The order at issue here holds that the statute of limitations bars appellant’s counterclaims, but that
the Defendant would still be able to use almost all of the same evidence with regard to the moisture problems, set-off costs, etc., as an affirmative defense to Plaintiff’s breach of contract action in order to possibly reduce the amount they owe due to the claimed improper workmanship.
We conclude that, although the district court erred in granting partial summary judgment to respondents on the basis that the statute of limitations barred appellant’s claims as “counterclaims,” any error is harmless because the defense of recoupment remains available. See Minn. R. Civ. P. 61 (harmless error ignored). Because that defense has not yet been fully litigated, we do not address the question whether appellant’s recovery, if any, may exceed the amount of respondent’s claims.
Appellant also argues that its reliance on respondent’s promises to repair the defects tolls the statute of limitations.
The two-year statute-of-limitations period, set forth in Minn. Stat. § 541.051, subd. 1(a), begins to run when the plaintiff discovers an injury that gives rise to a cause of action. Oreck v. Harvey Homes, Inc.,602 N.W.2d 424, 428 (Minn. App. 1999), review denied (Minn. Jan. 25, 2000).
But, when the defendant makes assurances or representations that the injury will be repaired and the plaintiff reasonably relies on these assurances to their detriment, the defendant may be estopped from asserting a statute of limitations defense.
Id. Such assurances may toll statutes of limitation on the theory of equitable estoppel. United States Leasing Corp. v. Biba Info. Processing Servs., Inc.,436 N.W.2d 823, 826 (Minn. App. 1989), review denied (Minn. May 24, 1989).
“Estoppel depends on the facts of each case and ordinarily presents a question for the jury.” Brenner v. Nordby,306 N.W.2d 126, 127 (Minn. 1981). But the question is one of law “when only one inference can be drawn from the facts.” L & H Transp., Inc. v. Drew Agency, Inc.,403 N.W.2d 223, 227 (Minn. 1987).
The district court found that the last communication between the parties that could arguably be construed as an assurance took place on March 12, 1997. On that date, respondent sent appellant a letter that discussed the moisture problem and which states “we will correct this as soon as we can come to terms with our outstanding invoices.” The district court concluded that, even if construed as an assurance on which appellant relied to its detriment, “the latest that the action could have been brought was March 13, 1999.”
Appellant argues that a September 1999 letter from respondent to appellant constituted an assurance that operated to further toll the statute of limitations. That letter, sent four months after litigation commenced, appears to be a settlement proposal that includes an offer to make repairs in exchange for payment of the outstanding invoices. Appellant argues, “That the fact that the last written promise came after litigation began served only to further assure [appellant] that it need take no further action.” Appellant’s argument casts both the March 1997 and September 1999 communications as assurances on which appellant relied to its detriment.
Ordinarily, viewing the evidence in the light most favorable to appellant, whether these communications were assurances, would create a fact issue sufficient to defeat summary judgment. See Sohns v. Pederson,354 N.W.2d 852, 855 (Minn. App. 1984) (holding that an inference that there was a promise of future action on which appellants relied created a material question of fact). Respondent counters, however, that even if characterized as “assurances,” the statute of limitations began to run on March 13, 1997, and thus the September 1999 communication took place more than six months after the two-year limitations period expired.
We agree. As discussed above, the limitations period began to run when appellant discovered the injury -- August 1995. The subsequent assurances that respondent would correct the moisture problem, relied on by appellant, tolled the statute. Assuming that all of the communications from respondent to appellant from August 1995 to March 1997 contained such assurances, the last of these took place on March 12, 1997. The statute of limitations, then, began to run on March 13, 1997, and expired two years later. Thus, the September 1999 communication, even if viewed as an assurance, could not serve as an event that tolled the statute because the limitations period had already expired.
Appellant also argues that other verbal assurances made during the limitations period tolled the statute. Citing the affidavit of Michael Ramy, a principal shareholder, appellant argues that “within the statute of limitations, Ramy met with counsel for J&D about the past due balance and again discussed the construction quality issues” and that “after the March 12, 1997 meeting [the parties] continued to talk about this problem off and on.” The actual language in the affidavit is, “Over the years, [respondent] and I continued to talk about this problem off and on.” Also, Ramy did not meet with counsel until April 1999, and the two-year limitations period, if calculated from March 13, 1997, had already expired by the time of that meeting.
The affidavit’s language is not specific enough to defeat summary judgment because the affidavit does not (1) supply concrete dates of conversations, which are necessary to the tolling determination, and does not (2) shed any light on whether any assurances were made. See Minn. R. Civ. P. 56.05 (providing that, when a summary judgment motion is made and supported as provided in rule 56, an adverse party may not rest on mere averments or denials in his pleadings, but must present specific facts showing a genuine issue for trial).
We conclude that the district court did not err by granting summary judgment to respondent on the basis that the limitations period had expired before the alleged September 1999 assurance and thus appellant’s counterclaims are barred.
Neither party disputes that the defects in this case fall within the meaning of Minn. Stat. § 541.051.
This discussion seems to suggest that the district court considered, at least in part, the issue of recoupment and undermines respondent’s argument that this issue is not properly before this court.