This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C8-03-7

 

 

Atlantic Mutual Insurance Co.,

As Subrogee of Joseph A. Bank Clothier,

Respondent,

 

vs.

 

North American Roofing Systems, Inc.,

an Indiana corporation,

Defendant,

 

Charles W. Nesbitt, d/b/a C.W.N. Enterprises,

jointly and severally,

Appellant.

 

 

Filed July 8, 2003

Affirmed

Robert H. Schumacher, Judge

Dissenting, Randall, Judge

 

Ramsey County District Court

File No. CX005836

 

 

Sean E. Hade, Mary P. Rowe, Jardine, Logan & O’Brien, P.L.L.P., 8519 Eagle Point Boulevard, Suite 100, Lake Elmo, MN 55042 (for appellant)

 

Michael D. O’Neill, W1750 First National Bank Building, 332 Minnesota Street, St. Paul, MN 55101; and

 

Jeffrey R. Learned, Grotefed & Denenberg, L.L.C., 30800 Telegraph Road, Suite 3858, Bingham Farms, MI 48025 (for respondent Atlantic Mutual)

 


            Considered and decided by Randall, Presiding Judge, Kalitowski, Judge, and Schumacher, Judge.

U N P U B L I S H E D   O P I N I O N

ROBERT H. SCHUMACHER, Judge

            Appellant Charles W. Nesbitt, d/b/a C.W.N. Enterprises argues that the district court erred in failing to grant its summary judgment motion and to dismiss the lawsuit brought against it by respondent Atlantic Mutual Insurance Co., as subrogee of Joseph A. Bank Clothier.  Nesbitt sought summary judgment, arguing that Atlantic Mutual's suit was time-barred under Minn. Stat. § 541.051, subd. 1 (2002), which provides that any and all actions "arising out of the defective and unsafe condition of an improvement to real property" must be commenced within two years of the loss.  The district court denied Nesbitt's motion for summary judgment, concluding there were genuine issues of material fact precluding summary judgment.

            Thereafter, the parties entered into a stipulation in which they agreed that there is a sufficient factual record for an appellate court to determine if Minn. Stat. § 541.051 applies to this case.  The parties also agreed to damages, in the event that Nesbitt is unsuccessful in this appeal.  We affirm the judgment entered by the district court on the parties' stipulation.

FACTS

In February 1998, Clothier was insured by and subrogated to Atlantic Mutual.  Clothier leased premises at the Fairdale Shoppes in Roseville from Walpert Properties.  In April 1998, Walpert contracted with North American Roofing to replace the roof.  North American Roofing in turn hired Nesbitt to install the new roof.  The old roof was a built-up, pitch bitumen, multi-ply roof; the new roof is a single-ply rubber membrane called the Adhered Perma-Lok EPBM Roofing System.  The project involved removing the entire old roof and replacing it with the new single-ply membrane.

The work began on May 7, 1998, but could not be completed in one day.  Nesbitt constructed "temporary dams" to protect the interior of the building pending the completion of the project.  Ultimately, failure of the temporary dams caused water damage to the Clothier property.  The temporary dams were made by erecting short, wall-like structures on the old roof, extending the rubber membrane from the new roof over the wall-like structures, and affixing the membrane near the bases of the structures with plastic cement.

The old roof was designed to pond water towards the front of the building.  The roof gradually sloped in that direction with an abutment to curb the water.  Two drains were located at the high side of the slope near the rear of the building.  Nesbitt blocked one of these drains with a metal plate during the work on May 7.  Atlantic Mutual contends that the blockage of the drain contributed to the water damage.  Nesbitt argues that there is insufficient evidence that ponding water on the old roof accumulated sufficiently during the storm to reach the blocked drain.

On the evening of May 7, a heavy rainstorm occurred and water entered the clothing store, which was located beneath one of the temporary dams that failed.  The parties agree that the loss at issue occurred no later than May 8, 1998, and that suit was not commenced until at least June 29, 2000, almost two months after expiration of the two-year limitations period in Minn. Stat. § 541.051 (2002).

On March 30, 2001, Nesbitt moved for summary judgment, arguing that Atlantic Mutual's lawsuit was barred by the statute of limitations.  The district court denied the motion, concluding that there were genuine issues of material fact.  The parties then entered into a stipulation, agreeing that the resolution of the case hinged on the applicability or inapplicability of Minn. Stat. § 541.051 (2002).  The stipulation provided in part:

IT IS HEREBY STIPULATED by and between [Atlantic Mutual] and [Nesbitt] * * * that judgment in favor of [Atlantic Mutual] against [Nesbitt] in the amount of $135,000.00 may be entered by the Court, subject to and without waiving, [Nesbitt's] right to appeal the applicability of Minn. Stat. § 541.051's two-year statute of limitations on the record and facts developed.

 

The undersigned parties agree that after [Nesbitt's] appeal regarding Minn. Stat. § 541.051 is resolved, if [Atlantic Mutual's] claims are time-barred by Minn. Stat. § 541.051, [Atlantic Mutual] will take  nothing.  Conversely, if some or all of [Atlantic Mutual's] claims are not time-barred, [Nesbitt] will pay to [Atlantic Mutual] the sum of $135,000.00, representing damages in this matter.

 

Judgment was entered pursuant to the stipulation.

D E C I S I O N

            The construction and applicability of Minn. Stat. § 541.051 (2002) is a question of law subject to de novo review on appeal.  Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn. 1998).  The party seeking application of a statute of limitations, which is an affirmative defense, bears the burden of establishing that the claims are time-barred as a matter of law.  Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988). 


            1.         Nesbitt contends that the record establishes, as a matter of law, that Atlantic Mutual's claims are time-barred under this statute and that the district court should have dismissed the lawsuit.

The supreme court has adopted a "common-sense interpretation" of the phrase "improvement to real property" as

a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs.

 

Pacific Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 554 (Minn. 1977) (quotation omitted).  In the present case, the parties do not dispute that the new roof constitutes an improvement to real property under the statute.  The more difficult question is whether the temporary dams and the blocked drain constitute "improvements" under Minn. Stat. § 541.051 and the case law construing that statute. 

            Case law has addressed the issue of whether the statute of limitations applies to claims arising from damages suffered while a construction project is in process.  In O'Connor v. M.A. Mortenson, 424 N.W.2d 92, 94 (Minn. App. 1988), review denied (Minn. July, 28, 1988), this court held that an unfinished stairway constituted an improvement under Minn. Stat. § 541.051.  Similarly, this court determined that an excavation as part of the process of building an attached garage and basement constituted an improvement, so as to hold that a claim for injuries suffered from a fall into this excavation was subject to the limitation.  Fiveland v. Bollig & Sons, Inc., 436 N.W.2d 478, 480-81 (Minn. App. 1989), review denied (Minn. Apr. 24, 1989).

            Conversely, in other cases this court has held that damages arising from accidents occurring during the construction process were not subject to Minn. Stat. § 541.051.  In Brandt v. Hallwood Mgmt. Co., 560 N.W.2d 396, 402 (Minn. App. 1997), review denied (Minn. June 11, 1997), this court determined that the two-year statute of limitations did not apply to bar a claim for injuries suffered due to negligence during demolition activities.  In that case, the injury occurred after the electrical subcontractor failed to de-energize the electrical wire prior to remodeling efforts. Id. at 400-01.  The court specifically noted that the electrical subcontractor failed "to make any permanent alteration to the property" and that the injuries claimed did not arise out of any improvement the electrical subcontractor had made.  Id. at 401.  The Brandtcourt relied upon Wiita v. Potlach Corp., 492 N.W.2d 270 (Minn. App. 1992).  In Wiita, this court stated:

Where an item does not permanently alter real property, it may not constitute an improvement, and [damages] arising from the item are not barred by the statute.

 

Id. at 272 (citation omitted).

The Wiita and Brandt decisions also discussed the difference between a claim alleging negligent construction activities and claims directed more specifically at a defect in the improvement itself.  Id.; Brandt, 560 N.W.2d at 402.  The Brandt decision distinguished Fiveland, stating that the excavation pit, while temporary, "was an integral part of the construction of an improvement to real property." Id.

            Essentially, these cases diverge depending on whether or not the injuries are caused by an improvement in progress or the conduct of construction activities.  If the item causing the damage is an integral part of the planned improvement, then the statute applies.  If the damage arises more directly from improper construction activities, as opposed to the actual construction itself, the statute does not apply. This distinction appears well-grounded in the statute's language, barring actions brought more than two years after injury or damage when the injury or damage "aris[es] out of the defective and unsafe condition of an improvement to real property," as opposed to arising out of defective and unsafe construction activities.  Minn. Stat. § 541.051, subd. 1.

In the present case, two instrumentalities caused the damages – the temporary dams and the blocked drain.  The temporary dams were clearly never intended to become a part of the actual, finished improvement.  The district court cited testimony from Nesbitt's foreman that the temporary dams were not intended to be incorporated into the new roof.  Instead, the dams were discarded with the old roof. 

As for the blocked drain, we conclude that this defect is more directly related to the construction activities, as opposed to the improvement itself, such that the statute does not apply.  Moreover, although the drain itself was certainly part of the old roof, which would be an improvement under the statute, Nesbitt supplied neither the old roof nor the drain.  This is directly analogous to Brandt, in which this court reasoned that the statute of limitations did not apply because the electrical subcontractor did not furnish the electrical wire and conduit, which existed in the building long before the subcontractor's work.  Brandt, 560 N.W.2d at 402.  Accordingly, we affirm the district court but on different grounds.

Affirmed.

RANDALL, Judge (dissenting).

            I respectfully dissent.  The posture here is strange.  Appellant’s appendix contains a stipulation whereby the two attorneys agreed, and candidly re-agreed in court, that the roofers would pay respondent one hundred percent of its claimed damages, sans interest and fees, provided we affirm the district court’s denial of summary judgment.  If we conclude that the claims are time barred, respondents will take nothing.  If we conclude that any claim is not time barred, respondents will be paid in full. 

Both sides do not want a trial, and are comfortable submitting to a legal ruling on the applicability of the two-year-statute of limitations on improvements to real property.  In fact, the damages of $135,000 have previously been agreed upon and we do not even have to reach that issue.  Nor to we have to reach causation or negligence.  The only issue before this court concerns the two-year statute. 

            The majority relies on Wiita in reaching its conclusion that Minnesota Statute section 541.051 is inapplicable because this case is not a classic “improvement to real property” case.  Minn. Stat. § 541.051 (2002).  I find the opposite; this case does fall under an improvement to real property.  In O’Connor, the court found that an unfinished stairway was determined to constitute an improvement to real property within the meaning of section 541.051.  O’Connor v. M.A. Mortenson Co., 424 N.W.2d 92, 94-95 (Minn. App. 1998), review denied (Minn. July 28, 1988).  Likewise, this court held in Fiveland that excavation, as part of the process of building an attached garage and basement, also constitutes an improvement to real property under the statute.  Fiveland v. Bollig & Sons, Inc., 436 N.W.2d 478, 480-81 (Minn. App. 1989), review denied (Minn. Apr. 24, 1989).

            Respondent concedes the new roof is a permanent improvement, but claims a temporary dam is not a part of the new roof.  I find O’Connor and Fiveland analogous to the present case, and persuasive.  Like O’Connor and Fiveland, you do not separate each nail pounded and each cement block laid, and then argue what is and what is not an improvement to real property.  I conclude that the temporary dam needed to prevent water damage between taking off the old roof and putting on the new roof was part of this permanent improvement.  

            The district court, on summary judgment, did not find it was a permanent improvement.  The court found too many material fact issues at stake for a disposition of summary judgment.  That may well be the case and I agree with the district court.  But, the two parties say to do it by summary judgment from the appellant bench.  We will abide.  I find that, under the statute, an improvement to real property, and thus, the claim for damages is time barred.