STATE OF MINNESOTA
IN COURT OF APPEALS
Donna Jane Murphy,
Hank's Specialties, Inc.,
Capital Services of Minnesota, Inc.,
d/b/a Gallery of Floors,
J. P. Stevens & Co., Inc., a foreign corporation,
Gulistan Carpet, Inc., f/k/a JPS Carpet Corp.,
a foreign corporation,
Para-Chem Southern, Inc., a foreign corporation,
E. I. du Pont de Nemours and Company,
a foreign corporation,
Filed July 28, 1998
Hennepin County District Court
File No. PI977800
Richard L. Carlson, Hunegs, Stone, Koenig, LeNeave & Kvas, P.A., 1650 International Centre, 900 Second Avenue South, Minneapolis, MN 55402 (for appellant)
William F. Davern, Andrea Reisbord, Cousineau, McGuire & Anderson, 600 Travelers Express Tower, 1550 Utica Avenue South, Minneapolis, MN 55416-5318 (for respondent Hank's Specialties, Inc.)
Ann Marie Hanrahan, Faegre & Benson, 2200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402-3901 (for respondent E. I. du Pont de Nemours and Company)
Peter C. Beckerman, Dorsey & Whitney, Pillsbury Center South, 220 South Sixth Street, Minneapolis, MN 55402 (for respondent Gulistan Carpet, Inc.)
David E. Rollwagen, Law Offices of Frederick E. Kaiser, 2600 Eagan Woods Drive, Suite 110, Eagan, MN 55121 (for respondent Capital Services of Minnesota, Inc.)
Andrea Carruthers, Kelly & Berens, 3720 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent Para-Chem Southern, Inc.)
Considered and decided by Peterson, Presiding Judge, Shumaker, Judge, and Schultz, Judge. [*]
Donna Jane Murphy appeals from the district court's grant of summary judgment in favor of respondents, claiming that the statute of limitations for injuries arising out of improvements to real property does not bar her claims. We affirm.
On April 9, 1997, Murphy brought the action against J. P. Stevens & Co., the alleged manufacturer of the carpet; E. I. du Pont de Nemours & Co., the alleged manufacturer of the nylon pile or nylon fiber contained in the carpet; Capital Services of Minnesota, d/b/a Gallery of Floors, the alleged installer of the carpet; Para-Chem Southern, Inc., the alleged manufacturer of "Hank's 219" adhesive; and Hank's Specialties, Inc., an alleged distributor of "Hank's 219" adhesive. Murphy filed an amended complaint naming as a defendant Gulistan Carpet, Inc, f/k/a JPS Carpet Corp., an alleged distributor of the carpet. Murphy pleaded theories of negligence, strict liability, and breach of warranty against each defendant.
On April 10, 1997, an investigator employed by Murphy's counsel went to the place of business of respondent Hank's Specialties to serve documents on the corporation. The investigator entered the front office area and spoke with a receptionist. There is a dispute regarding whether the investigator asked for the manager or for the person handling complaints. The receptionist, believing that the investigator had a customer complaint, called Richard Meissner to the front desk. Meissner was employed in Hank's customer service area. His duties included addressing customer complaints, correcting customer orders, and occasionally purchasing materials and taking phone orders. Meissner was not an officer of Hank's. There are factual disputes regarding the service; Meissner claims the papers were in a sealed envelope and that the investigator asked him if he could accept "service" for the company. Meissner thought the investigator meant a service delivery or certified mail. The investigator states that the summons and complaint were not in an envelope and that he did not ask Meissner to sign for the papers.
The district court granted summary judgment in favor of all defendants. The court also found that service of process was ineffective upon Hank's Specialties. This appeal followed.
I. Improvement to Real Property
The construction of a statute, including a statute of limitation, is a question of law fully reviewable by this court. Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn. 1985).
Generally, Minnesota law requires actions based on improvements to real property be brought within two years after discovery of the injury.
Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages * * * for bodily injury * * * arising out of the defective and unsafe condition of an improvement to real property, * * *, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury * * * .
Minn. Stat. § 541.051, subd. 1(a) (1996) (limitation of action for damages based on services or construction to improve real property).
Minnesota courts have defined an improvement to 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.
Kloster-Madsen, Inc. v. Tafi's, Inc., 303 Minn. 59, 63, 226 N.W.2d 603, 607 (1975) (quoting Webster's Third New International Dictionary 1138 (1971) and discussing improvement definition in context of mechanic's lien statute); Pacific Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 554 (Minn. 1977) (discussing improvement definition in context of Minn. Stat. § 541.051). A common sense approach must be used to determine what is an improvement to real property. Pacific Indem. Co., 260 N.W.2d at 554.
This definition of improvement has been found to include four components: (1) the permanent addition to or betterment of real property; (2) the enhancement of the property's capital value; (3) the expenditure of labor or money; and (4) making the property more useful or valuable, as distinguished from ordinary repairs. Sartori v. Harnischfeger Corp., 432 N.W.2d 448, 452 (Minn. 1988).
Applying the Sartori factors, we hold that the carpet was an improvement to real property because: (1) the carpet, glued to the floor, was a permanent addition and a betterment of the concrete floor beneath it; (2) the carpet increased the capital value of the clinic in comparison to bare concrete floors that existed when the previous carpet was ripped out; (3) installation of the carpet involved both the expenditure of labor and money; and (4) the carpet makes the clinic property more useful by creating a more comfortable environment for patients and employees.
Murphy argues that the replacement of the carpet was a repair rather than an improvement. Respondents contend that because Murphy seems to concede that the original carpet was an improvement, replacement of the carpet was a like "improvement." They also argue that replacement items have previously been held to be improvements. See Ford v. Emerson Elec. Co., 430 N.W.2d 198, 200 (Minn. App. 1988) (new water heater replacing defective water heater was improvement).
The first Minnesota case to address the distinction between an improvement and an ordinary repair was Hartford Fire Ins. Co. v. Westinghouse Elec. Corp., 450 N.W.2d 183, 186 (Minn. App. 1990), review denied (Minn. Mar. 22, 1990). In Hartford Fire, the court held that a permanently affixed power generator was an improvement to real property, but the replacement of rubber seals on the generator was "an ordinary repair merely restoring, not increasing, the value and utility of the generator improvement." Id.
Since Hartford, only three published opinions have addressed the repair issue. See Williams v. Tweed, 520 N.W.2d 515, 518 (Minn. App. 1994) (covering a septic tank hole was defective improvement, not repair, because value was added), review denied (Minn. Oct. 27, 1994); Horvath v. Liquid Controls Corp., 455 N.W.2d 60, 63 (Minn. App. 1990) (change in size of excess flow valve improvement, not repair, because there was evidence that original design did not work properly), review denied (Minn. July 13, 1990). Anderson v. City of Coon Rapids, 491 N.W.2d 917, 922 (Minn. App. 1992) (reports in planning stage prior to construction is not improvement or repair; no work yet undertaken) review denied (Minn. Jan. 15, 1993).
We hold that the carpet was an improvement and not a repair. To repair something means to fix something that exists, tending to maintain both the condition and the value of the item. An improvement is an original installation or a complete replacement of a preexisting item. When the carpet was completely removed, the installation of new carpet was an improvement, not a repair.
Murphy next argues that a 1990 amendment to Minn. Stat. § 541.051 specifically excludes the carpet from the two-year statute of limitations as "equipment or machinery." The two-year statute of limitations does not apply to "the manufacturer or supplier of any equipment or machinery installed upon real property." Murphy's argument that carpet is equipment or machinery does not stand up to any common sense interpretation of the statute. In addition, this argument was not made to the district court and should not be addressed on appeal. Thiele v. Stich, 425 N.W.2d 580, 582-83 (Minn. 1988) (appellate court will not consider matters not argued and decided in district court).
The district court did not err in determining that the statute of limitations under Minn. Stat. § 541.051 (1996) barred Murphy's claims arising out of the installation of carpet, an improvement to real property.
II. Service of Process
The determination of whether service of process was proper is a question of law. Amdahl v. Stonewall Ins. Co., 484 N.W.2d 811, 814 (Minn. App. 1992), review denied (Minn. July 16, 1992). Although there are factual disputes about the circumstances of the service, they are not sufficiently material to prevent a proper grant of summary judgment.
Minn. R. Civ. P. 4.03 provides that service of a summons upon a domestic or foreign corporation shall be effective with the delivery of a copy of the summons and complaint to "an officer or managing agent, or to any other agent authorized expressly or impliedly or designated by statute to receive service of summons * * *." Service of process in a manner not authorized by Rule 4 is ineffective. Tullis v. Federated Mut. Ins. Co., 570 N.W.2d 309, 311 (Minn. 1997). In addition, "actual notice of the lawsuit will not subject defendants to personal jurisdiction without substantial compliance with Rule 4.03." Id.
Murphy claims that the district court erred in finding that she ineffectively served process on Hank's Specialties. She contends that Meissner was a managing agent or had the implied authority to accept service of the summons and complaint.
[T]wo significant factors have evolved in determining whether a particular individual is a managing agent for service of process: (1) does the individual have the power to exercise independent judgment and discretion to promote the business of the corporation; or (2) is the individual's position of sufficient rank or character to make it reasonably certain the corporation would be apprised of the service.
In Tullis, the court found that a person who formerly held the position of executive director and who identified himself to the process server as the executive director was not a managing agent. The court held that the person's actual position at the time of service did not indicate that the "position conferred upon him the type of management duties and powers contemplated by Rule 4.03(c)." 570 N.W.2d at 312.
There are no facts indicating that Meissner's customer service position conferred upon him the type of management duties and powers contemplated by the rule. There is no evidence to suggest that Meissner was a managing agent of Hank's. Therefore, service of process on Meissner was ineffective because he did not have authority to accept service as a managing agent of Hank's.
Murphy also contends that Meissner had the implied authority to accept service of process. "Implied authority generally will be found where the `character of the agency is such as to render it fair, reasonable, and just to imply an authority on the part of the agent to receive service.'" Id. at 313.
Implied authority is actual authority, circumstantially proved * * * . Apparent or ostensible authority is not actual authority; rather it is authority which the principal holds the agent out as possessing or knowingly permits the agent to assume. Actual authority is what is required under Rule 4.03(c).
Tullis, 570 N.W.2d at 313 (citations omitted).
In this case, there is no evidence that Hank's held out Meissner as a person with actual authority to accept service of process. The district court properly found that Murphy had ineffectively served process on Hank's Specialties.
[*] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
 The respondents also cite to Citizens Sec. Mut. Ins. Co. v. General Elec. Corp., 394 N.W.2d 167, 170 (Minn. App. 1986), for the proposition that "wear items" can be improvements to property because electrical ballasts in Citizens, which respondents claim is a wear item, were found to be improvements to real property. But the issue of whether the item was a repair rather than an improvement was not addressed because the issue was improperly raised for the first time on appeal. Id. at 170 n.2.