David Essling, 1217 W. 7th St., St. Paul, MN 55102 (for respondent Goudge)

Leo I. Brisbois, Stich, Angell, Kreidler, Brownson & Ballou, P.A., The Crossings, Ste. 120, 250 Second Ave. S., Minneapolis, MN 55401 (for respondent Lyman Lumber)

Owen Reed Humphreys, Kristine Nelson Fuge, Hebert, Welch & Humphreys, P.A., 20 N. Lake St., Ste. 301, Forest Lake, MN 55025 (for respondents Johnson)

Considered and decided by Shumaker, Presiding Judge, Crippen, Judge, and Klaphake, Judge.

KLAPHAKE, Judge

Appellants Steven and Joan Pickard and their children commenced this action alleging injuries caused by the design, craftsmanship, and construction of their home. The district court granted summary judgment to all respondents, who include Brian Iverson, Corbett Johnson, and Century 21-Forest Lake, the seller's real estate agents and agency (Century 21); Alfred Goudge, d/b/a Goudge Construction, the construction company that built the home (Goudge Construction); and Lyman Lumber, d/b/a Minnetonka Design, the company that created the home blueprints and plans (Lyman Lumber). Because appellants failed to identify facts that could provide a basis of recovery against respondents Century 21 and Lyman Lumber, we affirm as to them. We reverse the grant of summary judgment as to Goudge Construction because appellants have raised material facts regarding their claim against Goudge Construction, and the record fails to establish (1) a valid settlement and a release between appellants and Goudge Construction, (2) a statute of limitations bar on appellants' claims against Goudge Construction, or (3) a failure to prosecute the case.

"On an appeal from summary judgment, we must examine two questions, whether there are any genuine issues of material fact and whether the lower courts erred in their application of the law." Cummings v. Koehnen, 568 N.W.2d 418, 420 (Minn. 1997). "A reviewing court must view the evidence in the light most favorable to the party against whom summary judgment was granted." Vetter v. Security Continental Ins. Co., 567 N.W.2d 516, 520 (Minn. 1997).

In granting summary judgment to Goudge Construction, the district court concluded that Goudge Construction offered three defenses that precluded appellants' claims. Because these defenses either involve fact questions or are unsupported by the record, we reverse the district court's findings on these defenses.

Statute of Limitations

As a basis for granting summary judgment, the district court found that more than "two years had passed after the accrual of this cause of action before the action was commenced." See Minn. Stat. § 541.051 (1996) (two-year statute of limitations for claims based on construction to improve real property). The statute of limitations begins to run when the property owner discovers, or with reasonable diligence should have discovered, the injury caused by the defective condition of the property. 200 Levee Drive Assocs., Ltd. v. Bor-Son Bldg. Corp., 441 N.W.2d 560, 564 (Minn. App. 1989). If reasonable minds may differ on when an injury should have been discovered, the time of discovery is a fact question. Metropolitan Life Ins. Co. v. M.A. Mortenson Cos., 545 N.W.2d 394, 399 (Minn. App. 1996) (citation omitted), review denied (Minn. May 21, 1996).

The house closing occurred on May 28, 1991, and this action was commenced on July 21, 1993. Appellants' complaint does not allege a specific date when their injuries were discovered, although Joan Pickard was first hospitalized in May 1992 with respiratory problems. Because the defects were of the type that would not be readily apparent or ascertainable and that could accumulate over time, the date of injury is a fact question precluding summary judgment. Therefore, the district court erred in granting summary judgment on this basis.

Failure to Prosecute

The district court found that appellants had failed to prosecute their claim because, without justification, they failed to take any action in this matter for over three years. See Minn. R. Civ. P. 41.02(a) (court may dismiss action for failure to prosecute). The district court considers two factors in determining whether to dismiss for failure to prosecute: (1) whether the delay prejudiced the defendant and (2) whether the delay was "unreasonable and inexcusable." Scherer v. Hanson, 270 N.W.2d 23, 24 (Minn. 1978) (footnote omitted). Prejudice may not be presumed merely because of the delay, and prejudice is not evidenced by matters such as ordinary expenses and inconvenience of trial preparation, which can be redressed by less drastic sanctions. Firoved v. General Motors Corp., 277 Minn. 278, 283 152 N.W.2d. 364, 368 (1967); Ed H. Anderson Co. v. A.P.I, Inc., 411 N.W.2d 254, 256 (Minn. App. 1987), review denied (Minn. Oct. 30, 1987).

Neither the record nor the district court's findings demonstrate any prejudice to respondents, other than the time delay. Further, although the court found that appellants' change of counsel did not justify their failure to prosecute, the court made no finding regarding the validity of appellants' claim that the delay was due to their serious health problems. See Sherer, 270 N.W.2d at 25 (denial of motion to dismiss for failure to prosecute appropriate if delay attributable to appellant's counsel and not to plaintiff). In addition, although rule 41.02 does not require the district court to provide some formal warning before dismissing a case, such a warning would have been warranted here because the action was not filed until 1997 and the court granted summary judgment in February 1998, several months before its own discovery deadline. Finally, the three-year delay, while significant, is of less duration than the delays in other cases involving dismissals after an extended period of years. See, e.g., State v. St. Paul Fire & Marine Ins. Co., 434 N.W.2d 6, 9 (Minn. App. 1989) (almost seven-year dormancy period), review denied (Minn. Mar. 17, 1989); Copeland v. Bragge, 378 N.W.2d 35, 39 (Minn. App. 1985) (five-year dormancy period); Dvoracek v. Lovely, 366 N.W.2d 391, 394 (Minn. App. 1985) (almost eight-year dormancy period); Reichert v. Union Fidelity Life Ins. Co., 360 N.W.2d 664, 668 (Minn. App. 1985) (six and one-half year dormancy period). For these reasons, we conclude that the district court abused its discretion in granting summary judgment to respondents for appellants' failure to prosecute their claim. See Chahla v. City of St. Paul, 507 N.W.2d 29, 32 (Minn. App. 1993), review denied (Minn. Dec. 14, 1993) (trial court's decision on failure to prosecute discretionary and reversed only for abuse of discretion).

Settlement and Release

Finally, the district court found that appellants had "already released any potential claims against defendant Goudge through their claim against, settlement with, and release of defendant Goudge's warranty insurer." The release documents included in the record do not provide a sufficient factual basis to support this finding. The release between National Home Insurance Company (NHIC) and appellants is entitled, "WORKMANSHIP/SYSTEMS PARTIAL CASH RELEASE," and releases NHIC from liability and assigns to NHIC all claims appellants

now have or might have in the future arising out of the items listed below only.

Item 1b. of the Analysis of Defects written by Custard Insurance Adjusters dated February 24, 1993 with agreed costs from J. Benson Construction.

Because the record does not include the "Analysis of Defects," which would provide the underlying basis for appellants' claim against NHIC, it is impossible to determine whether the district court properly determined that the release included all of appellants' claims against Goudge Construction.

The record also includes a release between NHIC and Goudge Construction that releases Goudge Construction from any liability from and any and all claims against Goudge Construction, for the payment of $850. This document is unrelated to any release of claims between Goudge Construction and appellants. Because the burden was on Goudge Construction to prove its entitlement to summary judgment and because there are unresolved factual issues regarding any settlement and release between Goudge Construction and appellants, Goudge Construction is not entitled to summary judgment on this basis.

Affirmed in part, reversed in part, and remanded.