Arden Hills North Homes Ass'n v. Pemtom, Inc., C9-91-686

• Decision Date: 24 September 1991
• Docket Number: No. C9-91-686,C9-91-686
• Citation: 475 N.W.2d 495
• Parties: ARDEN HILLS NORTH HOMES ASSOCIATION, on Behalf of its various members, Respondent, v. PEMTOM, INC., Appellant.
• Court: Minnesota Court of Appeals

Page 495

475 N.W.2d 495

ARDEN HILLS NORTH HOMES ASSOCIATION, on Behalf of its various members, Respondent, v. PEMTOM, INC., Appellant.

No. C9-91-686.

Court of Appeals of Minnesota.

Sept. 24, 1991.

Review Granted Dec. 23, 1991.

Syllabus by the Court

1. An improvement must be both defective and unsafe for the limitation of Minn.Stat. § 541.051, subd. 1 (1990), to apply.

2. Economic loss damages arising from negligent construction are recoverable in tort, unless the action involves a commercial transaction governed by the UCC.

3. An owner's negligence claim against a contractor/developer for failure to use due care in the performance of his undertaking is actionable as a matter of law.

4. Failure to object to jury instructions and raise specific arguments regarding special interrogatories at trial do not constitute grounds for reversal.

5. Subsequent purchasers with notice of defects are not entitled to recovery in owners' action against developer.

Thomas Laughlin, Michael Cohen, Nilva & Frisch, P.A., St. Paul, for respondent.

John M. LeFevre, Jr., Robert A. Alsop, Holmes & Graven, Ch., Minneapolis, for appellant.

Considered and decided by DAVIES, P.J., and PARKER and THOREEN, ^* JJ.

OPINION

PARKER, Judge.

The Arden Hills North Homes Association sued developer Pemtom, Inc., on August 14, 1985, claiming that siding prematurely deteriorated due to Pemtom's negligent construction.

Several months before trial, the trial judge told the parties he believed Minn.Stat. § 541.051, the limitations statute applicable to defects arising from improvements to real property, required the condition of the improvement to be both defective and unsafe if it were to apply. Because the association had not contended the defective siding created an unsafe condition, the court would not submit the limitations issue to the jury.

The jury found that Pemtom was entirely negligent, that the life expectancy of the siding was 26.2 years, and that the date on which prospective buyers knew or should have known of the defect was May 15, 1984.

Pemtom moved for judgment notwithstanding the verdict on grounds that the association's action was barred by Minn.Stat. § 541.051, subd. 1. In the alternative, Pemtom sought to reduce the association's damage award, arguing that subsequent buyers should not recover because they bought their townhomes when they knew or should have known of the defects. The association moved to strike the finding on notice by subsequent purchasers. It requested judgment of $396,464.64, which represented total damages of all the homeowners. The trial court refused to strike the finding and denied recovery to purchasers who bought their homes after May 15, 1984.

On appeal Pemtom argues that the association's action is time-barred by Minn.Stat. § 541.051, subd. 1, and its negligence claim is not actionable as a matter of law.

The association filed a notice of review, challenging the trial court's refusal to allow recovery by subsequent purchasers. We affirm.

FACTS

Pemtom, Inc., a real estate development company, constructed and sold the Arden Hills North Townhomes between 1975 and 1977. The Arden Hills North Homes Association owns the townhomes' common properties and is responsible for maintaining the siding. The individual unit owners own the siding which prematurely deteriorated.

In February 1983 the association's management company began a study to determine the reserves necessary to replace major building components. In June 1983, after some repairs were completed, the management company reported that the siding problems could not be remedied by ordinary maintenance; that they affected only appearance, however, and caused no structural problems or unsafe conditions.

In spring 1984 the association's president met with representatives of Pemtom to discuss the siding problems. The next year, the association hired an expert to determine the cause of the problems. He discovered that Pemtom had used unprimed siding on the homes, which acted as a wick to soak up water, thereby causing its deterioration. The expert concluded that the problems were due to Pemtom's poor choice of materials, insufficient attention to details, failure to prime the siding, and failure to caulk the vertical butt joints.

ISSUES

1. Does Minn.Stat. § 541.051 require that the condition of an improvement to real estate be both defective and unsafe before it applies?

2. Is a claim for purely economic loss damages arising from negligent construction actionable as a matter of law?

3. Did Pemtom breach a legally recognized duty of care outside its contractual duty to the association?

4. Did the trial court err by submitting to the jury a special interrogatory question sounding in assumption of the risk?

5. Did the trial court err in barring from recovery subsequent purchasers with notice?

DISCUSSION

I

Interpretation of a statute or rule is a question of law, and the reviewing court need not defer to the trial court's interpretation. Driscoll v. Driscoll, 414 N.W.2d 441, 445 (Minn.App.1984).

Minn.Stat. § 541.051, subd. 1 (1988), ¹ reads, in part:

Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of the injury, shall be brought against any person performing or furnishing the design planning, supervision, materials, or observations of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery thereof, nor, in any event shall such a cause of action accrue more than ten years after substantial completion of the construction.

Pemtom challenges the trial court's interpretation that the condition of an improvement must be both defective and unsafe before Minn.Stat. § 541.051 applies. Pemtom contends this interpretation implies that the improvement must result in personal injury. According to Pemtom, "unsafe" means "free from damage." A condition should be deemed "unsafe," it argues, if it threatens to cause injury or harm to either property or person. Because the negligent construction resulted in physical deterioration of the siding, the court should have found these townhomes "unsafe" and applied Minn.Stat. § 541.051, subd. 1.

Pemtom agrees that both "defective" and "unsafe" are required under the statute. It argues that the damages arose from an improvement that was both defective and unsafe. Pemtom's definition of "unsafe" ("free from damage") is, we believe, already embodied in the word "defective." "Defective" and "unsafe" are clearly distinguishable words, and both must be given effect. The case of Fiveland v. Bollig & Sons, Inc., 436 N.W.2d 478 (Minn.App.1989), pet. for rev. denied (Minn. Apr. 24, 1989), illustrates this point. There, the contractor dug a foundation but failed to erect a barricade or signs. The injured party claimed that Minn.Stat. § 541.051, subd. 1, did not bar his action brought more than two years after injury, because the excavation was unsafe but not defective. The court disagreed; the improvement was held defective as well as unsafe. Fiveland, 436 N.W.2d at 480. Although the court did not address the "unsafe" requirement, it clearly thought both criteria were necessary.

We take our definition of "unsafe" from Black's Law Dictionary (5th ed.1979). "Unsafe" means "dangerous, not secure." Id. at 1380. In the context of this statute, a common danger to which it refers is that threatening persons and property other than the improvement itself, as, for example, when a building might fall onto another building.

The trial court in this case relied on Sherbrook Co. v. E & H Earth Movers, Inc., 419 N.W.2d 818, 819 (Minn.App.1988), pet. for rev. denied (Minn. Apr. 20, 1988), for its interpretation. The Sherbrook court stated:

Our Supreme Court has applied the statute only to claims involving an injury caused by a defective and unsafe condition in an improvement. See Wittmer v. Ruegemer, 419 N.W.2d 493 (Minn.1988) (flooding caused by defective septic system); Frederickson v. Alton M. Johnson Co., 402 N.W.2d 794 (Minn.1987) (explosion caused by defective switchboard); Bulau v. Hector Plumbing & Heating Co., 402 N.W.2d 528 (Minn.1987) (fire caused by defective fireplace); Ocel v. City of Eagan, 402 N.W.2d 531 (Minn.1987) (flooding caused by defective sewage system); Lovgren v. Peoples Electric Co., 380 N.W.2d 791 (Minn.1986) (electric shock caused by defective transformer vault); Calder v. City of Crystal, 318 N.W.2d 838 (Minn.1982) (flooding caused by defective drainage system); Capitol Supply Co. v. City of St. Paul, 316 N.W.2d 554 (Minn.1982) (flooding caused by defective sewage system); Pacific Indemnity Co. v. Thompson-Yeager, Inc., 260 N.W.2d 548 (Minn.1977) (fire caused by defective furnace).

The reason cases seem to arise only in tort actions would seem to be that the unsafe condition gives rise to the lawsuit.

Id.

The Sherbrook court held that a suit against the excavator for improperly grading the property was not governed by Minn.Stat. § 541.051. The court reasoned that the land had not been rendered unsafe and the claim was not based on an injury similar to those in the cited cases. Therefore, Minn.Stat. § 541.051 did not bar the claim for breach of contract based on improper site preparation. The claim was based solely on a defective improvement, not on injury arising from an unsafe condition. Id. at 819.

Pemtom claims that Greenbrier Village Condo. Ass'n v. Keller Investment, Inc., 409 N.W.2d 519 (Minn.App.1987), controls this case, not Sherbrook. Greenbrier is inapposite. In Greenbrier the question was whether the "defective and unsafe" language applied to claims based on defective workmanship in the improvement...