Calloway v. City of Reno, 25628

• Citation: 939 P.2d 1020, 113 Nev. 564
• Case Date: May 22, 1997
• Court: Supreme Court of Nevada

Page 1020

939 P.2d 1020 113 Nev. 564 Charles CALLOWAY and Marlene Iacometti, on Behalf of
Themselves and Other Property Owners of Huffaker
Hills Units 3 and 4 Homeowners'
Association, Appellants,
v.
CITY OF RENO, P & H Construction Inc., Clarence Poehland,
John Carl Construction Company, Highland
Construction, Inc., and Offenhauser
Development Company, Respondents.
CITY OF RENO, Cross-Appellant,
v.
HIGHLAND CONSTRUCTION, INC., Offenhauser and Oetjen
Construction, Inc., Offenhauser Development Company, Sparks
Roofing and Siding Service, Inc., Charles Calloway and
Marlene Iacometti on Behalf of Themselves and Other Property
Owners of Huffaker Hills Units 3 and 4 Homeowners'
Association, Cross-Respondents. No. 25628. Supreme Court of Nevada. May 22, 1997.

Page 1022

Maddox & Saint-Aubin, Reno, for Charles Calloway, Marlene Iacometti, and other Property Owners of Huffaker Hills Units 3 and 4 Homeowners' Association.

Lemons, Grundy & Eisenberg, Reno, for City of Reno.

Beasley, Holden & Kern, Reno, for P & H Construction, Clarence Poehland, and John Carl Construction Company.

Erickson, Thorpe & Swainston, Ltd. and Thomas P. Beko, Reno, for Highland Construction, Inc. and Offenhauser and Oetjen Construction, Inc.

Haefner & Enzenberger, Reno, for Offenhauser Development Company.

Mortimer, Sourwine, Mousel & Sloane, Ltd., Reno, for Sparks Roofing and Siding Service, Inc.

Cecilia L. Rosenauer, Reno, for Amici Curiae Consulting Engineers Council of Nevada and Builders Association of Northern Nevada.

OPINION

PER CURIAM:

This appeal follows the complex construction defect litigation that arose out of alleged defects in the Huffaker Hills Townhouse Development in Reno. Charles Calloway and Marlene Iacometti are class representatives, representing the class of 164 townhouse owners in Huffaker Hills who brought the underlying lawsuit ("appellants").

Appellants asserted that their homes were built with defective framing that was responsible for extensive water damage from rain and snow. As a result, appellants sought recovery based upon warranty and tort theories. On October 30, 1989, appellants filed their original complaint. That complaint named Offenhauser Development Corporation, Highland Construction, Inc. (collectively referred to as "Developer and Contractor"), and Sparks Roofing and Siding Service, Inc., all Nevada corporations, as defendants. Pursuant to NRCP 10(a), the complaint also

Page 1023

named thirty fictitious individuals or entities as Doe defendants.

On October 15, 1991, appellants filed a third amended complaint that named the City of Reno ("the City") and various other subcontractors as defendants. The claim against the City was based upon negligent inspection of construction. Specifically, appellants alleged that the City approved the construction with actual knowledge of alleged defects.

On December 9, 1992, a fourth amended complaint was filed. That complaint named P & H Construction Inc. ("P & H"), Clarence Poehland ("Poehland"), and John Carl Construction Company ("Carl") as defendants (collectively referred to as "the Subcontractors"). The claims against the Subcontractors sounded in warranty and tort.

Appellants settled their claims against Developer and Contractor. As to the remaining defendants, the district court summarily dismissed sixty-five members of appellants' class based upon the statutes of repose. The district court summarily dismissed appellants' negligence and strict liability claims based upon the doctrine of pure economic loss.

In addition to the claims brought by appellants, defendants engaged in extensive third party litigation. The City cross-claimed against Developer and Contractor for indemnity and contribution. The district court summarily dismissed the City's cross-claim in conjunction with its approval of Developer and Contractor's settlement agreement with appellants.

In this appeal, appellants challenge the district court's interpretation and application of the statute of repose and the district court's use of the economic loss doctrine to preclude their negligence and strict liability claims. P & H and Poehland cross-appeal, challenging the district court's ruling regarding the relation back doctrine and its use with Doe defendants. Further, the City cross-appeals against Developer and Contractor, challenging the district court's dismissal of the City's cross-claim against them.

We conclude that the district court's interpretation and application of the statute of repose and the district court's use of the economic loss doctrine to preclude appellants' negligence and strict liability claims were erroneous. With respect to the Subcontractors' and the City's cross-appeals, we conclude that the district court's rulings were proper.

DISCUSSION

1. Statute of repose

Appellants filed their original complaint on October 30, 1989. In January 1993, the district court ruled that NRS 11.204 operated to bar all claims in the third amended complaint by homeowners whose certificates of occupancy were filed more than eight years before the filing of the original complaint. In February 1993, the district court used the Doe defendant pleading procedure to make the effective date on which the Subcontractors were named as defendants in this action the date of the original complaint. Then, in March 1993, the district court summarily dismissed the claims brought in the fourth amended complaint against the Subcontractors by the sixty-five plaintiffs whose homes were substantially completed before October 30, 1981.

No action may be brought more than eight years after substantial completion of construction against a person who provided construction services if the action is to recover damages for latent defects. NRS 11.204. This court reviewed the constitutionality of the current version of NRS 11.204 in Alsenz v. Twin Lakes Village, Inc., 108 Nev. 1117, 843 P.2d 834 (1992). This court stated that the running of a statute of repose is triggered not on the date of injury to a plaintiff, but on the date construction is substantially completed. Id. at 1120-23, 843 P.2d at 836-38. The Alsenz court then stated that NRS 11.204 could not be applied retroactively to bar claims involving construction that was substantially completed before the statute's enactment in 1983. Id.; see also Lotter v. Clark Co. Bd. of Commissioners, 106 Nev. 366, 793 P.2d 1320 (1990); Allstate Ins. Co. v. Furgerson, 104 Nev. 772, 766 P.2d 904 (1988).

On April 10, 1991, the legislature passed SB 105, expressing its clear intention that

Page 1024

NRS 11.204 be applied retroactively to limit actions arising out of construction completed before 1983. Alsenz, 108 Nev. at 1121 n. 1, 843 P.2d at 837 n. 1. However, we determined that SB 105 was unconstitutional because it did not provide a grace period within which to file an action that had accrued based upon the statute of limitation. Id. at 1121, 843 P.2d at 837; G and H Assoc. v. Hahn, 113 Nev. 265, 934 P.2d 229 (1997) (explaining distinction between statute of repose and statute of limitation).

In this case, the district court understood our holding in Alsenz, but attempted to predict whether the legislature would enact a grace period that would provide relief for the plaintiffs whose homes were completed before NRS 11.204 was enacted in 1983. The district court predicted that the legislature would not enact a grace period that would assist those plaintiffs, and then the district court summarily dismissed them from this action.

Our Alsenz decision clearly prohibits the use of SB 105 to apply NRS 11.204 retroactively because SB 105 did not provide a grace period for those with accrued rights to file actions to enforce those rights. At the time the district court summarily dismissed the actions brought by sixty-five homeowners based upon the statute of repose, the legislature had not yet provided a grace period. The district court was bound by our Alsenz decision and improperly varied from that mandate by attempting to predict what future actions the legislature might take. Such predictions were improper, and the district court's orders that summarily dismissed the actions brought by plaintiffs whose homes were completed before the enactment of NRS 11.204 in 1983 are hereby reversed. See McKay v. Board of Cty. Comm'r., 103 Nev. 490, 492, 746 P.2d 124, 125 (1987) (stating that it is not the business of the courts to fill legislative omissions).

2. Relation back doctrine

P & H and Poehland cross-appeal, arguing that the district court improperly applied the relation back doctrine in determining when appellants' action named P & H and Poehland as defendants. P & H and Poehland contend that appellants did not properly comply with NRCP 10(a) as described in Nurenberger Hercules-Werke v. Virostek, 107 Nev. 873, 822 P.2d 1100 (1991). Nurenberger explained that NRCP 10(a), the Doe defendant rule, should be applied liberally to allow plaintiffs to pursue redress from all wrongdoers. Id. at 878, 822 P.2d at 1103.

P & H and Poehland correctly point out that appellants sought to add them under the authority of NRCP 14(b), the rule governing third-party practice, not NRCP 10(a). However, appellants invoked NRCP 10(a) in their reply in support of the motion to add P & H and Poehland, and in a motion for reconsideration. Accordingly, we conclude that appellants properly asserted the authority of NRCP 10(a).

P & H and Poehland also argue that they were prejudiced because appellants did not satisfy the promptness requirement articulated in Nurenberger because appellants knew that Poehland was a potential defendant nearly two years before Poehland was named as a defendant. However, Poehland was deposed shortly after his involvement was made apparent, which put Poehland on notice that he could be named. Therefore, Poehland did not suffer prejudice. Accordingly, we hold that the district court properly ruled on this issue.

3. Negligence claim against the...