Citizens Ins. Co. v. Scholz

• Decision Date: 08 November 2005
• Docket Number: Docket No. 254466.
• Citation: 709 N.W.2d 164,268 Mich. App. 659
• Parties: CITIZENS INSURANCE COMPANY, Plaintiff-Appellant, v. F.C. SCHOLZ, III, Bultsma Excavating, Inc., and Hoonhorst Concrete, Inc., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

709 N.W.2d 164

268 Mich. App. 659

CITIZENS INSURANCE COMPANY, Plaintiff-Appellant, v. F.C. SCHOLZ, III, Bultsma Excavating, Inc., and Hoonhorst Concrete, Inc., Defendants-Appellees.

Docket No. 254466.

Court of Appeals of Michigan.

Submitted September 6, 2005, at Detroit.

Decided November 8, 2005, at 9:15 a.m.

Released for Publication January 23, 2006.

Betz & Bloss, P.C. (by Ralph M. Reisinger), Grand Rapids, for Citizens Insurance Company.

Damon, Oosterhouse & Witte, LLP (by Charles E. Damon), Grand Rapids, for F.C. Scholz, III.

Worsfold Macfarlane McDonald, P.L.L.C. (by David M. Pierangeli), Grand Rapids, for Bultsma Excavating, Inc.

Straub, Seaman & Allen, P.C. (by Joseph R. Enslen and Mary Catherine Beach), Grandville, for Hoonhorst Concrete, Inc.

Before: BANDSTRA, P.J., and NEFF and DONOFRIO, JJ.

NEFF, J.

Plaintiff filed this action as subrogee of its insured, Zinger Sheet Metal, to recover damages sustained by Zinger when a building wall collapsed during a construction project undertaken by defendant contractors. Plaintiff appeals as of right an order of the trial court granting summary disposition for defendants pursuant to MCR 2.116(C)(7). The court ruled that plaintiff's claim was time-barred because it was governed by the three-year statute of limitations applicable to ordinary negligence actions, MCL 600.5805(10),¹ and not by the six-year statute of limitation for breach of contract claims, MCL 600.5807(8), or for an action against a contractor based on an improvement to real property, MCL 600.5839(1). We conclude that plaintiff's claim is governed by MCL 600.5839(1) and was, therefore, timely filed. We reverse the grant of summary disposition and remand for further proceedings.

I

In 1997, plaintiff's insured, Zinger Sheet Metal, retained defendant F.C. Scholz, III, as the construction manager for a project to build an addition to Zinger's main building. Defendants Bultsma Excavating, Inc.; and Hoonhorst Concrete, Inc., were hired as subcontractors for the project. On July 31, 1997, after the subcontractors dug below the foundation of the existing building while excavating for the addition's foundation, the adjoining wall of the existing building collapsed. Plaintiff paid $62,182.97 in insurance proceeds for damages related to the wall collapse.

Nearly six years later, on April 23, 2003, plaintiff filed a complaint seeking recovery from defendants. The trial court granted defendants' motion for summary disposition pursuant to MCR 2.116(C)(7) on the basis that plaintiff's claim was time-barred.

II

This Court reviews de novo a trial court's grant of summary disposition under MCR 2.116(C)(7). Maiden v. Rozwood, 461 Mich. 109, 118, 597 N.W.2d 817 (1999). Summary disposition is properly granted under MCR 2.116(C)(7) when an action is time-barred. Id. at 118, n. 3, 597 N.W.2d 817. Young v. Sellers, 254 Mich. App. 447, 449, 657 N.W.2d 555 (2002). "`[A]bsent disputed questions of fact, whether a cause of action is barred by a statute of limitations is a question of law that this Court also reviews de novo.'" Id. at 450, 657 N.W.2d 555 (citation omitted).

III

Plaintiff contends that, contrary to the trial court's conclusion, the statute of repose for actions against architects, engineers, and contractors, MCL 600.5839(1), provides the limitations period for this action. We agree.

MCL 600.5839(1) provides:

No person may maintain any action 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 as a result of such injury, against any state licensed architect or professional engineer performing or furnishing the design or supervision of construction of the improvement, or against any contractor making the improvement, more than 6 years after the time of occupancy of the completed improvement, use, or acceptance of the improvement, or 1 year after the defect is discovered or should have been discovered, provided that the defect constitutes the proximate cause of the injury or damage for which the action is brought and is the result of gross negligence on the part of the contractor or licensed architect or professional engineer. However, no such action shall be maintained more than 10 years after the time of occupancy of the completed improvement, use, or acceptance of the improvement.

Section 5839 was enacted in 1967 in response to changes in the law that eliminated privity of contract as a defense against suits by injured third parties and that increased the likelihood that architects and engineers involved in the design and construction of improvements to real property might be forced to defend against claims arising out of alleged defects in the improvements many years after completion. O'Brien v. Hazelet & Erdal, 410 Mich. 1, 14, 299 N.W.2d 336 (1980). As originally enacted, the statute protected only architects and engineers. Id. at 9, 14, 299 N.W.2d 336; Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc., 456 Mich. 511, 514, 573 N.W.2d 611 (1998). In 1985, the statute was amended to include claims against contractors within its coverage. Id. at 513-514, 573 N.W.2d 611; Ostroth v. Warren Regency, GP, LLC, 263 Mich.App. 1, 9, 687 N.W.2d 309 (2004), lv. gtd. 472 Mich. 898, 696 N.W.2d 708 (2005).²

MCL 600.5839(1) is both a statute of limitations and a statute of repose. Ostroth, supra at 9, 687 N.W.2d 309, citing O'Brien, supra. "For actions which accrue within six years from occupancy, use, or acceptance of the completed improvement, the statute prescribes the time within which such actions may be brought and thus acts as a statute of limitations. When more than six years from such time have elapsed before an injury is sustained, the statute prevents a cause of action from ever accruing."³ Id. at 15, 299 N.W.2d 336.

The trial court concluded that the general negligence statute of limitations, MCL 600.5805(8), rather than § 5839(1), governed plaintiff's claim under the analysis in Witherspoon v. Guilford, 203 Mich.App. 240, 511 N.W.2d 720 (1994). In Witherspoon, a panel of this Court held that § 5839 did not preclude application of a general limitations period in § 5805 when the cause of action has accrued and been brought within six years after the occupancy, use, or acceptance of the improvement. Witherspoon, supra at 246, 511 N.W.2d 720. The panel reasoned that although § 5839 was intended to protect architects, engineers, and contractors from stale claims, it was not intended to expand the general three-year period of viability for injury claims under § 5805 to a six-year period and, thus, breathe additional life into claims that otherwise would have expired under § 5805. Witherspoon, supra at 247, 511 N.W.2d 720.

However, in Ostroth,⁴ this Court recently observed that Witherspoon was inconsistent with other decisions of this Court that have held that the specific statute of limitations, § 5839(1), controls over arguably applicable general statutes of limitations. See, e.g., Michigan Millers Mut. Ins. Co. v. West Detroit Bldg. Co., Inc., 196 Mich.App. 367, 378, 494 N.W.2d 1 (1992); Traver Lakes Community Maintenance Ass'n v. Douglas Co., 224 Mich.App. 335, 339, 341, 568 N.W.2d 847 (1997). The Ostroth panel reviewed the apparent conflict in case law and concluded that Witherspoon was wrongly decided. Ostroth, supra at 13, 687 N.W.2d 309. The Ostroth panel held that MCL 600.5839(1) provided the applicable six-year period of limitations for "all negligence actions against architects, contractors, and engineers" involving improvement to real property. Ostroth, supra at 16, 687 N.W.2d 309. The decision in Ostroth therefore settles any question whether this action falls outside the reach of § 5839 merely because it may arguably be governed by a general statute of limitations. "[B]y enacting § 5839(1) and later § 5805(10), the Legislature knowingly and necessarily abrogated the applicability of the general statutes of limitations for professional negligence, § 5805(4), and ordinary negligence, § 5805(8)." Ostroth, supra at 14, 687 N.W.2d 309.

IV

Defendants nonetheless argue that § 5839(1) is inapplicable because the injury in this case did not arise "out of the defective and unsafe condition of an improvement to real property," pursuant to the express language of § 5839(1). We disagree.

Under MCL 600.5805(14) and MCL 600.5839(1), the six-year period of limitations at issue applies to actions based on an improvement to real property. The general statute of limitations, MCL 600.5805, provides:

The period of limitations for an action against a state licensed architect, professional engineer, land surveyor, or contractor based on an improvement to real property shall be as provided in section 5839. [MCL 600.5805(14) (emphasis added).]

MCL 600.5839(1) more specifically states:

No person may maintain any action 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 . . . against any contractor making the improvement, more than 6 years after the time of occupancy of the completed improvement, use, or acceptance of the improvement. . . . [Emphasis added.]

Defendants argue that the act of excavating is not a "defective and unsafe condition" nor does it constitute an "improvement" to real property, which defendants assert has been defined as a "permanent addition to or betterment of real property. . ." [citation and quotation marks deleted] or a "product, object, or some other tangible item that remains on the real property after the contractor completes his work," Pitsch v. ESE Michigan, Inc., 233 Mich.App. 578, 601, 593 N.W.2d 565 (1999); Travelers Ins. Co. v. Guardian Alarm Co. of Michigan, 231 Mich.App. 473, 478, 586 N.W.2d 760 (1998). However, case law apply...