Day Masonry v. INDEPENDENT SCHOOL DIST. 347

• Decision Date: 15 April 2010
• Docket Number: No. A08-929.,A08-929.
• Citation: 781 N.W.2d 321
• Parties: DAY MASONRY, Appellant, v. INDEPENDENT SCHOOL DISTRICT 347, Respondent, Commercial Roofing, Inc., Appellant, GenFlex Roofing Systems, LLP, Appellant, Lovering-Johnson Construction, Appellant.
• Court: Minnesota Supreme Court

781 N.W.2d 321

DAY MASONRY, Appellant, v. INDEPENDENT SCHOOL DISTRICT 347, Respondent Commercial Roofing, Inc., Appellant GenFlex Roofing Systems, LLP, Appellant Lovering-Johnson Construction, Appellant.

No. A08-929.

Supreme Court of Minnesota.

April 15, 2010.

William A. Moeller, Blethen, Gage & Krause, PLLP, Mankato, MN, for appellant Day Masonry.

Amy E. Mace, Christian R. Shafer, Ratwik, Roszak & Maloney, PA, Minneapolis, MN, for respondent Independent School District 347.

William M. Drinane, Timothy S. Poeschl, Hanson, Lulic, & Krall, LLC, Minneapolis, MN; and Chad McKenney, Donohue, McKenney, & Bergquist, Ltd., Maple Grove, MN, for appellant Commercial Roofing, Inc.

Michael S. Kreidler, Louise A. Behrendt, Stich, Angell, Kreidler & Dodge, P.A., Minneapolis, MN, for appellant GenFlex Roofing Systems, LLP.

Mark S. Brown, Timothy J. Carrigan, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, MN, for appellant Lovering-Johnson Construction.

OPINION

GILDEA, Justice.

This action arises from alleged defects in the construction of Willmar High School, which opened in 1994. In 2006, respondent Independent School District 347 (School District) commenced an arbitration proceeding against appellants, Lovering-Johnson Construction (Lovering-Johnson), Commercial Roofing, Inc. (Commercial Roofing), and GenFlex Roofing Systems, LLP (GenFlex), which were contractors or suppliers on the project. The School District asserted claims based on express written warranties and other nonwarranty claims. Lovering-Johnson joined appellant Day Masonry to the arbitration proceeding because Day Masonry was the subcontractor that performed masonry work on behalf of Lovering-Johnson.¹

The Contractors sought to have the arbitration proceeding dismissed, arguing that it was untimely. The district court agreed with the Contractors and dismissed the claims based on the statute of limitations. On appeal, the court of appeals affirmed as to the non-warranty claims, but reversed as to the warranty claims. Because we conclude that the statute of limitations bars the non-warranty claims but not the warranty claims, we affirm in part. But because we conclude that the Contractors were not required to file a notice of review in order to preserve their statute-of-repose defense for appeal, we remand the warranty claims to the court of appeals for consideration of the statute-of-repose defense.

In January 1993, the School District entered into construction contracts with Lovering-Johnson and Commercial Roofing for the construction of a new high school. Lovering-Johnson was the general contractor for masonry work, and Lovering-Johnson subcontracted the masonry work to Day Masonry. Commercial Roofing installed the roofing systems, including the waterproof membrane, and GenFlex manufactured the membrane for the roof. GenFlex provided two warranties to the School District, a Full Roofing System Warranty and a Limited Membrane Only Warranty. The Full Roofing System Warranty provides that during the period May 1, 1994, through May 1, 2004, GenFlex "will repair any leak" in the roofing system. The Limited Membrane Only Warranty provides that during the period May 1, 2004 through May 1, 2014, the roofing membrane "will not deteriorate to the point of causing leaks through the membrane." The School District's contracts with both Lovering-Johnson and Commercial Roofing also contained express warranties that provide "that all Work will be of good quality, free from faults and defects and in conformance with the Contract Documents."

The new Willmar High School was substantially complete by September 1, 1994. But almost as soon as the high school opened, the building began experiencing numerous leaks. Several custodians testified in their depositions as to the extent and ongoing nature of the leakage problems. According to deposition testimony, there were at least six specific areas in the building that experienced frequent leaks.

The record also shows the School District's efforts to address the water problem at the high school. For example, in November 1996, the then head custodian at the high school wrote a letter to GenFlex informing the company of leaks in the roof. And, as detailed in two invoices from May 23, 2002, and October 30, 2002, the School District hired West Central Roofing to repair leaks in the roof on at least two occasions.

In 2004, the School District hired Waters Edge Architectural Group, Inc., to perform an assessment of the condition of the buildings in the district. In September 2004, on Waters Edge Architectural's recommendation, the School District hired Inspec, an independent forensic engineering and testing firm, to do a thorough investigation of the causes of the roof leaks at the high school. Inspec issued two reports detailing the nature and cause of the roof leaks and recommending extensive repairs to the exterior walls and the perimeter of the roof. The recommended repairs totaled about two million dollars.

Following receipt of the first Inspec report, the School District sent letters, dated December 13, 2004, to both Lovering-Johnson and Commercial, enclosing a copy of the Inspec report and informing them of the potential warranty claims. On August 12, 2005, the School District sent notice to GenFlex of issues with the roof membrane and its intention to make a claim under the GenFlex warranties.

On March 13, 2006, the School District submitted a demand for arbitration pursuant to its contracts with Lovering-Johnson and Commercial Roofing and the warranties therein, and the GenFlex warranties. The contracts with Lovering-Johnson and Commercial Roofing incorporate the American Institute of Architects' General Conditions of the Contract for Construction and contain an arbitration provision that provides that "all claims, disputes and other matters in question between the Contractor and the Owner arising out of or relating to the Contract Documents or the breach thereof ... shall be decided by arbitration." The arbitration clause goes on to stipulate that "the demand for arbitration... in no event shall ... be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations."

After Lovering-Johnson joined Day Masonry in the arbitration proceeding, Day Masonry filed an action in district court seeking to stay the arbitration. Day Masonry, joined by the other contractors, argued that Minn.Stat. § 541.051 (2006) barred all the School District's claims— both the express warranty claims and the non-warranty claims—and moved for summary judgment on the grounds that these claims were time-barred.² The district court made extensive findings of fact and found the School District's claims untimely under section 541.051, concluding that the statute of limitations had run on the School District's claims.³

The School District appealed, and the court of appeals affirmed in part and reversed in part. Day Masonry v. Indep. Sch. Dist. 347, 2009 WL 1182053 (Minn. App. May 5, 2009). The court of appeals concluded that the district court did not err in holding that the School District's non-warranty claims were barred by the statute of limitations because the record supports the district court's determination that the School District, through its agents, knew of an actionable injury more than two years before the School District's demand for arbitration. Id. at *4. But the court of appeals reversed the district court's determination that the School District's breach-of-warranty claims are also barred by the statute of limitations. Specifically, the court of appeals concluded that the district court applied the wrong legal standard as to when the breach-of-warranty claims accrued. Id. at *5. The court of appeals concluded that the record does not support the district court's finding that the School District should have known before March 13, 2004, that the Contractors would not honor their warranties and thus, the breach-of-warranty claims are not barred by the two-year statute of limitations. See id. at *5; Minn. Stat. § 541.051, subd. 4. The court of appeals concluded that the earliest the School District knew or should have known of the Contractors' unwillingness or inability to fulfill their warranties was after December 13, 2004, when the School District sent the first Inspec report to Lovering-Johnson and Commercial Roofing. Day Masonry, 2009 WL 1182053, at *5.

The court of appeals did not consider the Contractors' alternative argument that, if the warranty claims accrued in December 2004, the claims would still be time-barred under the statute of repose in section 541.051. Because the Contractors did not file a notice of review relating to the statute-of-repose defense, the court held that the Contractors waived their argument that the warranty claims were barred by the statute-of-repose. Day Masonry, 2009 WL 1182053, at *5; see Minn. R. Civ.App. P. 106 (2009).⁴ The court therefore held that the School District could proceed with arbitration of its warranty claims against Lovering-Johnson, Commercial Roofing, and GenFlex. See Day Masonry, 2009 WL 1182053, at *5.

The Contractors filed a petition for review on the accrual of warranty claims, and the School District filed a request for conditional cross-review on the accrual of non-warranty claims. We granted review on both issues.

I.

This case comes to us after the district court granted the Contractors' motion for summary judgment. We apply a de novo standard of review to a grant of summary judgment. Zip Sort, Inc. v. Comm'r of Revenue, 567 N.W.2d 34, 37 (Minn.1997). Because the district court granted the Contractors' summary judgment motion against the School District, we view the evidence in the light most favorable to the School District. Kratzer v. Welsh Co., LLC, 771 N.W.2d 14, 18 (Minn.2009). The judgment will be affirmed,...