Huron Center, Inc. v. Henry Carlson Co., 22219.

• Decision Date: 14 August 2002
• Docket Number: No. 22219.,22219.
• Citation: 650 N.W.2d 544,2002 SD 103
• Parties: HURON CENTER, INC., d/b/a Crossroads Hotel and Convention Center, Plaintiff and Appellant, v. HENRY CARLSON CO., Durrant Group, Inc., and Durrant Construction Management, Inc., Defendant and Appellee, and Durrant Group, Inc., and Durrant Construction Management, Inc., Defendant and Appellee, v. Zurbrigen Industries, Inc. (formerly Concrete Products Company), Third Party Defendant and Appellee.
• Court: South Dakota Supreme Court

650 N.W.2d 544

2002 SD 103

HURON CENTER, INC., d/b/a Crossroads Hotel and Convention Center, Plaintiff and Appellant, v. HENRY CARLSON CO., Durrant Group, Inc., and Durrant Construction Management, Inc., Defendant and Appellee, and Durrant Group, Inc., and Durrant Construction Management, Inc., Defendant and Appellee, v. Zurbrigen Industries, Inc. (formerly Concrete Products Company), Third Party Defendant and Appellee.

No. 22219.

Supreme Court of South Dakota.

Considered on Briefs on May 28, 2002.

Decided August 14, 2002.

Rodney Freeman, Jr., Jeff Burns of Churchill, Manolis, Freeman, Kludt & Shelton, Huron, for plaintiff and appellant.

William G. Beck of Woods, Fuller, Shultz and Smith, Sioux Falls, for defendant and appellee Henry Carlson.

Gary J. Pashby of Boyce, Murphy, McDowell and Greenfield, Sioux Falls, for defendant and appellee Durrant Group.

Michael L. Luce of Davenport, Evans, Hurwitz and Smith, Sioux Falls, for third party defendant and appellee Zubrigen.

MILLER, Acting Justice.

[¶ 1.] Huron Center, Inc., d/b/a Crossroads Hotel and Convention Center (Huron Center) sued Henry Carlson Co. and Durrant Group, Inc., for breach of contract as a result of a claimed defective design and the substandard construction of a hotel in Huron, South Dakota. Although the exact date is disputed, deterioration of the exterior panels began in the early 1990's. Huron Center, however, did not commence this action until April 1997. After four years of discovery, the defendants moved for summary judgment on the grounds that the six-year statute of limitations period had expired. The trial court granted the motion. We reverse and remand.

FACTS AND PROCEDURE

[¶ 2.] In 1985, Huron Center contracted with Durrant, an architectural firm, and Carlson, a general contractor, to build a hotel in Huron. Huron Center specified that the hotel would be built using pre-cast building panels manufactured by Concrete Products Company, n/k/a Zurbrigen Industries, Inc. Construction of the hotel was completed on May 1, 1987.

[¶ 3.] Prior to July 1990 (the exact date is unknown) Huron Center began having problems with Zurbrigen's pre-cast concrete panels. The panels gradually began to crack and discolor in various areas. Huron Center paid contractor Travis Dryvit to fix the problems by scraping away the crumbling concrete and replacing it with a styrofoam base, which was then covered with a finishing coat. In July 1990, when Steve Oetken replaced Richard Johnson as Huron Center's general manager, he noticed the exterior wall problems. In the spring of 1991,¹ Oetken contacted Dryvit to come make repairs. Dryvit fixed the exterior wall deterioration that had developed since his last repair job. While Dryvit has annually repaired the exterior panels since 1990, it was not until 1992 that he also began to inspect the interior walls.

[¶ 4.] In 1995, Huron Center began experiencing problems with the interior walls. Sheet rock on the walls of several rooms was deteriorating to the point that it would not hold the wall coverings. The walls were also retaining a significant amount of moisture. In the fall of 1995 or spring of 1996, Oetken wrote a letter to Carlson and Durrant explaining the problems, requesting advice as to why they were occurring, and asking who was responsible. Carlson sent an engineer to review the problems and Durrant sent Randy Hoscheid to perform some tests on the exterior panels. Hoscheid's testing revealed that the exterior panel design and construction were defective.

[¶ 5.] In April 1997, Huron Center sued Carlson and Durrant for breach of contract. Durrant brought a third party complaint against Dakota Engineering and Testing Co. and Zurbrigen. The trial court granted summary judgment in favor of Carlson, Durrant and Zurbrigen (collectively Defendants). Huron Center moved to vacate the grant of summary judgment, which motion was denied. Huron Center appeals, raising the following issue:

1. Whether the time of accrual of Huron Center's cause of action raises a genuine issue of material fact.

In this appeal, Defendants raise the following issue:

2. Whether Huron Center properly preserved the substantive issue for appeal.

For obvious reasons, we will address these issues in reverse order.

STANDARD OF REVIEW

[¶ 6.] This case involves the review of a trial court's grant of summary judgment. Given the standard set forth in SDCL 15-6-56(c):

[W]e must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied.

Wissink v. Van De Stroet, 1999 SD 92, ¶ 9, 598 N.W.2d 213, 215 (citations omitted).

ANALYSIS AND DECISION

[¶ 7.] 1. Whether Huron Center properly preserved the substantive issue for appeal.

[¶ 8.] Defendants claim this Court does not have jurisdiction because Huron Center has not properly preserved the substantive issue, i.e. when accrual of the cause of action occurred, for appeal. They allege the only dispute before the trial court was whether the ten-year statute of limitations or the six-year statute of limitations applied. We disagree.

[¶ 9.] In its letter brief opposing summary judgment, written to the trial court on September 21, 2001, Huron Center's counsel wrote:

I would alternatively advise that the determination as to when a cause of action accrues is a question of fact for a jury. Strassburg v. Citizens State Bank, 1998 SD 72, 581 N.W.2d 510. The Defendants cite Steve Oetken's testimony as to when the injury occurred. In reviewing the cited deposition testimony in Defendant's brief, Mr. Oetken mentions three different years in which he may have [first] contacted Travis Dryvit. Mr. Oetken's statements certainly are not conclusive as to when this cause of action accrued, the extent of any damage that may have occurred at that time, nor whether it is damage that was even included in this cause of action. The time this cause of action accrued is certainly in dispute and if necessary, should be determined by the trier of fact.

This letter clearly indicates the substantive issue was put squarely before the trial court prior to its summary judgment ruling. As a result, it has been properly preserved for appeal and this Court has jurisdiction to decide the matter.

[¶ 10.] 2. Whether the time of accrual of Huron Center's cause of action raises a genuine issue of material fact.

[¶ 11.] Both parties agree this action is governed by SDCL 15-2-13, which provides, in salient part:

Except where, in special cases, a different limitation is prescribed by statute, the following civil actions other than for the recovery of real property can be commenced only within six years after the cause of action shall have accrued:

(1) An action upon a contract, obligation, or liability, express or implied, excepting those mentioned in §§ 15-2-6 to 15-2-8, inclusive, and subdivisions 15-2-15(3) and (4); * * *

However, a claim that a cause of action is time-barred is an affirmative defense. Wolff v. Sec. of S.D. Game, Fish and Parks Dep't, 1996 SD 23, ¶ 14, 544 N.W.2d 531, 533-34 (holding filing outside the statutory period must be "established as a matter of uncontroverted fact."). Therefore, the burden is on Defendants to show that Huron Center's cause of action accrued more than six years before the April 1997 filing date.²Id. While the question of what constitutes accrual is one of law, the question of when accrual occurred is one of fact generally reserved for trial. See Wissink, 1999 SD 92 at ¶ 11, 598 N.W.2d at 215-16.

[¶ 12.] A cause of action accrues when "the plaintiff either has actual notice of a cause of action or is charged with notice." Strassburg v. Citizens State Bank, 1998 SD 72, ¶ 10, 581 N.W.2d 510, 514(citing SDCL 17-1-2, SDCL 17-1-3).³ Huron Center was not put on actual notice of Defendants' alleged breach until 1996 when Hoscheid's testing revealed the existence of architectural defects. Therefore, we must determine whether there is a genuine issue of material fact as to when Huron Center was put on constructive notice.

[¶ 13.] Construction of the hotel was completed on May 1, 1987. Dryvit was hired in 1990 to fix one or more deteriorating exterior panels. The extent of his repairs is unknown. Oetken became general manager of Huron Center in 1990, but did not contact Dryvit until sometime in 1991, when he first learned Dryvit had made previous repairs. Problems with the interior walls did not occur until 1995, again, the extent of which is unknown. As early as the fall of 1995, but possibly as late as 1996, Oetken attempted to contact Carlson and Durrant to determine why the deterioration problems had continued to occur. Carlson sent an engineer to look at the panels and Durrant sent Hoscheid to perform some tests.

[¶ 14.] Defendants argue that Huron Center's cause of action accrued before Oetken became manager in July 1992. They do not, however, indicate whether this was evidenced by the deterioration of the first panel or by its repair. They claim only that accrual occurred before the arrival of Oetken and therefore, the action is time-barred. Huron Center argues the repair of an exterior panel, without more, does not conclusively establish that it knew or should have known of Defendants' alleged breach. Huron Center maintains that, at the earliest, it was not aware of anything unusual until 1995, as evidenced by Oetken's attempts to contact Defendants for answers. Thus, the only undisputed date is that upon which the hotel was completed. The time of the first occurrence of damage, the extent of that damage,...