Johnston v. Homes

• Decision Date: 08 July 2013
• Docket Number: No. DA 12–0405.,DA 12–0405.
• Citation: 370 Mont. 529,305 P.3d 781
• Court: Montana Supreme Court
• Parties: Greg JOHNSTON, Elvira Johnston, Elvira Johnston Trust, Plaintiffs, Appellants and Cross–Appellees, v. CENTENNIAL LOG HOMES & FURNISHINGS, INC., Randy Toavs, Josh Harmon, Defendants, Appellees and Cross–Appellants.

370 Mont. 529

305 P.3d 781

Greg JOHNSTON, Elvira Johnston, Elvira Johnston Trust, Plaintiffs, Appellants and Cross–Appellees,

v.CENTENNIAL LOG HOMES & FURNISHINGS, INC., Randy Toavs, Josh Harmon, Defendants, Appellees and Cross–Appellants.

No. DA 12–0405.

Supreme Court of Montana.

Submitted on Briefs March 6, 2013.

Decided July 8, 2013.

For Appellants: P. Bradford Condra; Milodragovich, Dale & Steinbrenner, P.C.; Missoula, Montana.

For Appellees: Todd A. Hammer, Angela K. Jacobs; Hammer, Hewitt, Jacobs & Quinn, PLLC; Kalispell, Montana.

Justice BETH BAKER delivered the Opinion of the Court.

[370 Mont. 530]¶ 1 Greg and Elvira Johnston and the Elvira Johnston Trust appeal an order of the Twentieth Judicial District Court, Lake County, granting summary judgment to Centennial Log Homes & Furnishings, Inc. (Centennial) on the Johnstons' claims for negligence, breach of warranty and violations of the Montana Consumer Protection Act and Unfair Trade Practices Act. We consider the following issues on appeal:

¶ 2 1. Whether the District Court erred in concluding as a matter of law that the Johnstons' claims are barred by the applicable statutes of limitations.

¶ 3 2. Whether the District Court erred in determining that the release executed by the Leonards is binding on the Johnstons.

¶ 4 3. Whether the District Court abused its discretion in granting the Johnstons' motion to dismiss Keeko Log Homes, Ltd. as a defendant.

¶ 5 We reverse in part and remand the case for further proceedings.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 6 In 2001, Robert and Sandy Leonard purchased property in Bigfork, Montana. That same year, the Leonards entered into contracts with Centennial for the sale of a log home kit and construction of a custom log home on the property. After completion of the home—a three story residence with a loft floor and daylight basement—the Leonards moved in. By grant deed dated July 1, 2002, the Leonards granted 36% of the interest in the property to the Johnstons, who are Sandy Leonard's parents.

¶ 7 In October or November, 2002, the Leonards observed that their wood floors had begun to “bubble,” heave and raise, and they discovered extensive mold underneath the flooring. The Leonards discussed these problems with the Johnstons and Greg Johnston suggested that the Leonards hire an attorney. In an e-mail to the Leonards, Greg Johnston stated, “since I own 34% [sic] of the house, I could have a lawyer friend write a letter also to instill into Centennial that we mean business.” The Leonards hired Peter Leander to represent them and began to meet with him. The Johnstons did not attend those meetings. On December 16, 2002, Leander wrote a letter to Centennial's counsel that provided a “non-inclusive” list of additional problems with the home, such as cracked tile grout in two bathrooms, a broken shower light, a missing soap dish, stairs that were not to code, and the splitting apart of the corner of the office wall. Sandy Leonard recalled during her May 6, 2011 deposition that she considered the items on this list to be “some minor things.”

¶ 8 On April 10, 2003, the Leonards executed a “General Release” in favor of Centennial, describing the Leonards' “casualty” as:

Defective construction of log home in Sunset Heights, Woods Bay, Lake County, Montana; mold infestation and eradication due to defective construction; bodily injury claims due to mold infestation.

The Leonards released Centennial from “any and all” claims for damages, “asserted or unasserted, known or unknown, foreseen or unforeseen, arising out of the described casualty” and, as consideration, Centennial paid $6,000 to the Leonards, extinguished the remaining $59,704.13 due on their construction contract, and released the construction lien on the property. The release covered “all claims for defective construction or warranty arising out of the construction of the premises described above.” The release also covered future damages associated with the Leonards' casualty:

Inasmuch as the damages and losses resulting from the events described herein may not be fully known and may be more numerous or more serious than it is now understood or expected, the Releasors agree, as further consideration of this agreement, that this Release applies to any and all injuries, damages and losses resulting from the casualty described herein, even though now unanticipated, unexpected and unknown, as well as any and all injuries, damages and losses which have already developed and which are now known or anticipated.

The Leonards, Centennial and all of Centennial's subcontractors were parties to the release. The Johnstons were not parties, though they held a 36% interest in the property at the time the release was signed.

¶ 9 On March 31, 2004, the Johnstons granted their 36% interest to the Elvira M. Johnston Trust (Johnston Trust). The following year, on April 5, 2005, the Leonards granted their 64% interest in the property to the Johnston Trust.

¶ 10 In 2004 and 2005, the Johnstons employed Innovative Builders to conduct routine maintenance of the log home. Innovative Builders provided a “punch-list” of repairs to be performed, which included leveling of the home, chinking and staining the exterior logs, repairing the exterior railing and stairway, repairing exterior rock around a post, and replacing a structure beam on the deck in front of the south garage. The Johnstons paid Innovative Builders approximately $50,000 to repair stairs, decks, and problems with settling of the logs.

¶ 11 The Leonards moved out in 2005 and the home was used as a rental. In 2007, James Johnson and his wife began renting the home. In the spring of 2008, the Johnsons observed that the logs within the home had begun to split in an unusual manner. Johnson, who had worked extensively in the construction and architectural design industries, documented the progression of each occurrence. He observed that “the main support for the roof above the loft was twisting due to the shrinking and splitting of the surrounding support members” and determined that intervention was needed.

¶ 12 In April 2008, Guy Clare of Rocky Mountain Design inspected the home due to the excessive log cracking and post and beam movement in the loft area. He noted:

... cracked and rotting handrails on the outside deck, and major exterior siding problems. The majority of the “cedar skirl” siding on the upper level of the home had begun to peel away from the wall from lack of proper fastening. The exterior stair posts had been set at ground level and moisture had begun to rot the lower section of each post.

Clare advised the Johnstons to hire a structural engineer “because of the severity of the log splitting and structural movement of the log roof beams located at the upper loft.”

¶ 13 John Thomas of A2Z Engineering performed site visits on May 7, 2008 and May 21, 2008 to evaluate the home's structural integrity and the impact of extensive checking on its structural performance. His report explained that “[l]og homes are inherently prone to maintenance, settlement, and checking issues. However, with proper construction techniques the impact of these issues can be greatly mitigated.” He outlined steps that generally are taken in the harvesting and drying of logs to mitigate checking—the splits in logs as they dry and shrink over time, which, Thomas described, “extend radially from the center of the log and widen as they approach the log's exterior”—and concluded that these techniques likely had not been employed in construction of this home. Thomas noted that, according to the homeowners and tenants, significant interior checking had not occurred until the spring of 2008. He also noted that, between his May 7, 2008 and May 21, 2008 visits, the checking had become “significantly more advanced.” He concluded that the logs had likely been sealed in a moist or “green” condition, which was consistent with delayed onset and rapid acceleration of the wood checking:

During my site visit I observed significant checking of the majority of beam and column logs in the residence. The fact that this checking has occurred 6 years after the construction of the home suggests to me that the logs were processed and sealed in a moist or “green” condition. Because the logs were heavily sealed it would take a much longer time for the log to lose enough moisture to initiate checking. However, once checking began the log would then have an avenue to rapidly lose moisture through the check and further drying would then proceed rapidly.... Homeowner testimony of the windows breaking/jamming and multiple large screw jack adjustments add to the likelihood that high moisture content material was used.

According to Thomas, there was no way to ascertain the moisture content of the logs if moisture samples were not taken at the time of construction. He discovered additional problems, including several connections along the ridge beam of the structure which were not code compliant, an intermediate valley support that appeared to push toward the ridge beam, creating potential for large roof deflections and failure of the roof under snow loads, and an inadequate header above the garage door, creating risk of significant structural collapse.

¶ 14 Based on Thomas's recommendations, Clare of Rocky Mountain Design estimated the total repair cost to be $125,000, but clarified that the estimate pertained only to the “current problems that can be seen as of this writing.” He noted again that there had been “significant changes” to the interior logs of the home since his first visit in April 2008.

[370 Mont. 534]¶ 15 In October 2008, A2Z Engineering conducted another structural evaluation, limited to the high glass gable wall facing the lake, the lower garage door header facing the lake, the main floor beam spanning into the header, and the ridge-splice support connection. The report revealed numerous areas of deficiency under the 1997 Uniform Building...