Leno v. K & L Homes Inc.
| Decision Date | 02 September 2011 |
| Docket Number | No. 20100347.,20100347. |
| Citation | 803 N.W.2d 543,2011 ND 171 |
| Parties | Neal A. LENO and Susan A. Leno, Plaintiffs and Appelleesv.K & L HOMES, INC., a North Dakota Corporation, Defendant and Appellant. |
| Court | North Dakota Supreme Court |
OPINION TEXT STARTS HERE
Paul R. Sanderson (argued) and Kara J. Johnson (appeared), Bismarck, ND, for plaintiffs and appellees.Chris A. Edison (argued), Bismarck, ND, for defendant and appellant.KAPSNER, Justice.
[¶ 1] K & L Homes appealed the district court judgment based upon a jury verdict in favor of Neal A. Leno and Susan A. Leno (“the Lenos”). On appeal, K & L Homes argued the district court erred by deciding K & L Homes had not sufficiently raised the defense of fault by the Lenos in its answer, the court erred by refusing to instruct the jury on comparative fault, the court erred by denying K & L Homes' request for inspection and not allowing a defendant to testify on his observations during a jury viewing, and the court erred by ruling K & L Homes had not disclaimed any implied warranties as a matter of law. We affirm.
[¶ 2] The Lenos purchased a newly-constructed house from K & L Homes. The Lenos alleged they noticed cracks, unevenness, and shifting due to improper construction not long after purchasing the house from K & L Homes. Initially, the Lenos claimed K & L Homes was negligent, breached the parties' contract, and breached implied warranties. The Lenos claimed the parties' contract implied warranties that the house would be built according to the applicable codes, that it would fit its purpose as a residence, and that it would be constructed according to engineering standards and in a workmanlike condition. K & L Homes denied the Lenos' allegations and responded by claiming the Lenos were at fault for the damage to the house. The Lenos subsequently dropped their negligence claim and proceeded with the case on the breach of contract and breach of implied warranties claims. K & L Homes requested the jury be instructed on comparative fault, but the district court denied the proposed comparative fault instruction. The district court decided K & L Homes had not adequately pled fault, and comparative fault did not apply to Lenos' cause of action. The district court also found, as a matter of law, that K & L Homes had not disclaimed any implied warranties in a Homeowners' Guide given to the Lenos at the closing on the house.
[¶ 3] Before trial, K & L Homes made a “request for entry for inspection,” requesting that two witnesses be allowed to inspect the house. The district court noted the deadline for discovery had passed and denied the request. The district court also refused to allow Kelly Moldenhauer, the owner of K & L Homes and a witness, to testify about what he observed during the jury's viewing of the house.
[¶ 4] The jury found K & L Homes had breached the contract or implied warranty and awarded the Lenos damages. K & L Homes appealed.
[¶ 5] K & L Homes argued the district court erred in deciding K & L Homes had not sufficiently raised the defense of fault in its answer to the Lenos' complaint and erred in refusing to instruct the jury on comparative fault. K & L Homes pled in response to the Lenos' negligence claims: “Defendant asserts that the plaintiffs are guilty of comparative fault and that such fault is greater than any negligence or fault of the defendant, which negligence or fault are specifically denied.” The Lenos argued fault and comparative fault were irrelevant to their breach of implied warranties claim, and the court properly denied K & L Homes' fault arguments and comparative fault jury instructions.
[¶ 6] The Lenos dropped their claim that K & L Homes was negligent, but proceeded with their claims that K & L Homes breached the contract and implied warranties. In support of their breach of contract claim, the Lenos alleged:
The parties entered a contract which provided that the defendant would provide a home constructed in a workmanlike manner which did not have defects and which would have a value equal to what the plaintiffs paid for the house.
The defendant has breached its contract with the plaintiffs by performing in a non-workmanlike manner, which has resulted in a defective house which has substantially less value than was contracted for by the plaintiff.
In support of their breach of warranties claim, the Lenos alleged:
[I]mplicit in the parties' contract were warranties that the house had been built according to local building codes and laws, that the house was fit for its particular purpose as a residence, that the house was constructed according to sound engineering standards, and that the house was constructed in a workmanlike manner.
Defendant has breached all of these expressed and implied warranties and has instead delivered to the plaintiffs a defective home.
[¶ 7] K & L Homes did not assert a counterclaim under which evidence of fault would have independent significance.
[¶ 8] At the final pretrial conference, the district court said it would not allow K & L Homes to argue the Lenos were at fault for the damage to their house, and the court would not instruct the jury on comparative fault. The court ruled this was a contract case, and instead of arguing fault, K & L Homes should argue it did not commit a breach. The issue on appeal is whether fault and comparative fault were relevant to the cause of action.
[¶ 9] K & L Homes asserts the provisions of N.D.C.C. ch. 32–03.2 apply to this action, requiring the district court to allow the jury to allocate fault between the parties to determine recovery. Specifically, K & L Homes states:
B. The District Court erred by failing to instruct the jury on comparative fault as requested by Appellant K & L Homes, Inc.
1. The Lenos' alleged breach of warranty, which is specifically defined as “fault” under N.D.C.C. § 32–03.2–01, requiring the Court give the requested comparative fault instructions and apportion fault on the special verdict form.
2. The Lenos' claim for breach of the warranty of workmanlike construction is a tort claim masquerading as a contract claim and should be subject to apportionment of fault under N.D.C.C. § 32–03.2–02.
Resolution of this issue requires a review of the development of the doctrine of implied warranty of fitness for the purpose in construction contracts and of modified comparative fault.
[¶ 10] Since 1973, North Dakota law has recognized an implied warranty of fitness for the purpose in construction contracts. Dobler v. Malloy, 214 N.W.2d 510, 516 (N.D.1973) (citing Robertson Lumber Co. v. Stephen Farmers Coop. Elevator Co., 274 Minn. 17, 143 N.W.2d 622, 625–26 (1966)); see also Air Heaters, Inc. v. Johnson Electric, Inc., 258 N.W.2d 649, 653 (N.D.1977). This Court has recognized the implied warranty of fitness for the purpose in construction contracts where:
(1) the contractor holds himself out, expressly or by implication, as competent to undertake the contract; and the owner (2) has no particular expertise in the kind of work contemplated; (3) furnishes no plans, designs, specifications, details, or blueprints; and (4) tacitly or specifically indicates his reliance on the experience and skill of the contractor, after making known to him the specific purposes for which the building is intended.
Dobler, at 516. The existence of an implied warranty of fitness for the purpose in a construction contract, and the breach of the warranty, are findings of fact. Air Heaters, Inc., at 654. The record supports the existence of the implied warranty of fitness for the purpose as a residence. The parties did not dispute the existence of an implied warranty for fitness as a residence at the district court, nor is the existence of an implied warranty disputed on appeal.
[¶ 11] K & L Homes argued fault was relevant to the Lenos' breach of implied warranties claim and requested to argue evidence on the Lenos' fault at trial. K & L Homes cited the statutory definition of fault, which includes
acts or omissions that are in any measure negligent or reckless toward the person or property of the actor or others, or that subject a person to tort liability or dram shop liability. The term also includes strict liability for product defect, breach of warranty, negligence or assumption of risk, misuse of a product for which the defendant otherwise would be liable, and failure to exercise reasonable care to avoid an injury or to mitigate damages....
N.D.C.C. § 32–03.2–01 (emphasis added). K & L Homes argued the statutory definition of fault included breach of warranty language, and the breach of warranty language applied to the warranty of fitness for the purpose in construction contracts. The modified comparative fault statute provides that fault includes “product liability, including product liability involving negligence or strict liability or breach of warranty for product defect.” N.D.C.C. § 32–03.2–02 (emphasis added).
[¶ 12] The issues raised include the interpretation and application of the definition of fault and the modified comparative fault statute, and the “breach of warranty” language included in the statutes. “The interpretation and application of a statute is a question of law, which is fully reviewable on appeal.” Locken v. Locken, 2011 ND 90, ¶ 9, 797 N.W.2d 301. In interpreting a statute, this Court's primary objective is to determine the legislature's intent. Id. We initially examine the statutory language. Id. Words used in a statute are to be understood in their ordinary sense, unless a contrary intention plainly appears. N.D.C.C. § 1–02–02. “The letter of a statute cannot be disregarded under the pretext of pursuing its spirit when the language of the statute is clear and unambiguous.” Locken, at ¶ 9 (citing N.D.C.C. § 1–02–05). “Statutes are construed as a whole and are harmonized to give meaning to related provisions.” Id. (citing N.D.C.C. § 1–02–07). K & L Homes argued the broader definition of fault in N.D.C.C. § 32–03.2–01, referring to “breach of warranty,” negated...
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