Miller v. Lankow, A09–0244.

• Decision Date: 03 August 2011
• Docket Number: No. A09–0244.,A09–0244.
• Citation: 801 N.W.2d 120
• Parties: David J.T. MILLER, Appellant,v.Linda J. LANKOW, et al., Respondents,DCI, Inc., Defendant,Donnelly Brothers, Respondent,Total Service Company, Respondent,andLinda J. Lankow, et. al., Third–Party Plaintiffs, Respondents,v.Burnet Realty, Inc., d/b/a Coldwell Banker Burnet, et al., Third–Party Defendants, Respondents.
• Court: Minnesota Supreme Court

801 N.W.2d 120

David J.T. MILLER, Appellant,

v.Linda J. LANKOW, et al., Respondents,DCI, Inc., Defendant,Donnelly Brothers, Respondent,Total Service Company, Respondent,andLinda J. Lankow, et. al., Third–Party Plaintiffs, Respondents,

v.Burnet Realty, Inc., d/b/a Coldwell Banker Burnet, et al., Third–Party Defendants, Respondents.

No. A09–0244.

Supreme Court of Minnesota.

Aug. 3, 2011.

Syllabus by the Court

The duty of a custodial party to preserve evidence may be discharged when the custodial party has a legitimate need to destroy the evidence and gives the noncustodial party notice sufficient to enable the noncustodial party to protect itself against the loss of the evidence.

Patrick W. Michenfelder, Frederick M. Young, Gries & Lenhardt, P.L.L.P., St. Michael, MN, for appellant.Robert P. Christensen, Robert P. Christensen, P.A., St. Louis Park, MN; and Scott Wilson, Shorewood, MN, for respondents Linda J. Lankow, et al.Timothy W. Waldeck, Waldeck & Lind, P.A., Minneapolis, MN, for respondent Donnelly Brothers. Paul E.D. Darsow, Jonathan M. Zentner, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, MN, for respondent Total Service Company.William L. Davidson, Timothy J. O'Connor, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, for respondents Burnet Realty, Inc., et al.Sharon L. Van Dyck, Van Dyck Law Firm PLLC, St. Louis Park, MN; and Anne E. Workman, Robins, Kaplan, Miller & Ciresi, L.L.P., Minneapolis, MN, for amicus curiae Minnesota Association for Justice.

OPINION

ANDERSON, Paul H., Justice.

Appellant David Miller purchased a home owned by respondents Linda Lankow and Jim Betz, which home had been extensively remediated because of moisture intrusion damage. Respondents Donnelly Brothers and Total Service Company and defendant Diversified Contractors, Inc., did the remediation work on the home. After moving into the home, Miller discovered additional moisture intrusion damage. More than 18 months after notifying the respondents and the defendant of the damage, Miller began to repair the home. Three months later, Miller commenced this action against respondents and defendant to recover damages. The Wright County District Court excluded Miller's expert witness evidence as a sanction for the spoliation of evidence that resulted from Miller starting to make repairs to his home. The court then granted respondents' summary judgment motion on the basis that Miller could not make a prima facie case without the expert evidence. The court of appeals affirmed. We reverse.

Respondent Linda J. Lankow built a home in St. Michael, Minnesota, in 1992. Lankow's husband, respondent Jim Betz, moved into the home in 1999. In 2001 or 2002, Lankow discovered a problem with the stucco on the south wall of the home's garage. The stucco was lifting away from the wall, a problem that Lankow attributed to moisture intrusion. After discovering this problem, Lankow asked the original contractor to fix the wall.

In 2003, Lankow offered the home for sale, and, shortly after doing so, she entered into a purchase agreement. A home inspection conducted under the terms of the purchase agreement revealed fungal growth in a basement wall. When the potential buyers discovered this defect, they cancelled the purchase agreement. Lankow then hired Industrial Hygiene Services Corporation (IHSC) to test the home's interior drywall for fungal problems. IHSC's tests indicated that one area of the basement showed evidence of elevated moisture in the wall cavity. As a result of this report, Lankow hired three contractors to conduct repairs on the home's basement wall. Defendant Diversified Contractors, Inc. (DCI), was responsible for applying anti-fungal paint to the affected wood. Respondent Total Service Company (TSC) was responsible for investigating the extent of the moisture damage and repairing the home's wooden structures. Finally, because the repair of the internal structure would involve work on the outside walls, respondent Donnelly Brothers was hired to replace the stucco removed as a result of the repairs.

As work proceeded, it became clear that the moisture intrusion damage was more extensive than previously thought. As a result, Lankow asked IHSC to conduct further testing. IHSC returned to conduct this testing on July 28, 2003, and three days later submitted the results of its tests to Lankow. In its report, IHSC detailed several areas of the home that had heightened moisture levels. Based on IHSC's supplemental report, Lankow asked TSC to expand the scope of its investigation and repair. TSC agreed to investigate the area surrounding the moisture damaged areas until it was “comfortable” that it had identified and repaired the damage in those locations. TSC did identify and repair the damage, after which Donnelly Brothers repaired the stucco. Lankow also hired a landscape contractor, Bob Schroeder, to landscape the lawn in order to allow water to flow away from the home.

After the foregoing repairs were completed, Lankow again put her home on the market. In February 2004, she listed the home with Mark Geier, a real estate agent affiliated with Burnet Realty, Inc. On March 23, 2004, Lankow entered into a purchase agreement with appellant David Miller. At some point in the negotiations, Miller attended a showing of the home. At this showing, Miller learned about the moisture damage and Lankow's remediation work. Lankow also attached a disclosure statement to the purchase agreement that read as follows: “Seller became aware of a moisture intrusion/mold issue in spring of 2003. The affected areas were remediated by licensed professional contractors and engineers.” The disclosure also stated the following:

If you have a concern about water intrusion or the resulting mold/mildew/fungi growth, you may want to consider having the property inspected for moisture problems before entering into a purchase agreement or as a condition of your purchase agreement.

Attached to the disclosure statement were the IHSC reports, and invoices from DCI, TSC, Donnelly Brothers, and Bob Schroeder. Miller testified that he did not examine these documents until well after the closing. Miller also testified that his real estate agent at Burnet Realty, told him that Miller could have an inspection performed of the home at his own expense. Miller declined to conduct an independent inspection, saying that, because the home was repaired by professional contractors, he did not wish to spend extra money for the inspection. The closing of the home sale took place on May 21, 2004.

In 2005, Miller decided to sell the home, and entered into a purchase agreement with a prospective buyer. Along with the purchase agreement, Miller provided a statement that disclosed that the home's previous owner had experienced moisture problems. After receiving this information, the prospective buyer decided to investigate further, and requested a partial moisture inspection and report from Private Eye, Inc., (Private Eye) a home inspection firm. Private Eye's report indicated that the home still had significant moisture intrusion problems. After receiving this report, the prospective buyer decided not to purchase the home. Miller then contacted a friend who worked at a construction firm. Miller's friend came to the home and cut a hole in an exterior wall near the front entrance. When Miller examined the opening, he saw moisture on the inside of the wall and noticed that a board installed by TSC during Lankow's repairs was soft to the touch. Miller then had Private Eye complete the partial report that the prospective buyer had commissioned. The completed report was dated October 7, 2005.

On or about September 25, 2005, and before receiving Private Eye's completed report, Miller notified Donnelly, TSC, and DCI of his discovery of renewed moisture intrusion problems. On September 30, Donnelly and TSC representatives visited the home. During this visit, Miller showed the Donnelly and TSC representatives the hole in the wall, and they agreed that there was moisture in the wall. The contractors told Miller that they had only done limited repairs for Lankow, but they agreed that the area behind the hole was an area that they had repaired. Miller told the contractors that it would be necessary to have the problem fixed immediately because he did not want his children living with him in a mold-infested home. Miller asked the contractors what they could do for him. Mark Donnelly of Donnelly Brothers responded that he could give Miller a “fairly good price” for repairs, but no other suggestions or offers were made.

A few days after meeting with Miller, Donnelly and TSC met with Lankow and Betz to discuss the possibility of Miller bringing a “lawsuit” and the potential claims that he might assert against each of them. In his deposition, Jeff Agness of TSC stated:

The purpose of the meeting was to make us aware that there may be a lawsuit on this, and for the people that were involved in that to, you know, kind of take a look at what does that mean, why are we being sued, what are the issues here.

(Emphasis added.)

After meeting with the contractors, Miller hired attorney Michael G. Halvorson. On December 27, 2005, Halvorson sent letters to DCI, Donnelly Brothers, TCS, Lankow, and Betz. The contractors all received the same letter, in which Halvorson stated that he represented Miller in connection with construction problems Miller was having, and notified the contractors of potential construction defects in violation of Minn.Stat. ch. 327A (2008). Halvorson also stated that an inspection had revealed several instances of water infiltration and mold, and that the inspection report “discussed several items of work which was done inappropriately.” Finally, the letter to each contractor contained the following paragraph:

It is my hope that between your companies, the previous owner, and my client, we will be able to resolve this issue amicably and without...