Nerco Minerals Co. v. Morrison Knudsen Corp.

• Court: Idaho Supreme Court
• Writing for the Court: KIDWELL, Justice.
• Citation: Nerco Minerals Co. v. Morrison Knudsen Corp., 140 Idaho 144, 90 P.3d 894 (Idaho 2004)
• Decision Date: 12 April 2004
• Docket Number: No. 29352.,29352.
• Parties: NERCO MINERALS COMPANY and Nerco Delamar Company, now doing business as Kinross Delamar Company, Plaintiffs-Appellants, v. MORRISON KNUDSEN CORPORATION, and Morrison Knudsen Engineers, Inc., Defendants-Respondents.

90 P.3d 894

140 Idaho 144

NERCO MINERALS COMPANY and Nerco Delamar Company, now doing business as Kinross Delamar Company, Plaintiffs-Appellants, v. MORRISON KNUDSEN CORPORATION, and Morrison Knudsen Engineers, Inc., Defendants-Respondents.

No. 29352.

Supreme Court of Idaho, Boise, January 2004 Term.

April 12, 2004.

Stoel Rives, LLP, Boise, for appellant, Nerco Minerals Co. Thomas A. Banducci argued.

Hawley, Troxell, Ennis & Hawley, Boise, for respondent, Morrison Knudsen Corp. Eugene A. Ritti argued.

KIDWELL, Justice.

This case involves professional malpractice, fraudulent concealment and fraudulent misrepresentation. Nerco Minerals Company and Nerco Delamar Company (collectively "Nerco") appeal from the district court's grant of summary judgment in favor of the defendant, Morrison Knudsen Corporation and Morrison Knudsen Engineers, Inc. (collectively "MK"), in an action by Nerco alleging, inter alia, breach of contract, fraudulent misrepresentation, and fraudulent concealment by MK. Summary judgment was granted on the basis that the actions were barred by statutes of limitations. The judgment of the district court is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND

In July and August of 1986, Nerco entered into negotiations with MK for development of a heap leach pad at a mine owned by Nerco. Heap leaching is a method used to salvage precious metals from low-grade ore. Development of the project was separated into four phases: Phase I—pad design and conceptual planning; Phase II—feasibility studies; Phase III—detailed engineering; and Phase IV—construction management.

On or about October 1, 1986, MK entered into a contract with Nerco to perform Phase I of the project. MK completed performance in December of 1986, and provided Nerco a report containing the conclusion that the heap leach pad was "acceptable and safe." The report did not suggest that the conclusion was based upon incomplete data. In December of 1986, MK contracted with Nerco to perform Phase II of the project. MK completed the feasibility studies and submitted a report to Nerco in February 1987. In both reports, MK divided the heap leach pad into three modules for construction and production purposes.

MK then offered to contract to perform Phases III and IV of the project. However, in April of 1987, Nerco awarded these contracts to Conveyer Engineering, Inc. ("Conveyer"). Conveyer contracted to construct the entire heap leach pad, adopting MK's methodology of dividing the pad into three modules. On April 29, 1987, MK provided Nerco with preliminary drawings and a preliminary diagram that MK had previously produced in connection with its work on Phases I and II. MK did not perform further work on the project.

Conveyer completed construction of the first module in November of 1987. In January 1990, while the second module was under construction, the first module of the heap leach pad showed signs of failure. Nerco retained the services of several outside engineering firms to investigate the cause of the pad failure and recommend further actions. Nerco's legal counsel received a report from one of these firms during July of 1990. While Nerco was investigating the pad failure, Nerco and MK entered into an agreement to toll the running of the applicable statutes of limitation. The agreement was effective from December 17, 1991, until November 24, 1993, for a total of twenty-three months and seven days.

On November 24, 1993, Nerco filed complaints against MK in both the United States District Court for the District of Idaho and the District Court for the Third Judicial District of the State of Idaho, in and for the County of Owyhee. In both cases, Nerco alleged breach of contract and breach of express and implied warranties, negligence/professional malpractice, negligence/duty to warn or disclose, and negligent misrepresentation. Nerco served MK with a summons and complaint for the federal action on November 24, 1993, but did not inform MK of the state action until September 14, 1995. On August 9, 1995, despite Nerco's failure to serve MK with the complaint in the state action within six months as required by Rule 4(a)(2), I.R.C.P., Judge Goff issued an order retaining the case for six months. On September 25, 1995, Nerco voluntarily dismissed the federal action due to lack of diversity jurisdiction.

On October 31, 1995, Nerco amended its state court complaint to include claims for fraudulent concealment and fraudulent misrepresentation. Nerco served MK with the amended complaint on the same day. MK thereafter filed a motion to transfer venue to Ada County or, in the alternative, to dismiss the action. On May 21, 1996, venue was transferred from Owyhee County to Ada County. Judge Goff's assignment to the case ended upon the transfer of the case to Ada County.

On August 6, 1996, Nerco filed a second Complaint in Ada County, alleging five claims for relief: breach of contract; negligence/professional malpractice; negligent misrepresentation; fraudulent concealment; and fraudulent misrepresentation. MK was served with the complaint on January 31, 1997.

On August 5, 1997, all of Nerco's claims against MK in the first state action (dated November 24, 1993) were dismissed due to Nerco's failure to serve the complaint within six months, as required by court rule. This Court affirmed in Nerco Minerals Co. v. Morrison Knudsen Corp., 132 Idaho 531, 976 P.2d 457 (1999).

On February 19, 1997, MK filed its Answer to Nerco's second Complaint, filed August 6, 1996, and on February 27, 2001, MK filed a Motion for Summary Judgment asking the district court to grant summary judgment in its favor as to all counts.

On November 20, 2001, the district court entered its Memorandum Opinion and Order on MK's Motion for Summary Judgment. With the exception of Nerco's claim based upon the theory of breach of contract, the district court granted MK's motion as to all claims by Nerco because they were barred by the statute of limitations.

On August 22, 2002, MK moved for a second summary judgment as to the remaining count. In the alternative, MK requested that the district court reconsider its previous ruling as to the interpretation and application of Idaho Code § 5-241(b), which resulted in the denial of MK's motion for Summary Judgment as to the contract claim.

On December 5, 2002, the district court granted MK's motion for summary judgment as to Nerco's sole remaining claim based on the theory of breach of contract. The district court concluded that the rule of law pronounced in Lapham v. Stewart, 137 Idaho 582, 51 P.3d 396 (2002), governed the lawsuit; and because Lapham controlled, it was not necessary to address MK's alternative argument regarding I.C. § 5-241(b). Nerco appeals to this Court.

II. STANDARD OF REVIEW

On appeal from the grant of a motion for summary judgment, this Court employs the same standard as used by the district court originally ruling on the motion. Griffin Const., Inc. v. City of Lewiston, 135 Idaho 181, 185, 16 P.3d 278, 282 (2000). Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). This Court construes all disputed facts liberally in favor of the non-moving party, and it draws all reasonable inferences in favor of the non-moving party. Eagle Water Co., Inc. v. Roundy Pole Fence Co., 134 Idaho 626, 628, 7 P.3d 1103, 1105 (2000).

The time when "a cause of action accrues may be a question of law or a question of fact, depending upon whether any disputed issues of material fact exist." Kimbrough v. Reed, 130 Idaho 512, 516, 943 P.2d 1232, 1236 (1997). Where there is no dispute over any issue of material fact regarding when the cause of action accrues, the question is one of law for determination by the court. Id. However, where there is conflicting evidence as to when the cause of action accrued, the issue is one of fact for the trier of fact. Id.

III. ANALYSIS

The District Court Did Not Improperly Grant Summary Judgment By Ruling That Nerco's Claim Was A Professional Malpractice Claim Rather Than A Contract Claim And Therefore Barred By The Statute Of Limitations

On a motion for summary judgment, if the evidence reveals no disputed issues of material fact, then only a question of law remains. Lapham v. Stewart, 137 Idaho 582, 585, 51 P.3d 396, 399 (2002). This Court exercises free review over questions of law. Id. Because the parties are not disputing when the cause of action accrued on this issue but, instead, whether the district court mischaracterized Nerco's claim as professional malpractice, there remains only a question of law. Reis v. Cox, 104 Idaho 434, 438, 660 P.2d 46, 50 (1982); See Andrea v. City of Coeur D'Alene, 132 Idaho 188, 189, 968 P.2d 1097, 1098 (1998).

The first analytical step is to classify Nerco's cause of action so the applicable statute of limitations can be used to determine whether the claim is time barred. Nerco argues the cause of action is contract and, therefore, the five-year statute of limitations applies. MK, argues that the cause of action was for professional malpractice and, therefore, the two-year statute of limitations applies, resulting in Nerco's claim being time barred.

Idaho Code § 5-219(4) defines "professional malpractice" as "wrongful acts or omissions in the performance of professional services by any person, firm, association, entity or corporation licensed to perform such services under the law of the state of Idaho." I.C. § 5-219(4). This includes an action "arising from breach of an implied warranty or implied covenant." I.C. § 5-219(4); Lapham v. Stewart, 137 Idaho 582, 588, 51 P.3d 396, ft. nt. 4 137 Idaho 582, 51 P.3d 396, 403 (2002).

In Lapham, this Court stated that the focus of a professional malpractice claim under I.C. § 5-219(4) is ...