Filed August 21, 2007.
Appeal from the District Court, Hennepin County, File No. 27-CV-04-011008.
David K. Nightingale, Sarah L. Krans, Marvin A. Liszt, Bernick Lifson, P.A., (for appellant).
Robyn N. Moschet, Cheryl Hood Langel, McCollum, Crowley, Moschet and Miller, Ltd., (for respondent).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006)
On appeal from a directed verdict and denial of a new trial, Dona Roitenberg argues that the district court erroneously held that a builder breaches the statutory new-home warranty provided by Minnesota Statutes, section 327A.02, subdivision 1(c), when it refuses or is unable to repair the home. She argues alternatively that, even if the court applied the correct legal standard, she established this element. Because the district court correctly interpreted the statute and Roitenberg did not present evidence that her builder refused or was unable to repair the alleged damage, we affirm.
In 1997 Dona Roitenberg purchased a home built in 1995 by Halley's Custom Homes, Inc. A presale home inspection revealed no significant problems. When Roitenberg attempted to sell the home in 2003, inspectors discovered water damage in several places. In early 2004 the potential buyer, James Segal, obtained bids to repair the home. Segal offered to purchase the home if Roitenberg would pay for the repairs, and Roitenberg agreed. In March 2004 Segal contracted with Ungerman Construction Company to repair the home. The sale of the home closed in April.
On May 5, 2004, Roitenberg served Halley's Custom Homes with a complaint alleging it had breached the statutory warranty against major construction defects. Halley's Custom Homes first learned of the alleged construction defects when Roitenberg served her complaint. Six days later Roitenberg sent the company a letter stating that Segal would begin repairs within 30 days. Halley's Custom Homes inspected the home on May 21. The next week Halley's Custom Homes wrote to Roitenberg that it would consider a proposal for repairs but needed more information to determine the scope of repair and the cause of the damage. It noted that Roitenberg had painted over moisture stains in the home, indicating that she knew about the damage earlier than revealed, and that the property appeared to have postconstruction landscaping that had changed the original grade of the land. Roitenberg did not reply. On June 17 counsel for Halley's Custom Homes again wrote to Roitenberg, noting that he had received no response to his May 28 letter and that he had received no expert reports from Roitenberg establishing the nature, extent, and cause of the damage. Testimony indicated that Ungerman Construction began repairs on Segal's home in late May or early June, although documents submitted to the court after trial indicated that work may have begun toward the end of June.
At the trial in December 2005, the district court granted Halley's Custom Homes' motion for a directed verdict, finding that Roitenberg failed to present evidence of the essential element that the builder had either refused or was unable to repair the alleged defects. The court denied Roitenberg's motion for a new trial. Roitenberg appeals, arguing that the district court applied the wrong legal standard, and, alternatively, that the court erred by finding she did not present sufficient evidence of a refusal or inability to repair.
Roitenberg challenges the district court's determination of when a builder breaches the statutory new-home warranty as provided in Minnesota Statutes, section 327A.02, and its directed verdict in favor of Halley's Custom Homes. The district court may direct a verdict when the evidence is insufficient as a matter of law to create a question of fact. Border State Bank of Greenbush v. Bagley Livestock Exch., Inc., 690 N.W.2d 326, 331 (Minn.App. 2004), review denied (Minn. Feb. 23, 2005). We review the evidence in the light most favorable to the nonmoving party to determine whether a material issue of fact exists. Id. Statutory interpretation, however, is a question of law, which we review de novo. Koes v. Advanced Design, Inc., 636 N.W.2d 352, 358 (Minn.App. 2001), review denied (Minn. Feb. 19, 2002).
In every sale of a new home, the builder must warrant to the buyer that, during the ten years from the warranty date, the home will be free of major construction defects caused by noncompliance with building standards. Minn. Stat. § 327A.02, subd. 1(c) (2002). The district court relied on Vlahos v. R I Construction of Bloomington, Inc., 676 N.W.2d 672 (Minn. 2004), and held that Roitenberg could not prove that Halley's Custom Homes had breached its statutory warranty without presenting evidence that the company had either refused to, or was unable to, repair the damages to her home.
Based on our review of the caselaw, we conclude that the district court applied the correct legal standard to Roitenberg's claim. In Vlahos, the supreme court addressed when the applicable statute of limitations begins to run on a claim alleging a breach of the warranty provided in section 327A.02, subdivision 1(c). The court held that it begins to run when "the homeowner discovers, or should have discovered, the builder's refusal or inability to ensure the home is free from major construction defects." Vlahos, 676 N.W.2d at 678. Roitenberg asserts that Vlahos is distinguishable because the issue before the court was when the statute-of-limitations period begins to run, not which elements constitute the cause of action. But the concepts are necessarily intertwined, and the court addressed the elements of the cause of action when addressing the statute of limitations. See Hermann v. McMenomy Severson, 590 N.W.2d 641, 643 (Minn. 1999) ("A cause of action accrues and the statute of limitations begins to run when the cause of action will survive a motion to dismiss for failure to state a claim upon which relief can be granted.")
In determining the event that triggers the running of the statute of limitations, the Vlahos court began with the language of section 541.051, subdivision 4, which provides that a claim under section 327A.02 must be brought "within two years of the discovery of the breach." Minn. Stat. § 541.051, subd. 4 (2002); Vlahos, 676 N.W.2d at 677. The court then focused on the nature of the warranty at issue to determine when the breach occurs. The court noted that "[a] warranty of future performance provides a guarantee that the product will perform in the future as promised" and focused on its decision in Church of the Nativity of Our Lord v. WatPro, Inc., 491 N.W.2d 1 (Minn. 1992), overruled on other grounds by Ly v. Nystrom, 615 N.W.2d 302, 314 n. 25 (Minn. 2000). WatPro addressed a roofing company's warranty that it would "maintain the [homeowner's roof] in a watertight condition at its own expense for a period of five years." WatPro, 491 N.W.2d at 3. The company later refused to repair the roof. Id. at 4. The court held that the breach occurred when the company was unable or unwilling to honor its warranty. Id. at 7. Although the "maintain" language of the warranty in WatPro is distinct from the "shall be free from" language in the section 327A.02 warranty, Vlahos nonetheless held that a statutory new-home warranty "explicitly extends to future performance." Vlahos, 676 N.W.2d at 678. The court then relied on WatPro to explain that when a warranty extends to future performance, "the cause of action accrues and the statute of limitations begins to run when the plaintiff discovers or should have discovered the defendant's refusal or inability to maintain the goods as warranted." Id. (quotation omitted). This definition also finds support in the nature and function of the warranty: the builder has not breached its warranty until the guaranty of performance has not been honored. And a builder fails to honor the warranty when it refuses or is unable to repair the damage and restore the home to the promised standard of quality.
Cases addressing warranties of future performance in other contexts have also held that the warranty is not breached until the warrantor refuses or is unable to honor the warranty. For example, in Anderson v. Crestliner, Inc., 564 N.W.2d 218, 220 (Minn.App. 1997), this court addressed a warranty that a boat would be free from manufacturing and workmanship defects for five years. We distinguished a warranty of future performance and a warranty for repair or replacement, noting that "the key distinction between these two kinds of warranties is that a repair or replacement warranty merely provides a remedy if the product becomes defective, while a warranty for future performance guarantees the performance of the product itself for a stated period of time." Anderson, 564 N.W.2d at 222. A party relying on a warranty of future performance "has no opportunity to discover the breach until the future performance has been tested." Id. We held that the warranty at issue promised the first purchaser that the boat would be free from defects for five years, and we relied on WatPro to hold that the retailer breached its warranty when it did not honor the warranty and told the appellants that it was unwilling to spend more money on the boat. Id. at 223.
Similarly, in Metropolitan Life Insurance Co. v. M.A. Mortenson Cos., 545 N.W.2d 394, 400-401 (Minn.App. 1996), review denied (Minn. May 21, 1996), this court interpreted a warranty in a contract for sale warranting windows for ten years. We held that the plaintiff failed to bring his claim within two years after the date the breach occurred, which was when the party notified the manufacturer of the problem and the manufacturer did not promise to repair or replace the windows. Id. at 401. Minnesota's statute addressing contracts for sale expressly provides that when the contract involves a warranty that extends to future performance, "the cause of action accrues when the breach is or should have been discovered." Minn. Stat. § 336.2-725(2) (2004); see also id. § 541.051, subd. 4 (stating that action under section 327A.02 must be brought "within two years of the discovery of the breach"). In applying this statute, the Eighth Circuit held that if the warranty at issue extended to future performance, the statute of limitations did not begin until the warrantor refused to or was unable to maintain the goods as warranted. Marvin Lumber Cedar Co. v. PPG Indus., Inc., 223 F.3d 873, 881-82 (8th Cir. 2000) (quoting WatPro and holding that, if warranty extended to future performance, statute of limitations did not begin to run when delivery was tendered but when defendant refused to or was unable to maintain the goods as warranted). Discovery of damage is not equivalent to discovery of a breach of warranty.
The legislature recently amended section 327A.02 to expressly require a homeowner to allow the builder to inspect and repair a known loss or damage. 2006 Minn. Laws ch. 202, § 6, at 110. Although the previous version of section 327A.02, which is applicable here, did not expressly require a party to allow the warrantor an opportunity to repair, the statute, through the applicable statute of limitations, necessarily assumes a legally recognizable moment when the breach occurs. And caselaw has held that a warranty for future performance is breached when the warrantor refuses to honor the warranty. Under either version of the statute, without notice and an opportunity to repair, the warrantor has no opportunity to honor the warranty.
Rejecting this interpretation, Roitenberg argues that a cause of action accrues instead when the homeowner discovers damage to the home. But we conclude that discovery of damage only triggers the statutory requirement to give notice to the builder. See Minn. Stat. § 327A.03(a) (2002) (excluding builder from liability if owner does not report loss or damage in writing within six months after discovering damage). The breach occurs when the builder fails to respond to this notice in a manner that honors the warranty.
Roitenberg contends alternatively that if her claim requires a builder's refusal or inability to repair, she satisfied this element because, even through the conclusion of the trial, Halley's Custom Homes never offered to repair her home. A party may satisfy the written-notice requirement of section 327A.03(a)by serving a detailed complaint and summons. Peterson v. Johnson, 773 N.W.2d 502, 504-05, (Minn.App. 2007). Roitenberg provided Halley's Custom Homes with a complaint stating only that she had uncovered "a pattern of water intrusion, seepage and mold resulting from faulty workmanship and structural deficiencies" and incurred more than $186,000 in damages. Although the amended statute specifies a time frame within which the builder must offer to repair, this deadline was not in effect during the events of this case. See Minn. Stat. § 327A.02, subd. 4 (2006). Correspondence between the parties established that the company acknowledged damage to the home following its inspection and that it intended to investigate further to determine the cause of the damage and whether it was responsible. The correspondence also indicates that Roitenberg did not respond to requests for information in a timely manner and that, despite the company's attempts to explore the matter, Segal began repairs. Segal contracted for the repairs almost seven weeks before the complaint was served and began repairs soon after. Even with no express deadline in the older, applicable version of section 327A.02, a company must offer to make repairs within a reasonable period. But Roitenberg's failure to engage Halley's Custom Homes in the offer-and-repair process prohibited Halley's Custom Homes from having a reasonable opportunity to meet its repair duties under the warranty. Additionally, because Roitenberg no longer owned the home, she could not have authorized Halley's Custom Homes to repair the home when she notified it of the damage. And she presented no evidence that Segal would have considered an offer by Halley's Custom Homes to repair the home. This is not surprising since Segal had already contracted with another company to make the repairs well before Roitenberg informed Halley's Custom Homes of any concerns.
Roitenberg also challenges the denial of her motion for a new trial. A new trial is appropriate when an error of law occurred or the court's decision is not supported by the evidence. Minn. R. Civ. P. 59.01 (f)?(g). Ordinarily, we review a district court's denial of a new trial for abuse of discretion. Stoebe v. Merastar Ins. Co., 554 N.W.2d 733, 735 (Minn. 1996). On issues of law, however, the district court's conclusions do not bind an appellate court, and we need not give deference to the district court's decision. Id. Because the district court applied the correct legal standard and Roitenberg did not present any evidence that Halley's Custom Homes had refused to or was unable to repair the home and honor its warranty, the court did not abuse its discretion by denying Roitenberg's motion for a new trial.