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Independent School District No. 775 v. Holm Brothers Plumbing and Heating

April 29, 2003

INDEPENDENT SCHOOL DISTRICT NO. 775, APPELLANT,
v.
HOLM BROTHERS PLUMBING AND HEATING, INC., RESPONDENT.



Swift County District Court File No. C90270

Considered and decided by Hudson, Presiding Judge, Kalitowski, Judge, and Minge, Judge.

SYLLABUS BY THE COURT

Because the parties' contract, which required arbitration to settle disputes and incorporated the Construction Industry Arbitration Rules of the American Arbitration Association, specifically adopted the statute of limitations for litigation claims, the limitations period for appellant's arbitration claim began to run once appellant discovered the injury, just as it would have had the action been brought in court.

The opinion of the court was delivered by: Kalitowski, Judge

Affirmed, Motion Denied

OPINION

Appellant Independent School District No. 775 challenges the district court's order staying arbitration, arguing that its demand for arbitration was timely because the limitations period established in the contract it signed with respondent Holm Brothers Plumbing and Heating, Inc., was not triggered when appellant discovered the injury, but rather when appellant knew both the specific cause of the injury and the responsible party.

FACTS

In 1993, appellant retained KKE Architects to develop plans and specifications for a new school building. KKE proposed installation of a geothermal heat pump system to heat and cool the building and developed plans and specifications for such a system. The plans and specifications were available to all bidders on the building project. Section 15510 of the plans called for the installation of balance valves for the geothermal heat pump system.

Respondent was the successful bidder for the installation of the pump system. Appellant and respondent entered into a standard form contract published by the American Institute of Architects (AIA) to perform the work set out in section 15510. That contract incorporated by reference the General Conditions of the Contract for Construction, which is a standard form contract published by the AIA. Paragraph 7.9.1 of the contract required that all disputes between the parties be resolved by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. And paragraph 7.9.2 stated that no demand for arbitration could be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations.

In 1994, respondent certified that it had completed the installation of the heat pumps. But in September 1995, problems began to appear. And between 1996 and 1998, Chappell Central, a heating, ventilating, and air conditioning contractor, was called on 12 times to make repairs to the heat pumps and heat exchangers. On December 9, 1999, Chappell informed the superintendent of the school district that multiple compressor/coils had failed and that they should not have failed in such a short amount of time.

On December 20, 1999, the superintendent hired GHP Systems to analyze the heat pumps and determine the specific cause of the failure of the compressor/coils and the responsible party. On January 4, 2000, Kris Jeppeson of GHP visually inspected the heat pumps and took a failed compressor/coil for further analysis.

On February 14, 2000, Jeppeson sent a letter to the superintendent explaining the results of the investigation. Jeppeson blamed the problems on the fact that the system did not have balancing valves installed. Jeppeson concluded that the responsible party was the contractor who performed the work in section 15510 of the bid specifications.

On December 28, 2001, appellant served a demand for arbitration on respondent. Pursuant to Minn. Stat. § 572.09(b), respondent brought a motion in the district court for an order to stay and dismiss the arbitration on the ground that the demand for arbitration was untimely. The district court granted respondent's motion and stayed the arbitration. The district court found that the school district had discovered an actionable injury by December 9, 1999, if not sooner, and that the two-year statute of limitations in Minn. Stat. § 541.051, subd. 1, began to run by that date. ...


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