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Vlahos v. R&I Construction of Bloomington

April 01, 2004

DEAN P. VLAHOS, ET AL., APPELLANTS,
v.
R&I CONSTRUCTION OF BLOOMINGTON, INC., F/K/A ROBERT WAADE & ASSOCIATES, INC., ET AL., RESPONDENTS,
JOHN DOE, ET AL., DEFENDANTS,
AND R&I CONSTRUCTION OF BLOOMINGTON, INC., F/K/A ROBERT WAADE & ASSOCIATES, INC., ET AL., THIRD-PARTY PLAINTIFFS, RESPONDENTS,
v.
QUALITY INSULATION, INC., THIRD-PARTY DEFENDANT, RESPONDENT,
INTEX INSULATING CO., INC., THIRD-PARTY DEFENDANT,
KLEVE HEATING & AIR CONDITIONING, INC., THIRD-PARTY DEFENDANT, RESPONDENT,
TAPPE CONSTRUCTION CO., THIRD-PARTY DEFENDANT, RESPONDENT,
DONNELLY BROTHERS CONSTRUCTION COMPANY, INC., THIRD-PARTY DEFENDANT, RESPONDENT,
COLLINS ELECTRICAL CONSTRUCTION CO., THIRD-PARTY DEFENDANT, RESPONDENT,
WEATHER SHIELD MFG., INC., THIRD-PARTY DEFENDANT.



SYLLABUS BY THE COURT

1. The statute of limitations, Minn. Stat. § 541.051, subd. 4 (2002), applicable to the statutory new home warranty provided by Minn. Stat. § 327A.02, subd. 1(c) (1990), 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.

2. Subject to the specifically enumerated exclusions and exceptions provided in Minn. Stat. § 327A.03 (2002), the definition of "major construction defect" in the statutory new home warranty extends to actual damage to load-bearing portions of the dwelling occurring after the completion of construction.

Reversed and remanded.

The opinion of the court was delivered by: Anderson, Russell A., Justice.

Took no part, Gilbert, J.

Heard, considered and decided by the court en banc.

OPINION

In this case, we consider when the statute of limitations begins to run on a home owner's claim that the builder breached the 10-year statutory new home warranty against "major construction defects" provided by Minn. Stat. § 327A.02, subd. 1(c) (1990).*fn1 We hold that the applicable statute of limitations, Minn. Stat. § 541.051, subd. 4 (2002), 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. We also consider whether the definition of "major construction defect" in the statutory new home warranty extends to actual damage to load-bearing portions of the dwelling occurring after the completion of construction. We hold that it does, subject to the specifically enumerated exclusions and exceptions provided in Minn. Stat. § 327A.03 (2002). Concluding that the homeowner's claim was barred by the statute of limitations and failed to allege major construction defects, the district court granted summary judgment to the builder and the court of appeals affirmed. We reverse and remand.

In 1999, Dean and Michelle Vlahos (Vlahoses) purchased a home from Roger and Carol Rovick (Rovicks), which had been constructed in 1990 by respondent R&I Construction of Bloomington, Inc., f/k/a Robert Waade & Associates, Inc. (R&I). When the Vlahoses subsequently discovered water damage to the home and R&I refused to repair any of the damage, the Vlahoses commenced suit against R&I.

R&I entered into a contract with the Rovicks in June 1990 to construct a luxury home on Lake Minnetonka. In 1991, the home was substantially completed and a certificate of occupancy was issued. The Rovicks moved in immediately and occupied the home continuously until 1999. Between 1992 and 1999, the Rovicks experienced repeated water and moisture-related problems with the home.

In August 1999, the Vlahoses entered into a purchase agreement with the Rovicks for the purchase of the home. The purchase agreement contained a "Complete House Inspection" contingency entitling the Vlahoses to inspect the property and cancel the transaction if the inspection revealed unsatisfactory conditions. The Rovicks provided the Vlahoses with a "Seller's Property Disclosure Statement" which disclosed roof, wall and ceiling damage caused by water and identified areas of water seepage, leakage, corrosion, and mold. The Rovicks also informed potential buyers that "some windows may need replacement."

Prior to closing, the Vlahoses hired a building inspector to inspect the home. The inspector prepared a report which detailed extensive water damage to the home, including areas of water seepage, leakage, corrosion, and mold. After negotiating a $20,000 credit to repair and replace some windows, the Vlahoses closed the transaction in January 2000, paying $5,175,000 for the home. During an extensive remodeling project undertaken in April 2000, the Vlahoses discovered significant water damage to the home. The Vlahoses claim that much of the water damage was discovered behind the walls and involved "decay of interior floor trusses, ceiling trusses and other load-bearing supports throughout the [r]esidence." The Vlahoses deny any awareness of the extent of the damage to the home prior to the remodeling. The Rovicks claim that the problems of which they were aware regarding water penetration were isolated, not significant, and had been fixed prior to the sale to the Vlahoses.

Beginning in May 2000, the Vlahoses provided both oral and written notice of the problems and their claim to R&I and afforded R&I the opportunity to repair and/or pay for the repair of the damage to the home. Thereafter, R&I and its insurers inspected the home as the damage was being discovered. R&I refused, however, to repair and/or pay for any of the damage. The Vlahoses subsequently spent $3,800,000 to remodel the home, of which $1,118,000 was attributed to the repair of the water damage.

The Vlahoses initiated this lawsuit against R&I in April 2001, asserting claims for breach of the residential 10-year statutory warranty provided by Minn. Stat. § 327A.02, subd. 1(c), negligence, and false and deceptive trade practices under Minn. Stat. § 325D.44 (2002).*fn2 R&I denied liability to the Vlahoses and asserted third-party claims seeking contribution and indemnity against numerous ...


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