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Village Lofts At St. Anthony Falls Association v. Housing Partners III-Lofts, LLC

Supreme Court of Minnesota

January 15, 2020

Village Lofts at St. Anthony Falls Association, Respondent/Cross-Appellant,
v.
Housing Partners III-Lofts, LLC, and Kraus-Anderson Construction Company, Appellants/Cross-Respondents, Doody Mechanical, Inc., Kenneth Kendle, P.E., and M&E Engineering, Inc., Respondents, and Elness Swenson Graham Architects, Inc., Defendant.

          Court of Appeals Office of Appellate Courts

          Einar E. Hanson, Jonathan A. Edin, Nathaniel J. Weimer, Strobel & Hanson, P.A., Hudson, Wisconsin; and John D. Hagen, Jr., Minneapolis, Minnesota, for respondent/cross-appellant Village Lofts at St. Anthony Falls Association.

          Timothy P. Tobin, Brock P. Alton, Gislason & Hunter LLP, Minneapolis, Minnesota, for appellant/cross-respondent Housing Partners III-Lofts, LLC.

          Jonathon M. Zentner, Steven J. Erffmeyer, Jeffrey M. Markowitz, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, Minnesota, for appellant/cross-respondent Kraus-Anderson Construction Company.

          Kevin F. Gray, Matthew W. Moehrle, Rajkowski Hansmeier, Ltd., Saint Cloud, Minnesota, for respondent Kenneth Kendle, P.E.

          J. Scott Andresen, Kate L. Homolka, Bassford Remele, P.A., Minneapolis, Minnesota; and Mike Schechter, Associated General Contractors of Minnesota, Saint Paul, Minnesota for amicus curiae Associated General Contractors of Minnesota.

         SYLLABUS

         1. Under Minn. Stat. § 327A.01, subd. 8 (2018), the warranty date for a condominium building is the date on which the first buyer occupies or takes legal or equitable title to any unit in the building.

         2. A building or project is a separate improvement that triggers the repose period of Minn. Stat. § 541.051 (2018) when the building or project satisfies our definition of "improvement" set forth in Pacific Indemnity Co. v. Thompson-Yeager, Inc., 260 N.W.2d 548 (Minn. 1977), and its progeny, and is sufficiently complete so that the improvement may be turned over to the person who hired the construction entities to use it for the purpose for which it was intended.

         Affirmed in part and reversed in part.

          OPINION

          THISSEN, JUSTICE

         This case requires us to decide how the repose periods in Minn. Stat. § 541.051 (2018) apply to condominiums. First, we must determine how the statute of repose operates for claims of breach of the statutory warranties in Minnesota Statutes chapter 327A. See Minn. Stat. §§ 327A.01-.08 (2018). The central question we must answer is whether each unit within a condominium building has its own warranty date or whether a single warranty date applies to the entire condominium building. We conclude that a single warranty date applies to an entire condominium building.

         Second, we must consider how the period of repose in section 541.051 applies to claims arising out of a defective or unsafe condition resulting from construction of the condominium. Because the condominium development that is the subject of this case includes two buildings, the critical inquiry is whether the buildings constitute one single improvement or two separate improvements to real property. See Minn. Stat. § 541.051, subd. 1. We conclude that a building or project is a separate improvement that triggers the repose period of Minn. Stat. § 541.051 when the building or project satisfies our definition of "improvement" set forth in Pacific Indemnity Co. v. Thompson-Yeager, Inc., 260 N.W.2d 548 (Minn. 1977), and its progeny, and is sufficiently complete so that the improvement may be turned over to the person who hired the construction entities to use it for the purpose for which it was intended. Accordingly, under the circumstances of this case, we hold that the two buildings are separate improvements to real property for purposes of applying the repose period in section 541.051 to defective or unsafe-condition claims.

         FACTS

         Village Lofts at St. Anthony Falls is a condominium complex located in northeast Minneapolis. The condominium consists of Building A, at 100 2nd Street NE, and Building B, at 150 2nd Street NE. Appellant Housing Partners III-Lofts, LLC (Housing Partners) developed the project.

         In April 2001, Housing Partners retained appellant Kraus-Anderson Construction Company (Kraus-Anderson) as the general contractor for Building A. Defendant Elness Swenson Graham Architects, Inc. (ESG), and respondents Doody Mechanical, Inc. (Doody) and Kenneth S. Kendle, P.E. (Kendle), were subcontractors on the project. In September 2002, the City of Minneapolis issued a partial certificate of occupancy for Building A, including the base building and public spaces. On October 4, 2002, Housing Partners recorded a declaration under the Minnesota Common Interest Ownership Act (MCIOA), Minn. Stat. § 515B.2-101 (2018), creating the Village Lofts at St. Anthony Falls condominium to be operated and administered by respondent Village Lofts at St. Anthony Falls Association (Village Lofts).[1] Less than one week later, on October 10, 2002, the first unit in Building A was sold. The City of Minneapolis (City) issued a certificate of occupancy for all of Building A, excluding two units, in November 2003.

         In May 2003, Housing Partners entered into a separate contract with Kraus-Anderson for the construction of Building B. Kraus-Anderson engaged ESG, Doody, and M&E Engineering, Inc. (M&E) as subcontractors. In September 2004, Housing Partners added Building B to the Village Lofts condominium development. The following month, the project architect issued a certificate of substantial completion and the City issued a certificate of occupancy for Building B. Sale and occupancy of units in both buildings continued into 2005 and later.

         In January 2014, Village Lofts contacted Encompass, an engineering consulting firm, regarding a water leak in a unit in Building A. The firm determined that the source of the leak was a broken pipe that was part of the heating, ventilation, and air conditioning (HVAC) system in Building A. Encompass broadened its investigation and discovered similar defects throughout Building A. In May 2015, Village Lofts notified Housing Partners and Kraus-Anderson of the defects in the HVAC system in Building A. By the end of June 2015, Encompass had found similar defects in the HVAC system in Building B. Village Lofts paid to repair the relevant pipes throughout both buildings.

         Village Lofts commenced this action in August 2015. It ultimately asserted claims of common-law negligence, breach of implied warranty, and breach of contract against Housing Partners, Kraus-Anderson, and Doody. It further claimed that Housing Partners and Kraus-Anderson breached the warranties provided by Minnesota Statutes chapter 327A. Finally, Village Lofts asserted a common-law negligence claim against ESG, Kendle, and M&E.

         The district court granted summary judgment for the defendants on all claims, concluding that the claims were barred by the statutes of repose in Minn. Stat. § 541.051. The district court determined that the repose period for the Building A statutory warranty claims started to run when the first condominium unit in that building was occupied in 2002. The repose period for Building B began to run in 2004, when the first condominium unit in that building was sold and occupied. Consequently, the district court reasoned that the 10-year statute of repose ran before Housing Partners and Kraus-Anderson were given notice of the alleged construction defects in each building in 2015. The district court also found that Buildings A and B were two separate improvements to real property and that the repose period for common-law claims for each building began to run more than 10 years before the claims accrued.

         The court of appeals affirmed the district court's dismissal of Village Lofts' common-law claims. Vill. Lofts at St. Anthony Falls Ass'n v. Hous. Partners III-Lofts LLC, 924 N.W.2d 619, 631 (Minn.App. 2019). It reversed the dismissal of the statutory warranty claims, reasoning that each condominium unit is entitled to its own warranty date. Id. at 634. It remanded for the district court to determine the warranty dates of each unit. Id. at 638.

         Housing Partners and Kraus-Anderson sought review on the statutory warranty claims, arguing that each building has only one warranty date and that warranty date is applicable to all units in that building. Village Lofts sought cross-review on the dismissal of its common-law claims, arguing that Buildings A and B together are one single improvement. We granted the petitions for review and cross-review.

         ANALYSIS

         On appeal from summary judgment, we determine "whether there are any genuine issues of material fact" and whether the district court "erred in its application of the law." Offerdahl v. Univ. of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988). This case involves the interpretation of two statutes. We review matters of statutory interpretation de novo. Amaral v. Saint Cloud Hosp., 598 N.W.2d 379, 383 (Minn. 1999). The purpose of statutory interpretation is to "ascertain and effectuate the intention of the legislature." Minn. Stat. § 645.16 (2018).

         When interpreting a statute, we first determine whether the language of the statute is plain. "When the language of a statute is plain and unambiguous, that plain language must be followed." Amaral, 598 N.W.2d at 384 (citing Minn. Stat. § 645.16). "A statute is only ambiguous when the language therein is subject to more than one reasonable interpretation." Id. In that case, we "may resort to the canons of statutory construction to determine its meaning." 500, LLC v. City of Minneapolis, 837 N.W.2d 287, 290 (Minn. 2013). We will "read and construe a statute as a whole and . . . interpret each section in light of the surrounding sections to avoid conflicting interpretations." Am. Family Ins. Grp. v. Schroedl, 616 N.W.2d 273, 277 (Minn. 2000).

         I.

         The first question presented is whether each unit in a condominium building is entitled to its own warranty date under Minn. Stat. §§ 327A.01-.08. We start by noting that the language of the statute does not fit comfortably with condominium developments. Unlike a traditional home, a residential condominium is a property with parts of the development designated for separate ownership by "unit owners" and the remainder-the "common elements"-designated for common undivided ownership by all unit owners. See Minn. Stat. § 515A.1-103(4), (7), (20) (2018) (defining "common element," "condominium," and "unit owner"). Chapter 327A, however, makes no reference to, or distinctions about, a "unit owner" or "common element," and does not appear to contemplate a residential condominium's mix of individual and common-property ownership.

         At oral argument, Kraus-Anderson suggested that we could decide that chapter 327A simply does not apply to condominiums. Because that issue was not raised before the district court or the court of appeals, we assume that the statute applies. See In re Welfare of K.T., 327 N.W.2d 13, 16-17 (Minn. 1982) ("It is well settled that a party may not raise for the first time on appeal a matter not presented to the court below."); see also Minn. Stat. § 515B.4-113(g) (2018) ("This section does not in any manner abrogate the provisions of chapter 327A relating to statutory warranties for housing . . . .").[2]

         Chapter 327A provides warranties to purchasers of new homes. It states, in relevant part:

In every sale of a completed dwelling, and in every contract for the sale of a dwelling to be completed, the vendor shall ...

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