Gerald Lietz, et al., Plaintiffs, Jaenty, Inc., d/b/a/ Taco John's Restaurant, Appellant, vs. Northern States Power Company, Respondent, Seren Innovations, Inc., Respondent, Cable Constructors, Inc., Respondent, Sirti, Ltd., Respondent.

Gerald Lietz, et al., Plaintiffs, Jaenty, Inc., d/b/a/ Taco John's Restaurant, Appellant, vs. Northern States Power Company, Respondent, Seren Innovations, Inc., Respondent, Cable Constructors, Inc., Respondent, Sirti, Ltd., Respondent. A04-901, Court of Appeals Unpublished, January 11, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-901

 

Gerald Lietz, et al.,

Plaintiffs,

 

Jaenty, Inc., d/b/a/ Taco John's Restaurant,

Appellant,

 

vs.

 

Northern States Power Company,

Respondent,

 

Seren Innovations, Inc.,

Respondent,

 

Cable Constructors, Inc.,

Respondent,

 

Sirti, Ltd.,

Respondent.

 

Filed January 11, 2005

Affirmed Forsberg, Judge* Dissenting, Schumacher, Judge

 

Stearns County District Court

File No. C1-01-005758

 

Kenneth B. Huber, John G. Ness & Associates, 6465 Wayzata Boulevard, Suite 450, St. Louis Park, MN  55426 (for appellant)

 

Timothy R. Thornton, Matthew D. Forsgren, Jason R. Asmus, Briggs and Morgan, P.A., 2200 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for respondent Northern States Power)

 

Cooper S. Ashley, Laurie A. Kindel, Kai H. Richter, Maslon Edelman Borman & Brand, LLP, 3300 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN  55402 (for respondent Seren Innovations, Inc.)

 

Michael T. Feichtinger, Kenneth H. Bayliss, Quinlivan & Hughes, P.A., 400 South First Street, 600 Wells Fargo Center, P.O. Box 1008, St. Cloud, MN  56302-1008 (for respondent Cable Constructors, Inc.)

 

Kyle E. Hart, Stephen A. Melcher, Fabyanske, Westra & Hart, P.A., 800 LaSalle Avenue, Suite 1900, Minneapolis, MN  55402 (for respondent Sirti, Ltd.)

 

            Considered and decided by Schumacher, Presiding Judge; Halbrooks, Judge; and Forsberg, Judge.

U N P U B L I S H E D   O P I N I O N

FORSBERG, Judge

            The district court granted summary judgment in favor of respondents because appellant failed to raise its claim within the statute of limitations established by Minn. Stat. § 541.051 (2002).  We affirm.

FACTS

            On December 11, 1998, respondent Cable Constructors, Inc. (CCI) was in the process of constructing a fiber-optic cable system for respondent Seren Innovations, Inc. (Seren) when it struck an underground gas line while installing an anchor for a utility pole.  The system was designed by respondent Sirti, Ltd. (Sirti).  Appellant Jaenty, Inc.  sustained property damage to its building, a Taco John's restaurant.  Appellant commenced a property-damage action against respondents on December 31, 2001.  On April 21, 2004, the district court granted summary judgment in favor of respondents.  This appeal follows.

D E C I S I O N

            "On an appeal from summary judgment, we ask two questions:  (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law."  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The interpretation of the applicability of a statute of limitations is a question of law that this court reviews de novo.  Sarafolean v. Kauffman, 547 N.W.2d 417, 419 (Minn. App. 1996), review denied (Minn. July 10, 1996).

            It is undisputed that appellant did not commence its action against respondents within the two-year statute of limitations for damages based on services or construction to improve real property set forth in Minn. Stat. § 541.051 (2002).  Therefore, this appeal centers on the applicability of section 541.051 to the December 11, 1998 accident.  Appellant contends that the placement of a utility pole anchor was construction activity, not an improvement to real property, thereby rendering section 541.051 inapplicable.

            Minn. Stat. § 541.051, subd. 1(a) (2002) provides in pertinent part:

Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of the injury, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury . . . .

 

            In construing an earlier version of this statute, the Minnesota Supreme Court has stated an improvement is "a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs."  Pac. Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 554 (Minn. 1977) (quotation omitted).  Fifteen years later this court elucidated the supreme court's definition by stating, "[I]n order for an improvement to be a permanent addition to or betterment of real property, it must be integral to and incorporated into the building or structure on the property."  Ritter v. Abbey-Etna Mach. Co., 483 N.W.2d 91, 93 (Minn. App. 1992), review denied (Minn. June 10, 1992).

            Minnesota courts have applied the statute of limitations contained in Minn. Stat. § 541.051, subd. 1(a), to a variety of situations. See generally Sartori v. Harnischfeger Corp., 432 N.W.2d 448, 452 (Minn. 1988)(concluding that overhead rail crane at a mining facility constituted an improvement); Frederickson v. Alton M. Johnson Co., 402 N.W.2d 794, 797 (Minn. 1987) (concluding electrical switchboards were an improvement); Capitol Supply Co. v. City of St. Paul, 316 N.W.2d 554, 555 (Minn. 1982) (concluding implicitly that a storm sewer system constituted an improvement); Pac. Indem., 260 N.W.2d at 554 (holding that the installation of a furnace constituted an improvement to real property); Horvath v. Liquid Controls Corp., 455 N.W.2d 60, 63 (Minn. App. 1990) (holding that a change in an excess flow valve was "a design change in an improvement to real property"), review denied (Minn. July 13, 1990); Citizens Sec. Mut. Ins. Co. v. Gen. Elec. Corp., 394 N.W.2d 167, 170 (Minn. App. 1986) (holding that installation of light fixtures constituted an improvement), review denied (Minn. Nov. 26, 1986); Kemp v. Allis-Chalmers Corp., 390 N.W.2d 848, 850 (Minn. App. 1986) (concluding that electrical transformer at industrial plant constituted an improvement).

            The utility pole anchor here qualifies as an improvement to real property under our definition because: (1) the anchor was a permanent addition to or betterment of real property as it was an integral item installed during the course of a larger improvement; (2) the anchor enhanced the capital value of the property by allowing the addition of the fiber-optic cable system; and (3) installing the anchor on the property, and constructing the other portions of the fiber-optic cable system, involved the expenditure of both labor and money.  As such, the anchor provides long-term benefits through its essential physical support of the utility pole, which thereby permits the remainder of the installation of the fiber-optic cable system.

            Because the anchor in this case was an integral and permanent element of the improvement to real property the fiber-optic cable system we conclude that the placement of the anchor falls squarely within the definition of an improvement to real property.  Appellant's injuries arose from the defective and unsafe condition of the anchor, and the district court properly applied Minn. Stat. § 541.051, subd. 1(a).

            Appellant cites Brandt v. Hallwood Mgmt. Co., 560 N.W.2d 396 (Minn. App. 1997), in support of its argument that placement of the utility pole anchor was construction activity, rather than improvement to real property.  We disagree.  In Brandt, this court determined that demolition work in anticipation of construction activities were not within the bounds of the two-year statute of limitations set forth in Minn. Stat. § 541.051, subd. 1(a).  Id. at 399-400.  The situation here is far different from Brandt because the placement of the anchor was an integral part of the overall fiber-optic system construction.  See Lederman v. Cragun's Pine Beach Resort, 247 F.3d 812, 815 (8th Cir. 2001) (holding a temporary trench "that is integral to a construction project constitutes an ‘improvement to real property' under § 541.051").

            While appellant failed to cite Wiita v. Potlatch Corp., 492 N.W.2d 270 (Minn. App. 1992), the dissent believes that this case, in addition to Brandt, support appellant's assertion that the placement of the anchor constituted a defective and unsafe construction activity, as opposed to a defective and unsafe condition of an improvement to real property.  But, similar to Brandt, we believe the application of Wiita is inappropriate in this situation.  The issue in Wiita was whether the damages sustained by Donald Wiita, a bricklayer foreman, arose out of an improvement to real property within the meaning of section 541.051.  Id. at 271.  The injury occurred when cement blocks being moved by a crane fell on Wiita.  Id. at 270.  He argued that his injuries occurred due to the supervision or negligent operation of the crane operator and not the condition of the wall that he conceded was an improvement to real property.  Id. at 271.  This court determined, "Where an item does not permanently alter real property, it may not constitute an improvement, and injuries arising from the item are not time barred by the statute."  Id. at 272.  Based on this premise, the Wiita court held that there was no "causal connection between Donald Wiita's injury and the condition of the improvement to real property."  Id.  But the case at bar differs from Wiita because the anchor significantly altered real property when it was permanently affixed to the ground.  Therefore, Wiita is distinguishable.

            Appellant also cites Red Wing Motel Investors v. Red Wing Fire Dep't, 552 N.W.2d 295 (Minn. App. 1996), review denied (Minn. Oct. 29, 1996), in support of its assertion that section 541.051 does not apply to the case at bar.  The Red Wing court, interpreting Minn. Stat. § 541.051, subd. 1(d) (1994), not subdivision 1(a), followed the legislative intent expressed in Sartori, 432 N.W.2d at 454.  552 N.W.2d at 297.  In Sartori, the Minnesota Supreme Court determined that "[t]he statutory limitation period [of Minn. Stat. § 541.051, subd. 1 (1980), was] designed to eliminate suits against architects, designers and contractors who have completed the work, turned the improvement to real property over to the owners, and no longer have any interest or control in it."  432 N.W.2d at 454.  Following this rationale, appellant argues that because the construction of the fiber-optic cable system had not been completed and turned over to Seren, section 541.051 cannot apply.

            But no Minnesota court has ever limited the application of section 541.051 to projects that have been actually completed and turned over to the property owner.  Such an application of the statute would place undue restriction on the statute of limitations, thereby allowing the statute to be applicable in only those situations where a cause of action arose following completion of the project.

            Alternatively, using a contribution and indemnity exception found in Minn. Stat. § 514.051, subd. 1(b), appellant argues the two-year statute of limitations did not begin to run until Travelers Insurance Co., as a subrogee, fully compensated appellant.  But it is well-established law that the statute of limitations begins to run when the injury is realized.  Kline v. Doughboy Recreational Mfg. Co., 495 N.W.2d 435, 440 (Minn. App. 1993) (concluding that following a sudden or unexpected injury, respondents discovered or with reasonable diligence should have discovered the defective and unsafe condition, even if the exact nature of the defect is not known at the time of the incident); Thorp v. Price Bros. Co., 441 N.W.2d 817,820-21 (Minn. App. 1989) ("[T]he two-year statute of limitations is triggered by discovery of the injury, not discovery of the defective and unsafe condition of the improvement."), review denied (Minn. Aug. 15, 1989).  Here, it is undisputed that appellant was aware of the explosion at the time it occurred.  Additionally, the application of the exception contained in Minn. Stat. § 541.051, subd. 1(b), upon which appellant relies, applies to contribution and indemnity situations, not subrogation claims.  Minn. Stat. § 541.051, subd. 1(b).  Thus, because a subrogee "is entitled to no greater rights than those possessed by its insureds," Gen. Elec. Corp., 394 N.W.2d at 169, the statute of limitations began to run on the date of the injury December 11, 1998. 

            Appellant's reliance on the exceptions in Minn. Stat. § 541.051, subd. 1(c), 1(d), is also misplaced.  It cannot be argued that respondents' actions, which led to injuries incurred during the course of a construction project, constituted "negligence in the maintenance, operation or inspection of the real property improvement."  Minn. Stat. § 541.051, subd. 1(c).  See Ocel v. City of Eagan, 402 N.W.2d 531, 534 (Minn. 1987) (concluding that "claims against the contractor, the developer, and the engineering firm are for ‘constructing' and ‘designing' the improvement, activities which are expressly covered by the 2-year limitations period"); see also Lederman, 247 F.3d at 818-21 (holding a claim against the property owner for an injury that occurred before a project was complete did not fall within the bounds of subdivision 1(c)). 

            Similarly, the exception in subdivision 1(d), which pertains to the manufacturer or supplier of equipment or machinery fixed to real property, does not apply because, as noted by the district court, the anchor installed does not qualify as equipment or machinery.  See Twinco Romax Auto. Warehouse, Inc. v. Olson Gen. Contractors, Inc., 643 N.W.2d 338, 342 (Minn. App. 2002) (holding ordinary building materials are those items that are "incorporated into construction work outside the control of their manufacturers or suppliers, at the direction of architects, designers, and contractors" (quotation omitted)); Red Wing, 552 N.W.2d at 297 (holding sprinkler components were ordinary building materials not susceptible to the exception contained in subdivision 1(d)); Cape Henry Towers, Inc. v. National Gypsum Co., 331 S.E.2d 476, 480 (Va. 1985) (explaining that "machinery and equipment are subject to close quality control at the factory and may be made subject to independent manufacturer's warranties, voidable if the equipment is not installed and used in strict compliance with the manufacturer's instructions").

            Because it is undisputed that (1) appellant did not commence its action against respondents within the two-year statute of limitations set forth in Minn. Stat. § 541.051, subd. 1(a); (2) the placement of a utility pole anchor is an improvement to real property; and (3) there are no applicable exceptions to the statute of limitations, we conclude that the district court properly granted summary judgment to respondents.

            Affirmed.

ROBERT H. SCHUMACHER, Judge (dissenting)

            I respectfully dissent.  Because I do not believe the explosion that occurred when  CCI struck and ruptured the gas line arose out of an "improvement to real property" within the meaning of Minn. Stat. § 541.051 (2002), I cannot agree with the majority's conclusion that appellant's claim was time-barred by the statutory limitation period.  I would reverse the grant of summary judgment and remand for trial on the merits.  

If placement of the utility-pole anchor had been completed, it would have been an "improvement to real property" as the supreme court has defined the term:  "a permanent addition to . . . real property . . . designed to make the property more useful or valuable."  Pac. Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 554 (Minn. 1977); see also Ritter v. Abbey-Etna Mach. Co., 483 N.W.2d 91, 93 (Minn. App. 1992) (specifying that in order to be permanent, an improvement "must be integral to and incorporated into the building or structure on the property"), review denied (Minn. June 10, 1992).

As the majority states, Minn. Stat. § 541.051 was enacted in order "to eliminate suits against architects, designers and contractors who have completed the work, turned the improvement to real property over to the owners, and no longer have any interest or control in it."  Sartori v. Harnischfeger, 432 N.W.2d 448, 454 (Minn. 1988).  I take no issue with the majority's assertion that section 541.051 can also apply to claims arising from damages such as those alleged here suffered while a construction project is in progress, provided the instrumentality of the injury is an "improvement" within the meaning of the statute.  In Fiveland v. Bollig & Sons, Inc., 436 N.W.2d 478, 480-81 (Minn. App. 1989), review denied (Minn. Apr. 24, 1989), we held that an excavation as part of the process of building an attached garage and basement constituted an improvement subject to the statutory limitation such that a claim for injuries suffered from a fall into the excavation was subject to the limitation.

But the majority's analysis does not sufficiently distinguish between the proper and negligent placement of the utility-pole anchors, and consequently fails to address a critical issue in determining the applicability of section 541.051:  whether the claim alleges a defective or unsafe improvement and is limited by the statute, see id. or defective or unsafe construction activities and is not limited by the statute.  See Brandt v. Hallwood Mgmt. Co., 560 N.W.2d 396, 402 (Minn. App. 1997) (holding the two-year statute of limitations did not apply to bar a claim for injuries suffered due to negligence during demolition activities), review denied (Minn. June 11, 1997); Wiita v. Potlatch Corp., 492 N.W.2d 270, 272 (Minn. App. 1992) (holding section 541.051 does not apply where the damages are caused by negligent operation of a crane during construction).

Here, CCI struck an underground gas line while installing an anchor for a utility pole.  The anchor never got installed and therefore, at the time of the explosion, the anchor was neither "integral to [nor] incorporated into the building or structure on the property," and as such was not a permanent improvement within the meaning of section 541.051.  Ritter, 483 N.W.2d at 93.  "Where an item does not permanently alter real property, it may not constitute an improvement, and [damages] arising from the item are not barred by the statute."  Wiita, 492 N.W.2d at 272.  Interestingly, the complaint alleged negligent construction activities both in the placement of the anchor and in CCI's failure to promptly respond to the punctured gas line rather than a defect in the improvement itself. 

            The purpose of section 541.051 is to protect parties from liability arising from a statutory "improvement," not to impose a limitations period on negligent construction activities involving items that are not integral to the improvement.  Here, the negligent excavation into the gas line was clearly never intended to be a part of the finished improvement.  Because I believe the statutory purpose is frustrated by subjecting appellant's claim to the two-year limitation period, I would reverse the district court's grant of summary judgment and remand for trial.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.