Scott Johnson, Appellant, vs. Kraus-Anderson Construction Company, Respondent.

Scott Johnson, Appellant, vs. Kraus-Anderson Construction Company, Respondent. A06-207, Court of Appeals Unpublished, December 20, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-207

 

Scott Johnson,
Appellant,

vs.

Kraus-Anderson Construction Company,
Respondent.

 

Filed December 20, 2006

Affirmed

Peterson, Judge

 

Hennepin County District Court

File No. AC 04-001261

 

Jaren L. Johnson, Edwin A. Cook, III, Thomas M. Fafinski, BenePartum Law Group, P.A., 860 Blue Gentian Road, Suite 295, Eagan, MN  55121 (for appellant)

 

Joseph A. Wentzell, James W. Moen, Wentzell Law Office, P.L.L.C., 2855 Anthony Lane South, Suite 200, St. Anthony, MN  55418 (for respondent)

 

            Considered and decided by Peterson, Presiding Judge; Randall, Judge; and Klaphake, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

            In this appeal from a judgment for respondent-contractor in a dispute about  roofing work on a building that appellant owns, appellant argues that the district court (1) made findings that are not supported by the record; (2) erred when it determined that appellant was not an intended beneficiary of a contract between respondent and the previous owner of the building; (3) erred when it held that appellant's claim was barred by the two-year statute of limitations in Minn. Stat. § 541.051, subd. 1(a) (2004); (4) misapplied Minn. Stat. § 327A.03(a) (2004) to bar appellant's warranty claim; and (5) erred in ruling that the building was not a residential building for purposes of chapter 327A.  We affirm.

FACTS

            In May 1997, the Woodcrest Apartment Building in Warroad was damaged by fire.  The roof was entirely destroyed, and the building's interior was exposed to the elements.  In December 1997, Ontra, Inc., the agent for the building's owner, decided to take steps to protect the building from further exposure to the elements.  Ontra had not decided whether it would eventually restore the building, sell it in its damaged condition, or raze it.  On December 12, 1997, respondent-contractor Kraus-Anderson Construction Company entered into an agreement with Ontra to rebuild the roof and enclose the rest of the building with polyurethane sheeting to prevent further weather damage.  Kraus-Anderson agreed to work on a time-and-material basis beginning January 2, 1998.  The work to be done included removing and replacing burned studs and top wall plates; installing new roof trusses, sheathing, and fascia; completing a shingled-roof system, including an ice-and-water shield; and installing temporary plastic sheeting protection for the building's window and door openings.  The estimated project cost was $80,000.  The contract did not set forth specific project specifications and instead incorporated a letter that stated, "Due to the unknown snow, winter conditions and total extent of repair replacement work required for the new roof this is proposed as a budget only.  We propose to proceed on this project on a time and material basis and all costs would be summarized for your review."

            Duane Kaiser, a project manager for Kraus-Anderson, testified in a deposition that the contract was for repairs to prevent further damage, not to prepare the building for occupancy.  Kaiser testified that additional work, including electrical, plumbing, and structural work, needed to be done to bring the building up to code.  Because of this additional work, the roof could not be completed until there was a final decision about what to do with the building. 

            Kraus-Anderson obtained a building permit to replace the roof on January 7, 1998, and began work on the project soon after.  Gary Francisco, a project superintendent for Kraus-Anderson, stated in an affidavit:

            5.  After Kraus-Anderson started work on the Project, I determined that the exterior and interior walls of the building were not level because an interior wall was higher than the exterior walls.  Because of that, the roof trusses could not be put in place so that they would sit on the exterior walls.  It appeared to me that frost and moisture had caused the interior wall to heave.  After the fire the building was not heated and the footings of the interior wall were above the frost line.

 

            . . . .

 

            7.  In my opinion, the best way to put new roof rafters on the building during the cold winter months was to remove the top plates from the interior walls so that the trusses could sit on the exterior walls, and then replace the interior wall top plates when the weather was warmer and the interior walls were no longer heaved.  Kraus-Anderson would remove the top plates from the interior walls where they obstructed the installation of the new roof rafters and proceed with the roof repairs, and that the owner would need to arrange for the replacement of the top plates at a later date. 

 

            Kaiser testified in his disposition that after Francisco discussed the issue with Ontra representative Katherine Rafdahl, it was decided that Kraus-Anderson would remove the top plates where they obstructed the trusses and that Ontra would take care of replacing the plates later.  When Kraus-Anderson completed its work on the project, Kaiser made Ontra aware that additional work was required on the roof, including replacing the top plates that had been removed.  The final project cost was approximately $68,000. 

            In 2001, Ontra advertised the building for sale, describing the building as follows:

            The building sustained heavy damages in a fire in May 1997.  Since then, two independent structural engineers have inspected the building and found it to be structurally sound to re-build.

 

            The building's exterior walls, subfloors, and frame work are intact (with the exception of the third floor where the fire started).  All windows, doors, drywalls, and cabinets were removed.  Bathroom and kitchen fixtures and most appliances are still in working order and stored nearby.

 

            Construction of a new shingle roof was completed in January 97. 

 

The advertisement stated that the building's appraised value before the new roof was installed was $125,000. 

            Appellant-buyer Scott Johnson entered into a purchase agreement, dated August 7, 2001, and signed by Johnson on August 10, 2001, to buy the building for $68,000.  The purchase agreement contains the following "as-is" clause:

            Except as herein expressly stated, Buyer is purchasing the Property and the Personal Property based solely upon its own investigation and inquiry and is not relying on any representation of Seller or any other person regarding the physical condition of the Property, the improvements on the Property, and the Personal Property.  Buyer agrees to accept and purchase the Property, the improvements on the Property, and Personal Property "as is, where is," with all faults and defects.  Buyer acknowledges that the Personal Property is not new, and that some or all of the Personal Property may have been damaged by fire and may not be operable. 

 

            The purchase agreement granted Johnson the right to inspect the property and to cancel the purchase agreement within 30 days if results of tests and investigations were unacceptable to Johnson.  Johnson had experience in construction and inspected the building several times before closing on it, and the top plates had been removed before his inspections.

            Francisco stated in his affidavit:

            It would have been impossible for one with any degree of building expertise not to see that the center wall top plates were removed, because when one inspects a roof you look from the top plates upward to the peak.  You could not miss the removal of the top plates.  When a person was inspecting the building to buy it they would have seen that the walls and floors were damaged from the fire and exposure to the elements for seven months, and that the fire damage and exposure would have affected the structure of the building. 

 

Johnson did not discover the missing top plates until he inspected the property in April 2002. 

            Johnson contacted Kraus-Anderson and requested that it repair the roof or reimburse him for repair costs.  Kraus-Anderson responded by letter explaining why the top plates had been removed and stating that the "top wall plate removal work was fully reviewed with Mike Soechting of Ontra" and that Ontra instructed Kraus-Anderson not to complete any additional work. 

            Johnson brought a conciliation court action against Kraus-Anderson alleging that Johnson incurred damages as a result of Kraus-Anderson's negligent installation of the roof.  Judgment was entered for Kraus-Anderson.  Johnson removed the case to district court, alleging claims for negligence and breach of statutory warranties.  Pursuant to the parties' agreement, the case was submitted to the district court for decision based on stipulated facts and further submissions of the parties, including deposition testimony, affidavits, documents, and photographs.  Following a hearing, the district court issued an order dismissing Johnson's claims, and judgment was entered.  This appeal followed.

D E C I S I O N

I.

            "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses."  Minn. R. Civ. P. 52.01.  In applying Minn. R. Civ. P. 52.01, we view the record in the light most favorable to the district court's judgment and will not reverse merely because we view the evidence differently.  Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999); see Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000) (stating "[t]hat the record might support findings other than those made by the [district] court does not show that the . . . findings are defective").  The district court's factual findings must be clearly erroneous or "manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole" to warrant reversal.  Id. (quotation omitted).  "Findings of fact are clearly erroneous only if the reviewing court is left with the definite and firm conviction that a mistake has been made."  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (quotation and citation omitted).  "If there is reasonable evidence to support the district court's findings, we will not disturb them."  Rogers, 603 N.W.2d at 656.

            The district court found:

            Kraus-Anderson obtained a building permit to replace the fire-damaged roof, with the intent of completely rebuilding and repairing the roof.  Due to freezing of the ground in early [1998[1]], the building floor underneath one of the load-bearing center walls rose and buckled.  Due to the buckling, the interior walls were higher than the exterior walls, which would prevent the roof, and the roof trusses, from sitting level on the walls.  This caused a major problem, which Kraus-Anderson promptly brought to Ontra's attention.

 

            Kraus-Anderson and Ontra discussed two options.  One option was to temporarily remove the top plates of the center wall so that the roof trusses sat on the exterior walls, and come spring, when the ground thawed, to re-install the top plates.  Removing the top plates would allow the roof trusses to sit evenly on the top of the interior and exterior walls.  Another option was to attempt to thaw the frozen January ground, at considerable expense, and to eliminate the buckling problem so that the roof would sit level on the walls.

 

            Ontra and Kraus-Anderson agreed on the first option, with the understanding that the work on the roof would not be completed until the top plates were re-installed.  Ontra and Kraus-Anderson agreed that removing the top plates was the best way to rest the roof trusses evenly on the interior and exterior walls, at least while the interior wall had heaved up due to the frozen ground from the cold winter months.

 

            The roof was not considered completed by Ontra and Kraus-Anderson.  Both Ontra and Kraus-Anderson understood that the bitter winter conditions prevented Kraus-Anderson from replacing the top plates in January 1998, without considerable additional expense to thaw the winter ground in January.  Both Kraus-Anderson and Ontra understood that additional work would be required come spring, in order to replace the top plates in compliance with the building code. . . . 

 

            . . . .

 

            There is no written evidence that Kraus-Anderson and Ontra agreed that the roof was not completed in January, that the top plates were removed, and that Kraus-Anderson needed to return at a later date to complete the work.  However, the undisputed evidence indicates that the work in Warroad was [done] on a "handshake basis," and the testimony is uncontradicted that this was the agreement between Kraus-Anderson and Ontra.

 

            That the work was incomplete was supported by the uniform testimony that the roof would not be completed until the top plates [were] re-installed, that the work in January 1998 was $15,000 under the estimate for completion, that Kraus-Anderson never called for a final inspection pursuant to the local Building Code, and that the construction contract did not call for Kraus-Anderson to make the building ready for occupancy.  Moreover, Ontra paid Kraus-Anderson for its work, never complained, and by its actions, words, and agreement, confirmed that the work done by Kraus-Anderson, including the removal of the top plates, conformed completely with the contract. 

 

            Johnson argues that the findings that Ontra and Kraus-Anderson did not consider the roof to be complete and that Ontra knew that the top plates were missing when Kraus-Anderson stopped working on the roof are manifestly contrary to the evidence and are not reasonably supported by the evidence as a whole.  Johnson also argues that the documentary evidence establishes that Kraus-Anderson considered its work to be complete and in no way indicates that Kraus-Anderson intended to return to complete any work on the roof. 

            Johnson does not dispute that the district court's findings are supported by the affidavits, documentary evidence, and deposition testimony presented by Kraus-Anderson.  Johnson instead argues that this evidence is not sufficient because it was procured in anticipation of litigation and "directly contradicts the written record as it existed prior to the time at which [Johnson] notified [Kraus-Anderson] about the defects in the building's roof."  But the documents existing at the time Johnson notified Kraus-Anderson about the alleged roof defects do not contradict the district court's findings; they are silent about whether Kraus-Anderson and Ontra understood that the roof was complete when Kraus-Anderson stopped working on the project in early 1998.

            Furthermore, the district court explicitly acknowledged that there was no written evidence that Kraus-Anderson and Ontra agreed that the roof was not completed when Kraus-Anderson stopped working on it and evaluated the evidence that was presented in this light.  The district court determined the credibility of the affidavits and the deposition testimony and the relative weight to be given evidence created before and after the dispute arose and determined that because Kraus-Anderson's evidence was not contradicted and because Ontra paid Kraus-Anderson without ever complaining about the work, removing the top plate conformed to the contract between Ontra and Kraus-Anderson.  We defer to the fact-finder's ability to weigh evidence and make credibility determinations.  Gada v. Dedefo, 684 N.W.2d 512, 514 (Minn. App. 2004); Minn. R. Civ. P. 52.01.  In light of the deference we accord the fact-finder, we conclude that the district court's findings that removing the top plates conformed to the contract, that Ontra knew that the top plates were removed, and that Ontra and Kraus-Anderson did not consider the roof to be complete are not clearly erroneous.

II.

            Ordinarily, non-parties or "strangers" to a contract acquire no rights under the contract.  Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn. App. 1987).  An exception to this rule involves a third-party beneficiary of a contract.  Dufresne v. Am. Nat'l Bank & Trust Co., 374 N.W.2d 763, 766 (Minn. App. 1985), review denied (Minn. Dec. 13, 1985).  A beneficiary of a contract must meet the intent-to-benefit test or the duty-owed test in order to qualify as a third-party beneficiary under contract law.  Cretex Cos., Inc. v. Constr. Leaders, Inc., 342 N.W.2d 135, 138-39 (Minn. 1984).  A beneficiary of a contract not meeting either of these tests is an incidental beneficiary and has no right to enforce the contract.  Wurm, 405 N.W.2d at 486.  Generally, the determination of a third-party beneficiary claim is a question of fact.   Gold'n Plump Poultry, Inc. v. Simmons Eng'g Co., 805 F.2d 1312, 1318 (8th Cir. 1986).       

            Intent to benefit

            To establish intent to benefit, the contract must express some intent by the parties to benefit the third party though contractual performance.  Chard Realty, Inc. v. City of Shakopee, 392 N.W.2d 716, 720 (Minn. App. 1986), review denied (Minn. Nov. 19, 1986).  A third party can establish third-party beneficiary status and associated rights by showing that the contracting parties intended to benefit the third party at the time the contract was executed.  Julian Johnson Constr. Corp. v. Parranto, 352 N.W.2d 808, 811 (Minn. App. 1984); see also Cretex, 342 N.W.2d at 139 (stating that while the third party may "receive a benefit when paid . . . , the issue is whether that benefit was intended by the contracting parties").           The requisite intent must be found in the contract as read in light of all the surrounding circumstances.  Buchman Plumbing Co. v. Regents of the Univ. of Minn., 298 Minn. 328, 334, 215 N.W.2d 479, 483 (1974).

Unless the contract expresses the parties' intent to benefit a third party through contractual performance, the third party is no more than an incidental beneficiary and cannot enforce the contract.  Wurm, 405 N.W.2d at 486.  Usually, when there is no reference to the third party in the contract, there is no intent to benefit the third party.  614 Co. v. Minneapolis Cmty. Dev. Agency, 547 N.W.2d 400, 410 (Minn. App. 1996).  "But the absence of the third party's name does not preclude a finding of intent to benefit a third party if the circumstances show otherwise."  Id. (quotation omitted).

            When Kraus-Anderson installed the roof, Ontra was undecided as to whether it would sell, raze, or keep the building.  The contract does not refer to a potential buyer.  More than three years elapsed between when Kraus-Anderson completed its work and Johnson bought the building.  Johnson cites no authority showing that under these circumstances, the district court erred in finding that Johnson was not an intended beneficiary of the contract.

            Duty-owed test

            The duty-owed test requires that the performance of the promise will satisfy an obligation of the promisee.  Mears Park Holding Corp. v. Morse/Diesel, Inc., 427 N.W.2d 281, 285 (Minn. App. 1988).  "‘If, by the terms of the contract, performance is directly rendered to a third-party, he is intended by the promisee to be benefited.  Otherwise, if the performance is directly rendered to the promisee, the third-party who also may be benefited is an incidental beneficiary with no right of action.'"  Twin City Sav. & Loan v. Zimmerman, 411 N.W.2d 294, 296 (Minn. App. 1987) (quoting Buchman Plumbing Co., 298 Minn. at 335, 215 N.W.2d at 484.

            Here, Kraus-Anderson is the promisor, and Ontra is the promisee.  See Chard Realty, Inc., 392 N.W.2d at 720-21 (analyzing agreements between parties to determine whether intent-to-benefit or duty-owed test was met).  During the term of the contract between Kraus-Anderson and Ontra, there was no relationship between Ontra and Johnson, and the building was not for sale.  Under these circumstances, there is no basis for finding that Kraus-Anderson owed Johnson a duty.

III.

            Minn. Stat. § 541.051, subd. 1 (2004) states:

            (a) 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 . . . .

 

            (b) For purposes of paragraph (a), a cause of action accrues upon discovery of the injury . . . .

 

            Under this provision, "the statute of limitations begins to run when an actionable injury is discovered or, with due diligence, should have been discovered, regardless of whether the precise nature of the defect causing the injury is known."  Dakota v. BWBR Architects, 645 N.W.2d 487, 492 (Minn. App. 2002), review denied (Minn. Aug. 20, 2002).  When reasonable minds can differ about when the injury was discovered, summary judgment is inappropriate because the issue should be left to the trier of fact.  200 Levee Drive Assocs., Ltd. v. Bor-Son Bldg. Corp., 441 N.W.2d 560, 564 (Minn. App. 1989); Lake City Apartments v. Lund-Martin Co., 428 N.W.2d 110, 112 (Minn. App. 1988), review denied (Minn. Oct. 19, 1988).

            Johnson's breach-of-statutory-warranty claim is also subject to a two-year limitation period.  Actions based on breach of statutory warranties set forth in Minn. Stat. § 327 A. 02 (2004) must be brought within two years following the discovery of the breach.  Minn. Stat. § 541.051, subd. 4 (2004).  A breach-of-statutory-warranty claim accrues when an owner "discovers, or should have discovered, the builder's refusal or inability to ensure the home is free from major construction defects."  Vlahos v. R&I Constr. of Bloomington, Inc., 676 N.W.2d 672, 678 (Minn. 2004).

            Johnson began the conciliation court action in October 2003, more than five years after Kraus-Anderson completed its work and more than two years after Johnson executed the purchase agreement in August 2001.  Johnson argues that because Kraus-Anderson never informed Ontra about the defects in the roof, the two-year statute of limitations began running in March or April of 2002, when he discovered that the top plates were missing.  But, as we have already discussed, the district court's finding that Kraus-Anderson informed Ontra that the top plates were removed is not clearly erroneous.  Consequently, Ontra knew in 1998 that the top plates were missing, and the statute of limitations for any claim based on the missing top plates began to run more than two years before Johnson brought this action.

            Because Johnson's breach-of-statutory-warranty claim was not brought within the applicable two-year limitations period, it is not necessary to discuss Johnson's arguments that the district court misapplied Minn. Stat. § 327A.03(a) to bar the warranty claim and erred in ruling that the building was not a residential building for purposes of chapter 327A. 

            Affirmed.

[1] The reference in the findings to 1999 appears to be a typographical error as the undisputed evidence shows that the roof work was done in January 1998.