In William Blanchette v. The Superior Court of Imperial County [D070545, 2/20/17], the California Court of Appeals strictly construed the statutory requirement that a builder respond to a notice of claim of defects under the Right to Repair Act (Civil Code §§ 895 et seq.) (the “Act”) within 14 days of receipt even where the notice did not sufficiently identify the alleged defects. This, according to the court, is because the purpose of the Act is to encourage prompt pre-litigation resolution of claims. The plaintiff, William Blanchette, is the owner of 1 of 28 homes constructed by GHA Enterprises, Inc. (GHA). On February 2, 2016, Blanchette served GHA with a notice of claim under the Act, which set forth alleged defects in all 28 homes. The notice was non-specific and tracked the language of Section 896 of the Act, which sets forth the building standards for which a violation gives rise to an actionable claim against a builder. On February 23, 2016, GHA responded to the notice by written letter advising that the defect claims were not set forth with reasonable detail as required by Section 910 of the Act. In that letter, GHA also offered to inspect the homes. On February 26, 2016, Blanchette responded to GHA’s letter asserting that GHA’s response was untimely and therefore excused him and the other homeowners from further pre-litigation resolution obligations under the Act. Thereafter, Blanchette filed a construction defect class action complaint against GHA in the Superior Court of Imperial County. GHA moved for a stay of the action until Blanchette satisfied the pre-litigation requirements of the Act. Blanchette opposed the motion on the grounds that GHA had not timely responded to the pre-litigation notice of claim. The trial court agreed with GHA that Blanchette’s claim lacked sufficient detail to trigger GHA’s obligation under the Act, and then stayed the action pending completion of the pre-litigation procedures. Blanchette filed a petition for writ of mandate to the California Court of Appeals. The appellate court reversed the trial court’s ruling. The appellate court first recognized that the purpose of the Act is to give a builder the opportunity to resolve a homeowner’s construction defect claim in an expeditious and non-adversarial manner. The court also recognized that Section 910 of the Act lists the requirements for the pre-litigation notice of claim to the builder, which requires a reasonably detailed description of the extent and location of the defects, and that the notice is a pre-requisite to filing a lawsuit against the builder. However, the court applied a strict interpretation of Section 913 of the Act, which obligates the builder to respond within 14 days of its receipt of a notice of claim. The court reasoned that even if the notice did not comply with Section 910, the builder still had an obligation to timely respond to the notice, and if it failed to do so, the homeowner was released of its further pre-litigation obligations under the Act per Section 915. Thus, the court held that GHA should have responded within 14 days of receipt of the notice of claim from Blanchette raising the lack of specificity in the notice, because lack of specificity is not grounds to ignore the notice. Requiring prompt objection by the builder in responding to the claim is more consistent with the purpose of the Act. Add to Flipboard Magazine.
In Nazario v 222 Broadway, LLC, 2016 N.Y. LEXIS 3534 (N.Y. Nov. 21, 2016), plaintiff was performing electrical work as part of a retrofitting or renovation, and was reaching up while standing on the third or fourth rung of a six-foot A-frame wooden ladder, when he received an electric shock from an exposed wire and fell to the floor, holding the ladder, which remained in an open, locked position when it landed. According to the Appellate Division, First Department, plaintiff established prima facie that the ladder from which he fell did not provide adequate protection pursuant to Labor Law § 240(1). See Nazario v 222 Broadway, LLC, 135 A.D.3d 506, 507 (1st Dep’t 2016). However, on November 21, 2016, the Court of Appeals disagreed and found that plaintiff was not entitled to summary judgment on his Labor Law §240(1) claim, remitting the case back to the Appellate Division and stating that questions of fact existed as to whether the ladder plaintiff was using failed to provide proper protection, and whether plaintiff should have been provided with additional safety devices. This appears to be a departure from prior case law such as Vukovich v 1345 Fee, LLC, 61 A.D.3d 533 (1st Dept 2009) (summary judgment granted on Labor Law § 240(1) where plaintiff fell from an unsecured ladder after receiving electric shock while working as a pipe fitter), and suggests that the First Department will now require plaintiffs to show that the safety device provided was either defective or that the plaintiff required additional safety devices to conduct the work they were performing at the time of the incident. Add to Flipboard Magazine.
In Westfield Ins. Co. v. West Van Buren, LLC, the Appellate Court of Illinois, affirmed the trial court’s decision holding that the developer, West Van Buren, LLC (“Van Buren”), was not entitled to defense and indemnification under the policy of the roofing subcontractor, Total Roofing, because the suit did not allege an “occurrence.” In 2002 Van Buren constructed a condominium development in Illinois and subcontracted with Total Roofing for the construction of the roof. In connection with the project, Total Roofing obtained a CGL policy with Westfield Insurance Company (“Westfield”), which offered coverage for property damage caused by an “occurrence.” After construction was completed and shortly after the Condo Association took charge of the building, the Condo Association claimed construction defects including roof leaks that infiltrated the building and individual apartments. The Condo Associated demanded that Van Buren reconstruct the roof but when Van Buren refused, the Condo Association paid for the repairs itself and sought reimbursement from Van Buren and Total Roofing, alleging shoddy workmanship breach of warranty and consumer fraud. Westfield denied coverage to Van Buren but afforded defense to Total Roofing under reservation of rights. Westfield filed suit seeking a declaration that it owed no duty to defend to Van Buren and the trial court ultimately found in favor of Westfield, holding that Van Buren was not entitled to defense or indemnification. The appellate court affirmed, stating that it was questionable whether Van Buren was even an additional insured because the policy language implied that the additional insured coverage was limited to coverage available to the named insured during ongoing operations, and the Association’s suit involved leaks which occurred after the roof was completed. Regardless, the main focus of the court’s decision was the lack of a “property damage” caused by an “occurrence.” In this regard, policy defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policy defined “property damage” as “a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.” The Appellate Court reached its decision for the following three reasons: Westfield’s policy required an accidental event to trigger coverage alleged intentional bad acts by the developer and resulting damage due to shoddy workmanship of which Van Buren was allegedly aware. Since the alleged damage was not an accident, it was not an “occurrence” and, therefore, the allegations did not fall within coverage under the policy. The allegations in the Complaint did not constitute “property damage” based upon case law holding that “physical” injury occurs when property is altered in appearance, shape, color or other material dimensions. Travelers Ins. Co. v Eljer, 197 IL 2d 278, 308 (2001). The Association’s allegations that shoddy work by Total Roofing diminished value of the units did not constitute “physical” injury. The factual allegations of personal property damage set forth in the complaint were not offered for purposes of recovery and were only tangential to the claims. Therefore, those allegations do not trigger coverage. Further, the Association was not acting on behalf of individual unit owners, nor was the complaint amended to include the unit owners. Based upon the foregoing, the Court found that Westfield had no duty to defend Van Buren and, as such, no duty to indemnify. The decision includes a vigorous dissent. Add to Flipboard Magazine.
In McKean, et. al. v. Yates Engineering, 2015 Miss. App. LEXIS 446 (2015), the Court of Appeals of Mississippi affirmed the Circuit Court’s dismissal of four (4) plaintiffs’ personal injury claims stemming from the collapse of scaffolding at a construction site in Meridian, Mississippi. The project at issue involved the construction of a new multi-story medical building, a parking garage and other structures at the Anderson Regional Medical Center (“ARMC”). Foil Wyatt Architects and Planners PLLC (“Foil”) was retained to prepare overall design drawings for the project. Yates Construction (“YC”) was retained as the general contractor pursuant to an oral contract. YC in turn hired Spectrum II (“Spectrum”) to perform concrete work. All plaintiffs were employed by Spectrum. Excavation and other work began in 2008. By September, 2008, foundation walls and the first floor concrete slab had been poured. YC asked engineer Ted Pope to draft drawings of scaffolding and formwork necessary to complete the second story concrete work. Pope was employed by Yates Engineering (“YE”), described as a “sister company” of YC. YE’s retention to design the scaffolding and formwork was not reduced to writing. The scaffolding was intended not only to permit workers access to elevated work areas; it was also designed to keep the concrete forms properly positioned while the concrete cured. Engineer Pope’s design contemplated the use of 4” x 4” posts in 24 foot lengths. However, the posts were not milled at that length. Nevertheless, YC accepted the design drawings without comment. YC installed 12 foot long posts that were “spliced” together with short lumber pieces nailed to each of the 12 foot posts. YC never informed Mr. Pope or anyone else at YE that the scaffolding being installed was in derogation of Pope’s scaffold requirements and design. In November, 2008, while Spectrum workers were on the scaffolding pouring the concrete slab for the second floor, the scaffolding collapsed, causing plaintiffs to fall and allegedly sustain various injuries. In September, 2010, plaintiffs filed a tort suit against YC in Mississippi Circuit Court. YC filed a pre-answer motion to dismiss, arguing that it was the “statutory employer” of the plaintiffs and thus immune to suit based upon the excessive nature workers compensation coverage and benefits to the plaintiffs. In February, 2011, the plaintiffs amended their complaint and added YE and Foil as defendants. Plaintiffs alleged that the new defendants negligently designed and inspected the scaffolding and formwork, leading to the structural failure of the scaffolding. YC’s general liability insurer filed a declaratory judgment action in Federal court, arguing that plaintiffs were statutory employees and thus YC was immune from tort suit. In March, 2013, the U.S. District Court for the Southern District of Mississippi issued a ruling agreeing with the insurer, and the state court action against YC was subsequently dismissed. Plaintiffs then amended their complaint to add ARMC, alleging that the Medical Center negligently failed to obtain a written contract with YC, failed to supervise and inspect YC’s work and failed to maintain its premises in a reasonably safe condition and warn of potential dangers. Following a series of dispositive motions filed by each of the defendants, the Circuit Court found that neither YE, Foil or ARMC assumed the duty to inspect the construction work. Plaintiffs’ action was thus dismissed. Plaintiffs appealed the dismissal of their claims to the Court of Appeals of Mississippi. In an 8-1 decision, the Circuit Court’s decision(s) was upheld. The appellate court initially noted that YE performed its design work without benefit of a written contract or specifically, language requiring YE to inspect the scaffolding and formwork. The court then examined a series of factors to assist in its determination of whether YE was nevertheless bound by a duty to inspect the work and discover the noncompliant scaffolding. In this regard, plaintiffs argue that engineer Pope visited the worksite and observed the concrete formwork being installed. However, the court pointed out that the formwork installation observed by Pope was for the lower portions of the building, not the second floor scaffolding and formwork. That one visit was found insufficient to impose a duty to inspect the structures and equipment YE designed. The court next examined the causes of action asserted against ARMC. No written contract was available which defined the rights and obligations of the owner, ARMC, and its general contractor, YC. The court found that ARMC had “surrendered” the property to the general contractor at the excavation phase, prior to the concrete formwork being built. It also examined ARMC’s role at the project after YC took over the site. “[W]hen a property owner contracts its responsibility for the site to a general contractor, and there is no evidence that the property owner maintained any control over an instrumentality that injured a subcontractor’s employee, the property owner is not liable for the employee’s injuries.” McKean at 31. This conclusion is supported by the fact that ARMC administrators were not permitted to enter the construction area without first obtaining YC’s permission. ARMC retained no control over the worksite. Finally, the liability claims against architect Foil were evaluated. Its contract with ARMC stated, in pertinent part, that “[Foil] shall not have control over or charge of and shall not be responsible for construction means, methods, techniques, sequences or procedures, or safety precautions and programs in connection with the work, since these are solely the [general] Contractor’s responsibility.” Plaintiffs argued that Foil representatives visited the site on a weekly basis and checked the work to ensure that it conformed to the “Contract Documents.” However, the appellate court found that this inspection practice supported Foil’s “general authority to reject work that did not confirm to the Contract Documents” but did not create a right of Foil “to stop the work.” Id. at 40 [italics in original]. Thus, Foil lacked true supervisory authority that might permit extending liability in this suit. In a lengthy dissent, Court of Appeals Judge Ceola James argued that inspection duties could be extended to YE as there was no contract language available to specifically rule out extending such duty. Judge James also pointed out that YE’s engineer Ted Pope visited the site and observed that work had already begun on the lower building forms, although Pope had not yet submitted his overall plans for the scaffolding and forms to YC. Judge James reasoned that this situation arguably should have raised a “red flag” for Pope, and invited further inquiry. Also, compliance with YE’s plans and lumber requirements was impossible, and should have triggered questions about the safest manner to complete the scaffolding. In considering ARMC’s liability, Judge James found the general consensus of the parties that ARMC retained the authority to stop work that was sufficient to raise a question of fact. This was so even though ARMC was required to ask YC for permission to enter the worksite. Finally, the dissenting Judge noted that architect Foil exercised broad authority to supervise the work pursuant to its written contract and as reinforced by actual practice at the site. Judge James recounted the evidence supporting a supervisory role for Foil: weekly site visits, attending frequent onsite meetings involving the general contractor and subcontractors, worksite “walkthroughs” by Foil representatives and Foil’s submission of specifications for the formwork and rebar to be utilized in constructing the second story. “It would seem natural that the supervision of safety is encompassed in the duty to supervise, and no separate agreement to supervise safety is necessary where the architect is supervising the details of every other aspect of the project.” Id. at 64. The plaintiffs’ application for an appellate rehearing was denied in early 2016. 2016 Miss. App. LEXIS 116. More recently, plaintiffs’ application for a writ of certiorari to the Supreme Court of Mississippi was granted. 2016 Miss. LEXIS 246. Accordingly, that court will examine whether the conduct and unwritten authority of ARMC, YE and Foil are sufficient to deny defendants’ summary judgment motions and leave the supervision question for the trier of fact. Add to Flipboard Magazine.
The New Jersey Supreme Court recently considered whether damage caused by a subcontractor’s faulty workmanship constitutes property damage caused by an occurrence under a developer/general contractor’s commercial general liability policies. In Cypress Point Condo. Ass’n v. Adria Towers, L.L.C., 2016 N.J. LEXIS 847 (N.J. Aug. 4, 2016), the Court held that such damage resulted from an “occurrence” to trigger coverage under the policies and that the subcontractor exception to the “your work” exclusion applied. With the holding, the Court fell in line with the trend among courts across the country that have found such damage to be covered. Adria Towers acted as one of the developers/general contractors of the Cypress Point luxury condominium complex in Hoboken, which was constructed by subcontractors between 2002 and 2004. Evanston Insurance Company and then Crum & Forster Specialty Insurance Company insured Adria Towers from 2002 to 2009 under successive standard post-1986 ISO CGL policies. After construction was completed and control was turned over to the Association, the Association noticed leaks and water infiltration into the interior structure and sued, alleging faulty workmanship during construction, including but not limited to, defectively built or installed roofs, gutters, brick facades, exterior insulation and finishing system siding, windows, doors, and sealants. The Association claimed consequential damages, consisting of, among other things, damage to steel supports, exterior and interior sheathing and sheetrock, and insulation, to common areas, interior structures, and residential units. Adria Towers demanded a defense from Evanston, which refused. Eventually, the Association sought a judicial declaration regarding Evanston’s obligations under its policies, and Evanston brought Crum & Forster into the suit. The trial court granted summary judgment in favor of Evanston but the appellate court reversed. The New Jersey Supreme Court granted the insurers’ petition for certification. The Supreme Court began its analysis by discussing the history of the ISO CGL policy, specifically the 1986 version’s definition of “occurrence” and the subcontractor exception to the “your work” exclusion. As the court noted, the policies defined “occurrence” as an “accident” and found “that the term ‘accident’ … encompasses unintended and unexpected harm caused by negligent conduct.” Further, the Court noted that the subcontractor exception to the “your work” exclusion was the result of an agreement between insurers and policyholders that CGL policies should provide coverage for damage caused by a subcontractor’s bad work. Thus, the Court rejected the insurers’ argument that faulty workmanship could not result in coverage. Next, the Supreme Court discussed New Jersey precedent, including the seminal Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J. 1979), which has been cited by courts across the country for the proposition that CGL policies do not cover construction defects. The Supreme Court explained that the insurer in Weedo conceded that the policy initially provided coverage but that the “your work” exclusion precluded coverage for the insured’s defective work. The Court distinguished Weedo because that case did not address whether the alleged faulty workmanship constituted a covered “occurrence” and the policy at issue in that case did not contain the subcontractor exception (i.e. the exception to this exclusion “if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor”). The Supreme Court also surveyed case law from other states, finding a trend “interpreting the term ‘occurrence’ to encompass unanticipated damage to nondefective property resulting from poor workmanship.” Finally, the Supreme Court turned to the case before it and applied a three-step analysis: First, the Court considered whether the policies initially granted coverage; second, whether an exclusion applied; and third, whether an exception to the exclusion applied. The Court held that “consequential harm caused by negligent work is an ‘accident’”; therefore, the damage caused by the subcontractors was an occurrence and triggered the policies’ insuring agreement. Next, the Court found that the “your work” exclusion “would seem to eliminate coverage” but that the subcontractor exception applied to restore coverage. Add to Flipboard Magazine.
In the New York case of Schindler Elevator Corporation v. Tully Construction Co., Inc., 139 A.D.3d 930 (2d Dep’t 2016), the plaintiff sought recovery of additional expenses and costs it allegedly incurred as a result of delays in construction attributable to other entities at the site. Defendant Tully Construction Co., Inc.’s (“Tully”) was the general contractor for the construction of a multi-story garage for the City of New York Department of Sanitation. After contracting with the City in 2000, Tully subcontracted with certain entities to complete portions of the project. Plaintiff Schindler Elevator Corporation (“Schindler”) contracted with Tully in 2003 to install five (5) elevators in the new garage. Construction of the garage progressed over the next several years, until Schindler brought a breach of contract suit against Tully in 2010. Schindler alleged that project delays had prevented its completion of elevator work in a timely fashion, and caused it to incur various costs and expenses. At the subsequent bench trial of the action, plaintiff submitted a series of emails and letters it had forwarded to Tully, advising of delays and timetable issues during the period in question. Schindler asserted that these communications were sufficient to comply with the subcontract’s notice of damages provision. Moreover, Schindler argued that Tully had actual notice of project delays from other contractors and due to its continuous presence at the site. The trial judge found in plaintiff’s favor and awarded Schindler $209,235 plus interest. On appeal to the Second Department, the trial court’s decision and award were reversed, and the action was dismissed. The appellate court examined the controlling subcontract language regarding the elements of notice required to be given to Tully. Article 11.1.2 of the contract required that notice of any delay damages claimed was to be served on Tully within forty-five (45) days of the onset of such damages, and updates of the damages generated every thirty (30) days. In addition, a “verified statement” detailing the damages, and documentary evidence to support same was required to support a valid claim under the contract. The court held that “where a construction contract contains a condition precedent-type provision setting forth the consequences of a failure to strictly comply, strict compliance will be required.” Id. at 931. According to the court, Schindler’s communications clearly did not “strictly comply” with the contract’s condition precedent for a delay damages claim. Sealing plaintiff’s fate, and the dismissal of the action, was the contract wording stating that a “failure to strictly comply with [notice requirements] shall be deemed a conclusive waiver of any and all claims for damages due for delay arising from such condition.” Id. at 931. The court likewise brushed aside plaintiff’s argument that actual notice of the delay(s) and resulting damages obviated the contract-based notice obligation. The court found no contract language to support such a waiver of the contractor’s obligation to “strictly comply” with the notice requirement. Id. at 932. Add to Flipboard Magazine.
In Brock v. Garner Window & Door Sales, Inc., 187 So. 3d 294 (Fla. Dist. Ct. App., 2016), plaintiffs, Lawrence and Laura Brock (“Plaintiffs”) sued the contractor that installed windows on their home after they sustained water intrusion damage. Suit was filed more than four years, but less than five years, after discovery of the allegedly latent defect in the window installation. The window installer, Garner Window & Door Sales, Inc. (“Garner”), raised a statute of limitations defense under Florida’s statute, § 95.11(3)(c), which provides a four year statute of limitations for claims related to construction of an improvement to property. Plaintiffs argued that the general five-year statute for actions founded on a written contract applied. The trial court found that the four year statute applied and the Court of Appeals affirmed. The Court of Appeals explained that section 95.11(3)(c), Florida Statutes, which provides a four-year limitations period for all actions “founded on the . . . construction of an improvement to real property,” specifically applied to the facts of the suit and controlled over the general statute for written contracts. The court rejected what it described as Plaintiffs novel argued that the four year statute of limitations should not apply because Garner was not a licensed contractor. In support of that argument Plaintiffs pointed to language of the statute which states that the statute of limitations begins to run when the latter of the four events occurs: [T]he date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and his or her employer, whichever data is late; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. Fla. Stat. § 95.11(3) (c)… Having observed that the reference to the licensed contractor is in the portion of the statute which addresses when the statute of limitations begins to run and not what type of actions the statute applies to, the Court found Plaintiffs’ interpretation illogical. The Court noted that even if it were willing to accept Plaintiffs’ interpretation of the “licensed contractor” language in the statute, the trigger for the running of the statute of limitations was the discovery of a latent defect, not completion of contract and, therefore, Plaintiffs’ interpretation was immaterial. Plaintiffs’ also sought to rely upon Fla. Stat. §489.128, which deems contracts entered into by unlicensed contractors unenforceable, citing to Earth Trades, Inc. v. T&G Corp., 108 So. 3d 580 (Fla. 2013). The Court of Appeal, however, disagreed, finding that Fla. Stat. § 489.128 and the Earth Trades decision prevent an unlicensed contractor from enforcing a contract but not from defending an action to enforce the contract. Based upon the foregoing, the Court of Appeal affirmed the decision of the trial court dismissing Plaintiffs’ claims against Garner. Add to Flipboard Magazine.
In McCrea v. Arnlie Realty Co. LLC, 2016 N.Y.App.Div LEXIS 4215 (1st Dep’t June 7, 2016), plaintiff, an elevator repairman, was present at defendant’s property to investigate a scraping noise that could be heard while the elevator was in use. In order to investigate, plaintiff first rode in the elevator to hear the noise, and then attempted to investigate the safety underneath the elevator cab. Plaintiff manually raised the cab to halfway between the first and second floor while he was in the elevator pit beneath, three to four feet below ground level. While plaintiff was inspecting the safety, the elevator suddenly descended and pinned plaintiff, causing injuries. The court found that plaintiff was engaged in a repair rather than routine maintenance (which would not have been subject to the strict liability under New York Labor Law 240(1)) because the elevator shoes were not working at the time of the accident and the work plaintiff was performing was unrelated to normal wear and tear. Indeed, because the item at issue did not have a limited lifespan which would require replacement on a periodic basis, the trial court held that it could not be considered routine maintenance. Additionally, the trial court found that an elevator need not be inoperable for the work to constitute repair. New York Labor Law §240(1) imposes absolute liability upon owners and general contractors for injuries sustained due to gravity related risks including falling objects, which are in the process of being hoisted or secured. Finding that the elevator cab could be considered a falling object for purposes of the statute, the court relied on a line of cases applying the Labor Law where falling objects required securing for the purposes of the undertaking. Here, plaintiff was working below an elevator cab, which the court found required securing for purposes of the repair. No evidence was proffered to suggest that plaintiff refused or misused the available safety equipment. The First Department therefore affirmed the grant of summary judgment in favor of plaintiff and the denial of summary judgment to defendant on Labor Law §240(1), thus establishing liability as a matter of law. Defendant also moved for summary judgment seeking dismissal of the Labor Law 200 claims, but the court denied that motion, finding that issues of fact existed as to whether defendant had supervisory control over the means and methods of plaintiff’s work, whether the provision of a service agreement which required shutting down of the power to the elevator had been waived, and whether defendant ever gave specific instructions to Plaintiff. Add to Flipboard Magazine.
In The Village at North Pointe Condominiums Association v. Bloedel Construction Co. et al., 278 Or App 354 (2016), the Oregon Court of Appeals held that defendant contractor could recover attorneys’ fees against a homeowners association without apportionment between some fee-generating and non fee-generating claims because there were common issues between the claims. The Village at North Pointe Condominiums Association (“Association”) was established to manage a 52-unit condominium building located in Depoe Bay, Oregon. Bloedel Construction Co., Roger Bloedel and Big Sky Construction Company (collectively “Bloedel”) developed and built the condominiums. In 2008, the Association filed a complaint against Bloedel alleging that construction defects in the condominiums caused water intrusion. Bloedel Construction Co., in turn, brought a cross-complaint for indemnity and contribution against its subcontractors. At trial, the Association advanced five claims for relief against Bloedel: (1) negligence, (2) negligent misrepresentation, (3) unreasonable interference with use and enjoyment, (4) breach of fiduciary duty, and (5) breach of condominium unit sales contracts (against Bloedel Construction Co. only). After a lengthy trial, the jury returned a verdict for the defendants on all claims. As the prevailing party, and based on a provision in its written contract, Bloedel Construction Co. sought and was awarded attorney’s fees against the Association in the amount of $481,000. Other parties obtained their costs. On appeal, the Association argued that (1) attorney’s fees for work performed for Roger Bloedel (as oppsed to Bloedel Construction Co.) should not have been awarded, (2) the non fee-generating claims or issues could have been segregated from the fee-generating claim (i.e. breach of contract), (3) the attorney fee billing statements supplied by Bloedel Construction Co. were insufficiently detailed and too heavily redacted to be considered, and (4) the modified lodestar method applied by the trial court was improper because specific fee entries were not examined. In analyzing the first two arguments advanced by the Association, the Court recognized the exception to the general rule of apportionment, stating that “[w]hen a party prevails in an action that encompasses both a claim for which attorney fees are authorized and a claim for which they are not, the trial court must apportion fees, except when there are issues common to both claims.” This ‘common issue’ exception is based on “the premise that attorney fees should not be subject to apportionment when the party entitled to fees would have incurred roughly the same amount of fees, irrespective of the additional claim or claims.” The Court found there were two evidentiary components common to every claim asserted by the Association. First, evidence concerning the physical condition of the condominiums, the standard of care for constructing the building, the necessary repairs, and the cost of those repairs were common to every claim, including the breach of contract claim. Second, evidence concerning the deficiencies in the Association’s financial condition when Bloedel turned over control were common to plaintiff’s breach of fiduciary duty claim and the breach of contract claim. Consequently, based on the manner in which the Association pled it case, both evidentiary components invoked the breach of contract claim (the fee-generating claim). The Court also noted that identical damages were sought under each claim. The Court further found the award of attorney’s fees generated for prosecution of Bloedel Construction Co.’s cross-complaint against the subcontractors was proper. Indeed, because the third party claims were based on indemnity and contribution, by their very nature, they were common to the fee-generating contract claim that the Association brought against Bloedel Construction Co. The Court recognized the trial court’s determination that all litigated claims at trial were common because everything revolved around whether or not the building was constructed properly, regardless of the legal theories advanced. The court also refused to segregate fees incurred by Bloedel Construction Co. versus Roger Bloedel, as the Association brought identical claims against both and would have been incurred regardless. However, the Court determined that fees incurred by Bloedel Construction Co. for insurance coverage issues were not in common with the Association’s breach of contract claim and were incurred by separate counsel to handle insurance coverage issues only. The insurance coverage issues were not litigated in the construction defect case. Accordingly, such fees related were not recoverable by Bloedel Construction Co. The Court rejected the Association’s third and fourth arguments, noting that neither the written contract nor Oregon law required the trial court to use a particular method for calculating reasonable attorney fees, and the fee entries on the billing records were sufficiently detailed for the trial court to issue an award. Accordingly, the court reversed and remanded the fee award only for an apportionment of insurance coverage fees. Add to Flipboard Magazine.
In the case of 328 Barry Avenue, LLC v. Nolan Properties Group, LLC, 871 N.W.2d 745 (Minn. 2015), the Supreme Court of Minnesota considered the statute of limitations under Minn. Stat. § 541.051, subd. 1, for actions “arising out of the defective and unsafe condition of an improvement to real property,” and whether it required that construction be substantially complete to start the running of the statute of limitations. The Supreme Court of Minnesota agreed with the lower court decisions that “substantial completion” of a project was unnecessary to trigger the running of the statute of limitation, but reversed the lower court’s finding that the statute of limitations could be calculated as a matter of law based on facts presented. Thus, the Supreme Court remanded the action back to the trial court for further proceedings and to determine when notice of a construction defect was received. In 2008, construction of a three (3) story commercial building began on property owned by 328 Barry Avenue, LLC (“328 Barry”). 328 Barry retained Nolan Properties Group, LLC (“Nolan”) as the general contractor which, in turn, retained various subcontractors, including Minuti-Ogle Co. (“MOC”) that performed exterior stucco work, and Marvin Windows, Inc. (“MWI”) that installed windows in the new structure. In October, 2009 as the project was nearing completion, Nolan personnel conducting a “walkthrough” at the site noticed water running from the perimeter of one of the installed windows and pooling on the floor. MOC inspected the area, observed the condition and concluded that it was a “window issue” and applied silicone sealant around the window/wall border in an effort to eliminate the leakage. Despite the corrective measure taken, Nolan contacted MOC approximately two (2) weeks later to report the same pooling water condition. Nolan and MOC representatives performed a “spray test” using a garden hose to shoot water against the window and the surrounding exterior wall area. This test purportedly revealed that water seepage was occurring on one side of the window but no further corrective measures were taken. As of May 2010, the local municipality issued a certificate of occupancy and 328 Barry began to occupy portions of the building. In August, 2010, 328 Barry again noticed pooling water near the window at issue. MOC representatives inspected the window area and reiterated their belief that the problem was a window defect, not sealing or the surrounding stucco material. Over the next year, 328 Barry and Nolan retained construction experts to evaluate and pinpoint the problem. Some of the experts performed cuts in the walls around various windows. In June, 2012 an expert found widespread dampness, unsealed joints and stucco pulling away from its support at several windows. The expert’s June, 2012 report ultimately triggered 328 Barry’s suit against Nolan. This complaint alleged negligent performance of Nolan’s duties as a general contractor and negligent hiring of certain subcontractors. Nolan impleaded several subcontractors, including MOC and MWI, seeking contribution and indemnity. After completion of discovery, Nolan moved for summary judgment on statute of limitation grounds pursuant to Minn. Stat. §541.051(1)(a), which states that a tort or contract action to recover for property damage or injury “arising out of the defective and unsafe condition of an improvement to real property” must be filed no later than two (2) years after “discovery of the injury.” The trial court granted defendant’s summary judgment motion, finding that the construction defect was brought to 328 Barry’s attention in October, 2009. Its failure to ensure effective remediation at that time, according to the court, did not delay notice of the defect until the issue was revisited in August, 2010. The trial court also rejected 328 Barry’s contention that the two (2) year statute of limitation does not begin to run until the condition precedent of “substantial completion” of a construction project has been reached. In upholding dismissal of 328 Barry’s action, the Court of Appeals affirmed all aspects of the trial court’s ruling. The Minnesota Supreme Court turned first to plaintiff-appellant’s contention that “substantial completion” is required to trigger the running of the two (2) year statute of limitation. Rejecting that contention, the Court noted that the phrase “substantial completion” does not appear in the portion of the statute establishing the two (2) year limitation (Minn. Stat. §541.051(1)(a)). Moreover, that phrase appears only in the related “statute of repose,” which restricts any cause of action from accruing “more than ten years after substantial completion of the construction.” See Minn. Stat. 541.051(1)(a). The court applied a “plain reading” approach to the statute and determined that substantial completion of the construction work was not required in order to trigger the two (2) year statute of limitation, because the legislature did not include that phrase in the controlling portion the statute, as it specifically did with the related ten (10) year statute of repose. “A condition expressly mentioned in one clause of a subdivision provides evidence that the Legislature did not intend for the condition to apply to other clauses in which the condition is not stated.” Id. at 750. Thus, that portion of the Court of Appeals decision was upheld. The Court of Appeals then analyzed the lower courts’ holding regarding when 328 Barry was deemed to have received notice of the construction defect, thus triggering the two (2) year statute. The Court placed significant weight on the fact that, during a period of continued construction on the project, the caulking applied by MOC in October, 2009 seemed to have corrected the problem. No water complaints were received over the next several months. “Given the lack of evidence of any leaks in the building for 10 months and the fact that construction activities were still being performed in the Fall of 2009, we cannot say that reasonable minds could arrive at only one conclusion regarding when [plaintiff] was aware, or should have been aware of its injury.” Id. at 753. The court fond that the available evidence regarding when 328 Barry should be charged with notice of the defective construction was split between the events of October, 2009 and those occurring ten (10) months later. Accordingly, the Supreme Court remanded the matter to the trial court for further proceedings. The decision left the issue of notice of defect and when the statute of limitation accrued to the trier of fact. This case is a cautionary tale for owners and contractors to thoroughly investigate construction defects as soon as there is any indication of such an issue and preserve/pursue available remedies promptly. Add to Flipboard Magazine.