In August 2009, the Minnesota Court of Appeals affirmed a sanctions award against a plaintiff homeowner and his attorney, and in favor of defendant contractors, for intentionally trying to mislead the court. The main issues centered around an expert report, the effect that report had on starting the statute of limitations for a construction defect claim and attempts by the homeowner to mislead the court regarding when he first discovered his injury in an attempt to avoid the statute of limitations.

Case Overview

In Buscher v. Montag Development, et al., a homeowner hired various contractors to perform a remodeling project. Several years after the remodeling project was finished, the homeowner began to experience numerous water-related problems. After repairs were attempted, the homeowner hired an air quality expert to assess the air quality of the home. While the expert found most results to be within a normal range, there were elevated levels of mold in some parts of the house that went beyond what the expert considered to be safe. The expert discussed this with the homeowner and provided the homeowner with a written report that detailed his findings.

Two years after repairs were attempted and the air quality expert issued his report, the homeowner discovered a water leak in the master bedroom and evidence of water between the exterior and interior walls. The homeowner hired several companies to assess and investigate the problems, which ultimately led to the discovery of major mold and water damage. It was not until more than a year after this discovery that the homeowner hired an attorney and sued several contractors who had worked on the remodeling project.

During the course of the litigation, the homeowner provided several thousand documents to the attorneys for the contractors, including the air quality expert's report. However, the report was incorrectly labeled, making the document difficult to find. Furthermore, the homeowner failed to produce the report when specifically asked for it, and according to the court, tried to mislead the court regarding when the homeowner first discovered his injury by filing misleading memoranda and affidavits. The contractors ultimately prevailed on a summary judgment motion because the court found that the expert's air quality report put the homeowner on notice of a serious issue, and that by waiting several years to sue the contractors, the homeowner's claim was barred by the statute of limitations. The court also awarded large monetary sanctions in favor of the contractors and against the homeowner and his attorneys for misleading and wasting the time and money of the court and the contractors.

Statute of Limitations: Impact on Contractors and Homeowners

A key fact for the contractors was the time that had passed before the homeowner sued. As often happens in cases regarding a construction defect, a central issue is when the statute of limitations begins to run. Minnesota courts have consistently held that the two-year statute of limitations provision in Minnesota Statute 541.051, subd. 1(a) begins to run when an actionable injury is discovered, or when an actionable injury should have been discovered using due diligence. It does not matter whether the precise nature, cause or extent of the defect is known at the time of discovery. In the Buscher case, the court held that the statute of limitations started when the expert report was written and delivered to the homeowner. Even though the report did not detail the defects that were present, the court found that the homeowner was put on notice of a defect that could have, through reasonable effort and diligence, been discovered at that time. The homeowner had the responsibility to investigate further.

However, the court in Buscher reiterated an important point that contractors need to keep in mind: the statute of limitations will not serve to bar a claim against a contractor when the contractor has made representations to the injured party that repairs will be made, but then fails to do so.

Sanctions

The court issued sanctions against both the homeowner and his attorney. The court found that several actions by the homeowner and his attorney amounted to an attempt to mislead the court and the opposing party about when the homeowner discovered his injury, thus triggering the statute of limitations. The attempts to mislead the court included the tailoring of affidavits to omit reference to the expert report, as well as the exaggeration of later investigations by the homeowner. To deter this type of behavior, the court awarded thousands of dollars in sanctions against the homeowner and awarded attorneys fees and costs to the defendant contractors.