Court Opinion

ID: 2803719
Source: CourtListenerOpinion
Date Created: 2015-05-27 17:13:17.467467+00
Date Added: 2024-06-11T12:22:31.427037
License: Public Domain

This opinion will be unpublished and
                        may not be cited except as provided by
                        Minn. Stat. § 480A.08, subd. 3 (2014).

                             STATE OF MINNESOTA
                             IN COURT OF APPEALS
                                   A14-1524

                          Second Chance Investments, LLC,
                                    Appellant,

                                           vs.

                             Sabri Properties, LLC, et al.,
                                    Respondents,

                             Puentes Exteriors, LLC, et al.,
                                      Defendants.

                                  Filed May 26, 2015
                                       Affirmed
                                   Peterson, Judge

                            Hennepin County District Court
                              File No. 27-CV-10-20858

Paul A. Sortland, Sortland Law Office, PLLC, Minneapolis, Minnesota (for appellant)

Joseph F. Lulic, Hanson, Lulic & Krall, Minneapolis, Minnesota (for respondents)

      Considered and decided by Connolly, Presiding Judge; Peterson, Judge; and

Harten, Judge.*

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                        UNPUBLISHED OPINION

PETERSON, Judge

      In this appeal from a summary judgment, appellant argues that the district court

erred in concluding that (1) appellant’s breach-of-contract claims against respondents

were barred by the doctrine of merger; (2) appellant’s negligence claim failed because

respondents owed no duty to appellant; (3) appellant could not bring a breach-of-express-

warranty claim based on the sale of a home; (4) appellant’s claim of breach of an implied

warranty of fitness for an intended purpose failed because there was no contract between

appellant and respondents; and (5) the warranty under Minn. Stat. § 327A.02, subd. 1

(2014), which protects home buyers, does not apply to this case. We affirm.

                                         FACTS

      Respondent Sabri Properties, LLC (Sabri Properties) is a property-development,

restoration, and general-construction-services business. Respondent Basim Sabri (Sabri)

is the sole shareholder of Sabri Properties. Respondent Rochelle Barrett is the office

manager for Sabri Properties. All three respondents were involved in the construction of

a home on property that Barrett owned. Construction began in the spring of 2004 and

took about a year and a half to complete. The certificate of occupancy for the home was

issued on September 27, 2005.

      In early September 2005, Barrett and appellant Second Chance, LLC, executed a

purchase agreement for Second Chance to buy the property. By warranty deed executed

September 26, 2005, Barrett, acting on behalf of herself and as attorney-in-fact for Sabri,

conveyed the property to Second Chance. Second Chance is a property-development

                                            2
business, and Terrence J. Magill, Second Chance’s owner, testified in a deposition that

Second Chance bought the property “to turn it for a profit.”

         In April 2008, the house sustained water damage from a toilet leak that caused

flooding inside the house. When the water damage was being repaired, several unrelated

defects were discovered, and Second Chance hired a professional engineer who worked

for Advanced Consulting and Inspection (ACI), to inspect the house. ACI prepared a

report that identified numerous construction defects and building-code violations that

resulted in water intrusion and structural damage occurring progressively since the house

was constructed. An estimate prepared by Northland Construction Group, LLC stated

that it would cost $741,149.36 to repair the moisture-intrusion damage.

         In November 2008, the house was nearly destroyed by fire. In January 2010,

Second Chance sold the property to Hearthside Properties, LLC, and the house was later

demolished. The sale agreement expressly reserved to Second Chance the right to pursue

its construction-defect claims.

         In June 2009, before selling the property, Second Chance brought this action

against respondents alleging claims of breach of contract, negligence, breach of express

warranty, breach of implied warranty of fitness for intended purpose, and breach of

statutory warranty under Minn. Stat. ch. 327A.1 The district court granted summary

judgment for respondents. This appeal followed.

1
    Other claims asserted by Second Chance are not at issue on appeal.

                                              3
                                     DECISION

       Summary judgment is appropriate when the record shows “that there is no genuine

issue as to any material fact and that either party is entitled to a judgment as a matter of

law.” Minn. R. Civ. P. 56.03. We review the district court’s grant of summary judgment

de novo, to determine whether there are genuine issues of material fact and whether the

district court erred in applying the law. Mattson Ridge, LLC v. Clear Rock Title, LLP,

824 N.W.2d 622, 627 (Minn. 2012). “We view the evidence in the light most favorable

to the party against whom summary judgment was granted.” STAR Ctrs. v. Faegre &

Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002).

                                             I.

       Second Chance’s breach-of-contract claims against Barrett and Sabri are based on

the alleged falsity of warranties and representations in the purchase agreement. “The

merger doctrine generally precludes parties from asserting their rights under a purchase

agreement after the deed has been executed and delivered.”          Bruggeman v. Jerry’s

Enters., Inc., 591 N.W.2d 705, 708 (Minn. 1999).          The merger doctrine creates a

presumption of merger, which can be overcome by sufficient evidence to the contrary,

such as a survival clause. Id. at 710. The presumption of merger does not apply to

conditions subsequent. Id. at 711. Merger does not apply when there is fraud. JEM

Acres, LLC v. Bruno, 764 N.W.2d 77, 83 (Minn. App. 2009).

       The purchase agreement states:

              SELLER   WARRANTS    THAT    CENTRAL   AIR-
              CONDITIONING, HEATING, PLUMBING AND WIRING
              SYSTEMS USED AND LOCATED ON SAID PROPERTY

                                             4
              SHALL BE IN WORKING ORDER ON DATE OF
              CLOSING,  EXCEPT  AS  NOTED  IN  THIS
              AGREEMENT. . . .

              BUYER    ACKNOWLEDGES   THAT    NO   ORAL
              REPRESENTATIONS HAVE BEEN MADE REGARDING
              POSSIBLE PROBLEMS OF WATER IN BASEMENT OR
              DAMAGE CAUSED BY WATER OR ICE BUILDUP ON
              ROOF OF THE PROPERTY, AND BUYER RELIES
              SOLELY IN THAT REGARD ON THE FOLLOWING
              STATEMENT BY SELLER:

              SELLER ___ HAS _X_ HAS NOT HAD A WET
              BASEMENT AND ___ HAS _X_ HAS NOT HAD ROOF,
              WALL OR CEILING DAMAGE CAUSED BY WATER OR
              ICE BUILDUP.    BUYER ___ HAS _X_ HAS NOT
              RECEIVED A SELLER’S PROPERTY DISCLOSURE
              STATEMENT OR A SELLER’S DISCLOSURE ELECTION
              FORM. BUYER HAS RECEIVED THE INSPECTION
              REPORTS, IF REQUIRED BY MUNICIPALITY.

       Second Chance argues that the merger doctrine does not apply because the

warranties were not something contemplated to be performed at closing. A condition

subsequent is a promise that by its nature is not performable until sometime after closing.

Bruggeman, 591 N.W.2d at 709. But the statements made in the purchase agreement

relate to the condition of the home as of and before the closing date and do not say

anything about the condition of the home after closing.         Therefore, the condition-

subsequent exception to the merger doctrine does not apply.

       Second Chance also relies on the fraud exception to the merger doctrine. An

element of fraud is “a false representation by a party of a past or existing material fact.”

JEM Acres, 764 N.W.2d at 83. The evidence presented by Second Chance is insufficient

to create a fact issue as to a false representation.      There is no evidence that the

                                             5
mechanical systems were not working as of the closing date. Although the ACI report

identified construction defects and stated that water intrusion and structural damage had

occurred progressively since construction, the house was sold to Second Chance shortly

after construction was completed, and the report does not indicate that any damage from

water intrusion had occurred as of the closing date. To withstand a summary-judgment

motion, a party must present specific facts showing the existence of a genuine issue for

trial, and speculation is insufficient. Nicollet Restoration, Inc. v. City of St. Paul, 533
N.W.2d 845, 848 (Minn. 1995).

      Finally, Second Chance cites a treatise stating that “[c]ovenants of warranty as to

quality and improvements are collateral to the conveyance and are not merged into nor

satisfied by the deed.” 11 Thompson on Real Property § 96.11(e) (David A. Thomas ed.,

2nd ed. 2002). Our supreme court, however, has declined to adopt a collateral-agreement

exception to the merger doctrine. Bruggeman, 591 N.W.2d at 710.

      The district court properly concluded that, as a matter of law, Second Chance’s

breach-of-contract claims were barred by merger.

                                            II.

             A defendant in a negligence suit is entitled to summary
             judgment when the record reflects a complete lack of proof
             on any of the four essential elements of the negligence claim:
             (1) the existence of a duty of care, (2) a breach of that duty,
             (3) an injury, and (4) the breach of the duty being the
             proximate cause of the injury.

                                            6
Funchess v. Cecil Newman Corp., 632 N.W.2d 666, 672 (Minn. 2001). The existence of

a duty of care is a question of law, which this court reviews de novo. Domagala v.

Rolland, 805 N.W.2d 14, 22 (Minn. 2011).

      “[A] contractor has a duty, independent of the contract itself, to erect a building in

a reasonably good and workmanlike manner.” Arden Hills N. Homes Ass’n v. Pemtom,

Inc., 475 N.W.2d 495, 500 (Minn. App. 1991), aff’d as modified, 505 N.W.2d 50 (Minn.

1993). The duty is owed to the contractee. Brasch v. Wesolowsky, 272 Minn. 112, 117,

138 N.W.2d 619, 623 (1965).

      Because there was no contract between Second Chance and respondents to build

the home, Second Chance is not the contractee and, as a matter of law, respondents did

not owe Second Chance a duty to build the home in a reasonably good and workmanlike

manner.   The district court properly granted summary judgment to respondents on

Second Chance’s negligence claim.

                                           III.

      To establish a breach-of-warranty claim, a plaintiff must show the existence of a

warranty, a breach of that warranty agreement, and a causal connection between that

breach and damages incurred. Peterson v. Bendix Home Sys., Inc., 318 N.W.2d 50, 52-53

(Minn. 1982).

      Although the basis of Second Chance’s express-warranty claim is unclear, it

appears to be that “Sabri represented to [Second Chance] that the house was the product

of high quality workmanship and materials, and that its value was, indeed, $1.9 Million.”

The only evidence Second Chance cites to support this claim is exhibit one admitted

                                            7
during Magill’s deposition, which is the purchase agreement.            But the purchase

agreement does not warrant that the house was the product of high quality workmanship

and materials or that its value was $1.9 million.

       If Second Chance’s claim is that Sabri made oral representations to that effect, the

oral representations were superseded by the purchase agreement, which contains an

integration clause that makes the written agreement the parties’ complete agreement. The

integration rule provides that

              where parties have reduced their contract to writing, the
              contract may not be proved by prior or contemporaneous
              utterances or writings and that these are entirely immaterial
              for the purpose of determining what the terms of the contract
              are. By making the writing the only depository and memorial
              of the contract, what was said during the negotiations therefor
              or at the time of its execution must be understood to be
              superseded by the writing, and so much of what was thus said
              as is not carried forward into the writing must be deemed to
              have been waived or abandoned. The rule is not one of
              evidence, but of substantive law – the writing is the contract,
              not merely the evidence thereof.             Antecedent and
              contemporaneous utterances are excluded, not because they
              are lacking in evidentiary value, but because the law for
              substantive reasons declares that such matters shall not be
              shown.

Lehman v. Stout, 261 Minn. 384, 390, 112 N.W.2d 640, 644 (1961) (quotation omitted).

       Second Chance has not identified any evidence in the record that shows that

respondents expressly warranted that the house was the product of high quality

workmanship and materials and that its value was $1.9 million. We note that just before

exhibit one was introduced, Magill testified that he did not talk to Sabri or Barrett about

                                             8
the property. But even if there were oral statements of warranty, under the doctrine of

integration, the district court properly granted summary judgment for respondents.

                                            IV.

      Citing Robertson Lumber Co. v. Stephen Farmers Coop. Elevator Co., 274 Minn.
17, 24, 143 N.W.2d 622, 626 (1966), Second Chance argues that “Minnesota recognizes

an implied warranty of fitness in the sale of land and buildings.” Second Chance’s

argument misconstrues Robertson Lumber, which states:

             This we believe to be an appropriate case for extending to
             construction contracts the doctrine of implied warranty of
             fitness for the purpose, under circumstances where (1) the
             contractor holds himself out, expressly or by implication, as
             competent to undertake the contract; and the owner (2) has no
             particular expertise in the kind of work contemplated;
             (3) furnishes no plans, design, specifications, details, or
             blueprints; and (4) tacitly or specifically indicates his reliance
             on the experience and skill of the contractor, after making
             known to him the specific purposes for which the building is
             intended.
274 Minn. at 24, 143 N.W.2d at 626.

      Second Chance did not have a construction contract with respondents; it had a

contract to purchase real estate. And Second Chance does not explain how the four

circumstances for applying the doctrine of implied warranty are met in this case where,

under Second Chance’s theory, respondents were both contractor and owner. The district

court properly granted summary judgment for respondents on Second Chance’s breach-

of-implied-warranty claim.

                                             9
                                             V.

       Minn. Stat. § 327A.02, subd. 1 (2014), sets forth warranties that apply to a

dwelling for specified periods “from and after the warranty date.”

                     “Warranty date” means the date from and after which
              the statutory warranties provided in section 327A.02 shall be
              effective, and is the earliest of:
                             (a) the date of the initial vendee’s first
              occupancy of the dwelling; or
                             (b) the date on which the initial vendee takes
              legal or equitable title in the dwelling.

Minn. Stat. § 327A.01, subd. 8 (2014).       “‘Initial vendee’ means a person who first

contracts to purchase a dwelling from a vendor for the purpose of habitation and not for

resale in the ordinary course of trade.” Id., subd. 4 (2014).

       Although Second Chance was the first party to contract to purchase the home, it

was not an initial vendee because it purchased the home “to turn it for a profit” and not

for the purpose of habitation. Without an initial vendee, the requirements of section

327A.01, subds. 4, 8(a)-(b), could not be met, and the statutory warranty never became

effective.   Accordingly, the district court properly granted summary judgment for

respondents on Second Chance’s statutory warranty claim.

       Affirmed.

                                             10