McCaulley v. C L Enters. ( 2021 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
06/25/2021 08:09 AM CDT
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Nebraska Supreme Court Advance Sheets
309 Nebraska Reports
McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141Richard McCaulley, individually and as
Personal Representative of the Estate
of Michelle McCaulley, appellant, v.
C L Enterprises, Inc., a Nebraska
corporation, et al., appellees.
___ N.W.2d ___
Filed May 7, 2021. No. S-20-075.
1. Summary Judgment: Appeal and Error. An appellate court will affirm
a lower court’s grant of summary judgment if the pleadings and admit-
ted evidence show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from those facts and
that the moving party is entitled to judgment as a matter of law. An
appellate court reviews the district court’s grant of summary judgment
de novo, viewing the record in the light most favorable to the nonmov-
ing party and drawing all reasonable inferences in that party’s favor.
2. Pleadings: Judges: Words and Phrases: Appeal and Error. A district
court’s denial of a motion for leave to amend a complaint is reviewed
for an abuse of discretion. A judicial abuse of discretion exists if the
reasons or rulings of a trial judge are clearly untenable, unfairly depriv-
ing a litigant of a substantial right and denying just results in matters
submitted for disposition.
3. Limitations of Actions: Negligence: Breach of Warranty: Contractors
and Subcontractors. The limitations period in Neb. Rev. Stat. § 25-223(Reissue 2016) applies to defective construction claims brought against
contractors and builders, whether such claims are based on negligence
or breach of warranty.
4. Limitations of Actions: Contractors and Subcontractors. When the
basis of a claim against a builder or contractor is improper workmanship
resulting in defective construction, the statute of limitations under Neb.
Rev. Stat. § 25-223 (Reissue 2016) runs from the date of substantial
completion of the project, not the date of any specific act which resulted
in the defect.
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 1415. ____: ____. Determining when a construction project is substantially
complete for purposes of the limitations period under Neb. Rev. Stat.
§ 25-223 (Reissue 2016) requires consideration of the nature and scope
of the agreed-upon project.
6. Pleadings: Rules of the Supreme Court: Appeal and Error. When a
party seeks leave to amend a pleading, appellate court rules generally
require that leave shall be freely given when justice so requires. Denial
of leave to amend pleadings is appropriate only in those limited circum-
stances in which undue delay, bad faith on the part of the moving party,
futility of the amendment, or unfair prejudice to the nonmoving party
can be demonstrated.
7. Pleadings: Summary Judgment: Evidence. Generally, it is not an
abuse of discretion to deny leave to amend when a party seeks to add
a new claim or defense after a motion for summary judgment has been
heard and submitted, unless evidence or testimony exists in the record
indicating the proposed claim or defense was newly discovered or that
counsel was previously unaware of the claim.
Appeal from the District Court for Douglas County: W.
Russell Bowie III, Judge. Affirmed.
Andrew M. Hollingsead and Michael J. Matukewicz, of
Liakos & Matukewicz, L.L.C., for appellant.
Robert D. Mullin, Jr., of McGrath, North, Mullin & Kratz,
P.C., L.L.O., for appellee Able Plumbing, Inc.
Robert M. Schartz and Julie M. Ryan, of Abrahams, Kaslow
& Cassman, L.L.P., for appellee Timberland Hardwood Floors,
Inc.
Danny C. Leavitt, of Salerno & Leavitt, for appellee Dan
Becker.
Daniel J. Welch, Damien J. Wright, and Daniel McDowell,
Senior Certified Law Student, of Welch Law Firm, P.C., for
appellee Hardscape Contractors, LLC.
Heavican, C.J., Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ.
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141Stacy, J.
In this construction defect case brought by homeowners
against several contractors, the district court found the home-
owners’ claims were time barred under Neb. Rev. Stat. § 25-223(Reissue 2016). The primary question on appeal is whether the
4-year limitations period under § 25-223 began to run on the
date each contractor substantially completed its project or on
the date the entire home was completed. Because we agree
with the district court that the limitations period against each
contractor began to run upon the substantial completion of
each contractor’s project, we affirm.
BACKGROUND
In approximately November 2006, Richard McCaulley and
Michelle McCaulley began construction on a home in Omaha,
Nebraska. The McCaulleys acted as their own general con-
tractor, and in that capacity, they hired a number of different
contractors to perform specific work. As relevant to the issues
on appeal, the McCaulleys hired Able Plumbing, Inc., to install
sewer lines servicing the property; Affordable Exteriors, Inc.,
to install exterior masonry and brickwork; Stile Construction
Services, LLC (Stile), to install the roof; Timberland Hardwood
Floors to install hardwood floors; Dan Becker Construction to
install the doors and windows; Senegal Specialty Contracting,
LLC, to perform waterproofing and to install drain tile and
sump pumps; and Hardscape Contractors, LLC, to construct a
retaining wall.
The McCaulleys moved into the home sometime in late
February or early March 2008. Approximately 4 years later,
on February 7, 2012, they filed this construction defect action
in the district court for Douglas County, naming as defendants
12 of the contractors involved in the construction of the home,
including the 7 contractors referenced above.
The McCaulleys alleged a separate negligence claim against
each of the seven contractors. Specifically, they alleged that
each such contractor owed a legal duty to install its “respective
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141improvements” to the property “in a good and workmanlike
manner” and failed to do so. They also alleged a breach of
warranty claim against four of the contractors: Able Plumbing,
Affordable Exteriors, Stile, and Dan Becker Construction.
Specifically, they alleged that each such contractor’s work
carried with it a warranty the work “would be performed in
a good and workmanlike manner, without latent defects, and
reasonably fit for the ordinary purposes” for which the spe-
cific work was intended. It was alleged that each such contrac-
tor breached the warranty, because the McCaulleys discovered
“numerous and substantial defects and deficiencies in the
installation” work of each. There were no allegations that any
of the contractors expressly warrantied their work.
While the case was pending, Michelle died. Her claims
have been revived by Richard in his capacity as personal
representative of her estate. For ease of reference, this opin-
ion will continue to refer to the plaintiffs/appellants as “the
McCaulleys.”
At different times during the litigation, each of the seven
contractors referenced above filed a motion for summary judg-
ment, arguing the claim against it was barred by the 4-year
limitations period under § 25-223. Each of the seven contrac-
tors generally argued that the McCaulleys’ claim accrued, and
the limitations period under § 25-223 began to run, on the
date that each contractor substantially completed its work. The
McCaulleys did not dispute the dates on which each contractor
claimed to have completed its work, but instead argued that
the 4-year limitations period did not start to run for any of the
seven contractors until the entire home construction project
was substantially completed.
In March 2014, the district court granted summary judgment
in favor of Timberland Hardwood Floors, Senegal Specialty
Contracting, and Hardscape Contractors, generally agreeing
that the limitations period for the McCaulleys’ claims against
these contractors began to run on the dates that each contrac-
tor substantially completed its work. After determining the
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141substantial completion date for each contractor, the district
court found the McCaulleys’ suit had not been filed within 4
years of such date. The district court also found the discovery
rule did not extend the time to file against any of these contrac-
tors, and thus, it dismissed the claims against those contractors
as time barred. In June 2015, the district court utilized identi-
cal reasoning to grant summary judgment in favor of Able
Plumbing and Dan Becker Construction.
Similar summary judgment motions were filed by Affordable
Exteriors and Stile, and those motions were pending when this
court decided Adams v. Manchester Park. 1 At the summary
judgment hearing in November 2015, the McCaulleys made an
oral motion for leave to file a fourth amended complaint, rely-
ing on language in the concurring opinion in Adams to argue
they should be allowed to amend their complaint to allege
the breach of an express warranty to repair. Both Affordable
Exteriors and Stile objected to the requested amendment, argu-
ing that the McCaulleys had already filed three complaints and
that none had alleged the existence, or breach, of an express
warranty to repair material defects. The court took the oral
motion to amend under advisement.
In an order entered February 11, 2016, the district court
granted summary judgment in favor of Affordable Exteriors
and Stile, again reasoning that the 4-year limitations period
under § 25-223 began to run on the dates each contractor
substantially completed its respective work and that the com­
pletion dates were more than 4 years before the date on which
the McCaulleys filed their lawsuit. The court also denied
the McCaulleys’ request for leave to file a fourth amended
complaint.
After all remaining claims were resolved, the district court
entered final judgment, and the McCaulleys timely appealed.
We moved the case to our docket on our own motion.
1
Adams v. Manchester Park, 291 Neb. 978, 871 N.W.2d 215 (2015).
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141ASSIGNMENTS OF ERROR
The McCaulleys assign, restated, that the district court erred
in (1) finding their claims against the seven contractors were
time barred by § 25-223 and (2) denying their oral motion
seeking leave to amend their complaint to add a new claim
against Affordable Exteriors and Stile.
STANDARD OF REVIEW
[1] An appellate court will affirm a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from those
facts and that the moving party is entitled to judgment as a
matter of law. 2 An appellate court reviews the district court’s
grant of summary judgment de novo, viewing the record in the
light most favorable to the nonmoving party and drawing all
reasonable inferences in that party’s favor. 3
[2] A district court’s denial of a motion for leave to amend
a complaint is reviewed for an abuse of discretion. 4 A judicial
abuse of discretion exists if the reasons or rulings of a trial
judge are clearly untenable, unfairly depriving a litigant of a
substantial right and denying just results in matters submitted
for disposition. 5
ANALYSIS
Statute of Limitations
The primary issue on appeal is whether the contractors were
entitled to summary judgment on statute of limitations grounds.
Given the nature of the McCaulleys’ claims against the con-
tractors, all parties agree the applicable statute of limitations is
found in § 25-223. That statute provides:
2
Fuelberth v. Heartland Heating & Air Conditioning, 307 Neb. 1002, 951
N.W.2d 758 (2020).
3
Id.4
Eagle Partners v. Rook, 301 Neb. 947, 921 N.W.2d 98 (2018).
5
Grothen v. Grothen, 308 Neb. 28, 952 N.W.2d 650 (2020).
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141Any action to recover damages based on any alleged
breach of warranty on improvements to real property or
based on any alleged deficiency in the design, planning,
supervision, or observation of construction, or construc-
tion of an improvement to real property shall be com-
menced within four years after any alleged act or omis-
sion constituting such breach of warranty or deficiency.
If such cause of action is not discovered and could not
be reasonably discovered within such four-year period,
or within one year preceding the expiration of such four-
year period, then the cause of action may be commenced
within two years from the date of such discovery or
from the date of discovery of facts which would reason-
ably lead to such discovery, whichever is earlier. In no
event may any action be commenced to recover dam-
ages for an alleged breach of warranty on improvements
to real property or deficiency in the design, planning,
supervision, or observation of construction, or construc-
tion of an improvement to real property more than ten
years beyond the time of the act giving rise to the cause
of action. 6
[3] We have long held that the limitations period in § 25-223
applies to defective construction claims brought against con-
tractors and builders, whether such claims are based on neg-
ligence or breach of warranty. 7 The dispute in this appeal
centers on when the 4-year limitations period under § 25-223
began to run as against the contractors.
[4] As a general rule, when the basis of a claim against a
builder or contractor “is improper workmanship resulting in
defective construction, the § 25-223 statute of limitations runs
from the date of substantial completion of the project, not the
6
§ 25-223 (emphasis supplied).
7
See Fuelberth, supra note 2, citing Murphy v. Spelts-Schultz Lumber Co.,
240 Neb. 275, 481 N.W.2d 422 (1992). See, also, Adams, supra note 1;
Witherspoon v. Sides Constr. Co., 219 Neb. 117, 362 N.W.2d 35 (1985).
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141date of any specific act which resulted in the defect.” 8 In the
instant case, the McCaulleys and the contractors disagree on
how to characterize the construction project for purposes of
applying this general rule.
The McCaulleys generally contend the project was the
construction of their home; as such, they argue the limita-
tions period did not start to run against any contractor until
the entire home was substantially completed in late February
or early March 2008. The contractors define the project more
narrowly. They contend the McCaulleys contracted for sepa-
rate construction projects with each of the contractors; as such,
they argue the limitations period began to run against each
contractor on the date that contractor substantially completed
its work.
The question presented in this case is one we have not
directly considered before: When a homeowner has not con-
tracted with a builder or general contractor to construct the
entire home, and instead has entered into separate agreements
with individual contractors to construct portions of the home,
when does the limitations period under § 25-223 begin to run?
Before addressing that question, we note the McCaulleys
do not contend the district court made any error in determin-
ing the dates on which each contractor substantially com-
pleted its own work, nor do they make any arguments related
to the discovery rule, or the statute of repose, under § 25-223.
We limit our analysis accordingly.
The plain language of § 25-223 requires that any action
must be commenced “within four years after any alleged act
or omission constituting such breach of warranty or defi-
ciency.” Most of our prior cases applying this language have
8
Adams, supra note 1, 291 Neb. at 983, 871 N.W.2d at 218-19. See, also,
Durre v. Wilkinson Development, 285 Neb. 880, 830 N.W.2d 72 (2013);
Board of Regents v. Lueder Constr. Co., 230 Neb. 686, 433 N.W.2d 485(1988); Board of Regents v. Wilscam Mullins Birge, 230 Neb. 675, 433
N.W.2d 478 (1988).
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141involved claims brought by a homeowner against the home-
builder or general contractor, and the alleged act or omission
was the builder’s and/or general contractor’s failure to erect
the home in a workmanlike manner. 9 Under those circum-
stances, we held that the wrongful act or omission of the
builder and/or general contractor occurred on the date the
home construction was substantially complete, not on the date
the defective work was performed. 10 In other words, when
a defective construction claim is brought against the home-
builder or the general contractor alleging failure to construct
the home in a good and workmanlike manner, we generally
view the project as the entire home.
More recently, in Fuelberth v. Heartland Heating & Air
Conditioning, 11 we addressed the application of § 25-223 in
a case potentially involving more than one project. There, the
property owner entered into an oral agreement with a contrac-
tor to design, construct, and install an interior geothermal
system that would heat and cool a farm shop building and an
exterior system that would melt ice on the building’s driveway.
Several years later, the owner sued the contractor, alleging
both systems had failed due to the contractor’s negligence and
breach of the implied warranty of workmanlike performance.
The contractor successfully moved for summary judgment,
arguing the owner’s construction defect claims were time
barred under § 25-223. On appeal, we considered how the
“substantial completion” rule applied when there was evidence
9
See, e.g., Adams, supra note 1 (holding when homeowner sues homebuilder
alleging defective construction due to improper soil compaction, limita­
tions period begins to run upon substantial completion of home, not
upon completion of soil compaction); Witherspoon, supra note 7 (holding
when homeowner sues general contractor for failure to construct home
in workmanlike manner due to subcontractor’s installation of faulty pipe,
limitations period begins to run upon substantial completion of home, not
upon date pipe was installed or broke).
10
Id.11
Fuelberth, supra note 2.
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141that the interior and exterior systems were substantially com-
pleted at different points in time.
Fuelberth recited the general rule that “where the basis
of a claim is improper workmanship resulting in defective
construction, the statute of limitations period under § 25-223
begins to run from the date of substantial completion of the
project.” 12 But application of that general rule to the facts
in Fuelberth required us to determine whether the agree-
ment between the owner and the contractor was divisible.
We framed the question as whether the contractor was hired
to complete one construction project involving two systems
(such that the limitations period did not begin to run until the
entire project was substantially complete) or two construc-
tion projects involving separate systems (such that a separate
limitations period would begin to run when the construction of
each system was substantially complete). Fuelberth noted that
whether the construction agreement between the owner and
the contractor was “divisible or indivisible” was a question of
fact, and because the evidence on that question was in dispute,
summary judgment was not appropriate. 13 We explained:
Whether the [owner] could institute and maintain suit
as soon as one system was substantially complete or
[was] required to wait until the substantial completion of
the work as a whole depends on whether the agreement
[between the owner and the contractor] was divisible or
indivisible. If a contract is divisible, breaches of its sev-
erable parts give rise to separate causes of action, [and]
the statute of limitations will generally begin to run at
the time of each breach. . . . If, however, a contract is
indivisible, an action can be maintained on it only when a
breach occurs or the contract is in some way terminated,
12
Id. at 1007, 951 N.W.2d at 762.
13
Id. at 1008, 951 N.W.2d at 762.
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141and the statute of limitations will begin to run from that
time only. 14
[5] Our opinions illustrate that when applying the general
rule that the limitations period under § 25-223 “begins to run
from the date of substantial completion of the project,” 15 con-
sideration must be given to the nature and scope of the agreed-
upon project. 16
Here, the evidence was undisputed that the McCaulleys
acted as their own general contractor when constructing their
home, and they entered into separate agreements with each of
the seven contractors to perform a specific project. There was
no homebuilder or general contractor responsible for erecting
the entire home. And we have been directed to no evidence in
the record suggesting that the completion of any contractor’s
project was necessarily tied to or contingent upon the comple-
tion of another contractor’s work. Nor is there any genuine
dispute over the dates on which any contractor substantially
completed its agreed-upon work.
On this record, we conclude the district court correctly
found that under § 25-223, the statute of limitations for each
of the McCaulleys’ claims against the contractors began run-
ning on the dates that each contractor substantially completed
its respective project. Because it is undisputed that all of those
dates were more than 4 years before the date the McCaulleys
filed this action, the contractors’ motions for summary judg-
ment were properly granted.
Amendment of Complaint
In their second assignment of error, the McCaulleys argue
the district court abused its discretion in denying their oral
14
Id. (internal quotation marks and citations omitted).
15
Id. at 1007, 951 N.W.2d at 762.
16
See, Fuelberth, supra note 2; Adams, supra note 1; Witherspoon, supra
note 7.
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McCAULLEY v. C L ENTERS.
Cite as 309 Neb. 141motion for leave to file a fourth amended complaint to add
a claim of breach of warranty to repair. Their request to amend
the complaint was made during the hearing on the motions for
summary judgment filed by Affordable Exteriors and Stile.
We review the district court’s denial of leave to amend for an
abuse of discretion. 17
[6] Generally, when a party seeks leave to amend a plead-
ing, our rules require that “‘leave shall be freely given when
justice so requires.’” 18 In applying this rule, we have explained
that the denial of leave to amend pleadings is appropriate only
in those limited circumstances in which undue delay, bad
faith on the part of the moving party, futility of the amend-
ment, or unfair prejudice to the nonmoving party can be
demonstrated. 19
Here, the district court denied leave to amend after find-
ing the proposed amendment would be futile and would cause
unfair prejudice to the nonmoving parties. Because the pro-
posed fourth amended complaint considered by the court in its
ruling is not in our record, we express no opinion on the futil-
ity of the proposed amendment. Instead, we focus on whether
the record supports denying leave to amend on grounds of
undue delay or unfair prejudice, 20 and we conclude it does.
The McCaulleys filed their original complaint in February
2012. They amended their complaint in April 2012 and again
in June 2015. All three complaints alleged the seven contrac-
tors failed to complete their project in a good and workman-
like manner and were therefore negligent. The third amended
complaint added breach of implied warranty claims against
17
Eagle Partners, supra note 4.
18
InterCall, Inc. v. Egenera, Inc., 284 Neb. 801, 811, 824 N.W.2d 12, 21
(2012), quoting Neb. Ct. R. Pldg. § 6-1115(a).
19
InterCall, Inc., supra note 18.
20
See Davis v. State, 297 Neb. 955, 902 N.W.2d 165 (2017) (holding
appellate court may affirm lower court ruling on different reasoning).
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Cite as 309 Neb. 141four of the contractors. Each of the seven contractors, after
conducting discovery and preparing its case, moved for sum-
mary judgment, asserting the McCaulleys’ claim was barred by
the § 25-223 statute of limitations.
By October 2015, the district court had granted the motions
for summary judgment filed by five of the seven contractors,
and only the motions filed by Affordable Exteriors and Stile
remained pending. Those defendants appeared at the November
2, 2015, evidentiary hearing on their motions and offered evi-
dence showing why the claims in the operative third amended
complaint were time barred. At that hearing, the McCaulleys,
for the first time, asked for leave to amend their complaint
to add a new claim that the contractors breached an express
warranty to repair. While the McCaulleys argue on appeal that
they were seeking amendment only with respect to the claims
against Affordable Exteriors and Stiles, and not with respect to
the five contractors already dismissed, their oral motion was
unclear on that issue.
[7] Generally, it is not an abuse of discretion to deny leave to
amend when a party seeks leave to amend to add a new claim
or defense after a motion for summary judgment has been
heard and submitted, unless evidence or testimony exists in the
record indicating the proposed claim or defense was newly dis-
covered or that counsel was previously unaware of the claim. 21
Absent such evidence, a request to amend an operative plead-
ing while summary judgment is pending is often just a belated
effort to inject issues of material fact into a proceeding where
previously the pleadings revealed none. 22
21
See, Parnell v. Madonna Rehab. Hosp., 258 Neb. 125, 602 N.W.2d 461(1999); Darrah v. Bryan Memorial Hosp., 253 Neb. 710, 571 N.W.2d 783(1998). See, also, John P. Lenich, Nebraska Civil Procedure § 15:4 at 701
(2021) (“[a]n explanation for the party’s failure to raise the new matter
earlier becomes especially important if leave to amend is sought while the
court is considering a motion for summary judgment”).
22
See id.
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Cite as 309 Neb. 141The McCaulleys claim the impetus for seeking leave to
amend was the concurring opinion in Adams. 23 But that
­concurrence did not recognize any new construction defect
claim. Instead, it suggested there may be certain claims, such
as a claim for breach of an express warranty to repair, that
would not accrue until after the project was complete and the
promised repairs had not been made. But since the homeown-
ers in Adams had not alleged such a claim, the concurring jus-
tice agreed the majority had correctly applied the general rule
that the limitations period in § 25-223 begins to run from the
date the project is substantially completed. Thus, the Adams
concurrence did not recognize a new claim or defense of
which the McCaulleys would previously have been unaware.
Moreover, while the McCaulleys argue they wanted to amend
their operative complaint to add the type of claim described
by the concurring justice in Adams, our appellate record
does not contain the proposed amendment, and thus does
not permit us to confirm or deny this characterization of the
proposed claim.
The record does, however, support the conclusion that the
McCaulleys’ request for leave to add a new claim was the
result of undue delay and would unfairly prejudice the defend­
ant contractors. By the time the McCaulleys sought leave to
amend their complaint a fourth time, the litigation had been
pending for several years, and five of the contractors had
already been granted summary judgment on statute of limita-
tions grounds. Affordable Exteriors and Stile had moved for
summary judgment on the same basis and objected to the
McCaulleys’ request to add a new warranty claim. Further,
Affordable Exteriors and Stile were present in court and pre-
pared to offer evidence showing they were entitled to summary
judgment based on the allegations in the McCaulleys’ opera-
tive complaint. This record supports a finding of both undue
23
Adams, supra note 1.
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Cite as 309 Neb. 141delay and unfair prejudice, and we cannot find the district court
abused its discretion in refusing to allow the McCaulleys to
amend their complaint to add a new claim.
CONCLUSION
For the foregoing reasons, the district court did not err in
finding the McCaulleys’ claims against the seven contractors
involved in this appeal were time barred as a matter of law
under § 25-223. Nor, on this record, did the district court abuse
its discretion in denying the McCaulleys leave to amend their
complaint to add a new claim. The judgment of the district
court is affirmed.
Affirmed.
Miller-Lerman, J., not participating.