Damon v. Vista Del Norte Development, LLC , 10 N.M. 480 ( 2016 )

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 Opinion Number:
3 Filing Date: July 12, 2016
4 NO. 33,775
5 JASON B. DAMON and
6 MICHELLE T. DAMON,
7 Plaintiffs-Appellants,
8 v.
9 VISTA DEL NORTE DEVELOPMENT, LLC,
10 Defendant-Appellee,
11 and
12 BRIAN MCGILL, JANELLE MCGILL,
13 CARRIE TRAUB, COLDWELL BANKER
14 LEGACY STILLBROOKE HOMES, INC.,
15 STRUCSURE HOME WARRANTY, LLC,
16 Defendants.
17 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
18 Nan G. Nash, District Judge
19 Tal Young, P.C.
20 Steven Tal Young
21 Albuquerque, NM
22 for Appellants
1 Allen, Shepherd, Lewis & Syra, P.A.
2 Daniel W. Lewis
3 Jenny L. Jones
4 Albuquerque, NM
5 for Appellees
1 OPINION
2 VIGIL, Chief Judge.
3 {1} This case comes before us after summary judgment was entered in favor of
4 Defendant Vista del Norte Development, LLC (Vista) on the basis that the complaint
5 brought by Jason and Michelle Damon (Plaintiffs) is barred by the ten-year statute of
6 repose that limits liability for defective or unsafe conditions on a construction project
7 to ten years after substantial completion of the project. NMSA 1978, § 37-1-27
8 (1967). We affirm.
9 I. BACKGROUND
10 {2} City law required Vista to enter into an Agreement to Construct Public
11 Subdivision Improvements with the City of Albuquerque (the City) in order to
12 develop a subdivision within the City to be called The Estates at Vista del Norte. The
13 agreement was made on December 22, 2000, and it required Vista to install and
14 complete “to the satisfaction of the City” specified infrastructure improvements in the
15 proposed subdivision on or before March 22, 2002. The required improvements
16 consisted of paving, sidewalk installation, waterlines, sanitary sewer lines, storm
17 drains, dirt work, and engineering for all of the work.
18 {3} On May 1, 2001, Vista and Stillbrooke Homes, Inc. (Stillbrooke) entered into
19 a purchase agreement in which Stillbrooke agreed to purchase the subdivision from
1 Vista and build homes on the lots within the subdivision. The agreement includes Lot
2 17, the lot on which the house at issue in this case was built.
3 {4} On February 26, 2002, the City issued to Vista its Certificate of Completion
4 and Acceptance, which certified that Vista had constructed the infrastructure
5 improvements in compliance with the December 22, 2000, Agreement to Construct
6 Public Subdivision Improvements. On July 25, 2003, Vista conveyed Lot 17 in the
7 subdivision to Stillbrooke through a special warranty deed. Stillbrooke built a home
8 on Lot 17 and sold the home to Defendants Brian and Janelle McGill in February
9 2004. On or about June 11, 2006, Plaintiffs purchased the home from the McGills.
10 {5} On December 7, 2012, Plaintiffs filed suit against several individuals and
11 entities seeking relief in different causes of action based on their discovery, after their
12 purchase of the home, that it “began to exhibit signs of structural failure.” Pertinent
13 to Vista, the complaint alleges that Vista developed the subdivision, and that
14 structural engineering studies reveal that “the home suffers from improper subsurface
15 preparation[.]” Specifically, the complaint alleges that “Vista had developed the
16 subdivision on the site of what was once utilized as an aggregate [pit]” and that there
17 is “documented distress to the above-grade/visible portions of the home as a result of
18 excessive post-construction movement of the post-tensioned structural slab.” In
19 addition, the complaint alleges that “water is infiltrating the soils beneath and around
2
1 the residence from surface [or] near-surface sources, causing soil settlement, and
2 leading to the cosmetic and functionality issues such that load bearing elements such
3 as foundations and loa[d]-bearing walls have been affected.” Plaintiffs also allege that
4 because of Vista’s improper site selection, improper soil compaction, and improper
5 surface preparation of the site, the home suffers from structural instability and
6 ongoing settlement issues that will ultimately result in failure of the foundation and
7 structural failure.
8 {6} Vista filed a motion for summary judgment contending that Plaintiffs’ claims
9 are barred by the ten-year statute of repose in Section 37-1-27. Under Section 37-1-
10 27, the ten-year bar begins to run from the date of “substantial completion” of a
11 physical improvement to real property. As we discuss in greater detail below, the
12 statute describes three ways for “substantial completion” to occur, and the ten years
13 begins to run from the date that occurs last. Vista contended that “substantial
14 completion” occurred when it completed its work on the site and the City issued its
15 Certificate of Completion and Acceptance to Vista on February 26, 2002. Plaintiffs’
16 response countered that “substantial completion” occurred when the home was
17 occupied by the McGills in 2004. The district court agreed with Vista, and because
18 the complaint was filed on December 7, 2012, which was more than ten years after
19 February 26, 2002, when the City issued Vista the Certificate of Completion and
3
1 Acceptance, it granted summary judgment in favor of Vista on all claims made by
2 Plaintiffs against Vista. Plaintiffs appeal.
3 II. DISCUSSION
4 A. Standard of Review and Principles of Statutory Construction
5 {7} “Summary judgment is appropriate where there are no genuine issues of
6 material fact and the movant is entitled to judgment as a matter of law.” Little v.
7 Jacobs, 2014-NMCA-105, ¶ 6, 336 P.3d 398 (internal quotation marks and citation
8 omitted). On appeal, “[w]e review the district court’s grant of summary judgment de
9 novo.” Brown v. Kellogg, 2015-NMCA-006, ¶ 5, 340 P.3d 1274, cert. denied 2014-
10 NMCERT-011, 339 P.3d 841.
11 {8} Plaintiffs’ argument on appeal requires us to construe Section 37-1-27. This
12 presents us with a question of law, which is also subject to our de novo review.
13 Deutsche Bank Nat. Trust Co. v. Maclaurin, 2015-NMCA-061, ¶ 5, 350 P.3d 1201.
14 “When construing statutes, our charge is to determine and give effect to the
15 Legislature’s intent.” Little, 2014-NMCA-105, ¶ 7 (internal quotation marks and
16 citation omitted). In determining legislative intent, “we look first to the plain
17 language of the statute, giving the words their ordinary meaning, unless the
18 Legislature indicates a different one was intended.” Diamond v. Diamond, 2012-
19 NMSC-022, ¶ 25, 283 P.3d 260 (internal quotation marks and citation omitted).
4
1 “Where the language of a statute is clear and unambiguous, we must give effect to
2 that language and refrain from further statutory interpretation.” Id. (internal quotation
3 marks and citation omitted). “Finally, the practical implications, as well as the
4 statute’s object and purpose are considered.” Reule Sun Corp. v. Valles, 2010-NMSC-
5 004, ¶ 15, 147 N.M. 512, 226 P.3d 611.
6 B. Analysis
7 {9} Section 37-1-27 is a statute of repose. As such, its purpose is “to put an end to
8 prospective liability for wrongful acts that, after the passage of a period of time, have
9 yet to give rise to a justiciable claim.” Garcia ex rel. Garcia v. La Farge, 1995-
10 NMSC-019, ¶ 14, 119 N.M. 532, 893 P.2d 428. A statutory triggering event
11 determines when the statute of repose begins to run, and the time runs “without regard
12 to when the underlying cause of action accrues and without regard to the discovery
13 of injury or damages.” Id. Such a statute “terminates the right to any action after a
14 specific time has elapsed, even though no injury has yet manifested itself.” Cummings
15 v. X-Ray Assocs. of N.M., P.C., 1996-NMSC-035, ¶ 50, 121 N.M. 821, 918 P.2d 1321
16 (discussing the medical malpractice statute of repose). Section 37-1-27 states:
17 No action to recover damages for any injury to property, real or
18 personal, or for injury to the person, or for bodily injury or wrongful
19 death, arising out of the defective or unsafe condition of a physical
20 improvement to real property, nor any action for contribution or
21 indemnity for damages so sustained, against any person performing or
22 furnishing the construction or the design, planning, supervision,
5
1 inspection or administration of construction of such improvement to real
2 property, and on account of such activity, shall be brought after ten
3 years from the date of substantial completion of such improvement;
4 provided this limitation shall not apply to any action based on a contract,
5 warranty or guarantee which contains express terms inconsistent
6 herewith.
7 Thus, the triggering event under Section 37-1-27 is the date of substantial completion
8 of a physical improvement to real property.
9 {10} This statute of repose was “enacted to provide a measure of protection against
10 claims arising years after substantial completion of construction projects.” Coleman
11 v. United Eng’rs & Constructors, Inc., 1994-NMSC-074, ¶ 10, 118 N.M. 47, 878 P.2d
12 996 (internal quotation marks and citation omitted). The Legislature determined such
13 protection was a necessity “in the wake of judicial decisions exposing those involved
14 in the construction industry to greater liability.” Id. Prior to its enactment, licensed
15 contractors were exposed to liability when the cause of action accrued, which
16 generally did not happen until an injury occurred. See Little, 2014-NMCA-105, ¶ 11.
17 Contractors were therefore exposed to potential liability long after they surrendered
18 control of the construction project, because an injury could occur many years after the
19 project was completed. See id. The Legislature’s response was to limit potential
20 liability to ten years after substantial completion of the project. See id.
21 {11} We first determine whether Vista constructed a “physical improvement to real
22 property” under Section 37-1-27. We have previously defined an “improvement”
6
1 under Section 37-1-27 as “the enhancement or augmentation of value or quality: a
2 permanent addition to or betterment of real property that enhances its capital value
3 and that involves the expenditure of labor or money and is designed to make the
4 property more useful or valuable as distinguished from ordinary repairs.” Mora-San
5 Miguel Elec. Coop., Inc. v. Hicks & Ragland Consulting & Eng’g Co., 1979-NMCA-
6 082, ¶ 4, 93 N.M. 175, 598 P.2d 218 (internal quotation marks and citation omitted).
7 In keeping with this definition, we concluded that construction of a power line is a
8 physical improvement that falls within the intent of Section 37-1-27, because “a given
9 parcel of land which has electrical service available is more valuable than a
10 comparable parcel without such service.” Id. In Delgadillo v. City of Socorro, 1986-
11 NMSC-054, ¶¶ 7- 8, 104 N.M. 476, 723 P.2d 245, our Supreme Court agreed with the
12 definition of “improvement” we provided in Mora-San Miguel, and added that “[i]n
13 applying the definition of improvement, courts also consider whether the
14 improvement adds to the value of the property for the purpose of its intended use.”
15 Delgadillo, 1986-NMSC-054, ¶ 8 (relying on Van Den Hul v. Baltic Farmers
16 Elevator Co., 716 F.2d 504, 508 (8th Cir. 1983)). Our Supreme Court then held that
17 the installation of new gas lines and routing existing gas lines to facilitate the
18 construction of a new highway in a city was a “physical improvement to real
19 property” because it was for the intended purpose of providing gas service, and “[a]
7
1 parcel of land that has service available is more valuable than a comparable parcel
2 without such service.” Id. ¶¶ 8-9.
3 {12} In keeping with Mora-San Miguel and Delgadillo, we conclude as a matter of
4 law that the infrastructure improvements Vista constructed to develop The Estates at
5 Vista del Norte subdivision constitute “physical improvements to real property” under
6 Section 37-1-27. The paving, sidewalk installation, sanitary sewer lines, storm drains,
7 dirt work, and engineering performed by Vista improved the real estate, were
8 permanent in nature, and required the expenditure of labor and money. Importantly,
9 the improvements significantly enhanced the use and value of the property for its
10 intended use as a subdivision. The land was more valuable with the infrastructure
11 improvements constructed by Vista than it was without them.
12 {13} We now turn to determining when construction of these infrastructure
13 improvements was substantially completed, because Section 37-1-27 bars a cause of
14 action brought “after ten years from the date of substantial completion of such
15 improvement[.]” Section 37-1-27 defines the “date of substantial completion” to
16 mean: (1) “the date when construction is sufficiently completed so that the owner can
17 occupy or use the improvement for the purpose for which it was intended”; (2) “the
18 date on which the owner does so occupy or use the improvement”; or (3) “the date
19 established by the contractor as the date of substantial completion, whichever date
20 occurs last.”
8
1 {14} Plaintiffs argue that the date of “substantial completion” is 2004 under the
2 second alternative, when the McGills purchased the home, because that is when the
3 home was “occupied” and used for the purposes for which it was intended. On the
4 other hand, Vista contends that the date of “substantial completion” is February 26,
5 2002, when the City issued Vista the Certificate of Completion and Acceptance under
6 the first alternative, because that is when Vista was able to “use” the improvements
7 for their intended purpose: sell the lots to builders.
8 {15} Plaintiffs’ argument overlooks the fact that there may be many different
9 “physical improvements” made to a parcel of real property by many different persons
10 or entities. By way of example, a subdivision may require the installation of paved
11 streets, gutters, sidewalks, curbs, water service, gas service, and electrical service,
12 among others. Nothing about Section 37-1-27 requires that all such improvements be
13 installed by the same person or entity or at the same time. In fact, Section 37-1-27
14 refers to “any person performing or furnishing the construction or the design,
15 planning, supervision, inspection, or administration of construction of such
16 improvement to real property,” which recognizes that there may be many ways and
17 different persons who may make a “physical improvement” to real property that falls
18 under its protection. Here, the only “physical improvements” Vista made to the
19 property were the infrastructure improvements. The house is a “physical
20 improvement” that is separate and apart from the infrastructure improvements, and
9
1 it is not a “physical improvement” that Vista constructed. So, when the house was
2 “occupied” is not relevant to determining whether Section 37-1-27 bars Plaintiffs’
3 lawsuit against Vista.
4 {16} Vista’s argument is more persuasive. In order to develop the subdivision, Vista
5 was legally required to enter into an agreement with the City to install and construct
6 specified infrastructure improvements “to the satisfaction of the City.” Vista entered
7 into an agreement and made the infrastructure improvements specified in the
8 agreement. The City subsequently certified that the work was constructed in
9 compliance with the agreement, and accepted the work on February 26, 2002. While
10 the record before us does not demonstrate when the infrastructure improvements
11 specific to Lot 17 were completed, the City’s certificate sets forth the latest date on
12 which those improvements were substantially completed, because the certificate
13 would not have been issued if those improvements had failed to comply with the
14 City’s requirements. We therefore conclude that the City’s issuance of its certificate
15 in this case is sufficient to serve as prima facie evidence of substantial completion of
16 the infrastructure improvements. See Rosso v. Hallmark Homes of Minneapolis, Inc.,
17 843 N.W.2d 798, 802 (Minn. Ct. App. 2014) (“While a certificate of occupancy may
18 serve as prima facie evidence of substantial completion because a certificate of
19 occupancy would never be issued before a structure’s construction were completed,
20 it is not a necessary condition that has to occur before substantial completion of a
10
1 home is achieved[.]” (emphasis omitted)). The City issued its certificate to Vista on
2 February 26, 2002, and Plaintiffs’ complaint against Vista was filed on December 7,
3 2012, more than ten years later. Plaintiffs’ claims against Vista are therefore
4 extinguished by Section 37-1-27. See Cummings, 1996-NMSC-035, ¶ 50 (explaining
5 that a statute of repose “terminates” a cause of action upon the passage of the
6 prescribed period of time).
7 {17} Although the conclusion we reach is based upon our interpretation of Section
8 37-1-27, in their briefing, both Plaintiffs and Vista discuss the potential application
9 of Jacobo v. City of Albuquerque, 2005-NMCA-105, 138 N.M. 184, 118 P.3d 189,
10 to the facts of this case. Jacobo involved interpretation of our statute of repose under
11 circumstances in which the defendants were the builders and continuous owners of
12 the improved property. Id. ¶ 12 (“[W]e hold that Section 37-1-27 does not protect
13 owners of property who built the property against claims arising from unsafe
14 conditions of that property[.]”). In the present case, Vista was not a continuous
15 owner, having sold Lot 17 to Stillbrooke on July 25, 2003. Jacobo is thus
16 inapplicable to this case.
17 III. CONCLUSION
18 {18} The order of the district court granting summary judgment to Vista is affirmed.
11
1 {19} IT IS SO ORDERED.
2 ___________________________________
3 MICHAEL E. VIGIL, Chief Judge
4 WE CONCUR:
5 ___________________________________
6 JAMES J. WECHSLER, Judge
7 ___________________________________
8 M. MONICA ZAMORA, Judge
12