American Family Insurance Company a/s/o Nicholas Oelke v. NB Electric, Inc. dba East Side Garage Doors, ...

STATE OF MINNESOTA
IN COURT OF APPEALS
A24-0377

American Family Insurance Company a/s/o Nicholas Oelke,
Appellant,

vs.

NB Electric, Inc. dba East Side Garage Doors,
Respondent,

Morningstar Remodeling, LLC,
Respondent.

Filed January 21, 2025
Reversed and remanded
Slieter, Judge
Dissenting, Cleary, Judge ∗

Ramsey County District Court
File No. 62-CV-23-3965

Stephen A. Smith, Matthiesen, Wickert & Lehrer, S.C., Hartford, Wisconsin (for appellant)

Nicole R. Weinand, Law Office of John C. Syverson, London, Kentucky (for respondent
NB Electric, Inc.)

Lance D. Meyer, Lukas F. Belflower, O’Meara Wagner, P.A., Minneapolis, Minnesota (for
respondent Morningstar Remodeling, LLC)

Considered and decided by Slieter, Presiding Judge; Cochran, Judge; and Cleary,

Judge.

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

As used in Minnesota Statutes section 541.051, subdivision 1(c) (2022), the phrase

“substantial completion, termination, or abandonment of the construction or the

improvement to real property” refers to the project as a whole.

OPINION

SLIETER, Judge

This appeal involves appellant’s subrogation action against respondent-contractors

based on its claim of defective construction to the home of appellant’s insured. The district

court granted respondents’ motions to dismiss based on the two-year statute-of-limitations

period set forth in Minnesota Statutes section 541.051, subdivision 1 (2022). Appellant

argues that the district court erred by determining that the statute of limitations began to

run when appellant’s insured terminated the initial general contractor, though he hired a

new general contractor to finish the construction project. Because the construction project

did not terminate upon the replacement of the general contractor, the cause of action had

not yet accrued, and the district court erred in dismissing appellant’s complaint on that

basis. Therefore, we reverse and remand.

FACTS

The following facts are taken from the summary-judgment record and stated most

favorably to appellant American Family Insurance Company. Moreover, we agree with

the parties that there are no genuine issues of material fact relating to the

statute-of-limitations issue, which is the sole basis of the district court’s dismissal decision.

2
 In February 2020, American Family’s insured (the homeowner) hired respondent

Morningstar Remodeling LLC to serve as the general contractor for a home-remodeling

project. Morningstar subcontracted with respondent NB Electric Inc. to perform electrical

work on the project. A fire damaged the home during construction in July 2020. The

home-remodeling project continued following the fire, though NB Electric was no longer

involved.

The homeowner terminated Morningstar in April 2021. Soon thereafter, the

homeowner hired a new general contractor to complete the project. The home-remodeling

project was substantially completed in July 2021. American Family commenced this action

against Morningstar and NB Electric in July 2023, alleging defective construction.

The district court granted Morningstar’s and NB Electric’s motions to dismiss the

complaint. The district court determined that the two-year statute-of-limitations period

began to run in April 2021—when the homeowner terminated Morningstar as the general

contractor—and, therefore, American Family’s claims against Morningstar and NB

Electric are time-barred under Minnesota Statutes section 541.051, subdivision 1(c).

American Family appeals.

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 ISSUE

Did the statute of limitations, as set forth in Minnesota Statutes section 541.051
(2022), begin to run when the homeowner terminated the general contractor but continued
the construction project with a new general contractor?

ANALYSIS

At the outset we address the applicable standard of review. We note that this matter

came before the district court as a rule 12 motion to dismiss. Minn. R. Civ. P. 12.02; see

also Oreck v. Harvey Homes, Inc., 602 N.W.2d 424, 427-28 (Minn. App. 1999) (noting

that a statute-of-limitations defense may be raised in a motion to dismiss). However, at the

time of its decision, the district court referred to several affidavits containing facts which

were not included or referenced in the pleadings. When “matters outside the pleading are

presented to and not excluded by the court, the motion shall be treated as one for summary

judgment and disposed of as provided in Rule 56.” Minn. R. Civ. P. 12.02. Because the

district court considered matters outside the pleadings which were not referenced in the

pleadings, we treat the district court’s order as one of summary judgment. See NSP v.

Minn. Metro. Council, 684 N.W.2d 485 (Minn. 2004) (holding that a court may consider

documents referenced in a complaint or pleading without converting the motion to one for

summary judgment.)

“On an appeal from summary judgment, [appellate courts] ask two questions:

(1) whether there are any genuine issues of material fact and (2) whether the [district court]

erred in [its] application of the law.” State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.

1990). “When the district court grants summary judgment based on the application of a

4
statute to undisputed facts, the result is a legal conclusion that [appellate courts] review de

novo.” Weston v. McWilliams & Assocs., Inc., 716 N.W.2d 634, 638 (Minn. 2006).

“[S]tatutes of limitations are both procedural, in that they regulate when a party may

file a lawsuit, and substantive, in that they are outcome determinative.” Lombardo v.

Seydow-Weber, 529 N.W.2d 702, 704 (Minn. App. 1995), rev. denied (Minn. Apr. 27,

1995). Statutes of limitations “spare the courts from litigation of stale claims,” and parties

from defending their case “after memories have faded, witnesses have died or disappeared,

and evidence has been lost.” Weavewood, Inc. v. S & P Home Inv., LLC, 821 N.W.2d 576,

580 (Minn. 2012) (quoting Chase Sec. Corp. v. Donaldson, 325 U.S. 304, 314 (1945)).

The statute of limitations applicable to American Family’s claim is found in Minn.

Stat. § 541.051. The statute bars claims (except when fraud is involved) “to recover

damages for any injury to property” arising out of “defective and unsafe condition” of

improvements to real property “more than two years after the cause of action accrues.” Id.,

subd. 1(a). Resolution of this dispute requires us to interpret the statutory definition of

when the cause of action accrues, which states:

[A] cause of action accrues . . . for an action for injury to real
or personal property, upon discovery of the injury, but in no
event does a cause of action accrue earlier than substantial
completion, termination, or abandonment of the construction
or the improvement to real property.

Id., subd. 1(c).

The parties agree that the discovery of the injury is not the accrual date. Instead,

the crux of the parties’ disagreement is about the meaning of the phrase “of the construction

or the improvement to real property.” Specifically, American Family suggests that the

5
statute is ambiguous and that, if we consider the legislative history, we will conclude this

phrase applies to the entire construction project, not the individual contractor who is

terminated. In contrast, Morningstar and NB Electric claim this language unambiguously

means that the triggering events—substantial completion, termination, or abandonment—

apply to an individual contractor rather than the entire construction project.

The first step in statutory interpretation is to determine whether the statute’s

language is ambiguous. Christianson v. Henke, 831 N.W.2d 532, 536 (Minn. 2013). To

determine whether a statute is ambiguous, the court interprets the statute’s words and

phrases according to their plain and ordinary meaning. Id. at 536-37. “A statute is only

ambiguous if its language is subject to more than one reasonable interpretation.” Id. at 537.

If a statute is unambiguous, we will “enforce the language of the statute and not explore

the spirit or purpose of the law.” Id. (quotation omitted). We agree with respondents that

the statute is unambiguous because we conclude that its language is not subject to more

than one reasonable interpretation. See id.

If a statute, construed according to ordinary rules of grammar, is unambiguous, we

apply its plain meaning. State by Beaulieu v. RSJ, Inc., 552 N.W.2d 695, 701 (Minn. 1996);

see also Leifur v. Leifur, 820 N.W.2d 40, 43 (Minn. App. 2012) (noting a party’s

“meritorious policy arguments” supporting his proposed reading of a statute but rejecting

that proposed reading because “this court may not disregard unambiguous statutory

language”).

As noted, Minn. Stat. § 541.051, subd. 1(c), states that a cause of action does not

accrue “earlier than substantial completion, termination, or abandonment of the

6
construction or the improvement to real property.” By these plain words, accrual of a cause

of action begins no sooner than the occurrence of one of the three triggering events

identified—substantial completion, termination, or abandonment—and each of the three

triggering events pertains to the next phrase, “of the construction or improvement to real

property.” And, as we stated above, it is the meaning of this final phrase that the parties

dispute.

The statute does not provide a definition for the term “construction” and, therefore,

a reviewing court “may turn to dictionary definitions of the word.” Moore v. Robinson

Env’t, 954 N.W.2d 277, 282-83 (Minn. 2021). And, although Moore analyzed subdivision

1(a), it defined the same term (construction) within the same section of statute and,

therefore, informs our analysis. We next consider the facts in Moore to provide context to

why that court was required to define the term “construction.”

Moore hired Robinson to remove an asbestos-insulated boiler in his home because

it was not working, along with the asbestos-lined piping. Id. at 278. Moore hired a separate

contractor to install the new boiler and piping system. Id. at 279. More than two years

after learning that asbestos existed throughout his home, Moore sued Robinson for injury

to his property. Id. The district court dismissed the lawsuit as time-barred pursuant to

Minn. Stat. § 541.051. Our court affirmed. Id. at 287. The issue before the supreme court

in Moore was whether the removal of the asbestos was “construction” of the improvement

to real property, thereby triggering the two-year statute of limitations. Id. at 282. 1 Moore

1
Minnesota Statutes section 541.051 was amended in 2018, which amended language
within subdivision 1(c) as we describe in this opinion. The previous language, which

7
argued that, unlike installation of the new boiler system, removing the boiler and removing

asbestos-lined piping was not “construction.” The supreme court, after considering the

definition of “construction” from three different dictionary sources, concluded that the term

“construction” means “actions that are necessary to move a construction project toward

completion.” Id. at 283 (emphasis added) (quotations omitted). Based upon this definition,

the supreme court concluded that removing the asbestos was “a necessary part of the

process of installing the new heating system” and was, therefore, “construction” which

involved the two-year statute-of-limitations period. Id. at 286.

With the plain language of the statute, aided by the definition of “construction”

provided in Moore, Minn. Stat. § 541.051, subd. 1(c), plainly links the three events

triggering accrual of the statute of limitations—substantial completion, termination, or

abandonment—to the entire construction project, not an individual contractor. As stated

in Moore, “the statute tells us to view a contractor’s coverage under the statute in light of

the entire process of the building project.” Id. at 283.

We are therefore not persuaded by respondents’ argument that the phrase

“construction or the improvement to real property” unambiguously refers to an individual

contractor rather than the entire construction project. They argue that, once a contractor is

terminated, the contract between that contractor and homeowner is terminated, which

triggers the running of the statute of limitations. However, nowhere does section 541.051,

subd. 1(c), refer to an individual contractor. Notably, the term “person” is referred to in

applied to the facts in Moore, stated that the accrual of the statute of limitations began upon
discovery of the injury. Id. at 279-80 n.2.

8
section 541.051, subd. 1(a), when referring to an action that “shall be brought against any

person.” The absence of a similar reference of an individual contactor in section 541.051,

subd. 1(c), supports this interpretation of this statute. “[D]istinctions in [statutory]

language in the same context are presumed to be intentional, and we apply the language

consistent with that intent.” In re Stadsvold, 754 N.W.2d 323, 328-29 (Minn. 2008).

Moreover, to interpret “termination” (or “substantial completion” and “abandonment”) as

applying to individual contractors would require replacing the term “construction” with the

term “contractor,” which we cannot do. See Tracy State Bank v. Tracy-Garvin Coop., 573

N.W.2d 393, 395 (Minn. App. 1998) (“[T]his court is prohibited from adding words to a

statute and cannot supply what the legislature either purposely omitted or inadvertently

overlooked.”).

We are also unpersuaded by respondents’ claim that the phrase “termination” is a

term of art in the construction industry that is specific to the construction contract, not the

project as a whole and that thus, when the homeowner terminated the construction contract

with Morningstar the statute of limitations began to run. However, we cannot ignore the

plain words of the statute and we do not interpret a statute’s meaning based upon a “term

of art” that is neither present in, nor defined by, the statute. See Rodriguez v. State Farm

Mut. Auto. Ins. Co., 931 N.W.2d 632, 634 (Minn. 2019) (“We construe words and phrases

according to rules of grammar and according to their common and approved usage.”

(quotation omitted)).

Finally, we do not agree with respondents’ claim that this interpretation of the

statute leads to an absurd result. Respondents claim that this interpretation would mean a

9
homeowner, who terminates a contractor, could wait many months, or even years, before

hiring a replacement contractor to resume the project without triggering the accrual of the

limitations period. And, in that scenario, the terminated contractor would remain

potentially liable for the defective construction long after having been terminated from the

project.

Even if facts as those hypothesized by the respondents were to occur, we remain

unpersuaded that this interpretation leads to an absurd result. The statute states that accrual

begins upon “substantial completion, termination, or abandonment” of the construction

project. Minn. Stat. § 541.051, subd. 1(c). Therefore, the hypothetical situation

respondents present, creates a separate factual question as to whether a delay constitutes

“termination” or “abandonment” of the construction such that the cause of action accrues

under the statute. And a factual dispute regarding whether a project has been terminated

or abandoned is not an “utterly absurd” result that “confounds [the] clear legislative

purpose” of establishing when the statute of limitations begins to run. See Hyatt v. Anoka

Police Dep’t, 691 N.W.2d 824, 827 (Minn. 2005) (stating an unambiguous statute may be

deemed absurd “only in rare cases [when] the plain meaning utterly confounds a clear

legislative purpose” (quotation omitted)).

It is undisputed that the homeowner hired a substitute general contractor soon after

terminating respondents as contractors and continued the home-remodeling project. And,

at that point in time, the project had not been substantially completed. There was, therefore,

10
no “substantial completion, termination, or abandonment” of the construction project and,

as a result, no accrual of the cause of action. 2

DECISION

Because the home-remodeling project had not been substantially completed,

terminated, or abandoned when respondents were terminated as contractors, American

Family’s cause of action had not yet accrued. The district court, therefore, erred in

dismissing the complaint based upon the expiration of the statute of limitations.

Reversed and remanded.

2
During oral argument counsel for Morningstar conceded that, if we conclude that the
statute of limitations was not triggered when Morningstar was terminated, American
Family’s complaint was timely served.

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CLEARY, Judge (dissenting)

I respectfully dissent from the majority opinion. I would affirm the district court in

all respects.

As to Minn. Stat. § 541.051, subd. 1(c) (2022), I agree with the majority that the

entire issue in controversy here, given the facts of this case, is the meaning of the phrase

“. . . of the construction or the improvement to real property.” It is after that point that we

part company, as I agree with the respondents that the triggering events of “substantial

completion, termination, or abandonment” apply unambiguously to individual contractors

rather than to all contractors involved in the entire construction project until that project is

completed at some future date. The majority decides otherwise and concludes that the plain

language of the statute—specifically, the word “construction”—must mean the actions that

are necessary to move a “construction project” toward completion, citing

Moore v. Robinson Env’t, 954 N.W.2d 277, 282-83 (Minn. 2021) (quotations omitted). Yet

such an insight is of minimal help, since it begs the question of what is a “construction

project?” For an electrical contractor, as an example, or a plumbing contractor, isn’t the

“construction project” limited to his or her subcontracted construction project? Does one

automatically assume that having arrived at that definition we are to conclude that an

individual contractor, when the injury to the property has been discovered and he or she

has been terminated, is not subject to the immediate running of the statute of limitations

found in Minn. Stat. § 541.051 (2022)? The majority leaps from “construction” to

“construction project” to the “entire construction project.” (Emphasis added). In doing so,

it loses me along the way.

D-1
 In further defense of its conclusion, the majority notes that nowhere in Minn. Stat.

§ 541.051, subd. 1(c), does the language refer to an individual contractor. Arguably, and

just as noteworthy, the language of the statute fails to include any reference to all

contractors or to all claims or, for that matter, to an “entire” construction project.

Finally, I believe that respondent Morningstar’s argument that the statutory

interpretation adopted here by the majority may well lead to absurd results has merit. There

is no dispute here that the injury to property had been discovered and respondent

contractors terminated more than two years before litigation ensued. The majority’s

rationale would leave that contractor in limbo for weeks, months, perhaps even years before

the statute would commence running. The majority opines that if such a span of time

elapsed, there would exist a factual dispute as to whether the construction project had been

terminated or abandoned somewhere along the way. That is cold comfort to any contractor

on any project who has substantially completed their part, or has been terminated from

their part, and is forced to wait an indeterminate length of time before being safe from any

claims, stretching a two-year window into something quite different in length.

In granting respondents’ motions to dismiss, the district court correctly interpreted

the language of Minn. Stat. § 541.051 and should be affirmed.

D-2