This opinion will be unpublished and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UNPUBLISHED OPINION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
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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.
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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
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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
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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.
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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
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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.
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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.
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