NO. 89-407
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
ASSOCIATION OF UNIT OWNERS OF THE
DEER LODGE CONDOMINIUM; LARRY BURNSIDE;
MARY BURNSIDE; MEL'S REMODELING, INC.;
ROBERT TOUSIGNANT; GERALD TEREICH;
CAROLYN TEREICH; BRUCE J. HEDBLOOM;
EMIL ESCHENBURG; DOLLY ESCHENBURG;
RAYMOND D. RYAN; ERNEST M. SHEWCHUK;
MURRAY B. STEVENS; W. KEITH STINSON;
SALLY STINSON; JAMES VANDERBIESEN; ;" *
l r
NORMAN WECKERLY; TOMKINS, ULRICH &
ROLL; ADRIAN BOM; WILLIAM BRUNSDALE;
ROBERT GARRITY; FRANK LIEBER; DONALD
K. MILLER; WILLIAM WOOD; DONNA WOOD;
and RICHARD WINCHELL,
plaintiffs and Appellants,
v.
BIG SKY OF MONTANA, INC.; BIG SKY OF
MONTANA REALTY, INC.; BOYNE USA, INC.;
THOMAS & CO. (GENERAL ELECTRIC PENSION
TRUST); THE MONTANA POWER COMPANY;
THE STATE OF MONTANA,
Defendants and Respondents.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Michael C. Coil, Bozeman, Montana
For Respondents:
Patrick Fleming, Butte, Montana; Rockwood Brown,
Billings, Montana; Allen B. Chronister, Chronister,
Driscoll & Moreen, Helena, Montana; Page Wellcome,
Wellcome, Frost & Barrett, Bozeman, Montana; John
S. Warren, Schulz, Davis & Warren, Dillon, Montana;
Patrick Frank, Worden, Thane & Haines, Missoula,
Montana.
Submitted: June 1 2 , 1 9 9 0
Decided: September 2 4 , 1 9 9 0
0
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
The plaintiffs (unit owners) sued to recover damages resulting
from two fires in 1981 in two buildings comprising the Deer Lodge
Condominiums at Big Sky, Montana. The District Court, Fifth
Judicial District, Madison County, entered summary judgment against
the unit owners and in favor of the defendants. The unit owners
have appealed the summary judgment against them in this cause. We
affirm the summary judgment.
To follow the complicated facts herein, the reader would do
well to refer to the following outline of the parties involved:
Unit Owners All but four of the appellants are owners
of condominiums at Big Sky, Montana, located in two
buildings, both commonly known as the Deer Lodge
Condominiums. The four appellants who did not own
condominiums owned personal property located in units of
the Deer Lodge Condominiums. Except where necessary to
distinguish the four personal property owners, all
appellants are hereinafter referred to as "unit owners. l1
Biq Sky of Montana Inc.. (Biq Sky) A corporation
which originally developed the Big Sky, Montana, ski
resort in the early 1970s and merged in 1978 with another
corporation to form Boyne USA., Inc., hereinafter referred
to as I1Big Sky.
Biq Skv of Montana Realty, Inc. (Realty) A corporation
organized in 1976 to manage and liquidate certain real
property at Big Sky formerly owned by Big Sky, including
the Deer Lodge Condominiums, hereinafter referred to as
llRealty.llRealty performed significant repairs to the
Deer Lodge Condominiums in 1976.
Bovne Mountain Lodqe, Inc. A corporation that acquired
the Big Sky ski resort facilities and 39 units of the
Deer Lodge Condominiums in 1976.
Boyne USA, Inc. (Boyne) A corporation and the current
owner of the Big Sky ski resort. Boyne is the product
of a 1978 merger of Big Sky and Boyne Mountain Lodge,
Inc.
Thomas & Co. (General Electric Pension Trust) One of
seven stockholders of Big Sky and Realty.
The Montana Power Company One of seven stockholders
of Big Sky and Realty.
The State of Montana The governmental entity
responsible for enforcement of building and fire codes
at Big Sky, Montana.
Bruce A. Houston The State's fire inspector who
investigated two fires which occurred in 1981 in the Deer
Lodge Condominiums.
Association of Unit Owners of the Deer Lodse
Condominiums (Association) An incorporated Association
comprised of the owners of the condominium units. The
Association itself is a party plaintiff in this action.
Lloyd W. Dars and Associates (Darq) Construction
engineer, Deer Lodge Condominiums.
Douqlas A. Moe, Architects (Moe) ~rchitect,Deer
Lodge Condominiums.
Big Sky constructed the Deer Lodge Condominiums in 1973-1975.
Darg was the construction engineer, and Moe the architect for the
project. In 1976, Big Sky's shareholders negotiated the sale of
their stock to Boyne Mountain, Inc. Because Boyne Mountain did not
want to acquire stock in a corporation with real estate development
assets, Big Sky transferred its real estate development assets to
Big Sky Realty, a corporation newly formed on May 6, 1976, in
exchange for its stock. The real estate development assets
included 44 unsold units of the Deer Lodge Condominiums. Big Sky
then distributed its Big Sky Realty stock to the original Big Sky
shareholders.
Realty sold 39 of its 44 Deer Lodge Condominium units to Boyne
Mountain Lodge Inc. on December 1, 1976. Realty sold its remaining
five Deer Lodge Condominium units during an auction in 1977. None
of the unit owners purchased their units from Realty.
In 1978, Big Sky and Boyne Mountain Lodge, Inc. merged to
become Boyne USA, Inc. Boyne is the current owner of Big Sky
Resort.
Significant structural and safety deficiencies in the
construction of Deer Lodge Condominiums were discovered in early
1976. The Association and unit owners were first notified of the
deficiencies on April 1, 1976. Realty employed the engineering
firm of Morrison-Maierle of Helena, Montana, to investigate and
report concerning the structural and safety deficiencies at the
condominiums. Realty notified each unit owner of the Morrison-
Maierle findings on September 12, 1976. On September 22, 1976,
Realty provided the chairman of the Association with a copy of the
Morrison-Maierle report describing the structural deficiencies.
The Association, through its board of directors, acknowledged
receipt of the notice of the structural deficiencies, and
thereafter authorized Realty to perform the work required to
correct the deficiencies.
Realty made the repair effort during 1976-77. The repairs at
that time cost approximately $1.4 million. There is no record that
the fireplaces in the condominiums were repaired or reconstructed
during the 1976-77 reconstruction or repair effort. However, in
a letter dated December 24, 1976, the president of Realty advised
the unit owners that the condominiums had been satisfactorily
repaired, and were sound and safe for occupancy.
Two fires occurred at the Deer Lodge Condominiums located at
Big Sky, one on January 20, 1981, and one on February 20, 1981.
The deficiencies in the fireplaces related to lack of fire
stops, improper or missing chimney connections, improper or lack
of insulation around the chimney flues and throughways; and
particularly, a failure to install a tin sheet protective covering
over plywood at the base of the hearths. The purpose of the tin
sheet was to guard against sparks which might work their way down
through the mortar of the hearth to the plywood. Unit owners
contend that the fires principally were ignited because of lack of
the tin sheet protection.
The repairs instigated by the Morrison-Maierle report were
completed and the condominiums reoccupied prior to the fires. The
record does not show that the fireplace deficiencies were corrected
in those repairs.
This action, seeking damages resulting from the fires and the
fireplace deficiencies was filed on January 18, 1983. Certain of
the original defendants named in the action were improperly served
with process. The facts relating to the improper service and the
resultant dismissal of certain of the defendants are chronicled in
the first appeal to this Court, Association of Unit Owners et al.
v. Big Sky of Montana, Inc. et al. (1986), 224 Mont. 142, 729 P.2d
469.
After the fire litigation started, the unit owners were
advised that the buildings contained other structural defects of
a serious nature. A second lawsuit involving many of the same
parties was filed on November 1, 1984. That case was known to the
parties as the lvStructurevv
case. This action was known to them as
the l1FireI1case.
The Structure case came to this Court in a proceedings for
supervisory control in State ex rel. Boyne USA, Inc. v. District
Court of Fifth Judicial District (1987), 228 Mont. 314, 742 P.2d
464. In that original proceedings, this Court directed that the
Structure case proceed as a class action on the part of the unit
owners as plaintiffs.
On February 26, 1987, the District Court entered a stay order
prohibiting any further action in the Fire case. The ~istrict
Court allowed the Structure case to proceed. On May 28, 1985, the
unit owners in the Fire case made a motion to consolidate the fire
case with the Structure case. The motion to consolidate was denied
by the District Court on July 8, 1985.
Thereafter the Structure case was pursued to settlement and
was never tried on the merits. Two of the defendants in the
Structure case, Darg and Moe, were granted summary judgment in
their favor on November 12, 1986, and May 15, 1987, respectively.
Motions for summary judgment made by Realty and by Boyne were
denied by the District Court.
When the Structure case was finally settled, the District
Court allowed the Fire case to proceed again. However, substantial
discovery, including depositions, affidavits, and thousands of
pages of exhibits had been compiled in the Structure case during
the discovery phase. On motion of Realty in the Fire case, the
District Court ordered that it would take judicial notice of the
pleadings and discovery in the Structure case.
The subject of attorney fees in the Structure case came before
this Court in cause no. 89-502 (unreported), Association of Unit
Owners, et al. v. Big Sky of Montana, Inc. et al., Opinion dated
April 9, 1990. It is not otherwise pertinent here.
There are other facts interrelating the Fire case and the
Structure case, to which we will advert in discussing the issues.
It should be noted, however, that the State of Montana and Bruce
Houston were not defendants in the Structure case. They were named
as defendants in the Fire case on the contention of unit owners
that Houston, as a fire inspector for the State of Montana, failed
to report the numerous defects in the fireplaces found by later
experts subsequent to the second fire of February 20, 1981.
The Deer Lodge Condominium buildings were, because of their
deficiencies in design and construction, ultimately razed in 1988
as part of the settlement in the Structure case.
On appeal, the unit owners raise three issues:
1. Summary judgment was improperly entered by the District
Court in favor of the defendants.
2. The District Court erred by refusing to grant the unit
owners' motion to consolidate the cases.
3. The District Court improperly entered summary judgment for
Bruce Houston and the State of Montana.
GENERAL REMARKS
In determining that the District Court properly granted
summary judgment in this, the Fire case, the Court is largely
influenced by the following factors:
a. Identity of Parties. All of the plaintiffs in the
fire case, except for Melts Remodeling, Robert
Tousignant, Gerald Tereich and Carolyn Tereich, were
plaintiffs in the Structure case.
b. Apparent complete settlement in the Structure case.
In the court-approved settlement of the Structure case,
the remaining defendants paid the sum of $3,526,857.32
to be allocated among the various unit owners. In
addition, a part of the settlement included the agreement
that the condominium buildings would be totally razed.
This suggests that the totality of the buildings was
defective. It is difficult to conceive that a claim for
fire damages in a portion of the building survived a
substantial money settlement and a demolition of the
total buildings.
c. Release. In August, 1977, the trustees of the
Association entered into a written release with Big Sky
of Montana Realty, wherein Realty paid $54,000.00 toward
the repairs of the building, and relinquished a claim for
$22,259.46 in payments due from the Association. As part
of the release, the Association waived "any claims they
may have1! against Big Sky of Montana, Inc. and its
subsidiaries "arising out of the construction and sale
of the condominium units known as Deer Lodge Condominium,
such waiver and release to apply to all claims arising
prior to and including the date of this settlement
agreement.
We recognize that the covenants of Deer Lodge Condominium
gave to the Association the right to enter the contracts
or hire personnel for the management of the affairs of
the Association and the maintenance and repair of the
common areas of the buildings, and thus did not preclude
individual claims by the unit owners. Nonetheless, the
settlement in the Structure case was one which included
the entire demolition of the condominium buildings and
when approved by the District Court on July 25, 1988, the
order provided that:
llFollowing compliance with the terms and
conditions of this settlement order, this
cause shall be by a separate order dismissed
with prejudice, each party to pay their or its
own costs." (Emphasis added.)
d. Dismissals of Dars and Moe. In the course of the
litigation in the Structure case, motions were made by
the defendants Darg and Moe for summary judgment.
Separately the District Court considered those motions
and in each case granted the same.
In the Moe case, in finding of fact no. 4, the District
Court found:
4. During the period of April 1, 1976 through
September 28, 1976, the owners of the
condominiums and the Plaintiffs were
repeatedly notified of and became aware of the
deficiencies and defects in the condominiums.
Such notices and knowledge were sufficient to
put them on notice that they had been damaged
and injured.
When the District Court considered the Darg motion for
summary judgment, it made the following findings:
3. The Plaintiff-Owners of the condominiums
became aware in 1976, of what was termed
!!significant structural defects." The
Plaintiffs1 complaint alleges that they were
advised and informed of the defects on or
about April 1, 1976. Each of the individual
Condominium owners were advised by letter
dated September 12, 1976, from Big Sky Realty
that the engineers, Morrison-Maierle, Inc:,
had discovered a llstructural deficiencyt1 in
the units and that the owners were cautioned
with respect to occupancy until the problem
was solved. Again, on September 22, 1976, Big
Sky Realty by letter to Plaintiff Association
notified the owners of the deficiency.
4. The Court finds that from April 1, 1976,
through September 22, 1976, the owners were
repeatedly notified of the structural defects
and the notices were sufficient to put them on
notice that they had been injured.
On January 30, 1987, the District Court entered final
judgment for Lloyd W. Darg and Associates, provided
therein that the judgment was final, and certified it for
appeal pursuant to Rule 54 (b), M.R. Civ.P. In like
manner, on May 15, 1987, the District Court entered final
judgment in favor of Moe, and directed also that there
be a final judgment and certified it for appeal pursuant
to Rule 54 (b).
Both the Moe and the Darg cases were appealed, but
eventually they were dismissed. The judgments in those
cases have therefore become final.
A principal argument of the unit owners in this Fire
case, to avoid the statute of limitations, is that they
never learned of the defects of the fireplaces until
after the fires occurred in 1981. It is clear, however,
that in the Structure case, the District Court determined
that the defendants have been fully notified of the
defective conditions of the construction of the
condominiums, and that the notice of defects included all
of the structural defects in the condominiums.
e. Subrosation Claims
In granting summary judgment in this case, the District
Court noted that on oral argument on the motions, counsel
for plaintiffs indicated that these claims were actually
subrogated claims brought by the insurers involved.
However, there is no amendment to the pleadings nor any
other indication of the pleadings that persons other than
the unit owners were the real parties in interest. That
the claims the plaintiffs made may in fact be subrogation
claims makes no difference, however. A subrogee stands
in the shoes of the subrogor and is subject to the same
defenses as though the action were sued upon by the
insured. Beedie v. Shelley (1980), 187 Mont. 556, 610
P.2d 713, 716.
f. Besinninq Date of Statute of Limitations
The unit owners contend that the beginning date of any
applicable statute of limitations in this case occurred
after the fires in the units in 1981. They contend that
after the repair effort in 1976, they were never advised
that the fireplaces had not been repaired or that they
were still defective. On this contention, the unit
owners based their various theories of liability,
including express warranty, implied warranty, strict
liability, negligence, fraud and deceptive practices.
In entering its order granting summary judgment to the
defendants in this, the Fire case, the District Court
recited facts established in the Fire case and the
Structure case which the District Court denominated
I1findings of fact." Usually there are no findings of
fact in an order granting summary judgment. In this
case, however, the portion of the order denominated
Itfindings of factM is really a statement of the
undisputed facts as they then appeared before the
District Court and from which the court concluded there
was no issue of material fact, and upon which the court
based its order of summary judgment.
Important to the findings were ,the statements relating
to the fireplace deficiencies. The court stated that the
1976 repairs included work on the fireplaces; the same
unit owners who were plaintiffs in the Fire case were
also plaintiffs in the Structure case; and that in the
Structure case, it had been alleged that the plaintiffs
had been damaged by defective original fireplace
installations in 1973-1975, and by defective fireplace
repairs in 1976. The court determined that each of the
legal theories alleged in the Fire case considering the
defective fireplaces was also alleged as a theory of
recovery against the defendants in the Structure case.
On that basis, the court had determined in the Moe and
Darg cases that during the period from April 1, 1976
through September 28, 1976, the owners of the
condominiums and the plaintiffs were repeatedly notified
of and became aware of the deficiencies in the
condominiums and that such notices and acknowledgements
were sufficient to put them on notice that they had been
damaged and injured.
Therefore, in view of the findings derived from the
Structure case, and the fact that the summary judgment
in both cases had become final judgments, there could be
no dispute as a material fact of the beginning date of
notice to the unit owners of the defects of the fireplace
deficiencies.
DEFENDANTS BRUCE HOUSTON AND THE STATE OF MONTANA
The unit owners claim that the District Court improperly
granted summary judgment in favor of Bruce Houston and the State
of Montana.
Houston and the State of Montana were not parties in the
Structure case. The unit owners contend that Houston, as an
employee of the State of Montana, committed acts of negligence in
1981 and following, in that he did not inform or warn the unit
owners that he had discovered the deficiencies in the fireplaces
that had led to the two earlier fires in 1981. The State of
Montana is added as a defendant in this case because it was the
employer of Houston, who was an assistant state fire inspector.
The unit owners point out that after the repairs were made in
1976, they were informed by an official of Realty that the units
were Itsafeand soundn and that Houston's negligence in failing to
find the defects which existed constitutes a separate cause of
action against Houston and the State of Montana based on different
facts from the action pending against the other defendants.
In granting summary judgment, the District Court took judicial
notice of the Structure case and the summary judgments granted to
Darg and Moe. The District Court determined in effect that
collateral estoppel arose from the judgments in both cases in that
in 1976, the plaintiffs knew or should have known that the Deer
Lodge Condominium in general and the fireplaces therein in
particular were defective, and that such notice was sufficient to
put the unit owners on notice of their injury and damage. The
court further determined that the only possible claims that the
unit owners might have against Houston and the State of Montana
were founded upon negligence in the alleged failure to discover and
warn the plaintiffs of the fireplace defects.
The unit owners contend that the summary judgment against them
was improper on the basis that collateral estoppel does not apply,
because there was no identity of the parties and identity of issues
in the two cases. They also contend that collateral estoppel does
not apply because the summary judgments were not final judgments
in the Structure case.
The unit owners rely on a sentence in State ex rel. First Bank
System v. District Court (1989), - Mont . I 782 P.2d 1260,
1262, 46 St.Rep. 1956, in which this Court said: ". . . We do
emphasize that summary judgment is not a decision on the merits."
That sentence, however, is taken out of context. The very next
sentence in the case goes on to say that a denial of summary
judgment is simply a decision that there are factual issues. We
are not dealing in this case with a denial of summary judgment, but
rather a qrant of summary judgments to Darg and to Moe. There can
be no doubt that a grant of summary judgment is a decision on the
merits of the case. Granger v. Time, Inc. (1977), 174 Mont. 43,
568 P.2d 535, 538.
In Marriage of Stout (1985), 216 Mont. 342, 701 P.2d 729, we
determined that collateral estoppel had three elements: (1)
identical issues decided in the prior adjudication; (2) a final
judgment on the merits; and, (3) the party against whom collateral
estoppel is asserted was a party or privy to a party in the prior
adjudication.
Identical issues were litigated, and final judgments on the
merits were entered in these cases.
The District Court found in the Structure case that the unit
owners knew or should have known of the various defects in the
condominiums in 1976 and prior thereto. On the whole record before
us, we determine too, because of the final judgments, that as a
matter of law the unit owners knew or should have known of the
defects, including the defective fireplaces. The cause of action
asserted by the unit owners against the State and Houston is based
upon negligence in failing to discover or to warn of the
deficiencies in the fireplaces. Houston, and his employer, the
State, may not be held liable on the basis of a failure to warn
when at the same time the unit owners knew or should have known of
those same defects.
Since the beginning date of the running of the statute of
limitations against the unit owners was in 1976 or earlier, the
period of limitations for actions based on negligence was three
years, 5 27-2-204, MCA. Thus, in 1981, any claim of the unit
owners based on negligence for the defective fireplaces was already
dead from the passage of time. A new cause of action based on the
same facts which barred the former action does not, like the
phoenix, rise from the burned ashes of the old cause of action
youthfully alive to live another period.
The unit owners also lose on their argument that there is no
identity of parties in the Structure case and the Fire case which,
if true, would preclude collateral estoppel. The unit owners,
suing as a class in the Structure case, and the unit owners here
in the Fire case were parties in both actions, and are the parties
against whom collateral estoppel is asserted. This establishes one
leg of the tripod test for collateral estoppel adopted by us in
Aetna Life and Casualty Insurance Company v. Johnson (1984), 207
Mont. 409, 673 P.2d 1277 and in Marriage of Stout (1985), 216 Mont.
342, 701 P.2d 729. The other legs, adjudication of identical
issues, and a final judgment on the merits, are also proved.
We therefore affirm the summary judgments in favor of Bruce
Houston and the State of Montana.
BIG SKY OF MONTANA, INC.; BIG SKY OF MONTANA REALTY, INC.
On January 17, 1989, the District Court entered its findings
of facts, conclusions and order granting summary judgment to
Realty. As noted in the foregoing, Realty was a successor in
interest of Big Sky of Montana, Inc.
In its order, the court discussed the several theories of
claims brought by the unit owners. We will examine each claim or
point of decision by the District Court to determine if we find
therein an issue of material fact which would preclude summary
judgment. Rule 56, M.R.Civ.P.
1. Collateral Estoppel
Essentially, the District Court concluded that the unit owners
were collaterally estopped from disputing, and were bound by the
facts and conclusions determined by the Mae and Darq final
judgments in the Structure case. As we have discussed earlier, the
District Court drew from those judgments the conclusion that in
1976 the unit owners knew or should have known the fireplaces
within the Deer Lodge Condominiums were defective and that such
knowledge was sufficient to put plaintiffs on notice of their
property damage.
In the discussion foregoing relating to the claim against the
State of Montana, we set out the legal essentials to establish
collateral estoppel. Those legal essentials are met here. There
can be no doubt in this case that the claims for fireplace damages
were included in the Structure case, and settled in the same. In
paragraph V of the amended complaint in the Structure case, we find
the following:
That said engineer and architect also discovered on or
about August 1, 1984, that the fireplaces and the flues
of said fireplaces in the Deer Lodge Condominium
buildings were not installed in accordance with the
Uniform Fire Code and did not have the required clearance
from combustible material to make them safe for operation
and that in some cases combustible insulation had been
installed next to the fireplaces. That the foregoing
enumeration of defects is representative of the defects
but not inclusive of all the defects presently known or
which may be hereafter discovered.
Except for the date of discovery, which affects the
application of the statute of limitations, and not collateral
estoppel, the elements of the unit ownerst claims relating to the
fireplaces rising in the Fire case are fully included in the
pleadings of the Structure case. There can be no dispute about the
identity of issues.
As we said earlier, the other two legs of the collateral
estoppel tripod, a final judgment and identity of parties, are also
present.
The late-revealed possibility that the Fire case is in reality
a subrogation case brought by the insurers does not affect the
applicability of collateral estoppel against their insureds as unit
owners.
2. Breach of Express or Implied Warranties
The District Court determined that Realty was entitled to
summary judgment in its favor because there were no facts showing
the existence of any written contract or express warranty between
the unit owners and Realty, and if the written protective covenants
established an express or implied warranty the claim was
nevertheless barred by any applicable statutes of limitation, 5 5
27-2-207 (I), -202 ( 3 ) , -204 (1) and 27-2-207 (2), MCA. In like
manner, the District Court determined that any implied warranty was
likewise barred by arguably applicable statutes of limitation, 5 5
27-2-207(1), and 27-2-204(1), MCA.
None of the unit owners purchased a condominium unit from
Realty. Nonetheless, the unit owners present an interesting theory
of express warranty. They point out that no specific language is
required to constitute an express warranty, citing Scovil v.
Chilcoat (Okla. 1967), 424 P.2d 87, 91. They contend that Big Sky
of Montana, Inc. warranted that the Deer Lodge Condominiums would
be built in accordance with the National Fire Code; and that Realty
later warranted in 1977 that the units would be repaired in
accordance with the National Fire Code. They then contend that
Realty "had advised the owners that the units had been brought up
to code.
The unit owners base their claim against Big Sky of Montana,
Inc. for express warranty upon the deposition of Bill Martel, the
repair contractor in 1977. He testified that in his contract for
repair, the reconstruction was to be done according to applicable
codes. The unit owners also base claims against Realty upon the
repair contract entered into by Realty with Martel Construction
Company, and Morrison-Maierle, Inc., party of the third part. In
that contract, the scope of the work was to correct defects, to
meet reasonable structural standards, and to meet all applicable
building codes.
The unit owners also rely on the protective covenants recorded
by Big Sky of Montana, Inc. related to the Deer Lodge Condominiums
which require that all construction on the premises comply with the
provisions of the Uniform Building Code, the National Plumbing
Code, and the National Electrical Code. They also rely on the
preliminary declaration for Deer Lodge Condominiums, recorded in
Madison County, which included the paragraph that the condominiums
were subject to the protective covenants already recorded. The
unit owners further maintain that the provisions of the condominium
documents run with the land because state law requires that they
be recorded in order to establish the condominium. Section 70-
23-305 (1), MCA.
The unit owners base their claim of implied warranty of
habitability upon Chandler v. Madison (1982), 197 Mont. 234, 642
P.2d 1028; and also upon Degnan v. Executive Homes, Inc. (1985),
215 Mont. 162, 696 P.2d 431, which holds that an implied warranty
of habitability is a legal duty placed on the builder/vendor of a
house, that a breach of such legal duty is a tort, and that torts
do not require privity of contract.
The unit owners further point to our decisions which have held
that subdivision plats, which reserve roadways or which show a park
or like open area, create an implied common law covenant between
developers and subsequent purchasers that the seller will open and
construct roadways or that the areas will be used in the manner
designated. Majers v. the Shining Mountains (1986), 219 Mont. 366,
711 P.2d 1375; Benson v. Pyfer (Mont. 1989), 783 P.2d 923, 46
St.Rep. 2033.
Realty answers these contentions by arguing that the unit
owners purchased their units from Big Sky of Montana, Inc., and not
from Realty and that there are no contract declarations or other
documents between Realty and the unit owners upon which a warranty
may be based. Realty further answers that if a breach of implied
warranty of habitability could be found in the contract for repair
in 1977, a breach of that implied warranty would be a tort (Desnan,
supra) barred by the statute of limitations. Sections 27-2-204 and
27-2-207, MCA.
We will discuss the applicability of the statutes of
limitations under the next caption, since the statutes are
applicable to other issues raised by the unit owners. It is enough
to say here that we find no express or implied warranties in the
documents described which expose Realty to liability to the unit
owners. On this issue we uphold the District Court.
3. Statutes of Limitation
In its grant of summary judgment, the District Court
determined that many of the claims of the unit owners were barred
because various statutes of limitation had run on the theories of
express warranty, implied warranty, strict liability, negligence,
fraud, and deceptive practices.
In disputing the applicability of the statutes of limitation,
the unit owners contend that they were never made aware of the
deficiencies in the fireplaces prior to 1976, and were never
advised after the repair effort of 1976 that the fireplaces were
still defective. They contend the actual condition of the
fireplaces was not discovered until the fires of 1981. They
therefore maintain that the statutes of limitation on all theories
did not start to run until the time of discovery. Since the Fire
case was filed in January 18, 1983, the unit owners contend they
meet all applicable statutes of limitation based on the time of
discovery.
Subject to certain exceptions not pertinent here, the Montana
statutes of limitation provide that an action for the relief of
fraud or mistake must be commenced within two years ( 5 27-2-203,
MCA) ; for a general tort, three years ( 5 27-2-204, MCA) ; for an
injury to real or personal property, two years ( 5 27-2-207, MCA);
and for damages arising out of construction of an approved real
property, ten years ( 5 27-2-208, MCA) , which latter statute will
require explanation.
The argument about late discovery is unavailable to the unit
owners in this case. They are foreclosed from such argument by
the final judgments entered in the Darq and Mae cases which
determined knowledge of the defects on the part of the unit owners
in 1976. Obviously, the unit owners may not rely on any cause of
action for which the statute of limitations is two or three years.
The unit owners, however, point to 5 27-2-208, MCA, contending
that it provides a limitation period of ten years. That contention
needs examination. The statute provides:
27-2-208. Actions for damaqes arisinq out of work on
improvements to real property. (1) Except as provided
in subsection (2) and ( 3 ) , no action to recover damages
(other than an action upon any contract, obligation, or
liability founded upon an instrument in writing)
resulting from or arising out of the design, planning,
supervision, inspection, construction, or observation of
construction of or land surveying done in connection with
any improvement to real property shall be commenced more
than 10 years after completion of such improvement.
(5) Nothing in this section shall be construed as
extending the period prescribed by the laws of this state
for the bringing of any action.
Taken by its four corners, 5 27-2-208, MCA, is not in itself
a statute of limitation. Under subsection (5) of the statute, the
ten-year period does not extend any other period prescribed by the
laws of this state for bringing any action. What 5 27-2-208, MCA,
provides is that other applicable statutes of limitation still
remains applicable but in no event shall any cause be commenced
more than ten years after the completion of the improvement.
Section 27-2-208, MCA, is not in essence a statute of limitations,
but rather a statute of repose which prevents any cause of action
relating to an improvement to real property from arising after a
ten year period. Thus, if late discovery of the facts were
applicable in this case to extend the time for commencement of the
action, or, if the circumstances which extend the periods of
limitations set out in 5 5 27-2-401, and -409, MCA, were involved,
the specific applicable limitations periods would be extended, but
in no event longer than ten years after the completion of the
improvement. We determine that 5 27-2-208, MCA, does not apply in
this case to extend the applicable statutes of limitation.
We therefore hold that the District Court correctly
interpreted the statutes of limitation in granting summary judgment
in this case.
4. Other Theories of Recovery
The unit owners claimed that Realty was liable on the ground
of negligence. The District Court held that the negligence claim
was barred by the applicable statutes of limitation, 5 27-2-207 (1)
and 27-2-204(1), MCA. From what we have said foregoing, we uphold
the District Court.
With respect to the unit owners claim based on a count of
fraud, the District Court held that the records showed no facts
substantiating the knowledge of Realty of the defectively installed
fireplaces in 1975, that the plaintiffs were collaterally estopped
to deny that the unit owners knew or should have known of the
defectively installed fireplaces in 1976 and again that their
claims were barred by the applicable statutes of limitation, 9 9
27-2-203 and 27-2-207(1), MCA.
The argument of the unit owners with regard to whether Realty
had knowledge of the defectively installed fireplaces states that
while it is true that Realty did not come into existence until
1976, its stockholders were the same as the stockholders of Big Sky
of Montana, and many of those employees carried over to Realty.
Although Big Sky of Montana knew of the defects in the buildings,
based on a letter from an insurance inspector, Realty undertook the
1976 repairs. The unit owners contend that Realty knew or should
have discovered the defects when it became responsible for the
repairs of 1976. That argument may be accepted and still the other
grounds relied upon by the District Court--collateral estoppel and
limitations--would serve to bar the claims for fraud. Again we
hold that the District Court was correct.
The unit owners also based a claim against Realty on the
grounds of deceptive practices. Here, the District Court
determined that the evidence did not substantiate that the
plaintiffs purchased their homes "primarily for personal, family
or household purposes11and that in any event, the claim is barred
by limitations, B 27-2-211, MCA.
The Montana Consumer Protection Act provides in 5 30-14-133,
MCA, that a person who purchases goods or services primarily for
personal, family or household purposes and suffers a loss of money
or property may bring an action (but not a class action) to recover
actual damages, which may be trebled. The Act also provides for
the recovery of reasonable attorney fees.
The Act does not define the term I1goodsgt
and no issue is
presented in this case as to whether the term llgoodsll
includes a
condominium unit. We are, therefore, not presented with that
issue.
The unit owners contend that the finding of the District Court
that the facts did not establish the use of the condominiums was
for "personal, family or household purposesv1 is contra to the
declarations filed for Deer Lodge Condominiums which stated that
they should be for residential purposes only. Moreover, the unit
owners contend that in any event, whether the use of the residences
comes within the Act creates a material issue of fact.
Realty answers that the unit owners use their units for
personal use only a few days of the year and allow the remainder
of the year to be rented out to other persons and that the units
were more investment than they were purchases of homes.
Whatever the merits of these arguments, the limitations of
actions still apply and the claim in any event is barred. Again
we uphold the District Court.
5. Release
The District Court also concluded that the claims against
Realty were barred by a fully-performed release executed by the
Association on behalf of the plaintiffs.
The unit owners contend that the release was not signed by the
entire board of directors, that it was not binding, that it
released only claims arising prior to the date of the document, was
related only to the repairs performed on the roof of the
condominiums and did not include undisclosed defects in the
buildings and fireplaces.
Respondents answer by pointing to the provisions of the
release:
. .
. Certain alleged deficiencies in the construction
of the Deer Lodge condominium units including
discrepancies between improvements constructed and the
original and amended construction plans, uncompleted
punch list, defective materials and construction, and the
like;
. ..
Any claims they may have against BMSR [Realty], its
employees, directors, shareholders, affiliates or
subsidiaries, and against ~ i g
Sky of Montana, Inc., its
employees, shareholders, directors, affiliates or
subsidiaries, arising out of the construction and sale
of the condominium units known as the Deer Lodge
Condominiums, such waiver and release to apply to all
claims arising prior to and including the date of this
Settlement Agreement.
In addition to the unit owners having released and waived any
and all claims relating to the condominiums, Realty argues that
the consideration of $76,259.46 in total cannot be disregarded.
The release in its terms is, of course, broad enough to
include all of the defects in the condominiums at the time the
release was signed. The unit owners avoid the all-inclusive
language by contending that the release was obtained by fraud, in
that Big Sky and Realty failed to disclose to the unit owners the
defective nature of the buildings and the fireplaces, and further
that the release itself was unconscionable.
If the release had been obtained by fraud, the release would
be unenforceable under 5 28-3-304, MCA. As we have discussed
foregoing, however, any claim of fraud is unavailable to the unit
owners for two reasons: there are no facts in the record
substantiating a claim of fraud, and in any event, the statute
limitations would apply.
As for the argued unconscionability, the circumstances here
prevent us from considering that claim. It would be the height of
judicial frivolity to state on the one hand that the claims of the
unit owners in the Fire case were collaterally estopped by the
settlement of the Structure case, and then reopen the Fire case
on the basis that a release executed four years before the fires
was unconscionable. The settlement of the unit owners claims in
the Structure case included the complete razing of the condominium
buildings. Surely the Fire claim did not survive the razing,
release or no release.
6. Indemnity
In granting summary judgment for Realty, the District Court
concluded that the 1976 agreement to indemnify Boyne against
liability against claims arising out of Big Sky's business affairs
prior to the 1976 stock sale was not a contract for the benefit of
the unit owners, nor did it create any rights for the unit owners
justifying their claims against Realty.
The unit owners contend in this case that they are entitled
to indemnity from Realty on three theories: as third party
beneficiaries, on grounds of quasi-contract, and that privity of
contract is not necessary to establish indemnity.
There are indications in the record that when Big Sky of
Montana was sold to Boyne and Realty was formed at the same time,
that Realty agreed that it would be responsible for and indemnify
both Big Sky and Boyne with respect to any pre-existing
obligations. The actual agreement of indemnity is not in the
record.
The record does show that Boyne contributed $400,000 to the
settlement of the Structure case. Based on that, the unit owners
make the following argument:
Since the District Court chose to take
judicial notice in the Structure case, part of
the record in this case is the settlement
payment made by the Defendants in the
Structure case to the Plaintiffs therein.
That settlement was for the approximate sum of
3.5 million dollars. Clearly, if that case
was settled by payment of any funds by B.S.M.,
[Realty], Boyne, or any of the stockholders of
those companies, then it raises a factual
issue with respect to the application of
indemnity agreements in these cases. Since a
payment was made in the Structure case large
enough to settle the same, there is a genuine
issue of material fact as to the obligation
which certain of the Respondents therein may
have to the [unit owners] with respect to
indemnification.
Taking the unit owners' claim for indemnification at face
value, in the apparent agreement Realty is the indemnitor, and Big
Sky of Montana and Boyne are the indemnitees. Boyne contributed
to the settlement in the Structure case; Realty did not. We have
no record here that an indemnitor made any payment on behalf of an
indemnitee. There is no record of a payment by an indemnitor which
would trigger any obligation to third parties.
It is unnecessary to discuss the three theories of indemnity
posed by the unit owners. The District Court was correct in
finding no basis for indemnity when it awarded summary judgment in
favor of Realty.
SUMMARY JUDGMENTS IN FAVOR OF GENERAL ELECTRIC AND MONTANA POWER
COMPANY
On March 1, 1989, the District Court adopted the undisputed
findings and conclusions of law made in the Realty case on January
17, 1989, and, on the conclusion that their corporate veils could
not be pierced in this case, rendered summary judgment in favor of
General ~lectricpension Trust, and the Montana Power Company. It
also rendered summary judgment in favor of Boyne, U.S.A. which we
will discuss separately.
The unit owners pose a derivative theory to upset the summary
judgments in favor of G.E. and MPC. They claim that the Chrysler
Realty corporation, as a stockholder of Big Sky of Montana and
Realty, used the corporations as an alter ego, and thereby, the
corporate veil is pierced as to all other stockholders. The unit
owners rely on Drilcon, Inc. v. Roil Energy corporation, Inc.
(1988), 230 Mont. 166, 749 P.2d 1058 and Hando v. PPG Industries,
Inc. (1989), 236 Mont. 493, 771 P.2d 956.
Under Drilcon, supra, the corporate veil can be pierced if a
stockholder of the corporation uses the corporation as an alter
ego, or as a subterfuge to defeat public convenience, to justify
wrong, or to perpetrate fraud. 749 P.2d at 1063. The unit owners
utilize Hando, supra, to argue that a subsidiary is the alter ego
of the parent corporation if the corporate affairs of both are so
intertwined that in effect each corporation has no separate
identity. 771 P.2d at 960.
We have nothing in this record to indicate anything but that
G.E. and MPC were passive stockholders of Big Sky of Montana and
of Realty. The affidavits before the District Court, which the
District Court considered in granting summary judgment, were
uncontradicted that these corporate stockholders had no more than
a passive interest in the corporations, and took no action as
stockholders which would indicate their use of the corporations
either as an alter ego or for purposes of subterfuge. There simply
can be no argument that each of the corporations is entitled to
summary judgment and that as to them the corporate veil has not
been pierced.
SUMMARY JUDGMENT IN FAVOR OF BOYNE U.S.A., INC.
The District Court's order of March 1, 1989 also granted
summary judgment in favor of Boyne U.S.A., Inc.
In their appellate brief, the unit owners argue since Boyne
absorbed Big Sky of Montana, Boyne became liable for its
obligations which arose thereafter, under 5 35-1-806(2)(e), MCA.
The District Court noted that Boyne took no part in the
repairs or reconstruction of the condominiums in 1976 and 1977, nor
made any representations regarding such repairs. It further
awarded summary judgment in favor of Boyne on the grounds of the
applicable statutes of limitation, the release, collateral
estoppel, laches, and a splitting of causes of action.
Most of the grounds utilized by the District Court granting
summary judgment have been discussed by us fully in the foregoing
material. Without belaboring this Opinion further, we hold that
the summary judgment in favor of Boyne was proper.
DENIAL OF CONSOLIDATION
On May 28, 1985, the unit owners in the Fire case made a
motion to consolidate with the Structure case. The District Court
denied the motion on July 8, 1985. On February 26, 1987, the
District Court stayed any further proceedings in the Fire case.
The stay was effective until June 6, 1988. Thereafter the District
Court ruled that the unit owners were barred from any further
action in the Fire case because of collateral estoppel arising out
of the Structure case.
The unit owners contend that the motion for consolidation
should have been granted because if it had, the situation of
collateral estoppel would not have arisen and the unit owners would
have had their day in court with respect to the Fire case.
Since 1929, it has been a rule in Montana that the subject of
consolidation of cases is within the discretion of the district
court, which will not be interfered with unless clearly abused.
St. George v. Boucher (1929), 84 Mont. 158, 162, 274 P. 489.
Although there appeared to be common issues of law and fact
in the two cases (Keller v. Llewellyn (1977), 175 Mont. 164, 573
P.2d 166) , there are other factors which influenced the District
Court not to consolidate.
The Fire case was initiated by the unit owners in 1983,
through their counsel Michael C. Coil. In 1984, the unit owners,
in a class action with other Deer Lodge Condominium owners, began
the Structure case, again represented by Mr. Coil. In January,
1986, the plaintiffs in the Structure case discharged Mr. Coil.
He was replaced by Page Wellcome as counsel for the unit owners in
the Structure case.
The District Court was then presented with a situation where
the unit owners may have been the same but there were different
defendants involved. The reason there were different defendants
was that in the Fire case, the shareholder defendants, Chrysler
Realty Company, Burlington Northern, Continental Oil Company,
Montana Power Company, Northwest Airlines Incorporated, and General
~lectricPension Trust had been dismissed from the case for various
reasons. Yet some or all of these were defendants in the Strilcture
case. The Structure case would require piercing-the-corporate-
veil issues, but these would not appear in the Fire case. After
Mr. Wellcome came into the case, the plaintiffs in two different
cases were presenting different issues of discovery. These factors
apparently moved the ~istrict Court to deny the motion to
consolidate, and to stay proceedings of the Fire case.
Under the circumstances, we find no abuse of discretion in the
denial by the District Court of the motion to consolidate the two
cases.
PLAINTIFFS WHO WERE NOT IN STRUCTURE CASE
Four of the plaintiffs in the Fire case were not plaintiffs
in the Structure case. They were Melts Remodeling, Robert
~ousignant,Gerald Tereich and Carolyn Tereich. Their claims may
have been subrogated to their insurers.
These four plaintiffs were not parties in this Structure case
so the rule of collateral estoppel is not available as to them.
Nonetheless, it is clear that their claims are barred by the
statute of limitations based on any alleged negligence of the
defendants (Montana Power Company and General Electric pension
Trust, of course, are not liable to these plaintiffs on any
ground). In reaching this decision, we take judicial notice of the
facts established in the Structure case which show that the unit
owners knew, or should have known, of the fireplace defects, and
were repeatedly notified of the structural defects from April 1,
1976 to September 28, 1976. We determine as a matter of law in
this case that there is no genuine issue of material fact as to
these plaintiffs and their knowledge before September 28, 1976, was
sufficient to put them on notice.
The law does not contemplate such discovery as would give
complete knowledge before the cause of action accrues.
Mobley v. Hall (1983), 202 Mont. 227, 657 P.2d 604.
Rather, the discovery doctrine only tolls the running of
the statutory clock until such time as the plaintiff, in
the exercise of reasonable care and diligence, should
have been aware of the wrongful act and injury.
E.W. v. D.C.H. (1988), 231 Mont. 481, 754 P.2d 816, 820.
The claims of these plaintiffs based on negligence are time-
barred, and no other ground of liability appears under any theory.
We uphold the summary judgment against these plaintiffs.
CONCLUSION
For the reasons foregoing, we hold that the summary judgments
granted by the District Court in this cause as to each and all
defendants be, and is hereby AFFIRMED.
We Concur: a
Company;' the State of Montana, De-
fendants ad &pondenh-:- :: - . i' For eobteraJ e s b p ~ l ~
- , ,.era of condominium units w
class in action b&ed'on st&
Decided Sept. 24, 1990. 5. Judgment e71M2)
Judgments obtained in action
by condominium unit owners
Frank Davis, J., granted summary judg- f-. ' .
ment for defendants, and owners appealed.
The Supreme Court, Sheehy, J., beld that:
(1) judgment in related actibn to m v e r Fact that developer of con
for struchml damage established when warranted that 'condorniniunw
ogners knew or should have known of fire built in accordance with National
place deficiencies; (2) claims were time
precluded recovery for fire damage: