Somersett Owners Ass'n v. Somersett Dev. Co.

492 P.3d 534

SOMERSETT OWNERS ASSOCIATION, a Domestic Nonprofit Corporation, Appellant,

v.SOMERSETT DEVELOPMENT COMPANY, LTD., a Nevada Limited Liability Company; Somersett, LLC, a Dissolved Nevada Limited Liability Company; Somersett Development Corporation, a Dissolved Nevada Corporation; Q & D Construction, Inc., a Nevada Corporation; Parsons Bros Rockeries, Inc., a Washington Corporation; and Stantec Consulting Services, Inc., Respondents.

No. 79921

Supreme Court of Nevada.

FILED JULY 29, 2021

Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP, and Bradley S. Schrager, John Samberg, and Royi Moas, Reno, for Appellant.

Castronova Law Offices, P.C., and Stephen G. Castronova, Reno, for Respondent Parsons Bros Rockeries, Inc.

Hoy Chrissinger Vallas, P.C., and Theodore E. Chrissinger, Reno, for Respondent Stantec Consulting Services, Inc.

Lee, Landrum & Ingle and Natasha A. Landrum, Las Vegas, for Respondent Q & D Construction, Inc.

Thorndal Armstrong Delk Balkenbush & Eisinger and Charles L. Burcham, Reno, for Respondents Somersett Development Company, Ltd.; Somersett, LLC; and Somersett Development Corporation.

BEFORE THE SUPREME COURT, EN BANC.¹

OPINION

By the Court, PICKERING, J.:

The miles of stacked rock retaining walls (rockery walls) that entwine and support the Somersett residential development in northern Nevada are failing, and via the underlying action, appellant Somersett Owners Association (SOA) seeks to recover damages against those involved in the rockery walls’ design and construction. But the Nevada Legislature has effected its judgment with regard to such suits—in the form of a statute of repose—that defendants like those SOA sued in the underlying action generally should "be free from liability after the legislatively determined period of time." CTS Corp. v. Waldburger, 573 U.S. 1, 9, 134 S.Ct. 2175, 189 L.Ed.2d 62 (2014) (quoting 54 C.J.S. Limitations of Actions § 7 (2010) ). In this case, a six-year period applies. NRS 11.202 (2015). That six-year period begins when the improvement to the real property is "substantial[ly] complet[e]," NRS 11.202(1) ; NRS 11.2055, which we clarify in the context of the common law, means sufficiently complete so that the owner can occupy or utilize the improvement. Here, SOA failed to offer anything beyond "gossamer threads of whimsy, speculation, and conjecture" to support its argument that it commenced this action within that six-year period. Wood v. Safeway , Inc., 121 Nev. 724, 732, 121 P.3d 1026, 1031 (2005) (quoting Pegasus v. Reno Newspapers, Inc., 118 Nev. 706, 713-14, 57 P.3d 82, 87 (2002) ). Thus, "[l]ike a discharge in bankruptcy, [the] statute of repose can be said to provide a fresh start or freedom from liability" for the respondents in this case. CTS Corp., 573 U.S. at 9, 134 S.Ct. 2175. Accordingly, the district court did not err by granting their collective motion for summary judgment, and we affirm.

I.

In early 2006, respondent Q & D Construction, Inc., graded the property that would eventually become the development into terraced residential lots and streets. Respondent Parsons Bros Rockeries, Inc., then constructed more than 13 miles of rockery walls to support the terraced lots. This phase of the development's construction ceased in December 2006, at which time respondent Stantec Consulting Services, Inc., issued letters to Somersett Development Company, Ltd.,² indicating that Stantec had conducted a final inspection on the rockery walls and that "the inspected work was performed ... in accordance with the approved (stamped) plans, specifications[,] and the ... International Building Code." Somersett then divided and sold the lots to individual builders to construct housing units on them. At the time of appeal, there were more than 3,000 such units in the development.

Though the expected lifespan of the rockery walls was at least 50 years, some began failing as early as 2011. After two walls collapsed on the same day in February 2017, SOA hired an inspector to determine whether there were additional as-yet undetected defects in the rockery walls. In fact, the inspector concluded that the 70,000 lineal feet of rockery walls were "globally unstable," and a separate investigation further revealed that two-thirds of the rockery walls materially deviated from the original plans and specifications. Accordingly, in 2017, SOA brought suit against Somersett, Parsons Bros, Q & D, and Stantec (collectively, respondents) for negligence and negligence per se, breach of express and implied warranties, negligent misrepresentation and/or failure to disclose, declaratory relief, and bad faith. The respondents moved for summary judgment on the ground that the six-year statute of repose in NRS 11.202 (2015), which limited certain civil actions for damages "commenced against the owner, occupier or any person performing or furnishing the design, planning, supervision or observation of construction, or the construction of an improvement to real property," had expired.³ The district court granted respondents’ motion for summary judgment, and this appeal followed.

II.

NRS 11.202 (2015) prohibits the commencement of a construction defect action such as this one⁴ "more than 6 years after the substantial completion " of the improvement to real property in question, (emphasis added). Accordingly, the threshold question that guides our de novo review, see Wood , 121 Nev. at 729, 121 P.3d at 1029 (noting that a ruling on summary judgment is subject to de novo review), is when the rockery walls achieved "substantial completion" for purposes of NRS 11.202. A companion statute, NRS 11.2055, undertakes to define "substantial completion." It provides:

1. Except as otherwise provided in subsection 2, for the purposes of this section and NRS 11.202, the date of substantial completion of an improvement to real property shall be deemed to be the date on which:

(a) The final building inspection of the improvement is conducted;

(b) A notice of completion is issued for the improvement; or (c) A certificate of occupancy is issued for the improvement, whichever occurs later.

2. If none of the events described in subsection 1 occurs, the date of substantial completion of an improvement to real property must be determined by the rules of the common law.

The summary judgment proceedings in district court advanced on the basis that the trigger dates specified in NRS 11.2055(1)(a)-(c) did not apply, so "the date of substantial completion ... must be determined by the rules of the common law," NRS 11.2055(2), the contours of which are a matter of first impression for this court. See Schuck v. Signature Flight Support of Nev., Inc., 126 Nev. 434, 437, 245 P.3d 542, 545 (2010) (reviewing summary judgment based on issues raised and resolved in district court).

Accepting NRS 11.2055(2) ’s reference to the common law as their starting point, both sides purport to endorse the definition of substantial completion offered by the American Institute of Architects (the AIA)—"the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use." Werner Sabo, Legal Guide to AIA Documents § 4.56 (6th ed. 2018). This definition is well recognized and frequently used. See Markham v. Kauffman, 284 So. 2d 416, 419 (Fla. Dist. Ct. App. 1973) (noting that a building is substantially complete "when it has reached the stage where it can be put to the use for which it was intended, even though some minor items might be required to be added") (quoting Sherwood Park, Ltd. v. Meeks, 234 So. 2d 702, 703 (Fla. Dist. Ct. App. 1970) ); State ex rel. Stites v. Goodman, 351 S.W.2d 763, 766 (Mo. 1961) (accord); Russo Farms, Inc. v. Vineland Bd. of Educ., 144 N.J. 84, 675 A.2d 1077, 1093 (1996) (holding that the statute of repose began running at substantial completion as defined by the AIA); Etheridge ex rel . Etheridge v. YMCA of Jackson, 391 S.W.3d 541, 548 (Tenn. Ct. App. 2012) (calling the AIA definition of substantial completion "[t]he most popular") (internal quotation omitted); see also 57 Joel Lewin & Eric F. Eisenberg, Mass. Prac., Construction Law § 3:12 (2020) (discussing the "widely-used" definition). We therefore adopt the AIA definition of substantial completion as stating the rules of the common law for purposes of NRS 11.2055(2).

Under this standard, whether an improvement to property is substantially complete is a fact-intensive inquiry, turning on the specific circumstances of the improvement in question. PIH Beaverton, LLC v. Super One, Inc., 355 Or. 267, 323 P.3d 961, 971 (2014) (examining record evidence of occupancy and completion notice in determining whether an improvement was substantially complete). And here, SOA bore the burden of submitting evidence of those circumstances to support that its action was timely. G & H Assocs. v. Ernest W. Hahn, Inc., 113 Nev. 265, 271, 934 P.2d 229, 233 (1997) (stating that "in addition to proving the elements of the cause of action, one must also prove that the cause of action was brought within the time frame set forth by the statute of repose"). Specifically, the district court properly granted respondents' motion for summary judgment unless SOA, "by affidavit or otherwise, set forth specific facts demonstrating the existence of a genuine factual issue" as to whether the action was brought within the time frame set forth by NRS 11.202 (2015). Wood, 121 Nev. at 731, 121 P.3d at 1030-31 (internal quotation omitted).

As relevant to this particular record, it has been said that "[p]aperwork can be important for determining the date of substantial completion." 2A Philip L. Bruner & Patrick J. O'Connor, Jr., Bruner & O'Connor Construction Law § 7:29 (2020); see also Suffolk City Sch. Bd. v. Conrad Bros., Inc., 255 Va. 171, 495 S.E.2d 470, 473 (1998) (noting that the statute of repose began to run upon the architect's submittal of...