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2003 Minn. App. LEXIS 395, *

2 of 83 DOCUMENTS
Stephen P. Hernick, et al., Appellants (CX-02-1424), Respondents (C002-1478), vs. Verhasselt Construction, Inc., Defendant and Third Party
Plaintiff, Respondent (CX-02-1424), Appellant (C0-02-1478), vs. Olson
Brothers Drywall, n/k/a Olson Construction, Third Party Defendant
(CX-02-1424), Respondent (C0-02-1478).
CX-02-1424, C0-02-1478
COURT OF APPEALS OF MINNESOTA
2003 Minn. App. LEXIS 395

April 8, 2003, Filed

NOTICE:
[*1] THIS OPINION WILL BE
UNPUBLISHED AND MAY NOT BE CITED
EXCEPT AS PROVIDED BY MINNESOTA
STATUTES.

JUDGES: Considered and decided by Randall,

Presiding Judge, Shumaker, Judge, and Wright,
Judge.

SUBSEQUENT HISTORY: Review denied by

Hernick v. Verhasselt Constr., Inc., 2003 Minn.
LEXIS 372 (Minn., June 25, 2003)

OPINION BY: WRIGHT

PRIOR HISTORY:
Chisago County District
Court. File No. C5011213. Hon. Robert G.
Rancourt.

UNPUBLISHED OPINION

DISPOSITION:

Reversed and remanded.

COUNSEL: David D. Hammargren, Jeffrey C.

Paulson,
Hammargren
&
Meyer,
P.A.,
Minneapolis, MN (for Stephen and Susan
Hernick).
Patrick J. Sweeney, JoAnn C. Toth, Spence, Ricke,
Sweeney & Gernes, P.A., St. Paul, MN (for
Verhasselt Construction).
Edward F. Kautzer, Ruvelson & Kautzer, St. Paul,
MN 55104-3829 (for Olson Construction).

OPINION

WRIGHT, Judge
On appeal from summary judgment, Stephen
and Susan Hernick argue that the district court
erred by holding (1) that the two-year statute of
limitations for claims based on defective and
unsafe conditions arising out of a contract to
improve real property, Minn. Stat. 541.051, subd.
1(a) (2000), barred their action against Verhasselt
Construction for breach of a settlement agreement,
in which Verhasselt Construction made a new
promise to remedy stucco defects; and (2) [*2]
that the settlement agreement was invalid for lack
of consideration. In a separate appeal, Verhasselt
Construction challenges the district court's holding
that its claim for indemnity and contribution
against Olson Construction was barred by Minn.
Stat. 541.051. We reverse and remand.

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2003 Minn. App. LEXIS 395, *
While the settlement agreement did not
mention Olson, Verhasselt had indicated in earlier
FACTS
communications that Olson would return to
On May 10, 1993, Stephen and Susan Hernick
complete the stucco repairs. To date, the stucco
(the Hernicks) and Verhasselt Construction, Inc.
repairs have not been completed.
(Verhasselt) entered into a written agreement for
On January 22, 2001, the Hernicks
the construction of the Hernicks' home. Verhasselt
commenced this lawsuit in district court against
subcontracted Olson Construction (Olson) to apply
Verhasselt, alleging breach of the settlement
stucco to the exterior of the home.
agreement. Verhasselt filed a third-party claim
The parties closed on the construction contract
against Olson, seeking contribution and indemnity.
on December 22, 1993. At the time of the closing,
Both Verhasselt and Olson moved for summary
the Hernicks noted a number of construction
judgment, arguing that the two-year statute of
defects. Verhasselt indicated that all of the defects
limitations, Minn. Stat. 541.051 (2000), barred
would be repaired within six months after the
the Hernicks' claims. The district court granted
closing. On October 10, 1994, the Hernicks sent a
summary judgment in favor of Verhasselt and
letter to Verhasselt listing the remaining
Olson. The Hernicks appeal the summary
construction
deficiencies.
Among
those
judgment in favor of Verhasselt and Olson. In
deficiencies were problems with stucco, roofing,
order to preserve the contribution and indemnity
garage doors, and various interior items. Verhasselt
issues against Olson, Verhasselt appeals the entry
indicated that Olson would repair the stucco
of summary judgment in favor of Olson. This court
defects. But virtually nothing was done by either
consolidated the appeals.
Verhasselt or [*3]
Olson to remedy the
construction defects. From December 20, 1994,
DECISION
through January 22, 1997, the Hernicks sent a
series of letters to Verhasselt, complaining about
On appeal from summary judgment, [*5] this
the remaining construction problems and
court asks whether there are any genuine issues of
Verhasselt's failure to remedy them. Finally, on
material fact and whether the district court erred in
February 28, 1997, the Hernicks filed a complaint
its application of the law. State by Cooper v.
against Verhasselt with the Minnesota Department
French, 460 N.W.2d 2, 4 (Minn. 1990). No
of Commerce (the department).
genuine issue of material fact exists "where the
record taken as a whole could not lead a rational
During the rest of 1997 through early 1998,
trier of fact to find for the nonmoving party."
the department facilitated negotiations between
DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn.
Verhasselt and the Hernicks. After the parties
1997) (alteration in original) (quoting Matsushita
identified the defects, Verhasselt started the
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
repairs. On November 9, 1998, Verhasselt and the
574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538
Hernicks executed a settlement agreement. The
(1986)). "The party resisting summary judgment
agreement specifically stated that issues of stucco
must do more than rest on mere averments." Id. at
application, stucco cracking and its relation to
71. A genuine issue for trial must be established by
house movement will still remain to be remedied.
substantial evidence. Id. at 69-70. This court views
Cracking will be monitored throughout this winter.
the evidence in the light most favorable to the
Also, in the spring [of 1999,] any patch and repair
party against whom summary judgment was
stucco resulting from corrective work done at the
granted. Fabio v. Bellomo, 504 N.W.2d 758, 761
entry porch column and reconfiguration of facsia
(Minn. 1993). Summary judgment is appropriate
and soffit will be remedied by the contractor. The
when a party fails to make a showing sufficient to
amount of $ 3,000 will be payable to the Hernicks
establish the existence of an element essential to
* * * and both Mr. and Mrs. Stephen Hernick
the party's case. Bersch v. Rgnonti & Assocs., Inc.,
agree to hold harmless Verhasselt Construction
584 N.W.2d 783, 786 (Minn. App. 1998), [*6]
[*4] Company, Inc. and also Gary Verhasselt
review denied (Minn. Dec. 15, 1998).
personally for any past or present claims on their
home, * * * excluding any statutory obligations as
I.
far as structural issues would go.
The Hernicks argue that the district court
erred in concluding that their claims are barred by

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2003 Minn. App. LEXIS 395, *
the two-year statute of limitations, Minn. Stat.
Because the parties do not dispute that the
541.051 (2000), applicable to construction defects.
problems with stucco resulted in both defective
Because their claim arose out of the breach of a
and unsafe conditions, and because Minn. Stat.
settlement agreement, the Hernicks assert that the
541.051 applies to actions based on breach of
six-year statute of limitations for contract disputes,
contract, the Hernicks' claims would have been
Minn. Stat. 541.05 (2000), applies to their case.
precluded by a two-year statute of limitations had
We agree.
they sued based on the original construction
contract. However, this action arose out of the
Minn. Stat. 541.051 applies to disputes
settlement agreement entered into by the Hernicks
arising out of defective and unsafe improvements
and Verhasselt on November 9, 1998, in which
to real property. Sherbrook Co. v. E & H
Verhasselt specifically promised to resolve "issues
Earthmovers, Inc., 419 N.W.2d 818, 819 (Minn.
of stucco application, stucco cracking and its
App. 1988), review denied (Minn. Mar. 1, 1988).
relation to house movement." This new promise,
The statute provides, in pertinent part,
albeit related to the original construction contract,
was a contract to fix the agreed-upon defects
except where fraud is involved, no action by any
resulting from the original contract to construct the
person in contract, tort, or otherwise to recover
Hernicks' home; and the Hernicks' suit was an
damages for any injury to property, real or
action for breach of the promise to fix those
personal, or for bodily injury or wrongful death,
defects, not an action for damages arising out the
arising out of the defective and unsafe condition of
"defective and unsafe condition." Under these
an improvement to real property, nor any action for
circumstances, we conclude [*9]
that the
contribution or indemnity for damages sustained
applicable limitations period is six years under
on account [*7] of the injury, shall be brought
Minn. Stat. 541.05 (2000) (prescribing limitation
against any person performing or furnishing the
to action in contract or other obligation), not two
design, planning, supervision, materials, or
years as contemplated by Minn. Stat. 541.051
observation of construction or construction of the
(prescribing limitation to action for damages
improvement to real property or against the owner
resulting from defective and unsafe condition from
of the real property more than two years after
improvement to real property). Because the
discovery of the injury * * * .
limitation period begins to run against a cause of
action when it accrues, in a breach-of-contract case
Minn. Stat. 541.051, subd. 1(a). The legislative
the limitation period begins to run at the time of
purpose of enacting section 541.051 was to
the breach. Bachertz v. Hayes-Lucas Lumber Co.,
eliminate suits against architects, designers and
201 Minn. 171, 176, 275 N.W. 694, 697 (1937).
contractors who have completed the work, turned
Verhasselt allegedly breached the settlement
the improvement to real property over to the
agreement in the spring of 1999, less than two
owners, and no longer have any interest or control
years before the commencement of the action in
in it.
January 2001. Under the six-year limitation period,
therefore, the lawsuit was timely filed and
Red Wing Motel Investors v. Red Wing Fire Dept.,
summary judgment in favor of Verhasselt and
552 N.W.2d 295, 297 (Minn. App. 1996) (quoting
Olson was erroneously granted.
Sartori v. Harnischfeger Corp., 432 N.W.2d 448,
454 (Minn. 1988)), review denied (Minn. Oct. 29,
II.
1996). Accordingly, Minn. Stat. 541.051 applies
where the owner sues the contractor because a
Having resolved the statute-of-limitations
defective and unsafe condition arose on the
issue, we next review the district court's
property due to negligence or breach of some
determination that the settlement agreement with
contractual duty under the original construction
the Hernicks was invalid because it lacked
contract. See Greenbrier v. Keller Inv., Inc., 409
consideration. "Settlement agreements [*10] are
N.W.2d 519, 523 (Minn. App. 1987) [*8] (section
contractual in nature." Chalmers v. Kanawyer, 544
541.051 covers "actions sounding in contract or in
N.W.2d 795, 797 (Minn. App. 1996). A contract
warranty, based on defective workmanship and
must be supported by consideration. Baehr v.
brought by an owner against his architect or
Penn-O-Tex Oil Corp., 258 Minn. 533, 538-39,
contractor." (quotation omitted)).
104 N.W.2d 661, 665 (1960). The determination of
whether sufficient consideration underlies an

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2003 Minn. App. LEXIS 395, *
agreement raises a question of law, which we
N.W.2d 521, 522 (Minn. 1992). Here, however,
review de novo. Brooksbank v. Anderson, 586
whether all of the settled claims arose out of
N.W.2d 789, 794 (Minn. App. 1998), review
defective and unsafe conditions and thus were
denied (Minn. Jan. 27, 1999). Verhasselt argues
barred by section 541.051 had not been resolved
that the release by the Hernicks of any past or
when the parties entered the settlement agreement.
present claims against Verhasselt did not constitute
Moreover, at no time did Verhasselt attempt to
adequate consideration, because any claims against
raise the statute-of-limitations defense during the
Verhasselt were barred by the statute of limitations
settlement negotiations. On the contrary, it agreed
under Minn. Stat. 541.051. We disagree.
to settle all of the disputed issues by paying $
3,000 to the Hernicks and specifically agreeing to
"Consideration requires the voluntary
remedy the stucco defects. On this record, we do
assumption of an obligation by one party on the
not conclude as a matter of law that the settlement
condition of an act or forbearance by the other."
agreement between Verhasselt and the Hernicks
Cady v. Coleman, 315 N.W.2d 593, 596 (Minn.
lacked consideration. Because the agreement was a
1982) (citation omitted).
settlement of a good-faith dispute, we conclude
that it was supported [*13] by consideration. 1
Minnesota follows the long-standing contract
principle that a court will not examine the
adequacy of consideration as long as something of
1 In view of our holdings that a six-year
value has passed between the parties.
limitations period governs this action and
that the settlement agreement was not
[*11] C & D Inv. v. Beaudoin, 364 N.W.2d 850,
invalid for lack of consideration, we
853 (Minn.App.1985) (citing Estrada v. Hanson,
decline to consider the Hernicks' argument
215 Minn. 353, 356, 10 N.W.2d 223, 225-26
that Verhasselt was equitably estopped
(1943)), review denied (Minn. June 14, 1985).
from asserting a statute-of-limitations
Settlement of a dispute can be consideration.
defense.
Hillmeyer v. Watz, 415 N.W.2d 89, 92 (Minn. App.
1987). The disputed claim that is the subject of a
III.
settlement must be asserted in good faith, even if it
We next consider Verhasselt's third-party
is ultimately determined that the claim is not
claim against Olson for contribution and
objectively valid. C. J. Duffey Paper Co. v. Reger,
indemnity. Indemnity is an equitable remedy for
588 N.W.2d 519, 525 (Minn. App. 1999). While a
restitution. Blomgren v. Marshall Mgmt. Servs.,
"wholly baseless or utterly unfounded claim is not
Inc., 483 N.W.2d 504 (Minn. App. 1992).
consideration," Nybladh v. Peoples State Bank of
Indemnity arises out of a contractual relationship,
Warren, 247 Minn. 88, 96 n.11, 76 N.W.2d 492,
either expressed or implied by law, which
498 n.11 (1956), forbearance of a doubtful claim is
"requires one party to reimburse the other
sufficient consideration to support a contract.
entirely." Id. (quoting Hendrickson v. Minn. Power
Charles v. Hill, 260 N.W.2d 571, 575 (Minn.
& Light Co., 258 Minn. 368, 371, 104 N.W.2d
1977).
843, 847 (1960) (citation omitted)).
The record demonstrates that, at the time of
A claimant may recover indemnity:
the settlement agreement, there were a number of
disputed claims between the parties. In their
(1) where the one seeking indemnity has only
complaint to the department, the Hernicks listed
a derivative or vicarious liability for damage
problems with the quality of Verhasselt's
caused by the one sought to be charged[; [*14] ]
workmanship,
including
warranty
issues,
(2) where the one seeking indemnity has
noncompliance [*12] with the building codes,
incurred liability by action at the direction, in the
structural defects in the house, and negligent
interest of, and in reliance upon the one sought to
installation of the waterline that resulted in
be charged[;]
damages to the trees on the property. Verhasselt's
argument rests on the proposition that the
(3) where the one seeking indemnity has
Hernicks' "valid claims" were solely claims barred
incurred liability because of a breach of duty owed
by Minn. Stat. 541.051. But section 541.051
to him by the one sought to be charged[;] * * *
only applies to defective and unsafe conditions on
the property. Griebel v. Andersen Corp., 489

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2003 Minn. App. LEXIS 395, *
(5) where there is an express contract between
Tolbert v. Gerber Indus., Inc., 255 N.W.2d
the parties containing an explicit undertaking to
362, 367-68 n.11 (Minn. 1977).
reimburse for liability of the character involved.
The only alternative for Olson to have
asserted the statute-of-limitations defense under
Blomgren, 483 N.W.2d at 506 (footnote omitted)
Minn. Stat. 541.051 was via Minn. R. Civ. P.
(quoting Hendrickson, 258 Minn. at 372-73, 104
14.01. This rule allows a third-party defendant to
2
N.W.2d at 848) (citation omitted). The statute of
assert against the third-party plaintiff any defenses
limitations in an indemnification case ordinarily is
that the third-party plaintiff has to the plaintiff's
six years after final judgment or settlement. Oanes
claim. Minn. R. Civ. P. 14.01; Minnesota
v. Allstate Ins. Co., 617 N.W.2d 401, 403 (Minn.
Landmarks v. Mortenson Co., 466 N.W.2d 413,
2000). However, in an indemnification case arising
416 (Minn. App. 1991). [*16] In light of our
out of the defective and unsafe condition of an
holding that Minn. Stat. 541.051 does not bar the
improvement to real property, the limitation period
Hernicks' action against Verhasselt for breach of
is two years after final judgment or settlement.
the settlement agreement, the two-year statute-ofMinn. Stat. 541.051, subd. 1(b) (2000). Olson
limitations defense is likewise not available to
argues that Minn. Stat. 541.051 bars Verhasselt's
Olson in its action against Verhasselt. See
indemnity action against them because [*15] more
Landmarks, 466 N.W.2d at 415 (holding that thirdthan two years have passed since the Hernicks
party defendant is granted the right to assert the
discovered the stucco defects. We disagree.
defense of another only by rule 14.01 and may not
Because the underlying action between the
put themselves in a better position than that held
Hernicks and Verhasselt for breach of the
by the third-party plaintiff). Accordingly,
settlement agreement has not been resolved,
Verhasselt's contribution-and-indemnity action is
Olson's statute-of-limitations defense is not ripe at
not barred by the statute-of-limitations defense.
this stage of the proceeding.
Accordingly, we reverse the summary
judgment in favor of Verhasselt and Olson, and
2 In Hendrickson, the Minnesota Supreme
remand to the district court for further proceedings
Court outlined the five elements for
not inconsistent with this opinion.
indemnification. Hendrickson, 258 Minn.
at 372-73, 104 N.W.2d at 848. The fourth
Reversed and remanded.
element, however, was overruled by