Johnston v. Centennial Log Homes & Furnishings, Inc., 305 P.3d 781

Background

In 2001 Centennial built a custom log home for Robert and Sandy Leonard; the Johnstons (Sandy’s parents) acquired a 36% interest in the property in 2002.
In 2002 the Leonards discovered bubbling wood floors and extensive mold; counsel sent complaints to Centennial and in April 2003 the Leonards executed a general release in favor of Centennial (for $6,000, forgiveness of remaining contract balance, and lien release). The Johnstons were not parties to that release.
In 2004–2005 the Johnstons (as owners) paid about $50,000 to Innovative Builders for repairs/maintenance to stairs, decks, and settling-related problems.
Beginning in 2008 severe structural problems (extensive log checking/splitting, roof/beam and connection defects, insulation failures causing frozen/ruptured pipe and flooding, water infiltration and rot) were discovered by engineers; deconstruction in 2010 revealed numerous hidden structural defects and failures to meet building code.
The Johnstons sued Centennial (2009) for negligence, breach of warranty, and violations of the Montana Consumer Protection Act and Unfair Trade Practices Act; Centennial moved for summary judgment asserting statutes of limitations and that the Leonards’ 2003 release barred claims. The district court granted summary judgment and dismissed Keeko; the Supreme Court reversed in part and remanded.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Are plaintiffs’ claims time-barred (discovery rule)?	Johnstons: defects were concealed or not discoverable until 2008–2010, so statutes of limitations were tolled.	Centennial: 2002–2005 problems and $50k repairs put plaintiffs on notice and claims accrued by 2005.	Reversed summary judgment on limitations; factual disputes exist whether defects were self‑concealing and when plaintiffs reasonably should have discovered them — jury question for the 36% interest.
2. Does the Leonards’ 2003 release bind the Johnstons/Johnston Trust?	Johnstons: they were not parties to the release and it only covered mold/flooring issues.	Centennial: release broadly waived all claims arising from defective construction, including unknown latent defects; Trust later succeeded interests.	Release is unambiguous and bars claims of the Leonards’ 64% interest (later transferred to the Trust); release does not bind the Johnstons’ 36% interest because they were not parties.
3. Did the district court properly dismiss Keeko without full briefing?	Johnstons: voluntarily dismissed Keeko under Rule 41; dismissal proper.	Centennial: dismissal was premature, Keeko and Centennial had interrelated defenses; court should have allowed briefing and used Rule 41(a)(2) discretion.	Reversed dismissal of Keeko; district court should have given Centennial opportunity to brief opposition before ordering dismissal under Rule 41(a)(2).
4. Plaintiff’s standing under Consumer Protection Act (whether plaintiffs are "consumers")	Johnstons: they had a sufficient relationship with Centennial to be consumers under the Act.	Centennial: Johnstons not "consumers" under the Act.	Court declined to decide this undeveloped issue on appeal and left it for the district court/record.

Key Cases Cited

Rich v. Ellingson, 174 P.3d 491 (Mont. 2007) (interpreting broad release language as unambiguous and precluding later claims)
E.W. v. D.C.H., 754 P.2d 817 (Mont. 1988) (discovery rule not applied where plaintiff was aware of wrongful act and injury)
Deschamps v. Treasure State Trailer Ct., Ltd., 230 P.3d 800 (Mont. 2010) (claim accrual when plaintiff was alerted to serious defects by consultant)
Burley v. Burlington N. & Santa Fe Ry. Co., 273 P.3d 825 (Mont. 2012) (discovery rule tolling may present jury question)
Siebken v. Voderberg, 291 P.3d 572 (Mont. 2012) (when accrual timing is disputed, statute‑of‑limitations issues may be for the jury)