Dillon Companies v. Hussman Corporation ( 2006 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
January 20, 2006
TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
DILLON COMPANIES, INC.,
d/b/a KING SOOPERS, INC.,
Plaintiff-Appellant,
v. No. 03-1493
HUSSMANN CORPORATION, (D.C. No. 01-M-931)
(D. Colo.)
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BRISCOE, McKAY and EBEL, Circuit Judges.
This is a diversity action filed pursuant to 28 U.S.C. § 1332. Plaintiff
Dillon Companies, Inc., doing business as King Soopers, Inc. (“King Soopers”),
filed suit against Hussmann Corporation (“Hussmann”) for negligence as a result
of a fire that occurred during the remodeling of a King Soopers store. After a
seven-day trial, the jury returned a verdict for King Soopers in the amount of
$3,819,212.00. The jury also assessed 35% comparative fault to King Soopers,
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
which reduced the judgment entered in favor of King Soopers to $3,243,148.22.
King Soopers appeals, claiming that the district court erred in permitting
the jury to consider its comparative negligence. King Soopers also contends that
the district court erred in excluding evidence regarding leasehold improvements.
We affirm.
I.
This negligence suit arose from a fire in King Soopers’ Store #48 in
Greenwood Village. King Soopers designed the grocery store in 1978 and
remodeled it in 1987. Although an investment company owned the building, King
Soopers maintained exclusive possession and control as a lessee since 1978.
In 2000, King Soopers was remodeling the store, and it hired Hussmann as
the commercial refrigeration contractor. Hussmann employees, including Dan
Anderson, used acetylene oxygen torches to braze refrigeration pipes in the roof.
On March 22, 2000, Anderson accidentally ignited some combustible
paper-faced insulation. Anderson attempted to put the fire out, but his efforts
were to no avail. The flames spread across the roof in a rolling fire, the roof
collapsed, and the building was destroyed. A rolling fire suggests that “a large
amount of combustibles ignite[d] in a progressive motion.” Aplee. App. at 109.
As a result of the fire, King Soopers sued Hussmann, claiming negligence
and seeking damages. Hussmann responded by alleging that King Soopers was
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also negligent and that its negligence should be compared to reduce Hussmann’s
potential liability.
At trial, Hussmann argued that King Soopers negligently installed
combustible insulation and failed to take fire preventative measures, which
created a fire hazard and caused the fire to spread rapidly. Hussmann asserted six
grounds to support King Soopers’ comparative negligence: (1) installing
combustible paper-faced insulation; (2) failing to properly cover the combustible
insulation; (3) leaving old combustible ceiling tiles above the drop ceiling; (4)
failing to utilize draft stops in the attic, even though the insulation made the store
combustible; (5) failing to install fire sprinkler heads above the drop ceiling; and
(6) violating the building codes.
When it built the store, King Soopers installed combustible paper-faced
insulation in the roof, even though the original specifications called for foil-faced
insulation, which is the most fire resistant material. Several witnesses testified
that the presence of combustible insulation in the roof would make it easier to
start a fire, and that a fire would burn faster once started. Deputy Fire Marshal
Charles Graham, who investigated the fire, testified that the presence of paper-
backed insulation was why Anderson was unable to extinguish the fire with a
five-gallon bucket of water, wet rags, and two fire extinguishers. The Uniform
Building Code now prohibits combustible paper-backed insulation, and the new
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store could not use it.
After installing the combustible insulation in the roof, King Soopers left it
exposed, despite manufacturer’s warnings printed on the insulation that it was
“combustible and should not be left exposed.” Aplee. App. at 87. Several
witnesses testified that King Soopers should have covered the insulation. If King
Soopers covered the insulation with dry wall, thirty minutes would have elapsed
before the insulation ignited from heat transfer.
Moreover, King Soopers did not install any draft stops in the store, even
though the open area between the roof and the drop ceiling measured 50,000
square feet. Draft stops are physical walls that seal off areas of the roof, which
should confine any fires that occur to a smaller area. Graham testified that draft
stops could have contained the fire within a smaller area and prevented the loss of
the entire store.
King Soopers installed fire sprinklers below the drop ceiling, but it did not
install any above the drop ceiling. Because this fire occurred above the drop
ceiling, the sprinkler system did not activate during the fire. Robert Letcher, who
is King Soopers’ Director of Facility Engineering, and Graham testified that the
building was fully sprinklered because all of the occupied space had sprinklers.
John Schumacher, who is a certified fire investigator, testified that sprinklers
above the drop ceiling would have sensed the fire, assisted in slowing the fire,
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and “probably would have put the fire out.” Aplee. App. at 83. In the original
specifications, the store was supposed to have an automatic sprinkler system both
above and below the drop ceiling.
Finally, King Soopers installed a second, lower drop ceiling when it
remodeled the store in 1987. However, King Soopers did not remove the
combustible tiles from the old drop ceiling. Graham and Schumacher testified
that the presence of the old ceiling tiles contributed to the fire.
Hussmann presented expert testimony from Roger Craddock, who
investigates large accidents and fires. Craddock testified on five matters:
(1) The paper-backed insulation was highly flammable and should have
been covered;
(2) King Soopers violated the 1976 Uniform Building Code by installing
paper-backed insulation;
(3) The Building Code required draft stops or sprinkler heads above the
drop ceiling because the paper-faced insulation made the building combustible;
(4) The original specifications required foil-faced insulation and sprinkler
heads above the drop ceiling, but they were changed most likely to cut costs;
(5) The building would not have been lost if it was built with foil-faced
insulation, draft stops, or sprinklers above the drop ceiling.
II.
In a diversity action, we apply the law of the forum state, which is
Colorado. Hjelle v. Mid-State Consultants, Inc., 394 F.3d 873, 877 (10th Cir.
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2005).
Comparative Negligence
a. Evidence to Support Instruction.
The district court denied King Soopers’ motion to strike Hussmann’s
comparative negligence defense, stating: “Here, the jury can find from the
evidence that’s in this case that this fire would not have had the disastrous . . .
consequences if there had been reasonable care in the manner in which this
building was designed and constructed.” Aplee. App. at 1556. King Soopers
appeals from this ruling, contending that the district court abused its discretion
because there was insufficient evidence to support the comparative negligence
instruction.
We review the district court’s decision to give a particular jury instruction
for abuse of discretion. Allison v. Bank One - Denver, 289 F.3d 1223, 1241 (10th
Cir. 2002). “Under federal law, an instruction is properly given if supported by
competent evidence; only where there is sufficient evidence to support an issue or
theory is the party offering an instruction entitled to have the instruction given.”
Brownlow v. Aman, 740 F.2d 1476, 1490 (10th Cir. 1984); see also Thompson v.
United States, 223 F.3d 1206, 1210 (10th Cir. 2000).
Under Colorado law, comparative negligence is an affirmative defense to
the plaintiff’s negligence action. E.g., Harris v. Ark, 810 P.2d 226, 231 (Colo.
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1991) (en banc). Colorado’s comparative negligence statute, § 13-21-111,
provides in relevant part:
(1) Contributory negligence shall not bar recovery in any action by
any person or his legal representative to recover damages for
negligence resulting in death or in injury to person or property, if
such negligence was not as great as the negligence of the person
against whom recovery is sought, but any damages allowed shall be
diminished in proportion to the amount of negligence attributable to
the person for whose injury, damage, or death recovery is made.
Colo. Rev. Stat. § 13-21-111(1).
Comparative negligence rules apply only when the evidence “would
substantiate a finding that both parties are at fault.” Powell v. City of Ouray, 507
P.2d 1101, 1105 (Colo. Ct. App. 1973). Colorado’s comparative negligence
statute requires a jury to “apportion the relative percentages of fault attributable
to the plaintiff and the defendant.” Huntoon v. TCI Cablevision, Inc., 969 P.2d
681, 687 (Colo. 1998) (en banc). Comparative negligence ensures that “no party
shall be responsible for more than its share of the losses [and] that each shall
account for its share.” Painter v. Inland/Riggle Oil Co., 911 P.2d 716, 719 (Colo.
Ct. App. 1995), aff’d, 925 P.2d 1083 (Colo. 1996) (en banc). In comparative
fault, the plaintiff “has the duty to act as a reasonably prudent person by avoiding
undue risk of harm to himself.” Fay v. Kroblin Refrigerated Xpress, Inc., 644
P.2d 68, 70 (Colo. Ct. App. 1981).
After review of the evidence presented, we conclude that the district court
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did not abuse its discretion in instructing the jury on comparative negligence.
There was sufficient evidence for the jury to find that both Hussmann and King
Soopers were at fault for the fire that destroyed the building. The evidence
established that Anderson almost had the fire out, but then the fire spread in a
rolling fashion because of the presence of the combustible insulation and old
ceiling tiles. King Soopers built the store with combustible insulation without
either draft stops or sprinklers above the drop ceiling. Several witnesses testified
that the presence of draft stops or sprinklers above the drop ceiling could have
prevented the loss of the building. Graham and Schumacher testified that
combustible insulation should be covered with dry wall, but King Soopers left its
insulation exposed despite manufacturer’s warnings printed on the insulation.
Michael Bray, who is King Soopers’ architect, admitted that, if the change in
insulation made the building combustible, the 1976 Uniform Building Code
required the use of draft stops and sprinklers above the ceiling. Craddock
testified that the store violated the building code because it had combustible
insulation without either draft stops or sprinklers. Because there was ample
evidence presented that would support a jury finding that both parties were at
fault for the loss of the building, the district court did not abuse its discretion in
submitting the comparative negligence instruction to the jury.
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b. Duty to Support Instruction.
King Soopers claims that the district court erred in submitting comparative
negligence to the jury because (1) it owed no duty to Hussmann, and (2) it could
not have breached a duty because it was a tenant in the building rather than the
owner.
King Soopers contends that the district court erred in instructing on
comparative negligence because King Soopers owed no duty to Hussmann. While
King Soopers may not have owed a direct duty to Hussmann, it did have a general
duty to exercise reasonable care. In cases where comparative negligence applies,
the plaintiff has a “duty to protect oneself from unreasonable risk, and to act as a
reasonably prudent person.” Powell, 507 P.2d at 1105; see also Burr v. Green
Bros. Sheet Metal, Inc., 409 P.2d 511, 516 (Colo. 1966) (imposing on plaintiff a
duty to exercise care required of a reasonably prudent person under the
circumstances). Thus, King Soopers had a duty to protect itself from
unreasonable risk:
Negligence involves the violation of a duty or an obligation of
another; contributory negligence does not affect a duty but embraces
an undue risk of harm to oneself. The true measure of conduct
required of the plaintiff, is what would an ordinary prudent person
have done under the circumstances as they then appeared to exist.
Matt Skorey Packard Co. v. Canino, 350 P.2d 1069, 1071 (Colo. 1960) (per
curiam).
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If a plaintiff does not have a duty to exercise care, then the comparative
negligence instruction is improper. Wark v. McClellan, 68 P.3d 574, 580-81
(Colo. Ct. App. 2003).
King Soopers relies on a line of Colorado cases involving the failure to
wear seat belts or motorcycle helmets to support its contention that it had no duty
and that the district court should not have instructed the jury on comparative
negligence. King Soopers reasons that because the failure of an injured motorist
to wear a seat belt does not constitute comparative negligence, neither does its
conduct. However, these cases are limited to the failure to wear seat belts or
motorcycle helmets, and they are inapplicable here. E.g., Dare v. Sobule, 674
P.2d 960, 963 (Colo. 1984) (en banc) (motorcycle helmet); Churning v. Staples,
628 P.2d 180, 181-82 (Colo. Ct. App. 1981) (seat belt). Notably, the Colorado
courts and legislature have not extended the seat belt exception to other types of
pre-accident negligence.
King Soopers invites this court to apply the seat belt exception to the facts
of this case. King Soopers, however, offers no Colorado authority for such an
extension, which appears contrary to Colorado cases that impose “a duty [upon
plaintiff] to protect oneself from unreasonable risk, and to act as a reasonably
prudent person.” Powell, 507 P.2d at 1105.
King Soopers cites Burt v. Beautiful Savior Lutheran Church, 809 P.2d
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1064 (Colo. Ct. App. 1990), as support for its argument that a property owner’s
actions that contributed to the damages claimed do not constitute contributory
negligence. But King Soopers misreads the Burt case, which involved both
trespass and negligence claims. The Colorado Court of Appeals held that, “even
if refusal to give a comparative negligence instruction was error as to the
negligence theory, since the jury also found for plaintiffs on trespass, the verdict
can be upheld on the trespass theory alone.” Burt, 809 P.2d at 1067. Contrary to
King Soopers’ view of the case, the Burt court acknowledged that it is proper to
consider a plaintiff’s own negligent action when determining liability in a
negligence action brought by the plaintiff.
King Soopers also argues that it could not have breached a duty because it
was a tenant, and not the owner, of the building. This assertion misstates
Colorado law on premises liability. In Colorado, King Soopers is a “landowner”
for purposes of determining premises liability. See Colo. Rev. Stat. § 13-21-
115(1); Wark v. United States, 269 F.3d 1185, 1188 (10th Cir. 2001) (stating that
Section 13-21-115(1) applies to “tenants . . . who have complete possession and
control over the property”). Even as a lessee, King Soopers was included in the
definition of a “landowner” and subject to the statute governing premises liability.
See Pierson v. Black Canyon Aggregates, Inc., 48 P.3d 1215, 1219 n.4 (Colo.
2002) (en banc) (“The general assembly added without limitation specifically to
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ensure that lessees and renters were included in the definition of landowner.”)
(internal quotation marks omitted).
c. Expert Witness Craddock.
King Soopers also contends that the district court erred in admitting
Craddock’s expert testimony because he was not qualified as an expert. In
response, Hussmann asserts that King Soopers failed to object to Craddock’s
qualifications at trial, and that King Soopers waived appellate review because it
cannot show plain error.
In this case, King Soopers did not challenge Craddock’s qualifications as
an expert witness during his testimony or before trial. Nor did it file a motion in
limine to exclude Craddock’s testimony. King Soopers asserts that it objected at
least five times during Craddock’s testimony. But none of these objections
pertained to Craddock’s qualifications as an expert. “The specific ground for
reversal of an evidentiary ruling on appeal must be the same as that raised at
trial.” Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1331 (10th Cir.
1984). King Soopers’ objections on other grounds did not preserve an objection
to Craddock’s qualifications for appellate review. See McKenzie v. Benton, 388
F.3d 1342, 1350 (10th Cir. 2004) (refusing to treat an objection for relevance as
one for qualification), cert. denied, 125 S. Ct. 2294 (2005).
King Soopers claims that it challenged Craddock’s qualifications in its
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motion to strike Hussmann’s comparative negligence defense. In its motion to
strike, King Soopers maintained that the only basis for the comparative
negligence claim was Craddock’s testimony and he was not qualified. 1 To the
extent that King Soopers’ motion to strike the comparative negligence claim
challenged Craddock’s qualifications, this was not timely. See Macsenti v.
Becker, 237 F.3d 1223, 1230-31 (10th Cir. 2001) (requiring objection at the time
of witness’ testimony and applying plain error, even though the defendant raised
his argument in a motion to strike at the close of evidence).
As a result of King Soopers’ failure to challenge Craddock’s qualifications
before trial or when he testified, we review this issue for plain error. See Goebel
v. Denver & Rio Grande W. R.R. Co., 215 F.3d 1083, 1088 n.2 (10th Cir. 2000).
“To constitute plain error, the district court’s mistake must have been both
obvious and substantial.” Cartier v. Jackson, 59 F.3d 1046, 1050 (10th Cir.
1995). “The plain error exception in civil cases has been limited to errors which
seriously affect the fairness, integrity, or public reputation of judicial
1
The district court denied King Soopers’ motion to strike because “this
isn’t the type of comparative fault where you have to have an expert, like medical
negligence cases, to support it.” Aplee. App. at 156. Because King Soopers
never objected to Craddock’s qualifications during his testimony, the district
court did not make any findings regarding his qualifications. However, we
“assume that the district court performs such an analysis sub silentio throughout
the trial with respect to all expert testimony.” Macsenti v. Becker, 237 F.3d
1223, 1232 (10th Cir. 2001) (internal quotation marks omitted).
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proceedings.” McEwen v. City of Norman, Okla., 926 F.2d 1539, 1545 (10th Cir.
1991) (internal quotation marks omitted).
King Soopers complains that Craddock is not qualified because his
educational background is in civil engineering, and he is not an architect,
structural engineer, fire protection engineer, or certified fire investigator. A
person may be qualified “as an expert by knowledge, skill, experience, training,
or education.” Fed. R. Evid. R. 702; Graham v. Wyeth Labs., 906 F.2d 1399,
1408 (10th Cir. 1990) (stating that an expert is qualified when he possesses “such
skill, experience or knowledge in that particular field as to make it appear that his
opinion would rest on substantial foundation and would tend to aid the trier of
fact in his search for the truth”) (internal quotation marks omitted). King Soopers
cites no authority for its argument that only architects, structural engineers, fire
protection engineers, or certified fire investigators can provide expert testimony
regarding the origin of a fire. Our ruling in Bitler v. A.O. Smith Corp., 400 F.3d
1227 (10th Cir. 2004), which affirmed the admissibility of expert testimony from
a fire investigator, a chemical engineer, and an accident investigator, is support
for the district court’s ruling in the present case. See id. at 1235.
Further, Craddock was qualified as an expert under Rule 702. Craddock is
a consulting engineer for Engineering Systems, Inc., which investigates accidents
and fires. Craddock described his speciality as “the evaluation of very large
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fires.” Aplee. App. at 121. For three years, Craddock investigated a fire at the
MGM casino that spread rapidly from a restaurant where the sprinklers had been
removed. In this case, Craddock’s primary role was to determine why “this
particular fire had got out of hand and spread so rapidly and ended up basically
destroying this particular structure.” Id. at 128. Craddock has an undergraduate
degree in civil engineering, and he has taken additional courses in construction
materials. Craddock has performed tests on construction materials, including fire
testing involving different types of insulation, and evaluating the sufficiency of
sprinkler and fire alarm systems. Craddock has experience in designing and
evaluating sprinkler systems and interpreting building codes. He has testified as
an expert in Colorado state and federal courts. King Soopers has not established
that the admission of Craddock’s expert testimony constituted plain error.
King Soopers also maintains that Craddock was not qualified to render
expert opinion in this matter because he did not have an engineering license in
Colorado. King Soopers submits that Craddock is required to be licensed as an
engineer in Colorado, see Colo. Rev. Stat. § 12-25-101, presumably because he
worked as a consultant and testified as an expert in this case. However, King
Soopers has not cited any authority requiring engineers who are consultants or
expert witnesses to obtain an engineering license in Colorado. Nor has King
Soopers cited any cases concluding that an expert with an engineering background
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was not qualified to testify because he was not licensed in the state where the trial
occurred. While Craddock was not a licensed engineer in Colorado, he was
licensed in numerous other states. Craddock was qualified to testify as an expert.
Moreover, the district court afforded King Soopers ample opportunity to
cross-examine Craddock about his expert opinion. See McKenzie, 388 F.3d at
1351 (affirming admission of expert testimony and noting that plaintiff had an
opportunity to cross-examine the witness); Black v. M & W Gear Co., 269 F.3d
1220, 1231 (10th Cir. 2001) (holding that no plain error occurred in admitting
expert testimony and observing that the defendants cross-examined the expert).
Any deficiencies in Craddock’s method or theories were proper fodder for cross
examination. King Soopers cross-examined Craddock extensively.
Finally, King Soopers argues that the district court erred in admitting
Craddock’s testimony because Craddock relied on the work of certified fire
investigators in his office. But King Soopers’ argument that Craddock relied on
opinions of another goes to the weight, not the admissibility, of the evidence. See
Ferrara & DiMercurio v. St. Paul Mercury, Ins. Co., 240 F.3d 1, 9 (1st Cir. 2001).
King Soopers has failed to establish that the district court’s admission of
Craddock’s expert testimony was plain error.
Leasehold Improvements
Next, King Soopers appeals the district court’s exclusion of improvements
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in determining damages. King Soopers advances three arguments: (1) that the
lease agreement expressly vests ownership in the improvements in the lessee; (2)
that even in the absence of the lease agreement, it owned the improvements under
Colorado law; and (3) that Generally Accepted Accounting Principles (“GAAP”)
demonstrate that it was the owner of the improvements. On appeal, King Soopers
asserts that the improvements were worth $967,469.62.
We review the district court’s exclusion of evidence for abuse of discretion.
Hidalgo v. Fagen, Inc., 206 F.3d 1013, 1020 (10th Cir. 2000). Also, this court
reviews the failure to give a jury instruction for abuse of discretion. Allison, 289
F.3d at 1241.
At trial, former CFO Ronald Warren testified that King Soopers owned the
improvements that King Soopers made to the store. The portion of the lease
included in the record states that upon termination of the lease, the title in the
improvements “shall become” property of the lessor. Aplt. App. at 28. Warren
testified that the lease had not terminated or expired as of the date of the fire.
But King Soopers did not introduce the lease as an exhibit at trial, and it did not
introduce evidence of the date of termination.
On appeal, Hussmann argues that King Soopers failed to object to the
district court’s exclusion of improvements. Our review of the record confirms
that King Soopers did object on two grounds: (1) that it owned the improvements
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under Colorado law; and (2) that the improvements would have zero net book
value under GAAP upon termination. It does appear, however, that King Soopers
is arguing for the first time on appeal that the lease explicitly provided that it
owned the leasehold improvements and that the lease entitles King Soopers to
recover damages for the value of the improvements.
King Soopers’ reliance on the lease is made difficult because we have only
a portion of the lease in the record. 2 Although King Soopers did not introduce the
lease as an exhibit at trial, Hussmann appended part of the lease agreement to its
trial brief submitted to the district court. See Fed. R. App. P. 10 (defining the
“record on appeal” to include “the original papers and exhibits filed in the district
court”); Echo Acceptance Corp. v. Household Retail Servs., Inc., 267 F.3d 1068,
1081 n.7 (10th Cir. 2001) (noting that summary judgment exhibits and exhibits at
trial were part of the record on appeal).
This court will not consider a new theory on appeal, even one that “falls
under the same general category as an argument presented at trial or presents a
theory that was discussed in a vague and ambiguous way” at trial. Bancamerica
Commercial Corp. v. Mosher Steel of Kan., Inc., 100 F.3d 792, 798-99 (10th Cir.
1996) (internal quotation marks omitted), op. am. on other grounds, 103 F.3d 802
Therefore, any reference to “the lease” which appears in the analysis that
follows must by necessity refer only to that portion of the lease that is contained
in the record.
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(10th Cir. 1996). “[A] party must present the legal basis of the claim to the
district court clearly and explicitly. . . . [V]ague, arguable references to [a]
point in the district court proceeding do not . . . preserve the issue on appeal.”
Shoels v. Klebold, 375 F.3d 1054, 1061-62 (10th Cir. 2004) (internal quotation
marks and citations omitted), cert. denied, 125 S. Ct. 1302 (2005).
In this case, King Soopers argued before the district court that it was
entitled to recover damages for the value of the improvements because it owned
those improvements, but it provided no authority for its argument. It did not
attribute its ownership rights to the lease, although it now contends that the lease
expressly confers such ownership rights. Instead, King Soopers’ argument at trial
was that it was entitled to recover for the improvements (presumably under the
common law) and that the improvements would have zero net book value under
GAAP upon termination of the lease. King Soopers did not introduce the lease as
an exhibit at trial, nor draw the district court’s attention to it in its arguments at
sidebar. At best, King Soopers made vague references to its ownership rights,
which are insufficient to preserve the argument that the lease demonstrated
ownership of the improvements.
This court has “discretion to make exceptions in extraordinary
circumstances.” Shoels, 375 F.3d at 1062. We may reverse “a judgment on the
basis of issues not raised below when . . . the issues involved are questions of
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law, the proper resolution of which are beyond reasonable doubt, and the failure
to address the issues would result in a miscarriage of justice.” Petrini v. Howard,
918 F.2d 1482, 1483 n.4 (10th Cir. 1990) (per curiam).
Although this case involves a question of law in interpreting the lease
agreement, this case does not constitute extraordinary circumstances. The
resolution of the underlying issue is a matter of Colorado landlord-tenant law.
Furthermore, its resolution is not beyond reasonable doubt because the lease is
silent about the ownership rights of the improvements during the lease, despite
King Soopers’ contentions to the contrary. Finally, King Soopers cannot show a
miscarriage of justice where the district court entered judgment in its favor for
more than $3.2 million.
Next, King Soopers contends that, even in the absence of the express lease
agreement, that it would still be deemed the owner of the leasehold
improvements. Because King Soopers made this argument below, this court
reviews the district court’s decision for abuse of discretion. King Soopers cites
three cases in support of its argument, but none of these cases establish that the
district court abused its discretion in excluding the evidence of the improvements.
It is undisputed that the lessor owned the improvements upon the termination of
the lease. However, because the lease does not clearly confer ownership rights
upon King Soopers, the common law of fixtures applies.
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Under the common law, “[t]he general tests for determining whether a
particular object has become a fixture are usually said to comprise annexation to
the realty, adaptation to the use to which the realty is devoted, and intention that
the object became a permanent accession to the freehold.” Ferganchick v.
Johnson, 473 P.2d 990, 992 (Colo. Ct. App. 1970) (internal quotation marks
omitted) (affirming trial court’s decision to award damages for value of fixtures
in its condition at the time of removal or destruction); Puzzle Mining &
Reduction Co. v. Morse Bros. Mach. & Supply Co., 131 P. 791, 792-93 (Colo. Ct.
App. 1913) (determining that improvements were fixtures that became part of
realty). In this case, King Soopers retained explicit ownership of equipment,
fixtures, and furniture, but the lease was silent about ownership of the
improvements. Under the common law, the improvements were annexed to realty,
and the parties did not express clear intent that the improvements would not
become a permanent accession to the freehold. King Soopers has not established
that the district court abused its discretion in excluding evidence of improvements
and refusing to instruct the jury.
Finally, King Soopers advances a policy argument that the lessor could not
claim any value in the improvements under GAAP. Because King Soopers raised
this argument below, this court reviews the district court’s ruling for abuse of
discretion. In an offer of proof, former CFO Warren testified that GAAP required
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the improvements to be depreciated over the life of the lease, and that
improvements have zero net book value at the termination of the lease. While
King Soopers may be correct as a matter of accounting methods, it has cited no
authority to support its contention that a lessee is permitted to recover damages
for improvements because of GAAP. Rather, courts apply the common law of
fixtures in the absence of express agreement in the lease. King Soopers has not
shown that the district court abused its discretion in excluding evidence of
leasehold improvements and refusing to instruct the jury on damages for
improvements.
AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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