Goad v. The Buschman Company

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS March 19, 2009
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT
Clerk of Court
LUVONDA GOAD, wife;
GREGORY A. GOAD, husband,
Plaintiffs-Appellants,
v. No. 08-5065
(D.C. No. 4:06-CV-00341-GKF-FHM)
THE BUSCHMAN COMPANY, (N.D. Okla.)
an Ohio corporation, a/k/a FKI
Logistex Automation, Inc.;
FKI LOGISTEX AUTOMATION,
INC., an Ohio corporation,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before McCONNELL, McKAY, and GORSUCH, Circuit Judges.
The issue in this products-liability case is whether or not a large conveyor
system installed in a grocery-distribution center is an “improvement to real
property” within the meaning of Oklahoma’s ten-year statute of repose, Okla.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Stat. Ann. tit. 12, § 109. As relevant here, the statute serves to bar tort actions
against parties who performed or furnished “the design, planning, supervision or
observation of construction, or construction of an improvement to real property”
if more than ten years have elapsed from the time the improvement was
substantially completed. See id. 1 The district court granted defendants’ motion
for summary judgment, concluding that the statute barred plaintiffs’ claims
because the conveyor system was an improvement to real property that was
substantially completed more than ten years before the claims arose. Plaintiffs
have appealed. We have jurisdiction under 28 U.S.C. § 1291, and we affirm for
substantially the same reasons set forth in the district court’s decision.
1
The statute provides in full:
No action in tort to recover damages
(i) for any deficiency in the design, planning,
supervision or observation of construction or
construction of an improvement to real property,
(ii) for injury to property, real or personal, arising out of
any such deficiency, or
(iii) for injury to the person or for wrongful death
arising out of any such deficiency,
shall be brought against any person owning, leasing, or in possession
of such an improvement or performing or furnishing the design,
planning, supervision or observation of construction or construction
of such an improvement more than ten (10) years after substantial
completion of such an improvement.
Okla. Stat. Ann. tit. 12, § 109.
-2-
I
The material facts are undisputed. 2 Plaintiff LuVonda Goad worked as a
stocker at a grocery-distribution center in Ponca City, Oklahoma, owned by
Albertsons. The distribution center is equipped with a conveyor system
manufactured and installed in 1985 by defendants The Buschman Company and
FKI Logistex Automation, Inc. (Buschman or defendants). 3 The purpose of the
conveyor is to move materials within the distribution center. On November 14,
2000, Mrs. Goad sustained serious and permanent injuries when her left hand and
arm were pulled into the conveyor. She filed this diversity action in 2006,
asserting claims of strict liability and negligence/gross negligence based on
defective design, construction, or installation of the conveyor system. Her
husband, Gregory Goad, also brought a claim for loss of consortium.
Defendants filed a motion for summary judgment based on the statute of
repose. In response, plaintiffs argued that the statute of repose was not applicable
because the conveyor system was not an improvement to real property.
The evidence presented to the district court shows that in 1985, Buschman
contracted with American Stores Properties (ASP) for the design, construction,
and installation of the conveyor system. The sales agreement defines
“Equipment” as “all the equipment, machinery, parts and other items intended to
2
As discussed below, we reject plaintiffs’ contrary contention.
3
FKI is apparently a successor entity to Buschman.
-3-
be installed permanently at the Worksite.” Aplt. App. at 42 (emphasis added).
Buschman designed the system according to ASP’s expressed needs and installed
it in about eleven weeks with a crew of eleven or twelve Buschman workers. It
was constructed from several conveyor “standards” that were installed to fit
within the building’s existing footprint. The system is hardwired into the
building, is three stories high, and originally contained about 6,155 feet of
conveyor. It is attached to the floor by anchors set in concrete and bolts, and
further attached to the building by a variety of bolts, angle bracing, stabilizing
legs, floor-support columns, and ceiling hangers. The conveyor system is not
welded to the building or embedded in the floor. The purchase price of the
system was approximately $776,852.
ASP began using the conveyor system in January 1986 and later sold the
building to Albertsons. Albertsons has removed or replaced portions of the
conveyor system, but not the section at issue. The conveyor system is taxed to
Albertsons as business personal property, not real property, under Oklahoma’s
ad valorem tax structure.
Finding no genuinely disputed issues of material fact, the district court
concluded that the conveyer system is an improvement to real property within the
meaning of § 109. The court considered the ad valorem tax status but concluded
that under Smith v. Westinghouse Electric Corp., 732 P.2d 466 (Okla. 1987), the
fact that the conveyor is taxed as personal property rather than real property was
-4-
not dispositive because, unlike in Smith, it was taxed to the same entity that
owned the real property where the injury occurred. The court then applied a
three-pronged analysis discussed in Smith, which was formulated by the Georgia
Supreme Court in Mullis v. Southern Company Services, Inc., 296 S.E.2d 579,
583 (Ga. 1982):
(1) is the improvement permanent in nature; (2) does it add to the
value of the realty, for the purposes for which it was intended to be
used; [and] (3) was it intended by the contracting parties that the
“improvement” in question be an improvement to real property or did
they intend for it to remain personalty.
As to the first factor of the Mullis test, the district court concluded that the
conveyor is permanent in nature based on its size; the means and necessity of
attachment to the building; the fact that it was configured specifically for the
building’s footprint and to fulfill the building’s needs; and the amount of labor
and time it took to install. Regarding the second factor, the court concluded that
the conveyor system adds to the value of the building because it enhances the
operation of the distribution center by moving materials around. In this sense, the
court said, the conveyor was akin to an elevator, which the court deemed a clear
example of an improvement to real property. And as to the third Mullis factor,
whether the installation was intended by the parties (here, ASP and Buschman) to
be permanent, the court relied on the reference to permanence in the above-quoted
definition of “Equipment” in the sales agreement and the fact that ASP included
the conveyor system when it sold the distribution center to Albertsons.
-5-
In the alternative, the district court concluded that the conveyor system also
met the definition of a fixture under Okla. Stat. Ann. tit. 60, § 7, which provides:
A thing is deemed to be affixed to land when it is attached to it by
roots, as in the case of trees, vines or shrubs, or embedded in it, as in
the case of walls, or permanently resting upon it, as in the case of
buildings, or permanently attached to what is thus permanent, as by
means of cement, plaster, nails, bolts or screws.
Based on its statutory status as a “fixture,” the court concluded that the conveyor
system is an improvement under the “‘common law fixture’ test applied” in
O’Dell v. Lamb-Grays Harbor Co., 911 F. Supp. 490, 494 (W.D. Okla. 1995).
Aplt. App. at 13.
II
“We review the district court’s grant of summary judgment de novo,
applying the same legal standard used by the district court.” Simms v. Okla.
ex rel. Dep’t of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326
(10th Cir. 1999). Summary judgment “should be rendered if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(c). “When applying this standard, we
view the evidence and draw reasonable inferences therefrom in the light most
favorable to the nonmoving party.” Simms, 165 F.3d at 1326.
Applying these standards, and having reviewed the district court’s opinion
and order, the parties’ arguments, and the relevant law, we affirm the district
-6-
court’s decision for substantially the same reasons stated by the district court. In
doing so, we reject plaintiffs’ suggestion that there are genuine issues of material
fact that preclude resolution on summary judgment. The only specific fact they
allege to be disputed is whether ASP and Buschman intended the conveyor system
to be permanent. In support of this argument, plaintiffs rely on identical
statements in the affidavits of two Albertsons employees that the system “is not
intended to be permanent.” App. at 93, 95. Although these employees worked at
the distribution center when the conveyor system was installed and continue to do
so, nothing in their affidavits suggests that either one has any personal knowledge
of what the parties intended with regard to permanence. See Fed. R. Civ. P. 56(e)
(requiring affidavits to be made on personal knowledge). Instead, their opinion is
based on their view that it would be “unrealistic to believe that a conveyor
system, or other similar equipment, will remain operable and useful for the same
duration as real estate or the physical structure.” App. at 93, 95. Accordingly,
their testimony is inadmissible on the matter of intent, and plaintiffs have not
established a genuine issue of material fact that precludes summary judgment.
We also reject plaintiffs’ other arguments. The district court did not
wholly disregard the fact that the conveyor system is taxed as personal property.
We agree with the distinction the district court drew between this case and Smith,
where the alleged improvement, an electrical transformer, was taxed as personal
property but to the public utility that owned it, not to the owner of the real
-7-
property on which it was placed and where the injury occurred. While we
recognize that an item’s ad valorem tax treatment is weighed more heavily than
other factors under § 109, it is not dispositive. Durham v. Herbert Olbrich
GMBH & Co., 404 F.3d 1249, 1255-56 (10th Cir. 2005) (applying Oklahoma
law). Because the conveyor system here is taxed to Albertsons, the owner of the
real property, the fact that it is taxed as personal property rather than as real
property does not preclude a finding under the Mullis test that the system is an
improvement to real property under § 109. See O’Dell, 911 F. Supp. at 493(considering similar tax status and concluding that reliance on only that status to
determine whether an item is an improvement to real property would lead to an
absurd result under Smith). The district court considered the tax status and then
moved on to consider the Mullis factors, which is the proper procedure under
Oklahoma law. See Durham, 404 F.3d at 1253 (stating that the Oklahoma
Supreme Court “would look to the machinery’s ad valorem tax status, whether the
machinery was taxed as the personal property of somebody other than the owner
of the real property where the accident occurred, and the factors identified in
Mullis”). Thus, we also reject plaintiffs’ argument that Mullis is not the law of
Oklahoma.
Plaintiffs further contend that this case is factually similar to Durham,
where we held that production-line machinery was not an improvement to real
property because of its tax status (taxed as personal property to the owner of the
-8-
real property) as well as its failure to fulfill any of the Mullis factors. See id.,404 F.3d at 1256. Plaintiffs emphasize that like the machinery in Durham, the
conveyor system is not integral to the building. We disagree. The relevant focus
is whether the system “add[s] to the value of the realty, for the purposes for
which it was intended to be used,” Mullis, 296 S.E.2d at 583. This analysis must
not be made in a vacuum, that is, detached from consideration of the purpose to
which the realty is put to use when the improvement is made. Here, ASP
intended to use the building as a grocery-distribution center and had the conveyor
system installed for that purpose. Thus, we place no significance on the fact that
the system theoretically could be removed if it no longer met the needs of the
building’s user; doing so would mean that the answer to the § 109 question would
be dependent on speculation, which we do not think is appropriate under Mullis.
Our discussion in Durham of the removability of the machinery at issue there is
not to the contrary, as the conveyor system here has more indicia of permanence
than the production-line machinery in Durham, which was specific to a type of
manufacturing and not attached to the walls or roof.
Finally, plaintiffs take issue with the district court’s “common law fixture”
analysis. As this was an alternate basis for the court’s disposition, we need not
address plaintiffs’ arguments pertaining to it. 4
4
We also see no occasion to decide a question expressly left open in Smith,
and apparently still unresolved under Oklahoma law: whether an item must meet
(continued...)
-9-
III
The judgment of the district court is AFFIRMED.
Entered for the Court
Michael W. McConnell
Circuit Judge
4
(...continued)
any statutory definitions of real property in order to be considered an
improvement to real property under § 109. See Smith, 732 P.2d at 469 n.12.
-10-