Court Opinion

ID: 171907
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:42:18+00
Date Added: 2024-06-11T17:25:16.286209
License: Public Domain

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not binding precedent, except under the doctrines of law of the case, res judicata,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.

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                                         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.

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