Opinion
CIVIL ACTION NO: 01-2471, SECTION "R" (2)
September 23, 2002
ORDER AND REASONS
Before the Court are plaintiff's motion to withdraw an admission and defendant's motion for summary judgment on the ground that plaintiff's claim is precluded by the Louisiana Statute of Repose, LA.REV.STAT. ANN. § 9:2772 (West 2002). For the following reasons, the Court grants plaintiff's motion to withdraw an admission. Because the Court finds that plaintiff was not the owner of the land on which its transformer was located, the Court denies defendant's motion for summary judgment.
I. Background
Plaintiff, Dolet Hills Lignite Company, L.L.C., is the successor in interest to Dolet Hills Mining Venture (referred to collectively as "Dolet Hills"), which operated a lignite mine in DeSoto Parish near Mansfield, Louisiana. In November 1983, Dolet Hills contracted with defendant, General Electric Company, to design, manufacture and install an electric power distribution system. The power system was to be installed on land owned by Southwestern Electric Power Company ("SWEPCO") and Central Louisiana Electric Company ("CLECO"), which had contracted with Dolet Hills to develop the mine site.
The power distribution system manufactured by GE is comprised of a power substation with two high voltage transformers. One of these transformers weighed in excess of 75,200 pounds and was installed on a steel-reinforced concrete foundation. This transformer was put into operation in 1984 and has remained in the same location ever since. Plaintiff alleges that on July 15, 2000, this transformer failed, causing damage to itself and other property. An investigation revealed that a part of that transformer — one of four Type "U" bushings on top — had exploded. Plaintiff filed this lawsuit in state court to recover property damage caused by the explosion. Defendant removed the lawsuit to this Court and moves for summary judgment.
II. Discussion
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2551 (1986). The court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). The moving party bears the burden of establishing that there are no genuine issues of material fact. Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1445 (5th Cir. 1993). A factual dispute precludes a grant of summary judgment if the evidence would permit a reasonable jury to return a verdict for the nonmoving party. See Hunt v. Rapides Healthcare System, LLC, 2001 WL 1650961 (5th Cir. 2001) (citations omitted).
If the dispositive issue is one for which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. Celotex, 477 U.S. at 325, 106 S.Ct. at 2552; Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553.
B. Discussion
1. Defendant's Motion for Summary Judgment
Louisiana law provides that no action to recover damages in tort or in contract shall be brought against any person performing the construction of an improvement to immovable property more than seven years after the improvement has been occupied by the owner. LA.REV.STAT. ANN. § 9:2772; State Division of Administration v. McInnis Brothers Construction, 701 So.2d 937, 947 (La. 1997). The Louisiana Statute of Repose, as amended in 1999 and 2001, provides that:
"No action, whether ex contractu, ex delicto, or otherwise, including but not limited to an action for failure to warn, to recover on a contract, or to recover damages shall be brought against any person . . . performing or furnishing the design, planning, supervision, inspection, or observation of construction or the construction of immovables, or improvement to immovable property. . . .:
(1)(a) More than seven years after the date of registry in the mortgage office of acceptance of the work by owner."
(b) If no such acceptance is recorded within six months from the date the owner has occupied or taken possession of the improvement, in whole or in part, more than seven years after the improvement has been thus occupied by the owner.
LA.REV.STAT. ANN. § 9:2772(A). To receive the benefit of this statute, defendant must establish (1) that more than seven years have elapsed since plaintiff occupied the improvement, (2) that the transformer was manufactured by defendant pursuant to a construction contract, as opposed to a sales contract, and (3) that the transformer is either immovable property or an improvement thereto. Swope v. Columbian Chemicals Co., 281 F.3d 185, 201 (5th Cir. 2002); Summerfield v. Harnischfeger Industries, Inc., 1998 WL 726080, *2 (E.D.La. 1998); Poree v. Elite Elevator Services, Inc., 665 So.2d 133, 135 (La.Ct.App. 1995); Smith v. Arcadian Corporation, 657 So.2d 464, 467 (La.Ct.App. 1995).
First, it is undisputed that seven years have elapsed since plaintiff took possession of the transformer. The seven-year peremptive period runs either from the date of registry of acceptance by the owner in the mortgage records or within six months of when the owner occupies or takes possession of the improvement. Harris v. Black Clawson Company, 961 F.2d 547, 551 (5th Cir. 1992). At the latest, the peremptive period runs from the moment at which the new owner of the construction places it into operation. Id. at 554. The transformer at issue was placed into operation in 1984. (Def.'s Mot. for Summ. J., Ex. 3, GE's Request for Admissions, Second Interrogatories and Second Request for Production to Plaintiff, at 8.) The explosion occurred 16 years later, in 2000, well after the seven-year peremptive period expired.
Second, defendant asserts that the power distribution system was designed, manufactured and installed by GE pursuant to a construction contract, and not a sales contract. For the Louisiana Statute of Repose to apply, the contract "has to be a contract to build, not a contract of sale." Poree, 665 So.2d at 135. In making this determination, courts consider "the economics of the situation to determine if the primary obligation is 'to give' (sales contract) or 'to do' (construction construction)." Id.; Harris, 961 F.2d at 553. When a contract contains elements of both a construction contract and a sales contract, the Court must analyze the contract to determine which of the two obligations is fundamental. Smith, 657 So.2d at 468. One of the "main tests" that courts use in determining if a contract is a construction contract is the extent to which the product is custom-designed for the purchaser. Summerfield, 1998 WL 726080, at *5. Also relevant is whether negotiations over the product's design took place before construction of the product. Acadiana Health Club, Inc. v. Hebert, 469 So.2d 1186, 1189 (La.Ct.App. 1985.)
The contract between GE and Dolet Hills provided that GE's work was to consist of "[d]esign, manufacture, installation testing and commissioning of a mine power electrical distribution system." (Def.'s Mot. for Summ. J., Ex. 1, Subcontract at Schedule A.) GE was required to make calculations and submit design drawings subject to design criteria tailored to the needs of Dolet Hills. ( Id. at Special Conditions, Design Responsibilities of Subcontract.) GE also contracted to provide all labor, supervision and services necessary to complete its work. ( Id. at 1.) Before it signed the contract, GE submitted to Dolet Hills a work proposal that was custom-designed for Dolet Hills. (Def.'s Mot. for Summ. J., Ex. 2, Proposal.) This evidence persuades the Court that the contract between GE and Dolet Hills was a construction contract — a contract to do and to build — and not a sales contract for an off-the-shelf product.
Plaintiff asserts that the particular Type "U" bushing that exploded was an "off-the-shelf" product not custom-designed for Dolet Hills. Plaintiff argues that even if other elements of the contract constitute a "contract to do," the delivery of this particular bushing constitutes a "contract to give." This argument is without merit, for as the Fifth Circuit recently noted, "when a single obligor's plural obligations are intimately connected, one of the obligations must be recognized as fundamental, and the whole contract treated as giving rise to obligations of that kind." Swopes, 281 F.3d at 202-03. Thus, in Summerfield, in which this Court held a contract to install a custom-designed crane to be a construction contract, the Court declined to find that certain components of the crane that were not custom-designed were delivered pursuant to a sales contract. Summerfield, 1998 WL 726080, *6. The "primary and fundamental obligation" of the contract prevails. Smith, 657 So.2d at 468. Here, the fundamental obligation constitutes a construction contract. That in the course of executing this $3,000,000 construction contract GE supplied an off-the-shelf component priced at approximately $179,000 does not render the entirety of the contract a sales contract. (Def.'s Mot. for Summ. J., Ex. 5, Letter of Dec. 21, 1983.)
Having established that the power distribution system was manufactured pursuant to a construction contract and that more than seven years elapsed since this power system was put into operation, defendant must, finally, establish that the transformer is either immovable property or an improvement thereto. Harris, 961 F.2d at 552. In making a determination of whether a particular construction is either an immovable or an improvement to an immovable, courts look to the statutes that define immovable property and its "component parts." See LA. Civ. CODE ANN. arts. 462— 466 (West 2002); Summerfield, 1998 WL 726080, at *2. Louisiana law provides that "only tracts of land, with their component parts, are immovables." LA. Civ. CODE ANN. art. 462. Component parts to land include (1) buildings that are owned by the owner of the land, and (2) constructions permanently attached to the ground that are owned by the owner of the land. LA. Civ. CODE ANN. art. 463; see also LA. Civ. CODE ANN. art. 466. Under LA. Civ. CODE ANN. art. 464, a building that belongs to a person other than the owner of the land is a separate immovable. Defendants do not assert that the transformer is a building. Rather, defendants assert that the transformer is a construction permanently attached to the ground. When a construction that is permanently attached to the ground is not owned by the owner of the land, that construction is considered to be a movable. LA. Civ. CODE ANN. art. 464, comment (d). Thus, in order for defendant to receive the benefit of Louisiana's Statute of Repose, the transformer must (1) be "permanently attached" to the land, and (2) be owned by the owner of the land. Harris, 961 F.2d at 552; Smith, 657 So.2d at 467.
The Court finds that Dolet Hills was not the owner of the land on which the transformer was located. The record indicates that the property on which GE placed the transformer does not, and never has, belonged to Dolet Hills. The transformer is located on land in the northwest quarter of the southeast quarter of Section 14, Township 12 North, Range 12 West. (Pl.'s Supplemental Memorandum, Ex. F, Supplemental Aff. of Betty Lowe, at 2.) This land was acquired by SWEPCO by an Act of Exchange dated June 4, 1981, and recorded on June 9, 1981. ( Id. at Act of Exchange and Grant of Servitude and Right of Way.) SWEPCO sold a half-interest in the property to CLECO on November 13, 1981. ( Id. at 2.) The transformer was placed on the land in 1983. (Contract.) Since then, the only transactions involving a transfer of ownership of the land were sales of smaller interests by SWEPCO to the Oklahoma Municipal Power Authority and the Northeast Texas Electric Cooperative. (Supplemental Aff. of Betty Lowe) Neither Dolet Hills Mining Venture nor Dolet Hills Lignite Company has ever had an ownership interest in the land. ( Id.; Pl.'s Opp. to Def.'s Mot. for Summ. J., Ex. C, Aff. of Dennis Jay Meyer.)
In 1983, Dolet Hills Mining Venture was a joint venture between Mansfield Mining Company (a company owned by Jones Capital Corp.) and Costain Mining Inc. (Aff. of Dennis Jay Meyer; Pl.'s Opp. to Def.'s Mot. for Summ. J., Ex. D, Aff. of Betty Lowe.) As the contract indicates, Dolet Hills Mining Venture was a contractor, hired by SWEPCO and CLECO, the owners of the land in question. (Aff. of Dennis Meyer.) In 1995, Costain sold its interest in Dolet Hills Mining Venture to Mining Beiteiligungs — GmbH Co., and Jones. Neither of these companies owned the land on which the transformer was placed. Then, in June 2001, these two companies sold their interests in Dolet Hills Mining Venture to Dolet Hills Lignite Company, a subsidiary of SWEPCO. Id. Thus, Dolet Hills, the owner of the transformer, did not own the land at issue from 1983, when the transformer was built, through 2000, when the bushing exploded.
The Court notes that nearly one year after the bushing exploded, SWEPCO, the owner of the land, gained an ownership interest in the transformer when its subsidiary, Dolet Hills Lignite Company, acquired an interest in Dolet Hills Mining Venture.
The Court therefore finds that because Dolet Hills did not own the land upon which its transformer was located, its claim is not precluded by the Louisiana Statute of Repose. Accordingly, the Court denies defendant's motion for summary judgment.
2. Plaintiff's Motion to Withdraw Admission
In response to a Request for Admission, Dolet Hills admitted "that GE placed the transformer on land owned by [Dolet Hills]." (GE's Request for Admissions, at 7.) During a later examination of the construction contract between GE and Dolet Hills, however, counsel for plaintiff discovered that Dolet Hills did not, in fact, own the land on which the transformer was placed. The contract indicates that Dolet Hills "has been granted the operating rights to the lignite deposits on the reserves controlled by CLECO/SWEPCO." (Contract, at 011019.) Plaintiff then filed a motion to withdraw its admission, asserting that the prior admission was made in error due to the excusable neglect of Dolet Hills' general manager, a non-lawyer. Defendant opposes plaintiff's motion to withdraw its admission. Rule 36(b) provides that the Court may permit withdrawal of an amendment "when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal . . . will prejudice that party in maintaining the action or defense on the merits." FED. R. Civ. P. 36 (b). Given that defendant's motion for summary judgment under the Louisiana Statute of Repose turns on ownership of the land, the Court finds that the merits of the action will be subserved by withdrawal of admission. Further, withdrawal of admission will not prejudice defendant's ability to maintain the action on the merits. Therefore, the Court grants plaintiff's motion to withdraw its admission.
III. Conclusion
For the foregoing reasons, the Court grants plaintiff's Motion to Withdraw Admission and denies defendant's Motion for Summary Judgment.