Clark County v. Sioux Equip. Corp.

• Decision Date: 02 July 2008
• Docket Number: No. 24462.,24462.
• Citation: 2008 SD 60,753 N.W.2d 406
• Parties: CLARK COUNTY, a political subdivision of the State of South Dakota, and State of South Dakota Petroleum Release Compensation Fund, Plaintiffs and Appellants, v. SIOUX EQUIPMENT CORPORATION, a South Dakota corporation, Defendant, Third Party Plaintiff and Appellee, v. Eaton Corporation and Snap-Tite, Inc., Third Party Defendants and Appellees.
• Court: South Dakota Supreme Court

753 N.W.2d 406

2008 SD 60

CLARK COUNTY, a political subdivision of the State of South Dakota, and State of South Dakota Petroleum Release Compensation Fund, Plaintiffs and Appellants, v. SIOUX EQUIPMENT CORPORATION, a South Dakota corporation, Defendant, Third Party Plaintiff and Appellee, v. Eaton Corporation and Snap-Tite, Inc., Third Party Defendants and Appellees.

No. 24462.

Supreme Court of South Dakota.

Argued on February 12, 2008.

Decided July 2, 2008.

Judith K. Grunewaldt of Judith K. Grunewaldt Law, Prof. LLC, Pierre, South Dakota, Attorney for plaintiff and appellant SD Petroleum Release Comp.

Naomi R. Cromwell Richard Tieszen of Tieszen Law Office, Prof. LLC Pierre,

South Dakota, Attorneys for plaintiff and appellant Clark County.

Arthur M. Hopper of Austin, Hinderaker, Hackett, Hopper, Strait & Bratland, Watertown, South Dakota, Attorneys for defendant, third party plaintiff and appellee Sioux Equipment.

Robert B. Anderson of May, Adam, Gerdes & Thompson, LLP Pierre, South Dakota, Attorneys for third party defendant and appellee Eaton Corporation.

Ronald A. Parsons, Jr., of Johnson, Heidepriem, Janklow, Abdallah & Johnson, LLP, Sioux Falls, South Dakota, Attorneys for third party defendant and appellee Snap-Tite, Inc.

ZINTER, Justice.

[¶ 1.] Sioux Equipment installed a fuel storage and dispensing system on real property owned by Clark County (County). County and the State of South Dakota Petroleum Release Compensation Fund (PRCF) sued Sioux Equipment when the system leaked and released diesel fuel into the environment. Sioux Equipment moved for summary judgment on the ground that a ten-year statute of repose barred County's and PRCF's claims. The circuit court granted Sioux Equipment's motion, concluding that Sioux Equipment's work was "an improvement" to real property within the meaning of the statute of repose. The circuit court also concluded that the federal Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") preempted state statutes of limitations, but not the statute of repose. We affirm.

I

[¶ 2.] Sioux Equipment is in the business of installing petroleum storage and distribution equipment, including above-ground fuel storage tanks. County is a political subdivision of the State of South Dakota. County owns real property used as a highway shop. PRCF is a state agency that reimburses petroleum tank owners for certain costs of remediating the release of petroleum and petroleum-containing products into the environment.

[¶ 3.] In November 1991, County contracted with Sioux Equipment to install the fuel storage and dispensing system, which included three 10,000 gallon above-ground fuel tanks, piping, and related equipment for the County's highway department. The scope of the work was described in Sioux Equipment's permit application, which was submitted to the South Dakota Department of Environment and Natural Resources (DENR). The application described the work as follows:

SCOPE OF WORK

Existing Tanks and pump to be Removed and Disposed of under Separate Contract. ... Tanks shall consistent of 3 — 10,000 gal 11' X 15' New Single Wall Steel Aboveground tanks, 2 tanks shall store Class #2, Diesel Fuel, the other shall store Class # 1, Gasoline.... Estimated cost of this project (Excluding Excavation) is $15,000.

(Emphasis in original). When Sioux Equipment arrived to begin its work, the site had already been excavated. There is no dispute that Sioux Equipment did not perform the excavation, and that a pre-existing fuel system was removed before Sioux Equipment arrived.

[¶ 4.] Sioux Equipment's installation was substantially completed by January 7, 1992, with Sioux Equipment's submission of a Certificate of Compliance to DENR. Sioux Equipment did no further work at the site¹ until it was notified of a 4,000 gallon fuel leak in February of 2003. As a result of this leak, County and PRCF incurred significant remediation expenses. PRCF asserts that the County and PRCF will incur additional expenses in the future.

[¶ 5.] In February of 2006, County and PRCF sued Sioux Equipment for negligence, breach of implied and express warranties, and breach of implied warranty of fitness for a particular purpose. County sought $139,985.34 in damages and prejudgment interest. PRCF sought $182,113.64 in damages for remediation costs, attorney fees and prejudgment interest.

[¶ 6.] Sioux Equipment moved for summary judgment, asserting the affirmative defense that a ten-year statute of repose had expired.² County and PRCF responded arguing that the statute of repose issue involved a question of fact for the jury; i.e., whether Sioux Equipment's work was "an improvement" to real property within the meaning of the statute. County and PRCF alternatively argued that if the statute of repose applied, it was preempted by CERCLA — a federal statute imposing liability for releasing hazardous materials into the environment.

[¶ 7.] The circuit court concluded that Sioux Equipment's work was an improvement to property, and therefore, the claim was barred by the statute of repose. Following the most recent authority from federal court interpretations of CERCLA, the circuit court also concluded that CERCLA preempted state statutes of limitations, but not statutes of repose. County and PRCF appeal both conclusions.

II

[¶ 8.] "In reviewing a grant or denial of summary judgment ... we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and [established] entitlement to judgment on the merits as a matter of law." Behrens v. Wedmore, 2005 SD 79, ¶ 18, 698 N.W.2d 555, 565. "`[T]hose resisting summary judgment [must] show that they will be able to place sufficient evidence in the record at trial to support findings on all the elements on which they have the burden of proof.'" Bordeaux v. Shannon County Sch., 2005 SD 117, ¶ 14, 707 N.W.2d 123, 127 (quoting Chem-Age Indus., Inc. v. Glover, 2002 SD 122, ¶ 18, 652 N.W.2d 756, 765 (citation omitted)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986) (stating that entry of summary judgment is mandated against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which party will bear the burden of proof at trial). Mere general allegations and denials that do not set forth specific facts will not prevent issuance of summary judgment. Casazza v. State, 2000 SD 120, ¶ 16, 616 N.W.2d 872, 876.

III

[¶ 9.] SDCL 15-2A-3 is the applicable statute of repose. It provides a ten-year period after substantial completion of a project to bring an action for "an improvement" to real property:

No action to recover damages for any injury to real ... property ... arising out of any ... construction, of an improvement to real property ... may be brought against any person performing or furnishing the design, planning, supervision, inspection, and observation of construction, or construction, of such an improvement more than ten years after substantial completion of such construction. The date of substantial completion shall be determined by the date when construction is sufficiently completed[.]

SDCL 15-2A-3.

[¶ 10.] County and PRCF argue that Sioux Equipment's installation was a mere replacement of the prior underground storage tanks, and therefore, it could not have been an improvement to real property within the meaning of the statute. This argument requires us to first determine the meaning of "an improvement" to real property, a question of law we review de novo. We must then apply that definition to determine whether Sioux Equipment's work involved an improvement to real property. This second determination is a mixed question of law and fact because the historical facts are established, the rule of law will be established by the court, and the dispositive issue is "whether ... the rule of law as applied to the established facts is or is not [favorably satisfied]." In re Dorsey and Whitney Trust Co., LLC, 2001 SD 35, ¶ 6, 623 N.W.2d 468, 471 (citations omitted). Because the application of a legal test to the historical facts of this case requires us to consider legal concepts and "exercise judgment about the values that animate legal principles," we review the second determination de novo. Id.³

[¶ 11.] Although this Court has not defined an "improvement to real property" in the context of SDCL 15-2A-3, most courts considering the issue have adopted what has been described as a "common sense approach." In Jarnagin v. Fisher Controls Int'l, Inc., 573 N.W.2d 34 (Iowa 1997), the Iowa Supreme Court affirmed summary judgment in favor of manufacturers of LP gas regulators, concluding that the regulators, which were used in a home heating system, were an improvement to real property. The Jarnagin court adopted the following definition

A permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs.

Id. at 36.

[¶ 12.] In State Farm Fire and Cas. v. Aquila Inc., the Minnesota Supreme Court adopted the same definition, concluding that an underground natural gas pipeline system constituted an improvement to real property. 718 N.W.2d 879, 884 (Minn. 2006). Similarly, the Supreme Court of Wisconsin applied that definition in a case questioning whether an underground oil pipeline was an improvement to real estate within the meaning of the Wisconsin statute of repose. United States Fire Ins. Co. v. E.D. Wesley Co., 105 Wis.2d 305, 313 N.W.2d 833, 835 (1982). Notably, that case also involved a petroleum storage facility. The court held that, "as a matter of law, [ ] when the pipeline was connected to the equipment located on the ... real property, that pipeline became an improvement to the ... property." Id. The New...