Cooper Industries v. City of South Bend

• Decision Date: 22 January 2009
• Docket Number: No. 49S04-0711-CV-541.,49S04-0711-CV-541.
• Citation: 899 N.E.2d 1274
• Parties: COOPER INDUSTRIES, LLC, et al., Appellant (Plaintiff below), v. THE CITY OF SOUTH BEND, Indiana, et al., Appellees (Defendants below).
• Court: Indiana Supreme Court

899 N.E.2d 1274

COOPER INDUSTRIES, LLC, et al., Appellant (Plaintiff below), v. THE CITY OF SOUTH BEND, Indiana, et al., Appellees (Defendants below).

No. 49S04-0711-CV-541.

Supreme Court of Indiana.

January 22, 2009.

Mark E. Shere, Vicki Wright, Libby Mote, Krieg Devault, LLP, Indianapolis, IN, Dale E. Stephenson, Allen A. Kacenjar, Squire, Sanders & Dempsey L.L.P., Cleveland, OH, Mary Rose Alexander, Thomas Heiden, Latham & Watkins, LLP, Chicago, IL, Attorneys for Appellant.

Knight Anderson, Indianapolis, IN, Attorney for Hartford Accident and Indemnity Company.

Mary Reeder, Elizabeth Green, Indianapolis, IN, Attorneys for Continental Insurance Company.

David Temple, Indianapolis, IN, Attorney for Lexington Insurance Company.

Donald Snemis, Brent Huber, Freedom Smith, Indianapolis, IN, Attorneys for Indiana Association of Cities and Towns.

George M. Plews, Jeffrey D. Featherstun, Tina M. Richards, Plews Shadley Racher & Braun, Michael Keele, Indianapolis, Cheryl A. Greene, South Bend, IN, Attorneys for Appellee.

Stephen Peters, Indianapolis, IN, Attorney for Zurich American Insurance Company.

Bruce Kamplain, Indianapolis, IN, Attorney for Certain Underwriters at Lloyd's of London.

Peter Rusthoven, Indianapolis, IN, Attorney for Commercial Logistics Corporation.

Geoffrey Slaughter, Indianapolis, IN, Attorney for ACF Industries, LLC.

Bryan Babb, Matthew Klein, Indianapolis, IN, Attorneys for Indiana Legal Foundation.

On Petition to Transfer from the Indiana Court of Appeals, No. 49A04-0511-CV-637

SHEPARD, Chief Justice.

The City of South Bend now owns much of the land where Studebaker Corp. once manufactured automobiles. It has sued Cooper Industries, LLC and others for environmental damage done to the site. In this appeal, the questions are whether the applicable statute of limitation bars these claims and whether appellant Cooper Industries is the corporate successor to Studebaker such that it may be liable on these environmental claims.

We hold that the statute of limitation bars the City's common law claims, that its claim under the Environmental Legal Action statute accrued at the time the statute became effective and thus is not barred, and that Cooper is the corporate successor to Studebaker for these purposes.

Facts and Procedural History

From before the Civil War, Studebaker operated manufacturing facilities in the City of South Bend, eventually occupying more than a hundred acres. During the Twentieth Century, the plant produced primarily automobiles, until 1963, when Studebaker moved these operations to a Canadian subsidiary and disposed of its South Bend facilities. It later became apparent that significant soil and groundwater contamination had likely occurred during Studebaker's occupation of the land and buildings.

Most of the Studebaker assets and the assets of Worthington Corporation were combined in 1967 to form Studebaker-Worthington Corporation. Studebaker officially dissolved as a corporate entity on November 30, 1967. In 1979, McGraw-Edison Company acquired all of Studebaker-Worthington's shares. In 2004, McGraw-Edison merged into appellant Cooper Industries, LLC ("Cooper").

Meanwhile, the City of South Bend began acquiring parcels of the former Studebaker property during the mid-1980s. Suspecting the presence of environmental contamination, the City hired two environmental consultants to conduct testing and report on their findings. On September 30, 1988, the first consultant reported that "a source of hydrocarbons may exist below the site or that the ground water may be transporting contaminants under the site." (Appellant's App. at 497.) On November 25, 1988, the second consultant reported "[volatile organic compound] contamination in the groundwater sample from each boring" and "heavy metal contamination in the groundwater sample from each boring" exceeding the EPA's national drinking water standards. (Id. at 513-15.) In 1990, the South Bend Redevelopment Commission formally declared the Studebaker property a redevelopment area. Over the next several years, the City continued to acquire property and evaluate the contamination. By 2002, the City owned a significant fraction of former Studebaker land.

On March 19, 2003, the City of South Bend and the South Bend Redevelopment Commission (collectively "South Bend") sued McGraw, contending that it was a successor to the liability of Studebaker. It pleaded negligence, private nuisance, trespass, public nuisance, statutory illegal dumping, and an environmental legal action (ELA) under Ind.Code § 13-30-9-2 (2009). (Appellant's App. at 32-50.) South Bend later substituted Cooper as defendant.

In January 2005, McGraw/Cooper moved for summary judgment on all claims, and both parties later moved for summary judgment as to whether McGraw/Cooper is the corporate liability successor of Studebaker. The trial court granted South Bend summary judgment on the issue of successorship. The court held that Studebaker-Worthington expressly assumed Studebaker's environmental liabilities, and in any event, that the Studebaker-Worthington combination constituted both a de facto merger and a mere continuation of Studebaker. McGraw then succeeded to the liabilities of Studebaker-Worthington, and Cooper succeeded to the liabilities of McGraw.

The trial court also denied McGraw/Cooper summary judgment on all but one of South Bend's claims.¹ In its denial, the court held that South Bend had brought all of its claims within the six-year statute of limitation for harm to property found at Ind.Code § 34-11-2-7.

The court also declared that South Bend's ELA claim was timely because South Bend filed it less than six years after the ELA statute became effective on February 28, 1998. The court reasoned that "no cause of action accrued on behalf of South Bend prior to that date. To find otherwise would be to preclude claims under statutes not yet enacted." (Id. at 3225-26.) The court further held that South Bend had authority to file an ELA claim because it is a "person" as that term is used in the ELA statute, Ind.Code § 13-30-9-2.

Cooper appealed, and the Court of Appeals reversed, holding that the six-year statute of limitation for property injuries barred all of South Bend's claims. Cooper Indus., LLC v. City of South Bend, 863 N.E.2d 1253 (Ind.Ct.App.2007), vacated. We granted transfer.

Summary judgment is appropriate only where no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C).

I. South Bend's Common Law Claims

Cooper Industries contends that our statute of limitation, Ind.Code § 34-11-2-7, bars the instant claims because South Bend did not commence its action within six years after it discovered "some ascertainable damage" to the former Studebaker property. (Appellant's Br. at 12-13.) South Bend argues in reply that its common law tort claims are timely as to the property it purchased within six years from the date of commencing the action because a statute of limitation did not accrue until it purchased each parcel. (Appellees' Br. at 28-29.) The trial court agreed with South Bend.

A. Common Law Claims

The general six-year statute of limitation applies to South Bend's claims for negligence, trespass, and public and private nuisance. See Ind.Code § 34-11-2-7(3); cf., Pflanz v. Foster, 888 N.E.2d 756 (Ind. 2008) (applying a ten-year statute of limitation for a contribution action, rather than the six-year statute for property damage, because the statute of limitation did not begin to run until after the claimant was ordered to clean up the property). The parties dispute both when the action accrued and whether South Bend's claims were timely filed in light of the accrual date.

B. Statute of Limitation

Statutes of limitation seek to provide security against stale claims, which in turn promotes judicial efficiency and advances the peace and welfare of society. "The party pleading a statute of limitation bears the burden of proving the suit was commenced beyond the statutory time allowed." In re Paternity of K.H., 709 N.E.2d 1033, 1035 (Ind.Ct.App.1999). When application of a statute of limitation rests on questions of fact, it is generally an issue for a jury to decide. Fager v. Hundt, 610 N.E.2d 246 (Ind.1993).

South Bend argues that its cause of action for damages to the Studebaker property did not accrue for limitation purposes until it became the owner of the property and had a right to commence the action, citing Gray v. Westinghouse Elec. Corp., 624 N.E.2d 49 (Ind.Ct.App.1993), trans. denied. We cannot agree. Indiana adheres to the rule that "third parties are usually held accountable for the time running against their predecessors in interest." Mack v. Am. Fletcher Nat. Bank and Trust Co., 510 N.E.2d 725, 734 (Ind. Ct.App.1987).² Accepting South Bend's argument would have the practical effect of allowing the mere transfer of property to resurrect the claims of prior landowners and predecessors-in-interests who had actual knowledge of injuries to property. It seems much more likely that the General Assembly had the opposite in mind when enacting Ind.Code § 34-11-2-7.

Under Indiana's discovery rule, a cause of action accrues, and the limitation period begins to run, when a claimant knows or in the exercise of ordinary diligence should have known of the injury. Wehling v. Citizens Nat'l Bank, 586 N.E.2d 840 (Ind.1992). The determination of when a cause of action accrues is generally a question of law. Barnes v. A.H. Robins Co., 476 N.E.2d 84 (Ind.1985). For an action to accrue, it is not necessary that the full extent of the damage be known or even ascertainable, but only that some ascertainable damage has occurred. Pflanz, 888 N.E.2d at 759 (quoting Doe v. United Methodist Church, 673 N.E.2d 839, 842 (Ind.Ct.App.1996)). In addressing a recent claim for contribution based on an obligation to clean up an alleged hazardous use of real property, this...