Local Government Trust v. Wheeler Machinery

• Citation: 2006 UT App 513,154 P.3d 175
• Decision Date: 29 December 2006
• Docket Number: No. 20050557-CA.,20050557-CA.
• Parties: UTAH LOCAL GOVERNMENT TRUST, Plaintiff and Appellant, v. WHEELER MACHINERY CO., Defendant and Appellee.
• Court: Court of Appeals of Utah

154 P.3d 175

2006 UT App 513

UTAH LOCAL GOVERNMENT TRUST, Plaintiff and Appellant, v. WHEELER MACHINERY CO., Defendant and Appellee.

No. 20050557-CA.

Court of Appeals of Utah.

December 29, 2006.

Scott M. Lilja and Nicole M. DeForge, Van Cott Bagley Cornwall & McCarthy, Salt Lake City, and Huey P. Cotton, Los Angeles, California, for Appellant.

Joseph C. Rust and Matthew G. Bagley, Kesler & Rust, Salt Lake City, for Appellee.

Before BENCH, P.J., ORME and THORNE, JJ.

OPINION

ORME, Judge:

¶ 1 After a roof fire at its power plant, Appellant Utah Local Government Trust (the City)¹ brought a claim against Appellee Wheeler Machinery Co. (Wheeler). The City alleged, under negligence and contract theories, that Wheeler was responsible for the exhaust system modification that caused the fire. The trial court granted summary judgment in favor of Wheeler, and the City now appeals. We reverse.

BACKGROUND²

¶ 2 The City hired Wheeler to supply two generator sets to the City for its power plant, including the entire exhaust system. It was later determined that the mufflers, which were part of the exhaust system, were too heavy to be installed on the power plant's roof as the plans had originally intended. This problem was addressed by installing wooden supports and C-channel metal frames on the roof to help support the weight of the mufflers. Thus, each exhaust pipe ran from a generator, through a thimble placed in the roof, and to a muffler resting on the wooden supports and a metal frame cradle. A rain cap was also installed atop the thimble to keep moisture from entering the building through the gap between the thimble and the exhaust pipe.

¶ 3 Richard Carlson of Independence Welding installed various parts of the exhaust system, including the rain cap. During the installation, however, Carlson discovered that the rain cap was too large to fit within the metal frame cradle supporting the muffler. To ensure a proper fit, Carlson cut off about one-half inch on two sides of the rain cap. Carlson later submitted an invoice to Wheeler—not the City—for his work on the exhaust system, including his work on the rain cap. Wheeler paid the invoice without argument.

¶ 4 On August 3, 2000, several months after the generators were put into operation, a fire started on the roof, resulting in extensive damage to the building and equipment. The fire was caused when the modified rain cap directed the heated air toward the wooden supports.³ In 2003, the City brought suit against Wheeler for negligence and breach of contract, claiming Wheeler's installation of the exhaust system was faulty. Wheeler thereafter filed a motion for summary judgment, which the trial court granted, and the City timely appealed.

ISSUE AND STANDARD OF REVIEW

¶ 5 The City argues that summary judgment was inappropriate because there were controverted issues of material fact. "Because a summary judgment challenge presents only legal issues, we review the grant of summary judgment for correctness. We consider only whether the trial court correctly applied the law and correctly concluded that no disputed issues of material fact existed." Aurora Credit Servs., Inc. v. Liberty W. Dev., Inc., 970 P.2d 1273, 1277 (Utah 1998) (citation omitted).

ANALYSIS

I. Factual Disputes

¶ 6 Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Utah R. Civ. P. 56(c). The Utah Rules of Civil Procedure further specify what type of evidence is required to oppose summary judgment and to establish that there are genuine issues of material fact:

[O]pposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.... When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the pleadings, but the response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. Summary judgment, if appropriate, shall be entered against a party failing to file such a response.

Utah R. Civ. P. 56(e). Thus, in the face of a motion to strike or other timely objection, "[s]tatements made merely on information and belief will be disregarded. Hearsay and opinion testimony that would not be admissible if testified to at the trial may not properly be set forth" to establish a disputed issue. Walker v. Rocky Mountain Recreation Corp., 29 Utah 2d 274, 508 P.2d 538, 542 (1973). Failure to produce acceptable evidence demonstrating a genuine issue of material fact will result in a grant of summary judgment. See Utah R. Civ. P. 56(e).

¶ 7 The trial court determined that the City had failed to meet the standards of rule 56(e), reasoning that the City's memorandum "cited to materials which are not properly considered in the context of summary judgment" and "exaggerated, and . . . occasionally misrepresented, the substance of the material cited." The court therefore determined that the City had failed to appropriately show any disputed issues of material fact, and the court granted summary judgment in favor of Wheeler. Although we sympathize with the trial court's frustration regarding the City's memorandum,⁴ we determine that summary judgment was inappropriate because the City did produce sufficient admissible evidence to demonstrate the existence of genuine issues of material fact.⁵

¶ 8 Most significantly, the City's memorandum sets forth evidence showing that there are disputed issues of material fact regarding the installation of the exhaust system, particularly with respect to whether Carlson was working at Wheeler's behest when he modified the rain cap. For example, the testimony of Wheeler's Robert Spears indicates that he hired Carlson on behalf of Wheeler. And Carlson testified that the invoice for his work on the rain cap was paid by Wheeler without dispute. These facts, when viewed in the light most favorable to the nonmoving party, would support the conclusion that Carlson was acting as an agent of Wheeler when he modified the rain cap.

¶ 9 Wheeler argues that, at most, it paid for some of Carlson's work as part of the give-and-take in the project, but that Wheeler was never contractually responsible for the installation or resulting payment. Therefore, Wheeler argues, the retained control doctrine protects it from any liability because it was not directing Carlson's actions. See Thompson v. Jess, 1999 UT 22, ¶ 19, 979 P.2d 322 ("[A] principal employer is subject to liability for injuries arising out of its independent contractor's work if the employer is actively involved in, or asserts control over, the manner of performance of the contracted work.").

¶ 10 In this case, however, there is sufficient evidence to create a question as to the applicability of the retained control doctrine. First, an invoice notation suggests that Wheeler's agents gave verbal approval for Carlson's work. Second, the City's retained expert, Richard McPherson, stated that Don Johnson, a City employee, indicated that the direction to "make it fit" came from Wheeler's Spears, also strongly suggests that Wheeler was directing Carlson's actions.⁶ Further, Spears agreed that "any installation by Wheeler of the exhaust system was part and parcel of the installation of the generators and the exhaust system sold to the plaintiff as a single sale,"⁷ which certainly supports the view that Wheeler was contractually responsible for at least some portion of the installation. Finally, if it is determined that Wheeler was responsible for the portion of installation that included the rain cap, then Wheeler would clearly be liable for Carlson's modification of the rain cap regardless of who actually directed Carlson to make the modification. See First Am. Commerce Co. v. Washington Mut. Sav. Bank, 743 P.2d 1193, 1194 (Utah 1987) ("[C]ourts agree that a party who delegates his duties under a contract to a third person is not relieved of his responsibilities, but rather remains ultimately responsible to the party with whom he contracted for guaranteeing the successful execution of the contractual duties."). Thus, when the evidence is viewed in a light most favorable to the nonmoving party, the retained control doctrine does not support summary judgment in favor of Wheeler.

II. Product Liability

¶ 11 Wheeler argues that even assuming there are disputed issues of material fact, summary judgment was nonetheless proper because the two-year statute of limitations for product liability claims had run. See Utah Code Ann. § 78-15-3 (2002). Wheeler argues that under the rule recognized in Strickland v. General Motors Corp., 852 F.Supp. 956 (D.Utah 1994), "all claims against a manufacturer, based on a defective product, [are] subject to [the product liability statute of limitations], regardless of the theory alleged." Id. at 959 (emphasis added). The City agrees that the product liability statute of limitations would apply to all claims—including negligence claims—arising out of a product defect, but argues that its claims arise out of negligent installation, thus making a four-year statute of limitations applicable. See Utah Code Ann. § 78-12-25 (2002). The issue, then, is whether the defective installation alleged here is considered part of the product, thus making product liability analysis appropriate.

¶ 12 The Utah Product Liability Act provides that "[n]o product shall be considered to have a defect or to be in a defective condition, unless at the time the product was sold by the manufacturer or other initial seller, there was a defect or defective condition in the product which made the product unreasonably dangerous to the user or consumer." Utah Code Ann. § 78-15-6(1) (2002) (emphasis added). Thus, the...