Sapp v. Morton Bldgs., Inc.

• Decision Date: 24 August 1992
• Docket Number: No. 91-2078,91-2078
• Citation: 973 F.2d 539
• Parties: , Prod.Liab.Rep. (CCH) P 13,266 Harry T. SAPP, Jr., also known as Tom Sapp, individually, Plaintiff-Appellant, v. MORTON BUILDINGS, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 539

973 F.2d 539

61 USLW 2176, Prod.Liab.Rep. (CCH) P 13,266

Harry T. SAPP, Jr., also known as Tom Sapp, individually Plaintiff-Appellant, v. MORTON BUILDINGS, INCORPORATED, Defendant-Appellee.

No. 91-2078.

United States Court of Appeals Seventh Circuit.

Argued Jan. 15, 1992.

Decided Aug. 24, 1992.

Lex Venditti, William S. Spangler, Sr. (argued), Steven A. Johnson, Spangler, Johnson & Associates, Merrillville, Ind., for plaintiff-appellant.

Gregory S. Bell, Sutkowski & Washkuhn, Peoria, Ill., Terrence L. Smith (argued), Smith & Debonis, East Chicago, Ind., for defendant-appellee.

Before WOOD, Jr., ^* COFFEY, Circuit Judges and CURRAN, ^** District Judge.

COFFEY, Circuit Judge.

Harry T. Sapp, Jr. ("Sapp") filed this diversity action against Morton Buildings, Inc. ("Morton") seeking damages for the death of a quarter horse, "MBJ Tuff to Beat". Sapp alleged that Morton was liable for the horse's death under a strict liability theory pursuant to the Indiana Product Liability Act, Ind.Code § 33-1-1.5-1 et seq. (West 1991) ("Act") or, alternatively, under a theory of negligence. Because Sapp failed to make out a prima facie case under the Act, the district court submitted the case to the jury on the negligence theory only. The jury returned a verdict of no liability. Sapp appeals, arguing that the district court erred in refusing to allow the jury to consider the strict liability claim. We affirm.

I.

In 1982, Sapp contracted with Morton to remodel a barn on Sapp's farm in Leroy, Indiana, and convert it into a stable. Several months later, Sapp contracted with Morton to add a building adjoining the remodeled barn. The connected buildings were intended to serve as a large stable. Because the existing barn had non-standard dimensions, all materials, except the doors and windows, had to be tailor-made at the building site to fit the existing structure. This tailor-making of the parts included pieces of channel iron nailed to cover the top of exposed boards in the stable to prevent the horses from chewing on the wood. Morton manufactured the channel iron used on this job. The new adjoining stable building was of standard design and therefore was largely prefabricated at one of Morton's plants.

The horse "MBJ Tuff to Beat" was kept by Sapp in the No. 2 stall of the barn remodeled into a stable. In April, 1985, the horse suffered a laceration on its lip. Shortly after suffering the injury, the horse developed an infection, foundered and eventually had to be destroyed. Sapp contends that the laceration and the resulting infection were caused by an improperly installed and defective piece of channel iron. At trial, Morton argued that the horse received the laceration to its mouth as a result of an improperly maintained feed box constructed, designed and maintained by Sapp. Both sides agree that the law of Indiana is the substantive law governing this appeal, and that our review of the issue presented is de novo.

II.

The appellant challenges the district court's ruling that his strict liability theory could not be submitted to the jury because he failed to make out a prima facie case under the Act. The Act provides, in pertinent part, that

"... One who sells, leases, or otherwise puts into the stream of commerce any product in a defective condition unreasonably dangerous to any user or consumer or to his property is subject to liability for physical harm caused by that product to the user or consumer or to his property if that user or consumer is in the class of persons that the seller should reasonably foresee as being subject to the harm caused by the defective condition, and if:

(1) the seller is engaged in the business of selling such a product; and

(2) the product is expected to and does reach the user or consumer without substantial alteration in the condition in which it is sold by the person sought to be held liable under this chapter."

Ind.Code § 33-1-1.5-3(a). The Act defines a "product" as "any item or good that is personalty at the time it is conveyed by the seller to another party. It does not apply to a transaction that, by its nature, involves wholly or predominately the sale of a service rather than a product." Ind.Code § 33-1-1.5-2.

After listening to the evidence submitted by both parties, the district court ruled that the strict liability theory under the Act should not be submitted to the jury, and stated, "I am absolutely and firmly convinced that [the channel iron] is not a product." The Act in defining a "product" draws a crucial distinction between transactions which involve "wholly or predominately the sale of a service rather than a product." Although we have been unable to locate a case squarely on point, ¹ we hold that Morton's remodeling of Sapp's barn was a transaction involving predominately the sale of service, rather than a product. Thus, the district court ruling was proper in finding that the Act was not applicable to Sapp's action.

In explaining our reasoning, we turn to the case law of Indiana wherein the Indiana courts have considered the products/services distinction drawn by the Act. In Lilge v. Russell's Trailer Repair, Inc., 565 N.E.2d 1146 (Ind.App.1991), the defendant was hired to install a bumper and a rear cargo box on a truck. The plaintiff was a delivery driver who had been injured when he fell while stepping down to the bumper from the back ledge of the rear cargo box. The defendant argued that the Act was inapplicable because its work consisted mostly of the provision of services. The court reversed the summary judgment entered in the defendant's favor after concluding that there remained a genuine issue of material fact as to whether the defendant had manufactured the bumper it installed. The answer to this question, the court reasoned, could "determine whether the transaction was predominately the sale of a service rather than a product." Id. at 1149. In Ferguson v. Modern Farm Sys., Inc., 555 N.E.2d 1379 (Ind.App.1990), a worker who fell off a ladder attached to a grain bin sued the owner, the assembler and the furnisher of component parts of the bin for his injuries. In holding that the Act applied to the grain bin action, the Ferguson court briefly alluded to the Act's services/product distinction, noting that the Act "did not contemplate a distinction between movable and nonmovable property, but rather sought to exclude transactions which relate primarily to the act of providing a service, such as that provided by an accountant, attorney or physician." Id. at 1384-85. The Lilge court's application of the Act to the grain bin action makes clear, however, that licensed professionals are not the only ones who can be considered providers of services under the Act.

The facts of this case persuade us that Morton's work on behalf of Sapp lines up more properly on the service side of the product/services division. The stable in which "MBJ Tuff to Beat" was injured was not prefabricated at a Morton plant and erected on Sapp's farm, as was the large stable Morton built adjacent to the remodeled barn. Warren Koehl, the Morton salesman who worked on the Sapp project, testified at trial that the Morton employees "retrofitt[ed]" the barn in order to convert it into a stable. Koehl's testimony makes clear that the stalls constructed by Morton in the remodeled barn were not the standard Morton size, and that the materials used had to be modified "on the job" to custom fit the new stable. As Koehl stated, "[w]hen we go into a situation like this this was not a Morton building, so we had to make everything fit on the inside." "Meaning, when you have a project like this, everything has to be basically field designed. It can't be designed at the office or whatever. We sent out the components, but the components have to be cut to fit on the job." Thus, in sharp contrast to the prefabricated building also provided by Morton, the remodeled barn required Morton to make numerous and extensive site-specific adjustments to convert the building into a stable. The Morton employees did not simply install a prefabricated product on Sapp's property, like the truck bumper in Lilge or the grain bin in Ferguson; they custom designed and fit their materials to the specifications of the old barn. For this reason, we conclude that, as to the building in which the horse was injured, the transaction was primarily a sale of a service in the form of the remodeling of the barn to convert it into a stable.

Our conclusion that Morton's work was predominately a provision of a service and not a product is fortified by the analysis in Grain Dealers Mut. Ins. Co., Inc. v. Chief Indus., Inc., 612 F.Supp. 1179 (N.D.Ind.1985). In Grain Dealers, the plaintiff alleged that the defendant had negligently ² designed, manufactured, and assembled a large capacity, all-steel grain storage bin. The defendant responded that the complaint was time barred by the Indiana Product Liability Act's statute of limitations, Ind.Code § 33-1-1.5-5, which required that product liability actions "be commenced within two years after the cause of action accrues or within ten years after the delivery of the product to the initial user or consumer." Grain Dealers, 612 F.Supp. at 1180. The plaintiff countered that the applicable statute of limitations was Ind.Code § 34-4-20-2, which provided that any action for damages to real and personal property arising out of the design, planning, supervision, construction or observation of an improvement to real property must be brought within ten (10) years of the date of substantial completion of the improvement. Id.

The Grain Dealers court ruled that the product liability statute of limitations applied to the design, manufacturing, and assembling of the grain storage bin. The real estate improvement statute, the court reasoned, had "never been applied to actions against entities like [the defendant] who design fungible products without any particular parcel of real estate in mind...