Sonnier v. Chisholm-Ryder Co., Inc.

909 S.W.2d 475, 1995 WL 407397

• Court: Texas Supreme Court
• Decided: October 5, 1995
• Docket: 95-0206
• Status: Published

Opinions

ENOCH, Justice, delivered the opinion of the Court, in which HIGHTOWER, CORNYN, GAMMAGE and SPECTOR, Justices, join.

In 1969, the Texas Legislature enacted a statute of repose that protects registered or licensed architects and engineers from liability in suits filed more than ten years after the substantial completion of improvements to real property or the commencement of operations of equipment attached to real property. Act of May 27, 1969, 61st Leg., R.S., ch. 418, § 1, 1969 Tex.Gen.Laws 1379 (codified as TexRev.Civ.Stat.Ann. art. 5586a (1969)) (amended 1985) (current version at Tex.Cxv. PRAC. & Rem.Code § 16.008). The Legislature amended this statute in 1975 to extend repose protection to persons who construct or repair improvements to real property. Act of May 14,1975, 64th Leg., R.S., ch. 269, § 1,1975 Tex.Gen.Laws 649 (codified as Tex. Rev.Civ.StatAnn. art. 5536a § 2 (1975)) (amended 1985) (current version at Tex.Civ. Prac. & Rem.Code § 16.009). We are asked by certified question from the United States Court of Appeals for the Fifth Circuit whether the manufacturer of a tomato chopper that was installed in a cannery and twenty years later removed and reinstalled in another cannery is protected under the statute of repose in section 16.009. We conclude that the manufacturer does not receive repose protection under section 16.009.

I.

In February 1965, Chisholm-Ryder Co., Inc. (Chisholm)¹ manufactured a tomato chopper for use in a commercial cannery on the premises of the Sugar Land Central Unit of the Texas Department of Corrections. The machine weighed approximately 1,200 pounds, was bolted to the ground to prevent vibration, and was powered by electrical wires housed in conduit attached to the walls. In 1985, the Sugar Land Central Unit ceased its tomato processing operations, and the Texas Department of Corrections moved the machine to the Ramsey Unit where the machine was installed in the same manner as part of a different production line. In 1990, John G. Sonnier, a supervisory employee at the Ramsey Unit, had a portion of his arm severed while inspecting the machine. The Sonniers brought a diversity action in federal court for damages against Chisholm. Chisholm defended, claiming that the suit was barred by the statute of repose found in section 16.009 of the Texas Civil Practice and Remedies Code. Tex.Civ.Prac. & Rem.Code § 16.009. Both parties moved for judgment as a matter of law, and both motions were overruled. The trial court held a jury trial exclusively on the statute of repose defense. The jury found that the tomato chopper was an “improvement to real property at the Central Sugarland Unit.” On the basis of that finding, the district court entered judgment that the plaintiffs take nothing.

On appeal, the United States Court of Appeals for the Fifth Circuit certified the following question to this Court:

Whether a person or entity that manufactures a tomato chopping machine “constructs ... an improvement to real property” for the purpose of qualifying for the protection of the Statute of Repose. Tex. Civ.Praet.[sic] & Rem.Code § 16.009 when that machine is originally installed by another party on real estate, then removed and reinstalled by such other party on real estate at a different location.

47 F.3d at 134 (ellipses in original).

II.

At the outset, we recognize the question comes to us without a unanimous vote of the Fifth Circuit panel. The dissent from the certification argued that the question of Texas law is settled, citing Dedmon v. Stewart-Warner Carp., 950 F.2d 244, 249 (5th Cir. 1992), and that the certification was unnecessary. To the contrary, the majority of the panel apparently believed the law of the State of Texas is not settled on the issue, thus the question was certified to us. Due to this disagreement, we believe a brief comment is necessary.

We welcome the opportunity to respond to certified questions from the federal courts and give deference to the requests brought to us. We recognize that certification “helps build a cooperative judicial federalism,” Lehman Bros. v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d 215 (1974), and helps avoid inconsistency between the decisions of federal and state courts on issues of state law.

We accepted the certified question in this case because only our intermediate appellate courts have had the occasion to interpret the statute with the benefit of both briefing and oral argument. And this Court’s one opinion on the substance of the statute, Conkle v. Builders Concrete Products Mfg., 749 S.W.2d 489 (Tex.1988), a per curiam opinion, decided without the benefit of oral argument, provides no analysis of the statute, but turns on the decisions of two lower appellate courts. We also note that Conkle’s discussion of section 16.009 has been subjected to thoughtful criticism by a court of appeals, see Williams v. U.S. Natural Resources, Inc., 865 S.W.2d 203, 207-08 (Tex.App.—Waco 1993, no writ) (questioning this Court’s opinion in Conkle), by federal district courts, e.g., Dayton Indep. Sch. Dist. v. U.S. Mineral Products Co., 789 F.Supp. 819, 821 (E.D.Tex.1992) (reviewing Dedmon and urging the Fifth Circuit to consider the legislative history of section 16.009, and suggesting that this Court has approved an interpretation focusing on protecting construction industry professionals), by a panel of the Fifth Circuit, see Dedmon, 950 F.2d at 249 (recognizing that although the statute appears to protect those in the construction industry, Conkle may suggest the contrary), and in the academic community, see Shannon, The Reach for Repose: Have the Texas Courts Gone Awry?, 24 Tex.Tech L.Rev. 196, 206-13 (1993) (arguing that Conkle is subject to various interpretations). It is not a stretch to conclude that Dedmon, in fact, sent this Court a signal that Texas jurisprudence on section 16.009 was not well considered and that our sole opinion has not correctly construed the statute. See Dedmon, 950 F.2d at 250 (suggesting that the legislative history should lead to a result contrary to the one advanced by Texas intermediate courts of appeals, and stating that at most, Conkle only tacitly resolved the issue). Williams, the most recent court of appeals case on the issue, buttressed this conclusion. We accepted the certified question pursuant to Texas Rule of Appellate Procedure 114 to resolve the controversy regarding the correct construction of this statute.

III.

We address the question by breaking it down into two subquestions: 1) whether a manufacturer of personalty which becomes an improvement to real property “constructs” an “improvement to real property;” and 2) when personalty is installed and used on one piece of land for over ten years, and then is removed and reinstalled on another property by the initial purchaser, whether the ten-year repose period starts again upon the substantial completion of the personalty’s reinstallation.

We begin our analysis by reviewing the language in the statutes of repose. Section 16.008 states in pertinent part as follows:

(a) A person must bring suit for damages for [personal injury and other injuries] against a registered or licensed architect or engineer in this state, who designs, plans, or inspects the construction of an improvement to real property or equipment attached to real property, not later than 10 years after the substantial completion of the improvement or the beginning of operation of the equipment in an action arising out of a defective or unsafe condition of the real property, the improvement, or the equipment.

Tex.Civ.PRAC. & Rem.Code § 16.008. The language in section 16.009 is similar, but differs in a material respect from the preceding section. Section 16.009 reads:

(a) A claimant must bring suit for damages for [personal injury and other injuries] against a person who constructs or repairs an improvement to real property not later than 10 years after the substantial completion of the improvement in an action arising out of a defective or unsafe condition of the real property or a deficiency in the construction or repair of the improvement.

Id. § 16.009. Both statutes provide protection to those in the construction industry, but their applications differ.

The sections differ in who they protect and the object of the work protected. Section 16.008 protects registered or licensed architects or engineers, while 16.009 protects a person who constructs or repairs, and section 16.008 protects those inspecting improvements to real property or equipment attached to real property, while 16.009 only protects those who construct or repair improvements to real property.

IV.

The Sonniers argue that Chisholm did not “construct” an “improvement to real property,” but instead merely manufactured a product that another party moved and attached to the realty. As such, the Sonniers argue that Chisholm is not entitled to the protection afforded by the statute of repose. Whether the statute of repose applies to those who do no more than manufacture personalty that is subsequently attached as improvements to real property is a question of first impression for this Court. We find merit in the Sonniers’ argument and agree that the statute of repose was not intended to grant repose to manufacturers in product liability suits but only to preclude suits against those in the construction industry that annex personalty to realty.

An improvement includes all additions to the freehold except for trade fixtures which can be removed without injury to the property. Generally, whether an attachment of personalty to realty constitutes an improvement is a question of the owner’s intent. This Court’s opinion in Logan v. Mullis, 686 S.W.2d 605, 607 (Tex.1985), is frequently cited for its discussion of the three factors to be considered to ascertain whether personalty has become permanently attached to the realty: 1) the mode and sufficiency of annexation, either real or constructive; 2) the adaptation of the personalty to the use or the purpose of the realty, and 3) the intention of the owner who causes the personalty to be annexed to the realty. The third factor is preeminent and the other two are evidence of intent. Id. The owner’s intent is critical because personalty does not constitute an improvement until it is annexed to realty. To constitute an improvement there must be a joinder of personalty with realty. It is critical to distinguish among the three concepts involved in determining whether an object is an improvement — the personalty, the realty to which the personalty is annexed, and the result, the improvement. There can be no improvement without annexation to realty, and until personalty is annexed to realty, it by definition cannot be an improvement. ■ Only upon annexation does the personalty lose its characteristics as personal property and become viewed as an improvement. The plain language of the statute applies to those who construct or repair improvements — the statute applies to those who start with personalty and transform the personalty into an improvement.

Early appellate decisions construing this statute have created confusion by failing to grasp the significance of the different elements that combine to create an improvement. The confusion stems from focusing on the personalty as attached to realty without reference to the fact that it is the annexation that transforms the personalty into an improvement. For example, the court of appeals in Ellerbe v. Otis Elevator Co., 618 S.W.2d 870 (Tex.Civ.App.—Houston [1st Dist.] 1981, writ ref d n.r.e.), applied the statute in favor of an elevator manufacturer, reasoning that: “An elevator in a multi-sto-ried building obviously constitutes an improvement on real property. The manufacturer of the elevator would be a person performing or furnishing construction of the elevator even though it did not install it in the building.” 618 S.W.2d at 872. Although it is true that an elevator installed in a building constitutes an improvement, such a fact does not lead to the conclusion that the manufacturer of the elevator alone constructed an improvement — personalty annexed to real property.

The next case to address this issue was Reddix v. Eaton Corp., 662 S.W.2d 720 (Tex.App.—San Antonio 1983, writ refd n.r.e.). In that case, Eaton manufactured an electric hoist that operated an outdoor elevator. The court concluded that materialmen “who [do] no more than manufacture ... materials [do] not benefit from the statute [of repose].” Id. at 724. It then held that the hoist was a mere component of the elevator and, thus, the manufacturer of a “fully assembled” hoist was not a beneficiary of the repose statute. Reddix correctly held that under the statutory language, a materialman who does no more than manufacture or supply materials does not benefit from the statute. But its reasoning adopted the convoluted view of improvements announced in Ellerbe. In short, the Reddix court did not find repose was required under Ellerbe because the hoist was only a component of an elevator and not a complete improvement in itself. By failing to look at an improvement as personalty annexed to realty and failing to determine who actually constructed the improvement, Reddix tacitly approved the incorrect holding in Ellerbe that off-site manufacturers of personalty later annexed to real property as improvements are protected by the statute.

The holding in Reddix was a turning point in the analysis of section 16.009 because of its citation to Ellerbe and its discussion of materialmen. Reddix has been understood as holding that even though a materialman who merely supplies parts is not protected, one who supplies an entire product is protected. A correct application of the statute, however, holds that those who are not connected with the construction, whether they supply a component or an entire product, are merely materialmen because they perform no work or labor in constructing an improvement — annexing personalty to real property. See Huddleston v. Nislar, 72 S.W.2d 959, 962 (Tex.Civ.App.—Amarillo 1934, writ ref'd).

Next came Dubin v. Carrier Corp., 731 S.W.2d 651 (Tex.App.—Houston [1st Dist.] 1987), after remand, 798 S.W.2d 1 (Tex.App.—Houston [14th Dist.] 1990, writ dism’d by agr.). Here the trial court initially granted summary judgment for the manufacturer of a heating unit because of the repose statute. On the first appeal, the appellate court, concluding that the heater was an improvement, stated that section 16.009 required proof that a heater was installed more than ten years before the accident occurred. The summary judgment was reversed because there was no evidence that the heater was installed more than ten years before the injury. In so holding, the court relied upon Ellerbe’s statement that a manufacturer is protected notwithstanding the fact that it did not install the product. The court of appeals then remanded the case to the trial court. The parties did not appeal to this Court. On remand, the trial court again granted summary judgment to the manufacturer. In reviewing this disposition, the court of appeals, again following the dubious distinction drawn in Ellerbe, held that the manufacturer “both made a portion of the unit and also manufactured the entire assembly” and affirmed the summary judgment.

Finally, in Ablin v. Morton Southwest Co., 802 S.W.2d 788 (Tex.App.—San Antonio 1990, writ denied), the court held that a garage door opener was an improvement and was affixed more than ten years before the injury. The plaintiffs argued that the opener was not an improvement because it was easily removable. Ablin cited Logan and held that the evidence demonstrated that the opener was an improvement as a matter of law.

This Court’s only opinion on the substance of section 16.009 is Conkle. In Conkle, the plaintiff was killed in a concrete batch plant. The defendant manufacturer received summary judgment under section 16.009, and the court of appeals affirmed in an unpublished opinion. This Court reversed, holding that two fact issues precluded summary judgment. First, we held that fact issues existed as to whether the defendant only manufactured component parts. Second, summary judgment was improper because there was a factual dispute as to whether the plant was actually an improvement in the first instance given evidence that the plant was portable. In Conkle, the petitioner, who presumably followed the jurisprudence as espoused by the courts of appeals, only argued that the defendant was a mere materialman who did no more than construct component parts of a cement batching plant.

Conkle and the other cases addressing section 16.009 assumed without questioning the propriety of extending repose protection to off-site manufacturers, and focused instead on the issue evolving out of Reddix — whether a complete system had been built as opposed to only part of a system. The writs of error in all other cases that discussed off-site manufacturers have either been dismissed by agreement, see Rodarte v. Carrier Corp., 786 S.W.2d 94 (Tex.App.—El Paso 1990, writ dism’d by agr.); see also Dubin II, 798 S.W.2d at 1; or were not filed, Karisch v. Allied-Signal, Inc., 887 S.W.2d 679 (Tex.App.—Corpus Christi 1992, no writ); Big West Oil Co. v. Willborn Bros. Co., 836 S.W.2d 800 (Tex.App.—Amarillo 1992, no writ). Thus, this certified question is the first occasion for us to squarely address this issue.

We have found no authority that identifies a class of property as an improvement although not annexed to real estate. Neither have we found authority that states a component part, although annexed to realty, retains its character as personalty because it is merely a component of a larger system.

Exclusive focus on the distinction between a component part and a total system has resulted in a confused body of law leading to irreconcilable applications. Reddix held that a manufacturer of a motor that raises an elevator is not protected and is no more than a materialman. 662 S.W.2d at 723. Ablin, on the other hand, held that a manufacturer of a motor that raises a garage door is protected. 802 S.W.2d at 792. Dedmon, in deciding that a heater is an improvement, noted that a creative attorney could argue that anything is a part of its own system as opposed to a component of a larger system. 950 F.2d at 248. And the court in Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 517 n. 13 (5th Cir.1992), gave life to this idea when it held that an electrical duct is its own system and is not a component. One cannot effectively argue that a fully functioning hoist is any more or less a component part of an elevator than a garage door opener is more or less a component part of a garage door, or an electrical duct is any more or less a component part of an electrical system, or that a tomato chopper is any more or less a component part of a cannery.

Although there are a number of court of appeals opinions that have followed this distinction, the distinction between the manufacturer of a component and an entire system has skewed the focus of the rule and does violence to the concept of “improvement” and thus, to the plain language of the statute.

These opinions cut against the concept of improvement because they assume that personalty can exist as an improvement without attachment to real property. Such a conclusion is inconsistent with the requirement that property be annexed to really with the intent that it be a permanent addition to the realty. There can be no such thing as an improvement until personalty is annexed to realty. Whatever it is that a manufacturer actually makes, it is not an improvement until it is annexed.

These opinions, therefore, are contrary to the plain language of the statute because they look at the word “construct” in connection with an incomplete 'understanding of “improvement.” Personalty is not an improvement until annexed to realty; the manufacturer of personalty does not “construct” an improvement because there is no relationship with the annexation.

Recently, in Williams, 865 S.W.2d at 203, the Waco court of appeals addressed whether the statute of repose precluded suit against the manufacturer of a furnace installed in a house when the manufacturer did not actually annex the furnace to the real property. The court held that the statute of repose does not protect the manufacturer of a product who does not actually annex the product. The court questioned the reasoning of the other courts of appeals that have held that off-site manufacturers of goods purchased and installed by third parties come within the statute.

No writ of error was filed in Williams; consequently, we did not have the occasion to review the court’s holding. Now, as we review the holding, we conclude that the reasoning was correct. We agree that the prior courts erred in holding that the construction of personalty, even as a complete system, is the equivalent of the construction of an improvement to realty. See Shannon, 24 Tex Tech L.Rev. at 220. Accordingly, we disapprove of the express language to the contrary in Ellerbe and interpretations of Conkle inconsistent with the analysis in Williams. There is no evidence that Chisholm did anything more than manufacture personalty to be used by those in the construction industry. See Huddleston, 72 S.W.2d at 962. Thus, Chisholm did not “construct” an “improvement to realty.”

The jury in the present case found that the tomato chopper was an improvement as to the Sugar Land cannery. The determination that personalty has been transformed into an improvement is not dis-positive of the applicability of section 16.009. For example, a motel could bolt a painting to a wall, intending that it not be removed and thus transforming the painting into an improvement. The motel’s demonstrated intent does not transform the artist into one who constructs an improvement. Because the statute protects those who construct or repair improvements, the statute only protects those who annex personalty to realty, not those who manufacture personalty that is used in constructing an improvement. This reading of the statute is the only one consistent with the plain language of the statute, the legislative history, and the statutory purpose. See Tex.Gov’t Code § 311.028 (in construing a statute, whether or not ambiguous, a court may consider, inter alia, the object sought to be obtained and the legislative history). As originally enacted, section 16.008 required that:

There shall be commenced and prosecuted within ten years after the substantial completion of any improvement to real property or the commencement of operation of any equipment attached to real property ... all actions or suits [for damages] against any registered or licensed engineer or architect in this state performing or furnishing the design, planning, inspection of such construction of any such improvement, equipment or structure or against any such person so performing or furnishing such design, planning, inspection of construction of any such improvement, equipment or structure.

Act of May 27,1969, 61st Leg., R.S., ch. 418, § 1, 1969 Tex.Gen.Laws 1379 (codified as Tex.Rev.Civ.StatAnn. art. 5536a (1969)) (amended 1985) (current version at Tex.Civ. PRAC. & Rem.Code § 16.008) (emphasis added). Thus, the statute had at its origin an intent to protect those who design improvements to realty.

Section 16.009 was intended to complement section 16.008 by providing comparable repose protection to those who constructed the improvements to realty the architects and engineers designed. The forebear to section 16.009 originally read:

There shall be commenced and prosecuted within ten years after the substantial completion of any improvement to real property, and not afterward, all actions or suits in court for [damages] arising out of the defective or unsafe condition of any such real property or any deficiency in the construction or repair of any improvements on such real property against any person performing or furnishing construction or repair of any such improvement.

Act of May 14, 1975, 64th Leg., R.S., eh. 269, § 1,1975 Tex.Gen.Laws 649 (codified as Tex.Rev.Civ.Stat.Ann. art. 5536a § 2 (1975)) (amended 1985) (current version at TexlCiv. PRAC. & Rem.Code § 16.009).

The legislative history is silent with respect to those who manufacture personalty subsequently installed in buildings as improvements. From the history of the act, it is consistent to hold that the act was intended to protect those who actually alter the realty by constructing additions or annexing personalty to it, not to protect those who do no more than manufacture personalty that is later transformed by third parties into an improvement. This holding avoids the morass currently experienced by the state’s jurisprudence and alluded to by the Dedmon court:

We find the “improvement versus component part” distinction difficult to apply because, if only systems can be improvements, there is no principled way to tell whether an item is a system or a part of one. Arguably, the ducts that convey warm air from the heater throughout the dwelling are part of the attic system, rather than the heating system. Or if, as in this case, they convey chilled as well as heated air, it is fair to say that the ducts themselves are an “air-moving system” to which two “air temperature modification systems” attach.

Dedmon, 950 F.2d at 248.

The record before us indicates only that Chisholm manufactured personalty and sold it to the Department of Corrections. Absent any evidence that Chisholm did more, we conclude that Chisholm did not construct an “improvement to real property” as contemplated by section 16.009.

V.

The Sonniers ask us to consider, and the question certified to us to answer is, assuming the tomato chopper is an improvement, whether its detachment from the real property at the Sugar Land Unit and reannexation at the Ramsey Unit revivifies the ten-year statute of repose as to the manufacturer of the tomato chopper. It should be apparent from the analysis above that the answer is no. In fact, it should be apparent that this question does not arise under our analysis of the statute of repose because the question assumes the manufacturer constructed an improvement without any relation to the annexation.

The jury in this case answered that the tomato chopper was an improvement at the Sugar Land Unit. Clearly the ten-year statute of repose has run with respect to those who constructed that improvement. Whether the tomato chopper was an improvement at Sugar Land depended upon the facts surrounding its annexation to Sugar Land. The statute of repose governing the annexation at Sugar Land is not revivified by any activity occurring at another construction site. The subsequent annexation at Ramsey created a new ten-year repose period protecting those who annexed the personalty to the realty there, assuming the facts support a finding that the chopper was an improvement at Ramsey.

⅜ ⅜ ⅝ ⅜ ⅜ ⅜

Chisholm is only the manufacturer of personalty. As such it cannot claim the protection of section 16.009 of the Texas Civil Practice and Remedies Code because it did not “construct ... an improvement to real property.” Texas court of appeals decisions are disapproved and Conkle is overruled to the extent they hold that an off-site manufacturer of personalty used in the construction of an improvement may claim the protection of section 16.009.²

1 . Chisholm-Ryder changed its name to 3800 Highland, Inc. That company later dissolved, and most of its liabilities were assumed by Pre-max Limited Partnership. Although Premax contests whether it assumed the potential liability in this case, the federal district court did not address that issue. Nor need we, given the limited nature of the certified question before us. See Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 349 (Tex.1990).

2 . In response to the dissent, a few remarks are appropriate. First, notwithstanding the dissent’s reference to stare decisis, a cursory reading of the dissent demonstrates that this Court is unanimous in questioning the jurisprudential value of Conkle and the court of appeals’ decisions discussed above.

This is so because both this Court and the dissent disapprove of the notion that whether a manufacturer makes only a component part or the whole thing is dispositive of any issue under section 16.009. The dissent’s test for improvement would place great importance on whether the manufacturer of the product intended the product to become an improvement or whether it was reasonable for the manufacturer to expect its product would become an improvement at the time the product was manufactured. Under this test, it is irrelevant whether the manufacturer made a component part or the whole part. And since Conkle supports the proposition that only manufacturers of whole systems receive the benefit of the repose statute, the dissent silently disavows that portion of the opinion.

Second, although it asserts that this Court has disregarded settled jurisprudence, the dissent’s proposed test is clearly inconsistent with the principles espoused by earlier court of appeals decisions, both those interpreting section 16.009 and those determining whether property is an improvement. Not in Ellerbe nor in Reddix did the court consider the intent of the manufacturer. Reddix, which commented on the distinction between a whole product as opposed to a part, surely is deserving of disapproval even by the dissent — the manufacturer of a part may equally intend its product to be an improvement.

Finally, the dissent’s test is significantly more broad than any holding in this area so far. Despite its protests to the contrary, the dissent’s test encompasses all materialmen — all suppliers of any kind — in the context of the statute of repose. For example, a manufacturer of concrete reinforcing bars certainly intends for its products to be improvements. Under the dissent’s test, the manufacturer would be afforded repose. Arguably even suppliers of raw materials would be covered by the repose statute to the extent their labor contributed to the refining or extracting of the materials. The statute does not go that far.