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Oak Creek Investment Properties, Inc. v. American Electrical Power Services Corp.

United States District Court, W.D. Arkansas, Texarkana Division

January 9, 2020

OAK CREEK INVESTMENT PROPERTIES, INC. PLAINTIFF
v.
AMERICAN ELECTRICAL POWER SERVICE CORPORATION; KMT GROUP, INC.; and CLEAResult CONSULTING, INC. DEFENDANTS AND KMT GROUP, INC. THIRD-PARTY PLAINTIFF
v.
JIMMY HICKEY and RICHARD SMITH THIRD-PARTY DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE.

         Currently before the Court is Separate Defendant CLEAResult Consulting, Inc.'s ("CLEAResult") Motion for Partial Summary Judgment (Doc. 79), which is fully briefed and ripe for decision. The Motion is GRANTED IN PART AND DENIED IN PART. First, the Court dismisses Plaintiffs breach of contract claim against CLEAResult. Second, the Court finds, as a matter of law, that the Plaintiffs mobile homes are not items of personal property, but rather improvements to real property. Given this finding, the Court further determines the proper measure of Plaintiffs damages for any negligent injuries to its mobile homes.

         I. BACKGROUND

         In 2002 Jimmy Hickey and Richard Smith formed a corporation, Oak Creek Investment Properties, Inc.'s ("Oak Creek"), through which they purchased 12.5 acres of pastureland in Texarkana, Arkansas. (Doc. 88-1, pp. 1-2). The pair then developed a platted mobile home neighborhood that they named Oak Creek Manufactured Home Park. They installed underground utilities, asphalt streets, and built driveways to each of the park's 62 mobile home sites. Id. Oak Creek then began purchasing used mobile homes-mostly from the Dallas, Texas area-at an average price of approximately $8, 000.00. (Doc. 81, ¶ 7). The mobile homes were transported to Texarkana and physically affixed to each of the 62 lots by removing the wheels, axles, and tongues. When the development was complete, Oak Creek began leasing the homes to its tenants. Oak Creek has owned and operated the mobile home park ever since. (Doc. 88-1, p. 2).

         Sometime in 2014, representatives of Separate Defendant KMT Group, Inc. ("KMT") approached Oak Creek and pitched the idea of "weatherizing" its mobile homes. The objective was to make the mobile home units more energy efficient, which in turn would lead to energy-cost savings. KMT explained that it had partnered with Separate Defendants CLEAResult-the designer of the weatherization program-and American Electrical Power Service Corporation ("AEP-SWEPCO")-the provider of electric power to Oak Creek's mobile home park-to perform the contracting work necessary to weatherize the mobile homes. KMT would perform the labor and AEP-SWEPCO would reimburse KMT for its costs after the work was completed. The "weatherization program" was thus a free service offered to Oak Creek. (Doc. 36, p. 2).

         Initially, Oak Creek was not interested in the program. But KMT "persisted in offering its services," and sometime in December of 2015, Oak Creek reconsidered and approved the project. Id. However, in Oak Creek's view, once the work was completed, "it became apparent KMT failed to properly perform the weatherization program in the mobile homes." Id. at 3. Oak Creek "began noticing various issues with the interiors of mobile homes . . . including, but not limited to[, ] warped and cracked sub-flooring and flooring." Id. Oak Creek believes that CLEAResult's weatherization program was never intended to be used on mobile homes, and that Defendants either knew or should have known this before any of the work commenced. Id. at 3-4.

         Oak Creek claims to have been damaged by the weatherization program and asserts the following causes of action: (1) breach of contract arising from Oak Creek's third-party beneficiary status for contracts between the Defendants; (2) negligence; (3) deceit; (4) violations of the Texas Deceptive Trade Practices Act; and (5) violations of the Arkansas Deceptive Trade Practices Act. (Doc. 36).

         Regarding the negligence claims, Oak Creek alleges that it "suffered physical damage to its mobile homes." Id. at 8, 10. Oak Creek claims that such negligence has caused, among other things, a. "loss of income and loss of profits," and "greatly reduced the fair market value of [Oak Creek's] real property, [which] prevents it from being able to sell it as an ongoing and viable business," Id. at 8-9. Oak Creek "expects that it will experience future loss of income, loss of profit, ... and loss of value of the mobile home park as a going business concern." Id. at 9.

         In its Amended Complaint, Oak Creek asserts that the legal measure of its damages depends on whether the mobile homes are characterized as real property or personal property, and whether the injury is determined to be permanent or temporary. For example, according to Oak Creek:

• If the mobile homes are Real Property and the injury is Permanent:
• Then Oak Creek seeks replacement costs for all 62 mobile homes, plus loss of use damages. According to Oak Creek, the "replacement cost" for all mobile homes is necessary to "restore the fair market value of its mobile home park as an ongoing business concern." (Doc. 36, ¶ 5.2). o In the alternative, Oak Creek seeks damages equal to the difference in the fair market value of its Real Property (including the value of the mobile homes), as measured immediately prior to and after the injury, plus loss of use damages. Id.
• If the mobile homes are Real Property and the injury is Temporary:
• Then Oak Creek seeks damages equal to the cost to repair and restore the mobile homes to their pre-injury condition. Id. at ¶ 5.3.
• If the mobile homes are Personal Property and the injury is Permanent:
• Then Oak Creek seeks damages equal to the fair market value of the mobile homes immediately prior to the injury. Id. at ¶ 5.4.
• In the alternative, Oak Creek seeks damages equal to the replacement cost of the mobile homes. Id.
• If the mobile homes are Personal Property and the injury is Temporary:
• Then Oak Creek seeks damages equal to the difference in the fair market value of the mobile homes immediately prior to and after the injury. Id. at ¶ 5.5.
• In the alternative, Oak Creek seeks damages for the cost to repair and restore the mobile homes to their pre-injury condition. Id.

         Against this background, "CLEAResult moves for partial summary judgment on [Oak Creek's] measure of damages for its negligence claim and substantively on [Oak Creek's] breach of contract claim." (Doc. 79). In its response, Oak Creek concedes that its breach of contract action against CLEAResult should be dismissed, and therefore partial summary judgment is GRANTED as to that claim. Below, after summarizing the applicable legal standards, the Court will take up the parties' respective arguments with respect to the proper measure of Oak Creek's damages for its negligence claims.

         II. LEGAL STANDARD

         A. Summary Judgment

         The standard for summary judgment is well established. Under Federal Rule of Civil Procedure 56(a), "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The Court must review the facts in the light most favorable to the opposing party and give that party the benefit of any inferences that can be drawn from those facts. Canada v. Union Bee. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1997). The moving party bears the burden of proving the absence of a genuine dispute of material fact and that it is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Matsushita Bee. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nat'l. Bank of Commerce of El Dorado, Ark. v. DowChem. Co., 165 F.3d 602 (8th Cir. 1999).

         Once the moving party has met its burden, the non-moving party must "come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed.R.Civ.P. 56(c)). However, "the mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient" to survive summary judgment. Anderson v. Durham D&M, LLC, 606 F.3d 513, 518 (8th Cir. 2010) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Rather, in order for there to be a genuine issue of material fact that would preclude summary judgment, the non-moving party must produce evidence "such that a reasonable jury could return a verdict for the nonmoving party." Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson, 477 U.S. at 248). To meet its burden, "[t]he nonmoving party must do more than rely on allegations or denials in the pleadings, and the court should grant summary judgment if any essential element of the prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial." Register v. Honeywell Fed. Mfg. & Techs., LLC, 397 F.3d 1130, 1136 (8th Cir. 2005) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)).

         B. Property Damage

         The parties' briefing correctly explains that the proper measure of "property damage" is initially dependent on whether the injury harmed real property or personal property. The remedy for injury to real property, however, is further differentiated based on whether the injury is to the land or an improvement upon the land. Similarly, the remedies for injury to personal property can differ based on the specific nature of the chattel.

         In recognizing these distinctions, Professor Howard Brill concisely summarizes the case law in Arkansas as follows:

When land is negligently damaged, the initial question is whether the injury is permanent or temporary. Early case law stated that if the value of the property destroyed depends upon its connection with the soil, the damage is treated as permanent. For permanent damage to real property, the measure of general damages is the difference in fair market value immediately before and immediately after the occurrence. This measure has been applied to situations ranging from the overflow or diversion of a stream, to the destruction of growing trees, and to the loss of topsoil through water drainage. Particularly today, these types of damages should arguably be treated as temporary damages, because they may be reversible. Even the deposit of toxic wastes upon land may be correctable with modern techniques.
On the other hand, if the damage to the property is temporary, general damages are assessed as the reasonable expense of necessary repairs. That measure has been applied to the cost of restoring a bridge, cleaning a pond, reseeding a meadow, repaving a parking lot, replacing topsoil and other land cover, and remedying groundwater and soil contamination. The objective is to provide the funds to restore the property to its condition prior to the injury.

         Brill and Brill, 1 Arkansas Practice Series: Law of Damages § 30:1 (6th ed.).

         Pointing to other Arkansas cases, Professor Brill illustrates the importance of distinguishing injuries to land fromh ...


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