Opinion
Case No. 117,257
05-10-2019
John LAY and Connie Lay, husband and wife, Plaintiffs, and Clifford Farms Homeowners' Association, Inc., Intervenor, v. CONOCOPHILLIPS COMPANY; and Waterloo Road Pump and Supply, LLC, Defendants, and Pump & Supply, LLC, Third-Party Plaintiff, v. Dennis Miller, Third-Party Defendant, and ConocoPhillips Company, Third-Party Plaintiff/Appellant, v. Clifford Farms, LLC ; Gary L. Olson, individually and as Trustee of the Olson Family Trust, dated March 31, 1998; Clifford's Second One, LLC; Build One Development, L.P.; and G2, LLC, Third-Party Defendants/Appellees, and John Nail ; Brandon Baker a/k/a Aqua Well Drilling, Inc.; Dennis Miller and Mr. Miller d/b/a King Drilling ; James A. Nelson d/b/a Nelson Pump and Drilling a/k/a Nelson Pump Company ; Yuanshui Zheng and Fang Liu; Larry and Diane Burch; and Doug and Carrie Dannaway, Third-Party Defendants.
Amy M. Stipe, Rob F. Robertson, Ellen A. Adams, John M. "Jake" Krattiger, GABLEGOTWALS, Oklahoma City, Oklahoma, and Terry D. Ragsdale, GABLEGOTWALS, Tulsa, Oklahoma, for Third-Party Plaintiff/Appellant, Dennis S. Boxeur, Rollin Nash, Jr., James L. Scott, NASH, COHENOUR, KELLEY, & GIESSMANN, P.C., Oklahoma City, Oklahoma, for Third-Party Defendants/Appellees.
Amy M. Stipe, Rob F. Robertson, Ellen A. Adams, John M. "Jake" Krattiger, GABLEGOTWALS, Oklahoma City, Oklahoma, and Terry D. Ragsdale, GABLEGOTWALS, Tulsa, Oklahoma, for Third-Party Plaintiff/Appellant,
Dennis S. Boxeur, Rollin Nash, Jr., James L. Scott, NASH, COHENOUR, KELLEY, & GIESSMANN, P.C., Oklahoma City, Oklahoma, for Third-Party Defendants/Appellees.
Opinion by Bay Mitchell, Presiding Judge:
¶1 Third-Party Plaintiff/Appellant ConocoPhillips Company (Conoco) appeals from the trial court's order granting summary judgment to Third-Party Defendants/Appellees Clifford Farms, LLC; Gary L. Olson, individually and as Trustee of the Olson Family Trust, Dated March 31, 1998; Clifford's Second One, LLC; Build One Development, LP; and G2, LLC (collectively, Olson Defendants). After de novo review, we find a third-party contribution claim pursuant to 12 O.S. § 832 is subject to the 12 O.S. § 109 statute of repose, and Conoco's claims against Olson Defendants are barred. Olson Defendants are entitled to judgment as a matter of law. We affirm.
¶2 Gary Olson and his wife owned an 80 acre tract of undeveloped land. The Olson family lived on and farmed the land. They transferred the property to the Olson Family Trust in 1998. The property was sold to Clifford Farms, LLC, a company then partially owned by Gary Olson, in 1999. Mr. Olson and Clifford Farms, LLC began developing the 80 acres into the Clifford Farms Addition. On June 2, 2000, they filed a Final Plat subdividing the property into 49 residential lots. On June 29, 2001, Clifford Farms, LLC sold a lot at 17736 Clifford Farms Road to home builder ZCT, LLC. That lot would later become Plaintiffs John and Connie Lays' residence and is the subject property in this lawsuit. ZCT built a home on the lot. At the time, the Clifford Farms Addition was not on city water and each home required a water well. A water well was drilled in 2002 and then plugged in 2003, and a second well was drilled soon thereafter. ZCT sold the home in 2003. The Lays purchased the home in 2005.
This case is one of eight related lawsuits filed in federal and state courts.
¶3 In April 2013, the Lays filed a lawsuit against Conoco to recover for harm to their property from oilfield operations in the 1940s. The Lays claim when their water well was drilled, buried oil and salt pits were pierced and contaminated the aquifer and their potable water. On November 9, 2015, Conoco filed third-party claims for contribution against Olson Defendants pursuant to 12 O.S. § 832. Conoco asserts Olson Defendants are liable for the same injuries upon which the Lays base their claims against Conoco. Conoco alleges (1) Mr. Olson failed to disclose his knowledge of historic oil and gas activity on the subject property; (2) Mr. Olson and Clifford Farms, LLC failed to properly evaluate the environmental suitability of the property prior to developing the Clifford Farms Addition, specifically, whether there would be a fresh water supply for residential wells; (3) Olson Defendants had knowledge of "bad" water wells drilled on the subject property and failed to warn or disclose that information to buyers, builders, water well drillers, and/or homeowners; and (4) Mr. Olson, Build One, and G2, LLC failed to properly plug "bad" water wells on neighboring properties.
Mr. Olson had an ownership interest in and/or did business as Clifford Farms, LLC, Clifford's Second One, LLC, Build One Development, L.P., and G2, LLC, which were entities involved in the development of Clifford Farms Addition.
In its Second Amended Answer and Cross-Claims and Third Party Claims, Conoco contends Olson Defendants were involved in the drilling and/or plugging of "bad" water wells at the Dannaway, Burch, and Zheng properties.
¶4 Olson Defendants filed a motion for summary judgment based on the statute of repose, 12 O.S. § 109. Olsen Defendants contend it is undisputed their involvement with the subject property ended when Clifford Farms, LLC sold the property to ZCT in 2001, and Conoco filed its third-party contribution claims more than 10 years later. Conoco responds that the statute of repose does not apply to third-party contribution claims, because contribution is not a tort. Conoco contends that even if the statute of repose does apply to contribution claims, its allegations have nothing to do with the construction of an improvement to real property. Rather, their claims are based on Olson Defendants' role in the pre-construction development of the neighborhood and their "lack of improvement, lack of investigation, and complete failure to disclose pertinent information about the property to the Clifford Farms homebuilders and homeowners."
¶5 The trial court granted summary judgment to Olson Defendants. In its order, the trial court found "the act of subdividing the property in question constituted an ‘improvement to real property’ for purposes of the statute of repose." The trial court also determined the statute of repose applied to a claim for contribution. Conoco filed a motion to reconsider. After two hearings and supplemental briefing, the trial court determined the undisputed facts demonstrated that Olson Defendants did not perform any development activities within ten (10) years of the date Conoco filed its third-party claims against the Olson Defendants. The trial court entered an Order Denying Third-Party Plaintiff ConocoPhillips' Motion to Reconsider and Granting Third-Party Defendants Final Summary Judgment. The trial court certified its order for appeal, pursuant to 12 O.S. § 994 and Oklahoma Supreme Court Rule 1.36(A).
The merits, or lack thereof, of Plaintiffs John and Connie Lay's claims against Defendant ConocoPhillips are not at issue in this appeal.
¶6 This Court reviews summary judgment de novo , viewing all facts and inferences presented by the evidence in the light most favorable to the nonmoving party. See Miller v. David Grace, Inc. , 2009 OK 49, ¶10, 212 P.3d 1223. Summary judgment is appropriate when there is no genuine controversy as to any material fact, and the moving party is entitled to judgment as a matter of law. Id. This appeal requires us to construe 12 O.S. § 109 and 12 O.S. § 832. Statutory construction also presents a question of law which we review de novo . See Fanning v. Brown , 2004 OK 7, ¶8, 85 P.3d 841. We have plenary, independent and nondeferential authority to determine whether the trial court erred in its legal rulings. Id. ¶7 Two questions of law are presented in this appeal. First, whether a third-party contribution claim pursuant to 12 O.S. § 832 is subject to the 12 O.S. § 109 statute of repose. Second, if it is, whether the statute of repose bars Conoco's action against Olson Defendants.
¶8 Conoco seeks contribution from Olson Defendants pursuant to 12 O.S. § 832, which provides, in pertinent part:
A. When two or more persons become jointly or severally liable in tort for the same injury to person or property or for the same wrongful death, there is a right of contribution among them even though judgment has not been recovered against all or any of them except as provided in this section.
B. The right of contribution exists only in favor of a tortfeasor who has paid more than their pro rata share of the common liability, and the total recovery is limited to the amount paid by the tortfeasor in excess of their pro rata share. No tortfeasor is compelled to make contribution beyond their pro rata share of the entire liability.
12 O.S. 2011 § 832(A)-(B). Olson Defendants argue the 12 O.S. § 109 statute of repose bars Conoco's contribution claims against them. That statute provides:
No action in tort to recover damages
(i) for any deficiency in the design, planning, supervision or observation of construction or construction of an improvement to real property,
(ii) for injury to property, real or personal, arising out of any such deficiency, or
(iii) for injury to the person or for wrongful death arising out of any such deficiency,
shall be brought against any person owning, leasing, or in possession of such an improvement or performing or furnishing the design, planning, supervision or observation of construction or construction of such an improvement more than ten (10) years after substantial completion of such an improvement.
12 O.S. 2011 § 109. No reported decision in Oklahoma has examined the interplay between the right of contribution pursuant to 12 O.S. § 832 and the 12 O.S. § 109 statute of repose.
¶9 While many states expressly address in their statutes of repose whether they apply to contribution claims, the Oklahoma Statutes do not. Only a few appellate courts in other states have considered whether a statute of repose applies to third-party contribution claims when such claims are not expressly addressed in the statute, and all of these courts have determined contribution claims are subject to the statute of repose. See Hayes v. Mercy Hosp. & Med. Ctr. , 136 Ill.2d 450, 145 Ill.Dec. 894, 557 N.E.2d 873, 875-77 (1990) (finding the medical malpractice statute of repose applied to a third-party contribution claim and was not limited to only a direct action by the injured party); Dighton v. Fed. Pac. Elec. Co. , 399 Mass. 687, 506 N.E.2d 509, 512-13 (1987) (finding the construction statute of repose applied to a third-party contribution claim); Dep't of Transp. v. Echeverri , 736 So. 2d 791, 791-92 (Fla. Dist. Ct. App. 1999) (finding the construction statute of repose applied to a cross-claim for joint-tortfeasor-type contribution); Krasaeath v. Parker , 212 Ga.App. 525, 441 S.E.2d 868, 869-70 (1994) (finding the medical malpractice statute of repose applied because recovery on the contribution claim was dependent upon proof of professional negligence on the part of the joint tortfeasor). Additionally, Oklahoma's statute of repose specifically bars an "action in tort." 12 O.S. § 109. Oklahoma's statute is most similar to Massachusetts'. See Mass. Gen. Laws ch. 260, § 2B. Only Oklahoma and Massachusetts' statutes of repose (1) do not expressly address applicability to contribution claims; and (2) by their terms, are limited to tort actions. ¶10 In Dighton v. Federal Pacific Electric Co. , 399 Mass. 687, 506 N.E.2d 509 (1987), the Supreme Judicial Court of Massachusetts determined third-party contribution claims were subject to the statute of repose. At the time, Massachusetts' statute of repose provided:
More than twenty states have statutes of repose that expressly apply to contribution and/or indemnity claims. See Edward H. Tricker, Erin L. Ebeler & Christopher R. Kortum, Applicability of Statutes of Repose to Indemnity and Contribution Claims and 50 State Survey , 7 J. Amer. College of Constr. Lawyers, no. 1, Jan. 2013, n.41 (since publication Minnesota amended Minn. Stat. § 541.051 to apply to contribution and/or indemnity claims). Nevada's statute of repose, by its terms, does not apply to contribution and/or indemnity claims. Nev. Rev. Stat. § 11.202.
Rhode Island's statute of repose is also limited to tort actions, but it expressly applies to claims for contribution. See R.I. Gen. Laws § 9-1-29 (Westlaw, current through Chapter 19-6 of the 2019 Regular Session).
Actions of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property shall be commenced only within three years next after the cause of action accrues; provided, however, that in no event shall such actions be commenced more than six years after the performance or furnishing of such design, planning, construction or general administration.
Mass. Gen. Laws ch. 260, § 2B (1973) (emphasis added). In Dighton , tenants sued Federal Pacific, the circuit breaker manufacturer, after an apartment fire. See 506 N.E.2d at 511. Federal Pacific impleaded the architecture firm that designed the apartment building and sought contribution. Id. at 511-12. The trial court dismissed Federal Pacific's third-party contribution claim reasoning that the architecture firm could be liable for contribution only if it could be directly liable to the tenants and any direct claims by the tenants against the architecture firm were barred by the statute of repose. Id. On appeal, third-party plaintiff Federal Pacific made the same argument advanced by Conoco: the statute of repose does not apply to its third-party claim for contribution because the statute of repose, by its terms, only bars actions in tort. Id. at 512. The Supreme Judicial Court of Massachusetts rejected this argument, affirmed dismissal of the third-party claim, and explained that "[c]ontribution is available, however, only where two or more persons become jointly liable in tort . The right to contribution is derivative of the joint liability in tort of the third-party plaintiff and the third-party defendant. Without liability in tort, there is no right to contribution." Dighton , 506 N.E.2d at 512 (citations, footnotes, and internal quotations omitted) (emphasis original).
Massachusetts' construction statute of repose was amended in 1984 in ways not material to this issue and now provides:
Action of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property ... shall be commenced only within three years next after the cause of action accrues; provided, however, that in no event shall such actions be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner.
Mass. Gen. Laws 260 § 2B (Westlaw, current through the 2018 2nd Annual Session) (emphasis added).
¶11 We agree with the Dighton court's reasoning. Conoco has specifically sought contribution pursuant to 12 O.S. § 832. Conoco's right to contribution depends upon Conoco and Olson Defendants' joint or common liability in tort for the same injury to the Lays. Conoco cannot recover contribution for damages without proving Olson Defendants' tort liability. Therefore, we find Conoco's third-party contribution claim pursuant to 12 O.S. § 832 constitutes an "action in tort to recover damages" within the meaning of 12 O.S. § 109 and is subject to the statute of repose.
¶12 Our decision is consistent with the Oklahoma Supreme Court's recognition that "an alleged tortfeasor defending against a contribution claim is not without defenses." Barringer v. Baptist Healthcare of Okla ., 2001 OK 29, ¶9, 22 P.3d 695. The statute of repose is an affirmative defense available to Olson Defendants. Our conclusion also aligns with the purpose of statutes of repose. A statute of repose "restricts potential liability by limiting the time during which a cause of action can arise. It thus serves to bar a cause of action before it accrues." Smith v. Westinghouse Elec. Corp. , 1987 OK 3, n.11, 732 P.2d 466, 468. Section 109 "sets an outer boundary in time beyond which no cause of action may arise for conduct that would otherwise have been actionable." St. Paul Fire & Marine Ins. Co. v. Getty Oil Co. , 1989 OK 139, ¶17, 782 P.2d 915, 919. A third-party claim for contribution to recover damages arising out of any deficiency in the design, planning, supervision or observation of construction or construction of an improvement to real property exposes Olson Defendants to the same liability as if the Lays brought an action directly against them. Excluding third-party contribution claims from § 109 statute of repose would extend the period of exposure.
If the injured party's tort claim made directly against the third-party defendant would be barred by 12 O.S. § 109, it follows that the defendant/third-party plaintiff's contribution claim against the third-party defendant should also be barred. See Montaup Elec. Co. v. Ohio Brass Corp. , 561 F. Supp. 740, 747-48 (D.R.I. 1983) (applying Massachusetts' statute of repose).
¶13 Next, we turn to whether the injury to the Lays' property, i.e., contamination of their groundwater and/or soil, arises out of "any deficiency in the design, planning, supervision or observation of construction or construction of an improvement to real property." 12 O.S. § 109. Section 109 can be broken down into five elements. See Olsen v. Okla. Gas & Elec. Co. , 2012 OK CIV APP 97, ¶13, 288 P.3d 940. The elements applicable here are: (1) an action in tort; (2) for injury to property which arises from a described deficiency; (3) the described deficiency involves an improvement to real property; (4) the defendant is a member of a described class; and (5) more than ten years have passed since substantial completion.
¶14 We have already determined a third-party contribution claim pursuant to 12 O.S. § 832 constitutes an action in tort for purposes of 12 O.S. § 109. Therefore, the first element is present.
¶15 The second element of § 109 is also present. Conoco claims the following acts and omissions caused injury to the Lays' property: (1) Mr. Olson's failure to disclose his knowledge of historic oil and gas activity on the subject property; (2) Mr. Olson and Clifford Farms, LLC's failure to properly evaluate the environmental suitability of the property prior to developing the Clifford Farms Addition, specifically, whether there would be a fresh water supply for residential wells; (3) Olson Defendants' failure to disclose or warn buyers, builders, water well drillers, and/or homeowners of "bad" water wells drilled on the Lays' property; and (4) Mr. Olson, Build One, and G2's failure to properly plug "bad" water wells on neighboring properties. Conoco alleges the injury to the Lays' property arises from these failures or deficiencies. We find the broad language of 12 O.S. § 109 encompasses failure to do these things as part of the development of real property for residential use. Failure to disclose knowledge of historic oil and gas activity, failure to evaluate the environmental suitability of the property for residential development, and failure to disclose or warn of "bad" wells drilled on the Lays' property are alleged deficiencies in the design, planning, supervision or observation of construction of an improvement to real property. Failure to properly plug the "bad" wells is a deficiency in the supervision of the construction or construction of an improvement to real property. Therefore, Conoco's contribution claim is based on injury to the Lays' property which arises from a deficiency described in § 109.
¶16 Third, we find Olson Defendants' development of the Clifford Farms Addition constitutes an improvement to real property. The Oklahoma Supreme Court has said the ad valorem tax code's definitions are to be used to determine whether an activity constitutes an improvement to real property. See Kirby v. Jean's Plumbing Heat & Air , 2009 OK 65, ¶12, 222 P.3d 21. According to the ad valorem tax code, an "improvement" means a valuable addition made to property amounting to more than normal repairs, replacement, maintenance or upkeep. See 68 O.S. Supp. 2014 § 2802.1(A)(3). The definition of "real property" includes the land itself. 68 O.S. Supp. 2006 § 2806. Mr. Olson and Clifford Farms, LLC developed the land by subdividing the 80 acres into 49 residential lots and creating the Clifford Farms Addition. Olson Defendants installed a gate, planted trees at the entrance and around the swimming pool, and developed the common areas of the neighborhood, including a clubhouse and swimming pool. Additionally, Conoco alleges Olson Defendants were involved in the drilling and/or plugging of residential water wells. These are all substantial, expensive, and permanent improvements that make the property more useful and valuable. See Kirby , 2009 OK 65, ¶13, 222 P.3d 21 (holding the replacement of a sewer pipeline was an improvement to real property within the meaning of 12 O.S. § 109 ).
Olson Defendants also assert they installed access roads, street signs, and lights and advertised the lots. However, they have failed to provide evidentiary support for these assertions.
¶17 We find Olson Defendants were "performing or furnishing the design, planning, supervision or observation of construction or construction of an improvement to real property," and the fourth element of 12 O.S. § 109 is present. Mr. Olson and Clifford Farms, LLC oversaw the entire development of the Clifford Farms Addition, hired an engineer, and filed the Final Plat. Conoco also alleges Olson Defendants played a role in drilling water wells and/or plugging the "bad" wells on the Lays' property and neighboring properties either by contracting with parties to do the work or actually performing the work. Olson Defendants are members of the described class.
Courts in other jurisdictions have applied the construction statute of repose to developers. See Damon v. Vista Del Norte Dev., LLC , 381 P.3d 679 (N.M. Ct. App. 2016) ; McCulloch v. Fox & Jacobs, Inc. , 696 S.W.2d 918 (Tex. Ct. App. 1985).
¶18 The final inquiry is whether 10 years have passed since substantial completion of the improvements to real property. As discussed above, the improvements are the development of the 80 acres into Clifford Farms Addition and the drilling and/or plugging of residential water wells. We find the development of the Clifford Farms Addition was substantially completed in 2003. Mr. Olson's deposition testimony that all his development activities in the Clifford Farms Addition were completed when they finished construction of the clubhouse and swimming pool in 2003 is undisputed. Conoco produced evidence that some of the Olson Defendants continued to own and sell other properties in Clifford Farms Addition between 2005 and 2014. However, that evidence does not create a question as to when development of the neighborhood was substantially completed.
¶19 The drilling and/or plugging of residential water wells are separate improvements to real property. As to Conoco's claim Olson Defendants had a duty to disclose or warn about "bad" water wells drilled on the Lays property, those improvements were substantially completed no later than 2003, when the second well was drilled. As for Conoco's claim some of the Olson Defendants were responsible for the water wells drilled and/or improperly plugged on neighboring properties, those improvements were substantially completed in 2003.
In its Second Amended Answer and Cross-Claims and Third Party Claims, Conoco asserts the Dannaways' home was constructed in 2001, the Burch wells were drilled in 2002 and 2003, and the Zheng well was drilled in 2003.
¶20 Conoco filed its third-party claim for contribution on November 9, 2015, which was more than 10 years after substantial completion of these improvements to real property. Therefore, Conoco's action against Olson Defendants is barred by the statute of repose, 12 O.S. § 109, and Olson Defendants are entitled to judgment as a matter of law.
¶21 AFFIRMED.
BELL, J., and JOPLIN, J. (sitting by designation), concur.