There are
matters of law that have forever remained unclear. And presumably, always will
be.
Pornography vs. obscenity is one.
Limitations to constitutionally-protected free speech are another.
Realty vs. personalty is a third.
Bryce Corp operates a manufacturing
plant in Searcy, Arkansas. Bryce makes flexible packaging, such as potato chip
bags and zip pouches. As part of the production process, the Searcy plant
operates an 80-foot-long industrial lamination line with multiple machines.
A roll of unlaminated material is
placed on a spindle. The material is then unwound and fed through a series of
machines for lamination. At the end, another machine rewinds the laminated
material into a new roll.
This last machine is a “rewinder.”
In 2010 a new rewinder was purchased
from Bobst Italia, transported to the Searcy plant in sections, and assembled
there over a 10-day period with the help of a forklift. The machine weighed 10
tons and was affixed to the floor of the Searcy plant with metal ties. The
rewinder’s electrical and air pressure systems were then connected to the
plant’s systems to make the rewinder operational.
Vernon Holland worked at the Searcy
plant as a laminator helper. In November 2016 the material on the lamination
line became miswound, and production was stopped. Vernon opened the rewinder
and entered the machine to fix the issue.
When Vernon entered the rewinder,
one of the two spindles was still turning. While pulling the miswound film,
Vernon backed into the turning spindle and was propelled through the rewinder.
Vernon died in May 2017 as a
consequence of his injuries.
Robert Cearley, the personal
representative of Vernon’s estate, sued Bobst Group North America, the equipment
manufacturer’s affiliate. Bobst’s primary defense was based on a statute of
repose.
The district court granted Bobst’s
motion for summary judgment. Cearley appealed.
Arkansas has a statute of repose for
claims arising from personal injury or wrongful death caused by construction
defects. The statute provides that all claims must be asserted within four
years after substantial completion of the improvement to real property.
As a consequence, Cearley’s case
could proceed only if the lamination equipment is personal property. However,
if it constitutes real property, then Cearley’s case must fail as the claim was
not filed within four years after the new rewinder became “an improvement to
real property.”
The Court of Appeals determined that
the machinery: (a) was affixed to the real property, (b) furthers the purpose
of the realty, and (c) was designed for long-term use in connection with the
real estate. As a consequence, the machinery is a permanent improvement to the
realty for purposes of the statute of repose.
The lamination machine was
determined to be realty. Not personalty. This conclusion was reached
although the equipment was secured to the floor only with metal ties.
Since the equipment was incorporated
into the (and thus becomes) realty, the statute of repose applies. Claims
involving this rewinder, installed in 2010, must be asserted by 2014.
Not 2023.
Cearley
loses; Bobst Group NA again prevails. See Cearley v. Bobst Group North
America; US Court of Appeals, 8th Circuit; Case No. 23-1101; February
21, 2025: https://cases.justia.com/federal/appellate-courts/ca8/23-1101/23-1101-2025-02-21.pdf?ts=1740155438.
Questions / Issues:
1. Why Is This Realty? This case
gives little guidance about its conclusion. The only elements to justify this
result are that the machinery: (a) was “affixed” to the real property; (b) “furthers
the purpose” of the realty, and (c) was designed for long-term use in
connection with the real property.
While (c) is undoubtedly true, one
must wonder what evidence was submitted and compelled the Court of Appeals to
find that (a) and (b) are also true. Because all we know from the appellate
decision is that the equipment was secured to the floor with metal ties. Then,
electrical and air pressure systems were connected.
2. Alt-Recourse. Is it possible
that the Court took judicial notice of parallel litigation asserted by Cearley
against Siemens and others, and perhaps assumed that Cearley would prevail
there?
3. Practice Point. This Court finds
that a large, expensive, but replaceable fixture lost its character as
personalty and instead was converted to realty at installation. I am
unconvinced that other courts would follow a similar path.
Regardless,
the message is that timely filing of claims is essential. Ignoring or missing
these deadlines can prove to be a fatal mistake.
Stuart A. Lautin, Esq.*
* Board Certified,
Commercial and Residential Real Estate Law,
Texas
Board of Legal Specialization
Licensed
in the States of Texas and New York
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