Pandora Distribution, LLC v. Ottawa Oh, LLC

          MEMORANDUM OPINION AND ORDER

          JEFFREY J. HELMICK UNITED STATES DISTRICT JUDGE.

         I. Introduction

         It perhaps is not an exaggeration to say the parties to this litigation agree on only two things: (1) there are two conveyer bridges connecting two warehouses, divided by a railroad track, in Ottawa, Ohio; and (2) no one wants the bridges to be there anymore. There is substantial disagreement on nearly everything else, including the primary questions presented by the parties' motions for summary judgment which are currently before me - who owns the bridges, who is responsible for removing them, and who, if anyone, is responsible for compensating another party for any damage which results from the presence, removal, or both, of the bridges?

         Pandora Distribution, LLC; Ottawa OH, LLC (“Ottawa”); Philips Electronics North America Corporation (“Philips”); Genessee & Wyoming, Inc.; and, First American Title Insurance Company each have filed motions for summary judgment on a variety of claims, counter-claims, and cross-claims. (Doc. No. 250, 251, 252, 256, 257, and 258).

         II. Background

         In 1970, Philips^[1] entered into an agreement with the Detroit, Toledo and Ironton Railroad (the “Detroit Railroad”). Under this agreement, the Detroit Railroad granted Philips an easement to construct, use, and maintain a conveyer bridge between two warehouses in Ottawa, Ohio, which Philips owned (along with other buildings and additional, adjoining real property) and which were separated by the Detroit Railroad's railroad tracks (the “Easement Agreement”). (Doc. No. 251-2 at 47-51). The conveyer bridge was designed to transfer pallets of material between the two warehouses. The Easement Agreement approved specific plans for the construction of the conveyer bridge and required Philips to make changes to the conveyer bridge if necessitated by changes made to the railroad tracks. (Doc. No. 251-2 at 47-51).

         In 1986, Philips and the Grand Trunk Western Railroad Company, which had replaced the Detroit Railroad as the entity in control of the railroad tracks, entered into a license agreement for the construction of a second conveyer bridge between Philips' warehouses (the “License Agreement”). (Doc. No. 251-2 at 43-46). The License Agreement has an initial term of one year, and automatically renews for additional one-year terms, unless the agreement is terminated upon 60 days' written notice. (Doc. No. 251-2 at 43). That agreement also provides that, upon the termination of the License Agreement, the Licensee is “to remove all Licensee's material from the premises of the [railroad] and to leave the same in a neat, clean and level condition.” (Id.).

         This state of affairs continued without substantial change until October 11, 2005, when Philips sold all of the real property it owned at 700 N. Pratt Street in Ottawa, Ohio, along with all personal property located on the premises, to DBI Partners, LLC. DBI then split off a portion of this property, which it sold to Pandora on January 24, 2006. This portion, which DBI transferred to Pandora through a limited warranty deed, is located to the east of the railroad tracks over which the conveyer bridges pass (the “Pandora Property”).

         DBI and Pandora also executed a document titled “Encroachment Agreement.” (Doc. No. 251-7). The Encroachment Agreement was recorded in the Putnam County, Ohio Recorder's Office on the same day as the deed to the Pandora Property, and states that DBI and Pandora “agree that the two (2) existing conveyers shown on the Topographic Survey [dated January 16, 2006 and prepared in connection with the purchase and sale of the Pandora Property] shall remain the sole property of DBI . . . .” (Doc. No. 251-7 at 1). The Encroachment Agreement also requires DBI to assume the cost of repairing and maintaining the conveyer bridges, and to obtain Pandora's prior written consent before removing them. (Id.). Further, the Encroachment Agreement permitted Pandora to demand DBI remove the conveyer bridges and repair any resulting damage to the Pandora Property. (Id.).

         Subsequently, DBI sold another portion of property to Ottawa. (Doc. No. 252-10). This portion, which DBI also transferred through a limited warranty deed, is located to the west of the railroad tracks over which the conveyer bridges pass (the “Ottawa Property”).

         Michael Borer, then an attorney and title agent based in Putnam County, Ohio, assisted with first the Philips sale to DBI and the later DBI sales to Pandora and Ottawa. For each transaction, Borer issued title insurance commitments and title insurance policies underwritten by First American.

         Shortly after Ottawa and DBI completed the purchase and sale of the Ottawa Property, Pandora requested that Ottawa repair the conveyer bridges, asserting Ottawa had assumed DBI's responsibility to do so under the Encroachment Agreement. Ottawa refused, contending it had not purchased the conveyer bridges and that it did not have any obligations under the Encroachment Agreement because Ottawa was not a party to that agreement. Pandora, Ottawa, DBI, and Borer attempted to resolve the dispute over the conveyer bridges throughout 2007, but those discussions ultimately were unsuccessful. By early 2008, DBI ceased participating in the discussions, and further attempts by Pandora and Ottawa to informally resolve the dispute also failed.

         Pandora subsequently filed suit in November 2012, initiating a stream of pleadings. Pandora initially named Ottawa and DBI as defendants. (Doc. No. 1). Ottawa answered the complaint and filed a counterclaim against Pandora, (Doc. No. 13), but DBI failed to respond to the complaint and Pandora obtained a default judgment against DBI. (Doc. No. 62). Pandora later amended its complaint to add claims against Philips and Genesee & Wyoming. (Doc. No. 25). Ottawa amended its counterclaim against Pandora, added a crossclaim against DBI, and filed a third-party complaint against First American, Philips, and Genesee & Wyoming. (Doc. No. 26). Ottawa later amended its third-party complaint and its crossclaim. (Doc. No. 48).

         Philips asserted a crossclaim against Ottawa, DBI, and Genesee & Wyoming, and a counterclaim against Pandora, (Doc. No. 56), but subsequently dismissed those claims without prejudice. (Doc. No. 64). Pandora then filed a second amended complaint, (Doc. No. 65), Ottawa amended its third-party complaint against First American, (Doc. No. 67), and First American asserted a counterclaim against Ottawa. (Doc. No. 72).

         Pandora later filed a third amended complaint, dropping its claims against Genesee & Wyoming, after the railroad assigned its claims to Pandora. (Doc. No. 131). Pandora then filed a fourth amended complaint, (Doc. No. 205), and Ottawa further amended its third-party complaint against First American. (Doc. No. 212).

         III. Standard

         Summary judgment is appropriate if the movant demonstrates there is no genuine dispute of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). All evidence must be viewed in the light most favorable to the nonmovant, White v. Baxter Healthcare Corp., 533 F.3d 381, 390 (6th Cir. 2008), and all reasonable inferences are drawn in the nonmovant's favor. Rose v. State Farm Fire & Cas. Co., 766 F.3d 532, 535 (6th Cir. 2014). A factual dispute is genuine if a reasonable jury could resolve the dispute and return a verdict in the nonmovant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A disputed fact is material only if its resolution might affect the outcome of the case under the governing substantive law. Rogers v. O'Donnell, 737 F.3d 1026, 1030 (6th Cir. 2013).

         IV. Analysis

         Each remaining party in this litigation has filed for summary judgment. First American seeks summary judgment on the claims asserted in Ottawa's third-party complaint as well as on First American's counterclaim against Ottawa. (Doc. No. 250). Pandora seeks summary judgment on all claims in dispute between itself and Ottawa. (Doc. No. 251). Genesee & Wyoming also seeks summary judgment on Ottawa's claims against it. (Doc. No. 252). Philips requests summary judgment on all claims asserted against it by Pandora and Ottawa. (Doc. No. 256). Ottawa seeks summary judgment on Pandora's claims against it, (Doc. No. 257), and on its claims against First American. (Doc. No. 258).

         A. The Bridges

         The issue of who owns the conveyer bridges is the starting point for analyzing any of the parties' claims, and the answer to the ownership question begins with determining the proper characterization of the conveyer bridges.

         While American law has long adhered to the “simple and natural classification of property into the obvious and universal distinction of things moveable and things immovable, things tangible and things intangible, ” Teaff v. Hewitt, 1 Ohio St. 511, 526 (1853), there remain some items which do not fit neatly into one category or the other and which in fact may move between the categories. Property that once was moveable may be attached to immoveable property in such a way that the law treats the formerly-moveable property as immoveable. More specifically, items of personal property, like metal and rubber, may be converted into fixtures and then treated as real property.

         Personal property may be converted into a fixture if the following criteria are met: “(1) [a]ctual annexation to the realty or something appurtenant thereto; (2) appropriation to the use or purpose of the realty with which it is connected; and (3) the intention of the party making the annexation to make the article a permanent accession to the freehold.” Zangerle v. Standard Oil Co. of Ohio, 60 N.E.2d 52, 56 (Ohio 1945).

         The first criterion, considered “the least important, ” requires a “very slight” physical connection of the personal property and the real property. Holland Furnace Co. v. Trumbull Savings & Loan Co., 19 N.E.2d 273, 275 (Ohio 1939). The conveyer bridges were secured to the warehouses on the Pandora Property and the Ottawa Property and could not be easily removed. Therefore, I conclude the conveyer bridges satisfy the first factor of the fixture formulation. See, e.g., Masheter v. Boehm, 295 N.E.2d 917, 920 (Ohio Ct. App. 1973) (“Masheter I”) (noting “[t]he chattel may be bolted or screwed in place . . . .”) (rev'd on other grounds).

         The second criterion has received a relatively-lower amount of attention from courts applying these factors, but generally seeks to distinguish “between chattels primarily devoted to the business conducted on the premises and chattels devoted primarily to the realty itself.” Masheter v. Boehm, 307 N.E.2d 533, 538 (Ohio 1974) (“Masheter II”). The conveyer bridges were not used merely for the idiosyncratic purposes of Philip's business. Cf. Wheeling-Pittsburgh Steel Corp. v. Bd. of Revision, 271 N.E.2d 861 (Ohio 1971) (holding the caging system of an egg production facility was personal property, not a fixture); Roseville Pottery, Inc. v. Cnty. Bd. of Revision, 77 N.E.2d 608 (Ohio 1948) (pottery kilns attached to concrete slabs were not fixtures). Instead, they were installed for the general purpose of connecting two buildings and offered benefits to subsequent owners of the real property. See, e.g., Zangerle v. Standard Oil, 60 N.E.2d at 54 (citing “driveways” and “bridges” as an example of property permanently attached to real property which could benefit later owners even if those owners were involved in a different business); Masheter II, 307 N.E.2d at 538 (“[A]rticles annexed to the premises so as to become a part of it, even though of benefit to any and all businesses which might be carried on there, take on the legal characteristics of real property.”)

         The final criterion requires a court to determine whether the article was intended to be permanently annexed to the real property. “[I]t is not necessarily the real intention of the owner of the chattel which governs. His apparent or legal intention to make it a fixture is sufficient.” Holland Furnace Co., 19 N.E.2d at 275. This intention

may be inferred from the nature of the article affixed, the relation and situation of the party making the annexation, the structure and mode of annexation, the purpose and use for which the annexation is made, the utility in use or the indispensability of the combination when the chattel is once attached to the realty in the use of the whole, and the relationship of the owner of the chattel to ...