IN SUPREME COURT
Court of Appeals
Anderson, G. Barry, J.
Took No Part, Gildea, J.
State Farm Fire and Casualty, et al.,
Filed: August 3, 2006
Office of Appellate Courts
Aquila Inc. d/b/a People’s Natural Gas,
f/k/a UtiliCorp United Inc., d/b/a People’s Natural
Northern Pipeline Construction Company,
Robert Sauer, et al.,
George Rucker, et al.,
S Y L L A B U S
1. An underground natural gas pipeline system qualifies as “an improvement to real property” under Minn. Stat. § 541.051, subd. 1(a) (2004), where the evidence shows that the gas company installed the system to permanently replace an existing gas system in a hazardous location.
2. Where, after viewing the evidence in the light most favorable to respondents, the record does not establish that the gas explosion experienced by respondents was the result of the gas company’s negligence, Minn. Stat. § 541.051, subd. 1(c) (2004), does not apply to respondents’ claims.
Heard, considered, and decided by the court en banc.
O P I N I O N
ANDERSON, G. Barry, Justice.
Farm Fire and Casualty (State Farm), Auto Owners Insurance Company (Auto
Owners), and Joan Hernlem brought suit against appellant, Aquila, Inc.
(Aquila), defendant Northern Pipeline Construction Company (Northern Pipeline),
and other defendants for damages that were caused by a natural gas leak from a
pipeline system that is owned and operated by Aquila and was installed by
Northern Pipeline. The district court
granted summary judgment in favor of
Aquila owns and
operates natural gas pipelines in the
In early 2002 Hallmark Terrace hired Robert Sauer to repair sewer drains that were blocked by tree roots. On February 13, 2002, Sauer used a trap-and-drain auger to unclog the sewer pipes. During the process, the auger struck and ruptured the intersecting natural gas line, causing natural gas to escape through the sewer pipes and into several homes. The gas accumulated and ignited, resulting in an explosion and ensuing fire that damaged the real and personal property of several Hallmark Terrace residents.
brought an action, claiming that
Following discovery, Aquila and Northern Pipeline filed motions for summary judgment, arguing that respondents’ claims were barred by Minn. Stat. § 541.051, which imposes a 10-year repose period on all causes of actions “arising out of the defective and unsafe condition of an improvement to real property.” Minn. Stat § 541.051, subd. 1(a) (2004). Respondents filed a cross-motion for summary judgment, arguing Minn. Stat. § 541.051 did not apply to their claims because the natural gas pipeline system was merely an addition to the existing natural gas distribution system, and not an improvement to real property. Respondents further argued that, even if the natural gas pipeline system was an improvement to real property, Aquila and Northern Pipeline were not entitled to the protections afforded by the statute because Minn. Stat. § 541.051, subd. 1(c), provides an exception for claims arising out of the “actions for damages resulting from negligence in the maintenance, operation or inspection of the real property improvement against the owners or other persons in possession.”
The district court
granted Aquila and Northern Pipeline’s motions for summary judgment and
dismissed respondents’ claims against
appealed, and the court of appeals affirmed in part, reversed in part, and
remanded the matter to the district court.
State Farm, 697 N.W.2d at 645.
The court unanimously affirmed the district court’s decision to grant
summary judgment in favor of Northern Pipeline.
On appeal, Aquila
argues the court of appeals erred in concluding that (1) the natural gas
pipeline system is not “an improvement to real property” for the purpose of
applying the 10-year statute of repose in Minn. Stat. § 541.051 and (2) the
Minn. Stat. § 541.051, subd. 1(c), exception applied to respondents’
claims because a prima facie case of negligence against
judgment is proper where there are no genuine issues of material fact, and
either party is entitled to judgment as a matter of law.
Minnesota Statutes § 541.051, subd. 1, provides, in pertinent part:
(a) Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property * * * arising out of the defective and unsafe condition of an improvement to real property * * * shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury * * * nor, in any event shall such cause of action accrue more than ten years after the substantial completion of the construction.
* * * *
(c) Nothing in this section shall apply to actions for damages resulting from negligence in the maintenance, operation or inspection of the real property improvement against the owner or other person in possession.
We turn first to
the issue of whether the pipeline system constitutes an “improvement to real
property” for purposes of applying repose periods in Minn. Stat. § 541.051,
subd. 1(a). This court has adopted a
common-sense interpretation of the phrase “improvement to real property.” See Sartori v. Harnischfeger Corp.,
432 N.W.2d 448, 451 (
After carefully reviewing the record, we conclude that the natural gas pipeline system in question qualifies as “improvement to real property” as described by Pacific Indemnity Co. and Sartori.
First, the installation of the system involved more than 4,075 feet of new pipeline, valves, and fixtures, at a cost of more than $21,000, easily qualifying as a project involving “the expenditure of labor or money.” Second, the complete abandonment of the existing propane steel pipeline system and the installation of a new natural gas polyethylene pipeline system that provided more than 10 years of maintenance-free service prior to the incident is not “ordinary repair,” but rather represents, “a permanent addition to or betterment of real property,” by any definition. See Sartori, 432 N.W.2d at 452 (holding that a crane that was fabricated on a mining facility and operating for 19 years qualifies as “a permanent addition to or betterment of real property”). Third, as the project’s working order specifically stated, the installation of the natural gas pipeline system was due to the hazardous location of the existing steel pipeline system. While there is no specific evidence quantifying an increase in the capital value of Hallmark Terrace as a result of the gas system improvements, common sense indicates that replacing a hazardous propane system with a new, safer (if installed correctly), maintenance-free natural gas system increases the value of the real property the system serves. Respondents offered no contrary evidence, asserting only that the installation was an ordinary repair. As a result, the evidence in the record, while hardly overwhelming, supports the argument that the new natural gas system enhanced the capital value of Hallmark Terrace.
We note that, in reversing summary judgment to Aquila, the court of appeals majority concluded that the natural gas pipeline system was not “an improvement to real property” with respect to Aquila, but was “an improvement to real property” with respect to Northern Pipeline because the system was (1) owned and controlled by Aquila and (2) was part of Aquila’s distribution system. State Farm, 697 N.W.2d at 637. But neither the relevant statutory language nor this court’s interpretation of the phrase “improvement to real property” indicates a subjective analysis leading to different results for different owners. In other words, under the statute, an object is either an “improvement to real property” or it is not. The natural gas system at issue here is an improvement to real property.
We further note that for
the statute of repose in Minn. Stat. § 541.051, subd. 1(a), to apply, the
injuries that the respondents suffered must also arise out of “the defective
and unsafe condition of an improvement to real property.”
Having determined that respondents’ claims for negligent installation of a natural-gas line pipe system are barred by the 10-year statute of repose in Minn. Stat. § 541.05, subd. 1(a), the next question we address is whether summary judgment is appropriate on respondents’ claims for negligent inspection, maintenance and repair of the natural gas pipeline system. The statute of repose does not apply to claims for negligence in the maintenance, operation or inspection of an improvement to real property. See Minn. Stat. § 541.051, subd. 1(c) (providing that the limitation and repose periods in section 541.051 do not apply “to actions for damages resulting from negligence in the maintenance, operation or inspection of the real property improvement against the owner or other person in possession”).
first address which party bears the evidentiary burden of establishing an
exception to the application of the statute of repose. Generally, a party asserting a statute of
limitation or repose as an affirmative defense bears the burden of proving all
elements of the affirmative defense. See Thiele v. Stich, 425 N.W.2d 580, 583
assert that “the law imposes a higher standard of care for gas pipes owned and
controlled by the utility provider.” We
have stated that a gas company must “exercise a degree of care to prevent the
escape of gas proportionate to the danger which it is its duty to avoid.” Bellefuil
v. Willmar Gas Co., 243
In the present controversy, respondents do not
argue and the record does not indicate that
We have held that,
upon a motion for summary judgment, an adverse party cannot preserve a right to
trial on the merits merely by referring to “unverified or conclusory
allegations” in the pleadings or by speculating about evidence that may be
developed at trial. Lubbers v. Anderson, 539 N.W.2d 398, 401 (
The record shows
that respondents’ original complaint and amended complaint set forth the
At all times material
herein, [Aquila] maintained control over the natural-gas line at the
* * * *
In November of 1990,
[Aquila] contracted with Northern Pipeline to repair a portion of the existing
natural-gas line at the
* * * *
While Northern Pipeline was repairing a portion of the natural-gas system at Hallmark Terrace, Northern Pipeline either bored or pushed the replacement gas line through the existing sewer line.
* * * *
While [Robert Sauer] was attempting to unclog the sewer pipes, [Sauer] struck and ruptured the natural-gas line at Hallmark Terrace with [his] trap-and-drain auger or “snake,” causing natural-gas to migrate through the sewer piping and enter into the manufactured homes at Hallmark Terrace where the gas began to build up in large quantities.
Beyond these sparse factual allegations, the record contains very little additional factual support for respondents’ negligence claims. Respondents stated during oral argument that the facts that would raise a question of material fact regarding the applicability of the Minn. Stat. § 541.051, subd. 1(c), exception were: (1) a gas explosion occurred from a natural gas pipeline system owned and controlled by Aquila, (2) one of the gas pipelines was installed incorrectly, and (3) Aquila failed to inspect, service, or maintain the pipeline prior to the incident. But viewed in the light most favorable to respondents, these facts are not “sufficiently probative” to establish a prima facie case of liability.
We stated in Lubbers, “‘The essential elements of a
negligence claim are: (1) the existence of a duty of care; (2) a breach of that
duty; (3) an injury was sustained; and (4) breach of the duty was the proximate
cause of the injury.’” 539 N.W.2d at 401
(quoting Schmanski v. Church of St.
Respondents do not
allege that Aquila had a duty to conduct an independent inspection of Northern
Pipeline’s work that would have allowed
deficiency also exists with respect to respondents’ negligence per se
claim. Despite the allegation that
Aquila had “violated NFPA and other applicable codes and standards regarding
the inspection, maintenance, repair and/or installation of the natural[-]gas
system,” respondents failed to provide any statutory provision, code, or
industry standard against which
Last, we note that
the court of appeals held that a prima facie case of negligence against
GILDEA, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case.
 Both the court of appeals majority
opinion and respondents rely heavily on Johnson v. Steele-Waseca Coop. Elec.,
in which the court of appeals concluded that electrical equipment owned by a
regional utility, which was installed on a dairy farm, did not constitute an
improvement. 469 N.W.2d 517, 520 (Minn.
App. 1991), rev. denied (Minn. July 24, 1991). We leave for another day the wisdom of
applying Johnson to the statute at
issue and note only that here Johnson
is inapplicable. As correctly recognized
by the court of appeals dissent, the improvements at issue in Johnson allegedly causing injury were
part of a larger distribution system installed for the benefit of the power