Cottet et al v. Country Mutual Insurance Company
OPINION & ORDER: Plaintiffs' Motion for Partial Summary Judgment 10 is Denied, Defendant's Motion for Summary Judgment 16 is Granted, and summary judgment is entered in CMI's favor as to the Cottets' claims against it. A final judgment will be prepared. Signed on 11/9/17 by Magistrate Judge Paul Papak. (gm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
GABRIEL COTTET and KATIE COTTET,
COUNTRY MUTUAL INSURANCE
PAPAK, Magistrate Judge:
Plaintiffs Gabriel Cottet ("Gabriel") and Katie Cottet ("Katie" and, collectively with
Gabriel, the "Cottets") filed this action against their insurer, defendant Country Mutual Insurance
Company ("CMI") in the Multnomah County Circuit Court on October 3, 2016. CMI removed
plaintiffs' action to this cou1i effective October 26, 2016, on the asserted basis of diversity
Page 1 - OPINION AND ORDER
By and through their complaint, plaintiffs (each, a citizen of Oregon) allege that CMI (a
corporation organized under the laws of the State of Illinois and headquartered in Illinois) issued
them a homeowners insurance policy (the "Policy") pursuant to which CMI was obliged to
provide coverage for damage to plaintiffs' home (the "insured premises") and for damage to
plaintiffs' personal property, whether or not such property was located within the insured
premises at the time the damage occmTed. Plaintiffs further allege that, in November 2015, a fire
destroyed a garage located on a parcel of land owned by plaintiffs but separate from and
adjoining the insured premises. At the time the fire occurred, the garage contained a large
custom-built kiln which was also damaged by the fire. The patiies agree that the value of the kiln
exceeded the limits of coverage under the Policy. The parties further agree that CMI has paid all
amounts due and owing under the Policy for damage to plaintiffs' personal property damaged in
the fire other than damage to the kiln, and that the damage to the kiln is covered under the Policy
ifthe kiln is properly characterized as plaintiffs' personal property, but not ifthe kiln is properly
characterized as ajixture of the damaged garage. Thus, the parties' sole dispute is as to the
proper characterization of the kiln either as personal prope1iy or as a fixture.
Arising out of the foregoing, plaintiffs allege CMI's liability under Oregon common law
for breach of contract and for breach of the implied covenant of good faith and fair dealing, and
seek damages in the approximate amount of$260,000, plus pre- and post-judgment interest,
attorney fees, and costs. This court has diversity jurisdiction over plaintiffs' claims pursuant to
28 U.S.C. § 1332, based on the complete diversity of the parties and the amount in controversy.
Now before the court are plaintiffs' motion (#10) for summaiy judgment and CMI's crossmotion (#16) for summaiy judgment. I have considered the motions, oral argument on behalf of
Page 2 - OPINION AND ORDER
the patties, and all of the pleadings and papers on file. For the reasons set foith below, plaintiffs'
motion (#10) for summary judgment is denied, and CMI's motion (#16) for summaty judgment is
Sunnnaty judgment is appropriate "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 oflaw." Fed. R. Civ. P.
56(a). A patty taking the position that a material fact either "cannot be or is genuinely disputed"
must support that position either by citation to specific evidence of record "including depositions,
documents, electronically stored information, affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions, interrogat01y answers, or other
materials," by showing that the evidence of record does not establish either the presence or
absence of such a dispute, or by showing that an opposing party is unable to produce sufficient
admissible evidence to establish the presence or absence of such a dispute. Fed. R. Civ. P. 56(c).
The substantive law governing a claim or defense determines whether a fact is material. See
Morelandv. Las Vegas 1vfelro. Police Dep't, 159 F.3d 365, 369 (9th Cir. 1998).
Summmy judgment is not proper if material factual issues exist for trial. See, e.g.,
Celotex Corp. v. Catrett, 477 U.S. 318, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986); Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). In evaluating a
motion for surnnm1y judgment, the district courts of the United States must draw all reasonable
inferences in favor of the nonmoving pmty, and may neither make credibility determinations nor
perform any weighing of the evidence. See, e.g., Lytle v. Household }vfjg., Inc., 494 U.S. 545,
554-55 (1990); Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000).
Page 3 - OPINION AND ORDER
On cross-motions for summmy judgment, the court must consider each motion separately
to determine whether either party has met its burden with the facts construed in the light most
favorable to the other. See Fed. R. Civ. P. 56; see also, e.g., Fair Hous. Council v. Riverside
Two, 249 F.3d 1132, 1136 (9th Cir. 2001 ). A court may not grant summary judgment where the
court finds unresolved issues of material fact, even where the parties allege the absence of any
material disputed facts. See id.
Plaintiffs the Cottets are individual citizens of Oregon. Defendant CMI is a corporation
organized under the laws of the State of Illinois and headquartered in Illinois. CMI is engaged in
the business of providing insurance, including homeowners insurance.
Material Facts 1
In 1978, plaintiff Gabriel's father, Joel Cottet ("Joel") owned two adjacent lots in NW
Portland, Oregon. See Declaration(# 14) of Gabe Cottet ("Cottet Deel."), '\['\[ 2-3; Declaration
(#13) of Mark Lewis ("Lewis Deel."),'\['\[ 3, 5, 6. Joel's residence was located on one of the two
lots (now, the insured premises) and he kept a brick potte1y kiln of approximately 128 cubic feet
in volume in a garage located on the second of the two lots (the "adjoining lot"). See Lewis
Deel., if 5.
In or around 1979, Joel moved the brick potte1y kiln from the garage on the adjoining lot
to another property he owned, and replaced it with a significantly larger pottery kiln -
Except where otherwise indicated, the following recitation constitutes my construal of
the evidentia1y record in light of the legal standard governing motions for summary judgment
under Federal Civil Procedure Rule 56.
Page 4 - OPINION AND ORDER
approximately 1000 cubic feet in volume - that he personally had helped to design. See id,
Cottet Deel., if 3. In order to fit the new kiln onto the adjoining lot, it was necessmy for Joel to
pour a new, additional 25'x25' concrete pad for the existing garage, and then to build new walls
and a roof to enclose the newly added pad and the custom-build kiln. See Lewis Deel., if 8. The
new concrete slab was equipped with a trench intended to be used as a flue for a large downdraftstyle kiln like the one Joel had designed. See Declaration (#17) of Daniel E. Thenell ("Thenell
Deel. I"), if 8, Exh. 4 (Deposition of Gabriel Cottet ("Cottet Depo.")), 38:20- 39:2, 43: 11-17.
That flue was connected to a chimney of loose-stacked, unmortared bricks. See Declaration
(#12) of Robert Graydon ("Graydon Deel."), iii! 8, 12. The main structure of the kiln was made
of six solid metal plates approximately 1O'xl O' in area which were welded together with short
seam welds each of a few inches in length. See id, if 8. The metal plates were surrounded by
metal piping that could be detatched by unscrewing four connectors. See id The interior of the
kiln was lined with flame-retardant fiber. See id The kiln was attached to its power supply with
wire nut screws, and attached to the gas utility line with a unionjoint. See id, iii! 8-9. The kiln
was equipped with "pick points" to allow it to be moved by crane while fully assembled. See
Lewis Deel., if 13. In connection with the new construction needed to accommodate the new
kiln, Joel applied for and received from the county a permit to build a "kiln shed." See Thenell
Deel. I, Exh. 1 ("Application for Building Permit").
Plaintiffs offer Gabriel's testimony that, prior to his death, Joel "often" talked to Gabriel
"about his plan and intention to re-locate the kiln to Chehalis, Washington, in order to set up a
potte1y studio on property that he owned there." Cottet Depo., if 11. Plaintiffs further offer
Gabriel's testimony that his father "often 'bragged"' that the kiln had been "specifically designed
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... to be movable so he would be able to move it to Washington and set up his 'dream studio"'
there. Id.,~ 12. Plaintiffs further offer the testimony of Joel's former apprentice, Mark Lewis,
that the kiln was designed to be moved, and that Joel joked with Lewis that "'when we move it
later [Lewis] can take it apart."' Lewis Deel., ~~ 9-10. Plaintiffs further offer the testimony of
another of Joel's fo1mer apprentices, Robert Graydon, that in 1979 or 1980 Joel told him the kiln
would have to be moved in response to a neighbor's land-use complaint, although it does not
appear that the kiln was ever moved in response to that complaint. See Graydon Deel.,
In or around 2001, Joel died, and Gabriel inherited both the insured premises and the
adjoining lot with the garage and kiln. See Cottet Deel.,~ 2. Following Joel's death, two
community colleges approached Gabriel regarding the kiln, and he offered to donate it to one of
the colleges, but ultimately the contemplated donation did not occur and the kiln remained on site
in the garage on the adjoining lot. See id.,
In 2011, Graydon signed a writing stating in full as follows:
I Robert Gradon [sic] owe Gabe Cottet $12000.00 for the purchase of ceramic
equipment. I will pay as soon as possible, no later than two years.
Cottet Deel.,~ 15, Exh. 1 ("Purchase Agreement"). 2 The Purchase Agreement is dated February
2, 2011, and bears the signature of a witness. See id. Gabriel testifies that the Purchase
Agreement memorialized a contract pursuant to which he agreed to sell the kiln to Graydon, who
intended to move the kiln to his own studio in Bend, Oregon. See id.,
15. Notwithstanding the
foregoing, Graydon did not move or otherwise take possession of the kiln at any time in or
around the period from 2011-2013, and it is undisputed that Graydon never paid Gabriel any
Graydo n's name is mis-spelled both in the text of the writing and in its signature block,
but is spelled con-ectly in the signature. See id.
Page 6 - OPINION AND ORDER
amount of money in connection with the transaction referenced in the Purchase Agreement. See
Cottet Depo., 46:24- 47:6.
CMI issued the Policy to the plaintiffs on December 7, 2014. See Declaration (#17) of
Daniel E. Thenell ("Thenell Deel. I"), Exh. 2 (the Policy) at 3. The Policy provided coverage for
damage to the insured premises, and additionally provided coverage for damage to plaintiffs'
personal property located anywhere in the world. See Policy at 2-16. The coverage limit for
such damage was $283,719.00, and the effective period of the policy was from December 7,
2014, through December 7, 2015. See id.
In 2015, during the effective period of the Policy, an accidental fire occull"ed in the garage
on the adjoining lot, causing damage to the garage and its contents, including the kiln. See Cottet
Deel., if 4. It is undisputed that CMI paid the Cottets Policy benefits for all damage to the garage
itself, but declined to pay any Policy benefits for damage to the kiln itself.
In May 2017, Graydon moved the kiln to his Bend studio. See Graydon Deel., if 19. He
lifted the kiln out of the remains of the garage using a crane and the kiln's pick points, and placed
it fully assembled on a flat-bed truck in order to move it. See id. It was unnecessary to
disassemble the kiln or the garage before moving it, because the fire had burned the roof off of
the garage. See id.
As noted above, the parties' sole dispute is as to the proper characterization of the kiln as
a fixture of the garage on the adjoining lot or as personal property of the Cottets. It is the Cottets'
position that the kiln is personal property, such that the damage it suffered in the 2015 fire is
covered under the policy, whereas it is CMI's position that the kiln is properly characterized as a
Page 7 - OPINION AND ORDER
fixture outside the scope of Policy coverage.
As a preliminary matter, I note that it is the Cottets who bear the burden of proof on this
question. Under Oregon law, it is the burden of the insured in an insurance dispute to prove
coverage, and the burden of the insurer to prove the applicability of an exclusion from coverage.
See FountainCourt Homeowners' Ass'n v. FountainCourt Dev., LLC, 360 Or. 341, 360 (2016),
quoting ZRZ Realty Co. v. Beneficial Fire & Cas. Ins. Co., 349 Or. 117, 127 (2010). For
purposes of this determination, the Oregon courts distinguish between questions relating to
limitations on coverage, which they treat as "coverage" questions, and questions relating to
exclusionsfi·om coverage, which they treat as "exclusion" questions. See ZRZ, 349 Or. at 127,
127-133. Moreover, the Oregon comts recognize that there may be no difference in the rights
and obligations of the parties to an insurance policy providing broad coverage subject to
exclusions versus those of the patties to an insurance policy providing limited coverage subject
to no exclusions, and treat the choice of the drafter of an insurance policy to characterize a
restriction on coverage as a limitation or as an exclusion as controlling for purposes of the
burden-allocation issue. See id. at 133. Here, the Policy restriction that treats damage to fixtures
as covered losses only where the fixtures are fixtures of the insured propetty itself is
characterized as a limitation on coverage rather than as an exclusion from a broad grant of
coverage. In consequence, under ZRZ it is the burden of the Cottets to prove that the kiln was
personal property, and not the burden of CMI to prove that the kiln was a fixture of the garage on
the adjoining lot.
It is well settled that the Oregon courts apply a three-pmt balancing test to determine
whether an article on land is personal property or a fixture more properly considered part of the
Page 8 - OPINION AND ORDER
(1) real or constrnctive annexation of the atiicle to the realty; (2) appropriation or
adaptation to the use or pmposes of the realty with which it is connected; (3) the
intention to make the annexation pe1manent.
Johnson v. Hicks, 51 Or. App. 667, 672 (1981), quoting First State & Sav. Bankv. Oliver, 101
Or. 42, 48 (1921). "The intention of making the atiicle pemianently accessory to the real
property is to be infe!Ted from the nature of the article, the relation of the patiy making or
maintaining the annexation, the policy of the law in relation thereto, the structure and mode of
annexation, and the purpose and use for which it is made." kl, quoting First State, 101 Or. at 49.
"The controlling intention is that which the law deduces from all of the circumstances of the
installation of the atiicle upon the land." First State, 101 Or. at 50.
However, where an article is so folly attached to real property that it cannot readily be
severed therefrom without damage either to the article or the prope1iy (or both), the article is a
fixture of the real property as a matter of law:
This [three-pati balancing test] is without application, however, where, by reason
of the manner of annexation, the chattel loses its identity or distinctive character
as such, and becomes so inseparably a part of the freehold as that it can not be
detached without material i1tjury thereto, or without substantial impairment of the
value of the chattel,--such as the brick or timber contained in the walls of a
building, or the stones of a foundation upon which the structure is erected.
Alberson v. Elk Creek lvfining Co., 39 Or. 552, 559 (1901).
Because the facts underlying the patiies' conflict are not in dispute, it is appropriate for
this court to resolve the issue as a matter of law, notwithstanding that, in general, "the problem of
whether an atiicle is or is not a fixture is by nature a mixed question of law and fact. . ."
Wald01fv. Elliott, 214 Or. 437, 441 (1958). The Wald01fcourt applied the three-pati balancing
test to deteimine as a matter of law on undisputed ultimate facts that grain tanks or small
Page 9 - OPINION AND ORDER
granaries located on land were fixtures. See id., 441-444. More recently, the Oregon Court of
Appeals expressly affirmed that where the objective facts bearing on annexor intention are
undisputed (notwithstanding that the annexor's subjective intention was vigorously disputed), it
is appropriate for the proper characterization of an atiicle as personal property or as a fixture to
be detetmined as a matter of law by the court:
The law of fixtures in the United States has generally evolved from the landmark
case of Teaff v. Hewitt, 1 Ohio St 511, 59 Am Dec 634 (1853), which set forth a
tln·eefold test of a fixture. See, Brown on Personal Property 698, 700, § 137 (2d
ed 1936); Note, 19 Or L Rev 152 (1940). In adopting Teciff, our Supreme Comt
has said that the status of an mticle of personalty as a fixture depends upon (1)
annexation, real or constructive, to the real prope1ty; (2) adaptation to the use or
purpose of the realty, where, and as attached; and (3) the intention of the annexor
to make the item a pemrnnent accession to the freehold. Helm et al. v. Gilroy et
al., 20 Or 517, 522, 26 P 851 (1891); Alberson v. }.fining Co., 39 Or 552, 558-59,
65 P 978 (1901). Of the tln·ee tests -- annexation, adaptation and intention -- the
most important element, which is said to generally be controlling, "at least where
there is doubt as to the effect of the other two tests," is the objective intention of
the annexor. Highway Com. v. Feves et al, 228 Or 273, 278, 365 P2d 97 (1961).
The intention of the annexor can be inferred from "the nature of the article, the
relation of the patty annexing, the policy of the law in relation thereto, the
structure and mode of annexation, and the purpose and use" for which the
annexation of the article was made. Johnson v. Pacific Land Co., 84 Or 356, 361,
164 P 564 ( 1917). Thus the law deduces the controlling intention from all of the
circumstances of the annexation. 84 Or at 362.
In this light, tlte question ofwltetlter an item is a fixture is in essence a mixed
question of law and fact. Alberson v. lvfining Co., supra at 559; Johnson v.
Pacific Land Co., supra at 363. However, under certain circumstances, an
article may be determined to be a fixture as a matter oflaw. lvfasheter v.
Boehm, 37 Ohio St2d 68, 307 NE2d 533 (1974); Bay State York Co. v. lv!arvix,
Inc., 331 Mass 407, 119 NE2d 727, 729 (1954). This occurs when "the
evidence may be so clear that only one conclusion can be drawn therefrom,
and in such cases the court will take the matter from the jury and itself
decide the case, it being said, perhaps metaphorically, that tlte question is one
oflaw." Brown, supra at 703. See, e.g., Beebe v. Pioneer Bank & Trust Co., 34
Idaho 385, 201 P 717 (1921), where the couti held that a vault door in a bank
building was a fixture as a matter of law.
Page 10 - OPINION AND ORDER
"Where, in an appropriation proceeding, there is no substantial
dispute of material fact concerning the identity, nature and function
of property for which 'fixture' status is sought, determination of the
extent of the taking whether an item is an included fixture is a
question of law to be decided by the court." Masheter v. Boehm, supra,
307 NE2d at 540; cf, Kraxberger v. Rogers, 231 Or 440, 451, 373 P2d
647 (1962) (negligence action -- family purpose doctrine); Unemp.
Compensation Com. v. Brown, 225 Or 306, 309, 358 P2d 502 (1960)
The only apparent question presented concerning the fixtures is: What effect does
removability and resalability have in determining whether Empire's machinery and
equipment are fixtures or personal property? The Commission did not present
evidence, nor did it argue, that the machinery and equipment were not attached to
the realty -- either bolted to special cement foundations, or bolted and welded to
the structure of buildings. Nor did the Commission argue that the machinery was
not adapted for use in the production of concrete products. Of primaty
importance, there was no evidence that Empire, as the annexor, intended its
annexation of the machine1y and equipment to be anything other than permanent,
that is, until the machinery wore out. It is also self-evident that removal of the
articles would render the property useless for its intended purpose -- production of
It appears that the three tests of a fixture have been met. Helm et al. v. Gilroy et
al., supra; Alberson v. }.;fining Co., supra. The Commission's argument is,
however, that the machine1y could possibly be removed and resold; hence the
items were not fixtures. The fact that it is possible to remove this machinery
by dismantling it was not contested; therefore, on the evidence presented,
there was no factual question for the jury to decide. There was only a legal
question as to the effect of removability on the question of fixtures. On this
basis the trial judge ruled that the items were fixtures because they were attached,
adapted for use in concrete products production, and affixed with the intention to
remain permanently in place, regardless of possible removability or resalability.
State by State Highway Com. v. Empire Bldg. lvfaterial Co., 17 Or. App. 616, 625-628 (1974)
(emphasis supplied. modifications omitted). The State by State court expressly affirn1ed that
"[b]ecause there was no dispute as to the essential facts concerning the attachment, adaptation
and intention of the annexor in this case, the question was properly a question of law for the trial
court." State by State, 17 Or. App. at 634.
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Here, the undisputed objective indicia of Joel's intent3 present a close question oflaw. I
agree with the Cottets that some of those indicia militate in favor of finding that the kiln was not
intended to be permanently annexed to the garage on the adjoining lot, such that could properly
be characterizable as personal property, including that it was constructed with pick points to
permit it to be moved while fully assembled, that a permanent, mortared chimney was never built
for it, that its points of attachment to the garage were minor and designed for easy detachment,
and that it was designed such that it could be disassembled and later reassembled. However, I
agree with CMI that other indicia militate against that finding, including that the garage was
modified expressly and solely to accommodate the kiln, specifically through the constrnction of
a new concrete pad, new walls, and a trench in the concrete floor with no evident functionality
other than to serve as the flue for a large downdraft-style kiln like the one Joel had designed, and
that to have moved the kiln prior to the destrnction of the garage roof, it would have been
necessaiy either to remove the garage roof in order to lift the kiln out of the garage with a crane
or to grind tlu·ough multiple seam welds, to move the kiln in parts, and then to reassemble the
kiln and recreate new seam welds in the new location. The fact that the adaptations to the garage
would be rendered pointless by removal of the kiln (unless it were replaced by a substantially
similar kiln), and the fact that disassembly of the kiln would necessarily impair its value (in that
nontrivial labor costs would be required in order both to grind through its seam welds and to
disassemble it and also to reassemble and re-weld it) both militate heavily in favor of the finding
that the kiln was a fixture of the garage.
I construe the Cottets' proffered evidence as to Joel's subjective intention one day to
transpo1t the kiln to a new location as immaterial to the question of determining annexor intent
from the objective circumstances of the installation.
Page 12 - OPINION AND ORDER
As noted above, it is the Cottets' burden to establish that the kiln was personal property.
In determining whether the Cottets have met that burden for purposes of their own motion for
summaiy judgment, I view the evidence of record in the light most favorable to CMI, and resolve
any disputes of fact, if any, in CMI's favor; in determining whether the Cottets have met their
burden for purposes of CMI's motion, I view the evidence of record in the light most favorable to
the Cottets, and resolve disputes of fact, if any, in their favor. Because the objective indicia of
the annexor's intent are undisputed, there are no disputes of fact to resolve, and whether viewed
in the light most favorable to CMI or to the Cottets, I cannot find that the Cottets have met their
burden by a preponderance of the evidence. In consequence of the Cottets' failure to meet their
burden by a preponderance of the evidence, I find for purposes of resolving both motions now
before the court that the kiln was a fixture of the garage on the adjoining lot. It follows that
damage to the kiln was not a covered loss under the Policy, and that CMI is entitled to summary
judgment in its favor in connection with both of the Cottets' claims against it. 4
For the reasons set forth above, the Cottets' motion (#10) for summary judgment is
In light of that disposition, I need not address CMI's alternative argument that Oregon
law does not recognize a cause of action for violation of the implied covenant of good faith and
fair dealing under circumstances such as those at issue here.
Page 13 - OPINION AND ORDER
denied, CMI's motion (#16) for summary judgment is granted, and summary judgment is entered
in CMI's favor as to the Cottets' claims against it. A final judgment will be prepared.
Dated this 9th day of November, 201 .
United States Magistrate Judge
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