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Northern Indiana Public Service Co. v. Aqua Environmental Container Corp.

Court of Appeals of Indiana

April 30, 2018

Northern Indiana Public Service Company, Appellant-Defendant,
Aqua Environmental Container Corp. and Joki Leasing, LLC, Appellees-Plaintiffs.

          Interlocutory Appeal from the White Superior Court The Honorable Robert B. Mrzlack, Judge Trial Court Cause No. 91D01-1008-PL-10

          ATTORNEYS FOR APPELLANT Brent E. Inabnit Matthew R. Kaczmarek Nicholas J. Derda Sopko, Nussbaum, Inabnit & Kaczmarek South Bend, Indiana

          ATTORNEY FOR APPELLEES Thomas M. Dogan Dogan and Dogan Portage, Indiana

          KIRSCH, JUDGE.

         [¶1] This interlocutory appeal arises out of a fire that occurred at Aqua Environmental Container Corp.'s ("Aqua") warehouse facility in Wolcott, Indiana, which was owned by Joki Leasing, LLC ("Joki Leasing"). Aqua and Joki Leasing (together, "Aqua" or "Plaintiffs") filed a complaint against Indiana Public Service Company ("NIPSCO"), alleging that NIPSCO negligently supplied electrical power to the Wolcott area, including Aqua's warehouse, resulting in severe power fluctuations that caused a fire in the area of the ceiling-mounted furnace of Aqua's warehouse. NIPSCO denied all liability for the fire. During discovery, it was determined that Aqua preserved some, but not all, of the ceiling-mounted furnace equipment. NIPSCO filed a Motion for Default Judgment for Spoliation of Evidence, which the trial court denied. NIPSCO appeals and raises the following issue: whether the trial court abused its discretion when it denied NIPSCO's motion on the basis that Aqua did not intentionally spoliate evidence.

         [¶2] We affirm and remand with instructions.

         Facts and Procedural History[1]

         [¶3] In March 2010, Aqua was in the business of swimming pool manufacturing, and it leased a warehouse facility ("the premises") from Joki Leasing. Kirk Sullivan ("Sullivan") is both the president of Aqua and the managing director of Joki Leasing.[2] On the evening of March 28, 2010, a major fire occurred at the premises, in the ceiling area where the furnace was located, and the fire destroyed about 12, 000 square feet of finished warehouse, office, and factory space.[3] The ceiling furnace assembly is the basis of NIPSCO's spoliation claim.

         [¶4] At around 8:45 p.m. on the night in question, an Aqua sales representative, John Kantor ("Kantor"), was working in the factory showroom area, heard a bang sound, and saw in the ceiling area a glow that he suspected was fire, so he contacted Aqua's property manager, Mike Storz ("Storz"), who lived in a residence located next to the warehouse. Storz called 911, and he and Kantor went back to the premises. Wolcott Volunteer Fire Department Chief Kenneth Burns ("Chief Burns") was the first to respond to the fire, arriving about two minutes after he received the dispatch call. A number of local fire departments responded to the fire, and it did not get fully extinguished until after around 2:00 a.m. Chief Burns called dispatch and requested they contact the Indiana State Fire Marshal to send a fire investigator to the scene to investigate the origin and cause of the fire. Appellant's App. Vol. 3 at 159.

         [¶5] On his way to the fire, Chief Burns had noticed that the lights to the lumber yard and about five houses in town were "flickering." Appellees' App. Vol. 2 at 35. He also noticed that the generator at the fire station had started up automatically, which generally occurs if the voltage drops below 200 volts (from the normal 220 volts) and occurs in order to prevent damage to an electric motor. Id. at 28, 38-39. Chief Burns talked to Storz at the scene of the fire, and Storz told Chief Burns that the lights and television at his residence kept flickering and surging, going bright and dim, for forty-five minutes prior to the fire. Tr. Vol. 2 at 209.

         [¶6] In the morning on March 29, 2010, the day after the fire, Chief of Fire Investigations for the Indiana Department of Homeland Security Division of Fire and Building Safety, Robert Dean ("Fire Marshal Dean"), came to the premises in response to Chief Burns's request for an investigator. Chief Burns also returned to the premises, and he told Fire Marshal Dean that he believed the fire started in the furnace area and may have been caused "by NIPSCO's being low on power." Appellant's App. Vol. 3 at 161, 163-64. During his investigation, Fire Marshal Dean determined the area of a ceiling-mounted furnace was the area of origin and that the furnace was a possible cause of the fire. Tr. Vol. 2 at 27- 29. The furnace, including a firebox, blower box, and the A/C ductwork (together, "Furnace Assembly") survived the fire. Fire Marshal Dean took the following picture of the entire Furnace Assembly on the day

         following the fire, March 29, 2010:

         (Image Omitted)

         Ex. Vol. 4 at 159; Appellant's Br. at 9.

         [¶7] When he took the picture, Fire Marshal Dean was standing inside the building and under the furnace; because it was unsafe for Storz to accompany Fire Marshal Dean into the burned building, Storz was not with Fire Marshal Dean when he took the picture. At some point, while Storz and Fire Marshal Dean were standing approximately 30 feet outside of the building, Fire Marshal Dean pointed out the furnace to Storz - as they looked through a hole that had been made in the wall of the building during the process of fighting the fire - and Fire Marshal Dean told Storz, "This is a possible cause, you may want to save it for your insurance company or other entities." Id. at 31, 222-26. Fire Marshal Dean's March 29, 2010 report concluded that the fire was "accidental[, ]" and "[t]he area of origin was in the ceiling of the north portion of the south building. The possibility of an area of internal failure or resistive heating in a ceiling- mounted furnace could not be ruled out as the ignition source of this event." Appellant's App. Vol. 3 at 53.

         [¶8] Sullivan, who was out of state at the time, delegated responsibility for handling the situation to his uncle, Phil Sullivan ("Phil"), and Storz. Aqua sought estimates to remove the burned part of the building, and within about a week, Phil hired Xtreme Contractors ("Xtreme") for the project. Tr. Vol. 2 at 243. Phil and Storz worked with Terry Wilson ("Wilson"), an owner of Xtreme, on the project. Demolition took approximately two weeks, and on or about the third day, Xtreme removed the furnace with a claw or crane and placed it in a cleared-out location that was at least 100 feet from any other objects. According to Xtreme, it cut out and lowered the entire Furnace Assembly, including the firebox, and set it aside. According to Storz, Xtreme saved only the A/C ductwork portion, which is what Fire Marshal Dean had pointed out to him on March 29. Tr. Vol. 3 at 22; Def't's Ex. 9; Tr. Vol. 8 at 200. Using a pallet and a forklift device, Storz moved the saved furnace remains to the nearby Aqua warehouse for storage. According to Aqua, the saved furnace remains were untouched for six to eight months, until they were examined by Aqua's experts in the fall of 2010. Tr. Vol. 3 at 2-7.

         [¶9] On April 19, 2010, Sullivan traveled from Florida to Wolcott, Indiana to view the premises and meet with Chief Burns. Chief Burns advised Sullivan that NIPSCO's supply of electricity may have played a part in causing the fire. After talking to Chief Burns and a local electrician about NIPSCO having electrical surges on the night in question, Sullivan phoned NIPSCO's claims division on or around April 22, 2010, spoke to claims adjuster Cindy Jenkins ("Jenkins"), and made a claim.

         [¶10] Jenkins took notes of her conversation with Sullivan, and her "Adjuster Comments" reflect that Sullivan told her that: (1) he had been told by the fire chief and an electrician that NIPSCO had experienced "brownouts" in Wolcott and surrounding communities on the night in question; (2) the fire started in or at a "heater"; (3) the building had been torn down and all that remained was the slab; (4) the "heater" had been saved, and NIPSCO could view it by calling Phil Sullivan, and Sullivan gave Phil's number to Jenkins. Appellant's App. Vol. 3 at 181, 184. Jenkins sent a follow-up email to Sullivan, stating, "NIPSCO requests that you preserve and maintain any and all equipment, wiring and other facilities from the subject building." Id. Jenkins also stated in her email to Sullivan, "As we discussed, since the building has been torn down, NIPSCO would like to view the heater and any other remaining equipment or wiring from the building. They or someone on their behalf will be contacting Mr. [Phil] Sullivan to make these arrangements." Id. at 185. NIPSCO did not thereafter contact Aqua to arrange to see the saved furnace.

         [¶11] Several months later, in August 2010, Aqua and Joki Leasing filed a Complaint against NIPSCO and Nisource, Inc., a holding company in the business of distributing electrical utility service in White County, Indiana (together, "Defendants").[4] Appellant's App. Vol. 2 at 27-36. Plaintiffs asserted claims for negligence, strict liability, res ipsa loquitur, and breach of implied warranty. Id. Among other things, Plaintiffs asserted that Defendants were negligent in the following respects:

a. Defendants improperly installed, serviced, and maintained the utility service and its various providing implements over which the Defendants maintained exclusive ownership and control;
b. Defendants failed to conduct proper inspections of its electrical service implements, wiring and equipment and failed to discover the defective condition of their delivery of electricity to Joki Leasing and Aqua Environmental;
c. Defendants had prior notice of and failed to conduct proper maintenance and/or to repair their transformers and/or other equipment so that their electricity product could safely be ...

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