Thompson v. King Feed & Nutrition Service, Inc. , 153 Wash. 2d 447 ( 2005 )

¶1

Ireland, J. ^*

In this case we consider whether the trial court erred in its jury instruction as to the proper measure of damages for the negligent destruction of a barn and whether the trial court abused its discretion in granting sanctions under CR 37(c). We hold that the trial court’s instruction was not prejudicial or erroneous. We therefore affirm the Court of Appeals. As to the issue of sanctions, the opinion of the court is reflected in the dissent, which holds that the trial court abused its discretion and vacates the order imposing sanctions.

FACTS

¶2 Glenn and Janice Thompson (Owners) own a 15 acre parcel of land in Enumclaw, Washington. In June 1998, Owners agreed to rent the barn on the property to King Feed & Nutrition Service, Inc. (King Feed), for storing hay cut from Owners’ and other properties in the local area. On August 27, 1998 the barn was completely destroyed by fire. The cause of the fire was determined to be spontaneous combustion due to the negligent storage of wet hay. Liability as to the cause of the fire is not in dispute on appeal.

¶3 In October 1999, Owners brought suit to recover the cost of replacing the barn. During discovery, Owners sent King Feed a request for admission to admit negligence and proximate cause and to admit that Owners were not contributorily negligent or comparatively at fault. King Feed denied all requests for admission and raised the affirmative defense that Owners may have been comparatively at fault.

¶4 At trial, Owners called several experts to testily as to the value of the barn. A real estate agent estimated the rental value of the barn to be at least $2,500 per month and the value of the barn itself to be $400,000. A general contractor estimated the cost of rebuilding the barn to be more than $500,000. Areal estate appraiser estimated that the “barn contributed a value of $300,000 more or less” to Owners’ property. Verbatim Report of Proceedings at 285. The appraiser also estimated that the cost of replacing the barn would be between $485,000 and $500,000. In response, King Feed called one witness, a real estate sales associate, who testified that the barn added $100,000 to $110,000 to the value of Owners’ property.

¶5 The jury awarded Owners $300,000. In a posttrial motion, Owners requested the trial court to “order defendant to partially reimburse” Owners’ reasonable attorneys fees and costs as sanctions for discovery violations under CR 37(c) and/or CR 26(g) and RCW 4.84.185. Clerk’s Papers (CP) at 134. The trial court granted Owners’ motion under CR 37(c) and ordered King Feed to pay an additional $19,434. The court specifically noted that not every item related to negligence and causation is reimbursable. Rather, reimbursement is limited to the costs associated with the time period after which a reasonable person in King Feed’s position should have conceded the issues.

¶6 The Court of Appeals affirmed the trial court in a partially published opinion, holding that (1) the trial court did not err by refusing to give King Feed’s proposed instruction on damages, (Thompson v. King Feed & Nutrition Serv., Inc., 117 Wn. App. 260, 70 P.3d 972 (2003)), and (2) the trial court did not abuse its discretion in granting CR 37(c) sanctions against King Feed for its failure to admit certain matters in the requests for admission propounded by Owners during discovery. Id. at 261.

¶7 In addition, Owners requested an award of additional attorney fees and costs incurred on appeal under CR 37(c) and RAP 14.1-14.4. The Court of Appeals denied this request because none of the cited provisions support such an award. Thompson, 117 Wn. App. 260, slip op. (unpublished portion) at 21.

ISSUES

¶8 The following issues have been raised on appeal:

1. Did the trial court err in rejecting WPI 30.11 (6 Washington Pattern Jury Instructions: Civil (4th ed. 2002)) as the proper measure of damages instruction for the negligent destruction of a building?

2. Did the trial court abuse its discretion in granting sanctions against King Feed under CR 37(c)?

3. Should Owners be awarded additional attorney fees and costs incurred on appeal pursuant to CR 37(c) and RAP 14.1-14.4?

ANALYSIS

1. Did the trial court err in rejecting WPI 30.11 as the proper measure of damages instruction for the negligent destruction of a building?

¶9 Jury instructions are reviewed de novo, and an instruction that contains an erroneous statement of the applicable law is reversible error where it prejudices a party. Cox v. Spangler, 141 Wn.2d 431, 442, 5 P.3d 1265, 22 P.3d 791 (2000). Jury instructions are sufficient when they allow counsel to argue their theories of the case, do not mislead the jury and, when taken as a whole, properly inform the jury of the law to be applied. Id. “A clear misstatement of the law, however, is presumed to be prejudicial.” Keller v. City of Spokane, 146 Wn.2d 237, 249-50, 44 P.3d 845 (2002).

¶10 King Feed contends that the Court of Appeals’ affirmation of instruction 8 is “an erroneous statement of the applicable law on damages.” Pet. for Review at 15. Jury instruction 8 provides, in relevant part:

If your verdict is for the plaintiff, then you must determine the amount of money which will reasonably and fairly compensate the plaintiff for such damages as you find were proximately caused by the negligence of the defendant.

If you find for the plaintiff, you should consider the following factors:

1. The value the barn added to the plaintiff’s property immediately before the fire;

2. The fair market value of the barn;

3. The fair rental value of the barn;

4. The reasonable cost to replace the barn if you find:

a. that there is reason personal to the owner for replacing the barn or

b. where there is reason to believe that the plaintiff will replace the barn to its original condition, and you find that the cost of replacing the barn, although it may be greater than the value added to the property by the barn, is not unreasonably disproportionate to the diminution in market value of the property because of the loss of the barn.

CP at 99.

¶11 King Feed maintains the court should have given proposed jury instruction D6. According to King Feed, proposed instruction D6* ¹ 2was based upon WPI 30.11 and contained an accurate statement of the applicable measure of damages based on Hogland v. Klein, 49 Wn.2d 216, 298 P.2d 1099 (1956). WPI 30.11 states that the measure of damages to personal property should be the lesser of:

1. The reasonable value of necessary repairs to any property that was damaged; or

2. The difference between the fair cash market value of the property immediately before the occurrence and the fair cash market value of the unrepaired property immediately after the occurrence.

¶12 In addition to Hogland, King Feed relies upon the cases Pepper v. J.J. Welcome Construction Co., 73 Wn. App. 523, 871 P.2d 601 (1994), DeYoung v. Swenson, 6 Wn. App. 452, 493 P.2d 1247 (1972), and Falcone v. Perry, 68 Wn.2d 909, 416 P.2d 690 (1966) to support the contention that the “lesser than” rule is correctly applied when a barn is negligently destroyed by fire.

f 13 In response, Owners argue that instruction number 8 was proper and that the “lesser than” rule is inapplicable to this case. In support, Owners point to the “Note on Use” that accompanies WPI 30.11, which states: “This instruction may not be appropriate for damages to real estate or improvements thereon.” WPI 30.11. They also argue that under the general rule stated in Burr v. Clark, 30 Wn.2d 149, 190 P.2d 769 (1948), they were entitled to ask the jury to award the cost of restoring the barn. Lastly, Owners distinguish both DeYoung and Pepper.

¶14 We find that WPI 30.11, the “lesser than” rule, is inapplicable in circumstances involving negligent destruction of a building. In addition to the “Note on Use” cited by Owners, a careful reading of the cases cited by King Feed illustrates that WPI 30.11 applies to situations in which property is damaged, not destroyed.

¶[15 In Hogland, the owner of a house contracted with a company to have the house moved to a new location. The move required separating the house into two sections. The first section was moved without incident, but the second section was damaged when one of the supporting timbers fractured. The trial court, quoting 15 American Jurisprudence Damages section 113, at 524 (1938), applied the “lesser than” rule:

“The owner is entitled to recover the entire cost of restoring a damaged building to its former condition unless such cost exceeds its diminution in value as the result of the injury, in which event the recovery must be limited to the amount of such diminution. Under this rule the court should receive evidence both as to the cost of restoring the building and as to the amount of its diminished value, and then adopt as the measure of damages the lesser of the two amounts.”

Hogland, 49 Wn.2d at 220. We affirmed the “lesser than” rule as the proper measure of damages for the damaged portion of the house. Id.

¶16 In Falcone, the executors of an estate sued to recover damages from a truck driver whose runaway truck struck and damaged a home. We approved a jury instruction based upon the “lesser than” rule:

“The measure of damages with reference to the plaintiffs’ property in this case is the entire cost of restoring the damage to return the property to its former condition unless the cost exceeds the diminution in value as a result of the accident, in which event the measure of damages would be the difference between the fair cash market value of the plaintiffs’ property immediately before and immediately after the accident. You must adopt as the measure of damages the lesser of the two amounts, the cost of repair or the diminution in value as I have instructed you.

“If you find the plaintiffs’ building could be restored to its former condition, then you may take into account in determining plaintiffs’ damages the cost of restoration of the building and such loss of rent, if any, as you find plaintiffs may have sustained during the time when, with reasonable diligence, the building could have been restored to its former condition.”

Falcone, 68 Wn.2d at 912.

¶17 In Pepper, the landowners brought suit after observing increased runoff and sedimentary deposits on their land, allegedly due to the clearing and grading of a neighboring plat of land. Pepper, 73 Wn. App. at 528. The trial court limited the damage award to the lesser of restoration costs or the diminution in value of the property. Pepper, 73 Wn. App. at 541. The property owners appealed contending the proper measure of damages for injuries to land, where the land is capable of being restored to its former condition, is restoration costs. Id. The Court of Appeals agreed. Id. Only in dicta did the court state, “Washington courts have consistently applied the ‘lesser-than’ rule in fixture cases where the damaged real property is affixed to land.” Id.

¶18 Hogland, Falcone, and Pepper affirm our conclusion that prior case law holds the “lesser than” rule is limited to situations where property is damaged and capable of repair. None of these cases support the contention that the “lesser than” rule should be applied when a building is completely destroyed.

¶19 King Feed also relies on DeYoung. In DeYoung, the defendant’s negligent burning of debris on his land led to the destruction of his neighbor’s barn. The Court of Appeals stated the proper measure of damages as:

Where the wrong consists in the removal or destruction of some addition, fixture or part of real property, the loss may be estimated upon the diminution in the value of the premises, if any results; or upon the value of the parts severed or destroyed, and that valuation should be adopted which will prove most beneficial to the injured party, as he is entitled to the benefit of his property intact.

DeYoung, 6 Wn. App. at 454. The Court of Appeals then affirmed the trial court’s award of $12,000 for lost storage space. Id.

¶20 DeYoung, does not support King Feed’s argument for two reasons. First, the measure of damages articulated in DeYoung concerns calculating recovery of lost storage space, not for recovery of the building itself. As the Court of Appeals stated, “[t]he $12,000 award does not therefore represent the cost of replacing the identical building but rather the cost of replacing lost storage space to which plaintiff is entitled.” Id. Second, the DeYoung court did not apply the “lesser than” rule. While DeYoung did state the loss may be estimated upon the diminution in value or upon the value of the parts severed or destroyed, the rule was not limited to the lesser of the two amounts. On the contrary, the proper valuation was the one that proved most beneficial to the injured party. Id.

¶21 King Feed also claims that the Court of Appeals’ affirmation of jury instruction 8 in this case was prejudicial.

King Feed argues that if the jury had been instructed pursuant to the “lesser than” rule, it would not have awarded $300,000, which exceeds the diminution in value of the whole property by $200,000. Pet. for Review at 16. Kang Feed appears to base this claim on the testimony of its expert who stated that the diminution in value of the entire 15 acre parcel of land after the destruction of the barn was $100,000. As stated, we disagree with King Feed’s contention that the “lesser than” rule is the correct measure of damages. We also disagree with King Feed’s interpretation of the “lesser than” rule.

¶22 As we articulated in Hogland, the general “lesser than” rule is: “ ‘The owner is entitled to recover the entire cost of restoring a damaged building to its former condition unless such cost exceeds its diminution in value as the result of the injury, in which event the recovery must be limited to the amount of such diminution.’ ” Hogland, 49 Wn.2d at 220 (quoting 15 Am. Jur. § 113, at 524). Under this rule, an owner is entitled to recover the entire cost of restoring a damaged building to “its” former condition unless those costs exceed “its” diminution in value. Both of the “its” in this rule distinctly refer to the damaged building, not the entire parcel of property the building was located upon as King Feed would have us hold in this case.

¶23 Similarly, a close analysis of WPI 30.11 yields the same result. To reiterate, WPI 30.11 states that the measure of damages to personal property should be:

1. The reasonable value of necessary repairs to any property that was damaged; or

2. The difference between the fair cash market value of the property immediately before the occurrence and the fair cash market value of the unrepaired property immediately after the occurrence.

WPI 30.11 (emphasis added). As was the case with “its” in the general formulation of the “lesser than” rule articulated in Hogland, the term “property” in WPI 30.11 refers to the individual piece of personal property that was damaged, such as a vehicle. The term “property” does not include any uninjured real property the personal property may be attached to. Thus, WPI 30.ll’s references to “property” do not support a calculation of diminution based upon the entire 15 acre parcel of land.

¶24 WPI 30.11 does not apply for two additional reasons. First, the title of WPI 30.11 states that it is intended as a measure of damages for personal property. Second, the Note on Use specifically states, “This instruction may not be appropriate for damages to real estate or improvements thereon.” Id. The “lesser than” rule does not apply in the case of negligent destruction of a building, nor does it apply to the diminution in value of an entire parcel of real estate.

¶25 We also conclude that the jury’s award of $300,000 does not indicate any prejudice and was proper under the instructions given. “The purpose of awarding damages in cases involving injury to real property is to return the injured party as nearly as possible to the position he would have been in had the wrongful act not occurred.” 16 David K. DeWolf & Keller W. Allen, Washington Practice: Tort Law and Practice § 5.2, at 126 (2d ed. 2000). In addition, when awarding damages for an action concerning real property, “[t]he decision as to which measure of damages to apply is one left to the trier of fact.” Id. Testimony at trial estimated the fair market value of the barn to be $300,000 and the replacement cost of the barn to be more than $500,000. Under the evidence presented, instruction 8 resulted in a jury award that is a reasonable estimate of the amount necessary to put Owners in the position they would have been in had the wrongful act not occurred. King Feed was not prejudiced by the giving of instruction 8.

2. Did the trial court abuse its discretion in granting sanctions against King Feed under CR 37(c)?

¶26 King Feed argues that the trial court abused its discretion in granting sanctions under CR 37(c) for King Feed’s failure to admit certain matters in the requests for admission propounded by Owners. Owners argue the scope of their Request for Admission (RFAs) were proper under CR 36(a), which states that requests for admission may cover “any matters within the scope of rule 26(b) set forth in the request that relate to statements or opinions of fact or of the application of law to fact.” CR 36(a).

¶27 We review a trial court’s decision to impose discovery sanctions under CR 37(c) for an abuse of discretion. Rivers v. Wash. State Conference of Mason Contractors, 145 Wn.2d 674, 684, 41 P.3d 1175 (2002). A trial court abuses its discretion if its decision is manifestly unreasonable or based on untenable grounds. Wash. State Physicians Ins. Exch. & Ass’n v. Fisons Corp., 122 Wn.2d 299, 339, 858 P.2d 1054 (1993).

f28 CR 37(c) provides that if a party fails to admit the truth of any matter as requested under a CR 36 request for admission and the matter is subsequently proved, the party may apply to the trial court for an order requiring the other party to pay reasonable expenses incurred in making that proof, including attorney fees. The trial court may then order payment unless it finds that:

(1) the request was held objectionable pursuant to rule 36(a), or (2) the admission sought was of no substantial importance, or (3) the party failing to admit had reasonable ground to believe the fact was not true or the document was not genuine, or (4) there was other good reason for the failure to admit.

CR 37(c).

129 The purpose of requests for admission is to eliminate from controversy factual matters that will not be disputed at trial. Santos v. Dean, 96 Wn. App. 849, 861, 982 P.2d 632 (1999); Brust v. Newton, 70 Wn. App. 286, 295, 852 P.2d 1092 (1993). A party is not required to concede either factual matters central to the lawsuit or legal conclusions. Puget Sound Nat’l Bank v. St. Paul Fire & Marine Ins. Co., 32 Wn. App. 32, 49, 645 P.2d 1122 (1982); see also Reid Sand & Gravel, Inc. v. Bellevue Props., 7 Wn. App. 701, 704, 502 P.2d 480 (1972) (“It is not a proper use of CR 36 to request an adversary to admit, in effect, the truth of the assertion that he should lose the lawsuit.”).

¶30 However, CR 36 does permit “statements or opinions of fact or of the application of law to fact.” CR 36(a). CR 36(a) also states that a party who believes that a matter for which an admission has been requested relates to “a genuine issue for trial or a central fact in dispute may not, on that ground alone, object to that request; he may, subject to the provisions of rule 37(c), deny the matter or set forth reasons why he cannot admit or deny it.” CR 36(a).

¶31 The requests at issue here, and their answers, are as follows:

1. The defendant negligently stored its hay in the plaintiff’s barn.

RESPONSE: Denied.

2. The defendant’s negligent storage of hay was a proximate cause of the fire that burned the plaintiff’s barn. RESPONSE: Defendant denies this request for admission because it does not yet have sufficient information upon which to base an informed decision despite reasonable inquiry. Discovery and investigation are continuing.

3. There was no contributory negligence by the plaintiffs which proximately caused or contributed to the start of the fire in their bam.

RESPONSE: Defendant denies this request for admission because it does not yet have sufficient information upon which to base an informed decision despite reasonable inquiry. Discovery and investigation are continuing.

4. The defendant’s negligence was the sole proximate cause of the fire that burned the plaintiff’s barn. RESPONSE: Denied.

5. There was no contributory negligence or comparative fault by the plaintiffs which proximately caused or contributed to any of their damages as alleged in their Complaint.

RESPONSE: Defendant denies this request for admission because it does not yet have sufficient information upon which to base an informed decision despite reasonable inquiry. Discovery and investigation are continuing.

CP at 172-73.

¶32 King Peed argues that the trial court abused its discretion in granting sanctions pursuant to CR 37(c) because (1) the requests for admission asked King Feed to admit major factual issues central to the lawsuit, and (2) the requests for admission asked King Feed to concede legal conclusions (i.e., negligence, proximate cause, and absence of contributory negligence).

¶33 King Feed’s first argument is that Owners’ requests for admission asked King Feed to admit factual issues central to the lawsuit. This argument fails because CR 36 clearly states a party may not deny a request on the grounds that the party considers the matter on which the admission has been requested “presents a genuine issue for trial,” or “a central fact in dispute.” CR 36(a). A party may deny a request for admission only pursuant to the four exceptions of CR 37(c) and must include the specific reasons for such denial. Id.

¶34 Furthermore, King Feed had a duty to seasonably supplement its initial responses to the requests for admission. The fact that the requests were propounded within days of the complaint is immaterial. CR 26(e)(2) provides that a party is under a duty to supplement a prior response if he obtains information upon the basis of which “he knows that the response was incorrect when made” or “he knows that the response though correct when made is no longer true.” CR 26(e)(2)(A), (B). King Feed either denied each request for admission directly or denied each request based on insufficient information upon which to base an informed decision despite reasonable inquiry, further stating that discovery and investigation were continuing. Although King Feed contested its liability at trial, there is nothing in the record to support its contentions. As the trial judge noted in her ruling, “it doesn’t appear that there was a reasonable ground to believe that the cause of the fire was anything other than the storage of wet hay and that the plaintiff was not contributorily negligent.” CP at 444. All of the experts concluded the likely cause of the fire was spontaneous combustion of hay. As such, there was sufficient evidence upon which King Feed should have based an informed response to the request for admission.

¶35 King Feed’s second argument appears to be that the requests for admission asked King Feed to concede legal conclusions including negligence, proximate cause, and absence of contributory negligence. This argument fails because the requests did not ask King Feed to state legal conclusions. What courts refer to as legal conclusions may also be called questions of law. CR 36 does not authorize requests for admission to ask, nor require a party to answer, questions of law. Rather, the requests for admission asked King Feed major factual issues and asked King Feed to apply the law to the facts concerning negligence, proximate cause, and contributory negligence. Nothing in CR 36 entitled King Feed to deny the questions in absence of proof to support such denial.

¶36 Therefore I would affirm the trial court’s decision to grant sanctions pursuant to CR 37(c). There is no limitation in CR 36 or CR 37 that restricts requests for admission to the admission of major factual issues, nor were there any questions which asked King Feed to concede legal conclusions.

¶37 3. Should Owners be awarded additional attorney fees and costs incurred on appeal pursuant to CR 37(c) and RAP 14.1-14.4?

¶38 Owners request that we award them attorney fees and costs on appeal pursuant to CR 37(c) and RAP 14.1-14.4. We deny this request. Owners have cited no statutory, contractual, or other basis on which to award attorney fees in this action. Therefore we do not award attorney fees and costs on appeal.

CONCLUSION

¶39 In summary, we conclude that the trial court’s jury instruction on damages was not erroneous or prejudicial and that Owners are not entitled to attorney fees and costs on appeal.

Bridge, Chambers, and Owens, JJ., concur.

* Justice Faith Ireland is serving as a justice pro tempore of the Supreme Court pursuant to Washington State Constitution article IV, section 2(a).

1 Instruction D6 provides in relevant part:

If your verdict is for the plaintiff, then you must determine the amount of money which will reasonably and fairly compensate the plaintiff for such damages as you find were proximately caused by the negligence of the defendant.

If you find for the plaintiff your verdict should be the lesser of the following:

1. The reasonable value of necessary replacement of the bam which was destroyed; or

2. The difference between the fair cash market value of the property immediately before the occurrence and the fair cash market value of the unrepaired property immediately after the occurrence.

CP at 82.