Bernsen v. Big Bend Elec. Co-op., Inc.
| Decision Date | 12 January 1993 |
| Docket Number | No. 11676-0-III,11676-0-III |
| Citation | 842 P.2d 1047,68 Wn.App. 427 |
| Court | Washington Court of Appeals |
| Parties | Michael J. BERNSEN, d/b/a MJB Farms, Appellant, v. BIG BEND ELECTRIC COOPERATIVE, INC., a Rural Electric Administrative Cooperative, Respondent and Cross Appellant. |
Daniel M. Danforth, Underwood, Campbell, Brock & Cerutti, P.S., Spokane, for respondent.
The trial court awarded a judgment of $49,085.50 principal plus $607.44 costs to Michael J. Bernsen for damages sustained when Big Bend Electric Cooperative, Inc., (Big Bend) conditioned delivery of electrical service on payment of accounts for which he was not liable.
Michael Bernsen appeals his damage award, contending the trial court erred in reducing damages for failure to mitigate. Big Bend cross-appeals, contending its actions were not illegal and, even if they were, the damage award exceeded the proof at trial. We reverse and remand.
In late 1988, Michael Bernsen purchased farm property in Franklin County from Puget Sound National Bank. The bank acquired the property by foreclosing the mortgage of Real West Development. Real West Development was a limited partnership whose general partner was Paul Bernsen, Michael's father. Real West and Paul Bernsen were under federal bankruptcy court protection at the time, as were other entities owned, managed or controlled by Paul Bernsen. Big Bend was an unsecured creditor in those bankruptcies.
Big Bend is a Washington corporation organized under the Rural Electrification Act of 1936. It is the sole provider of electricity for the property purchased by Michael Bernsen.
In November 1989, Michael Bernsen contacted Irrigation Specialists, Inc., regarding installation of a new water delivery system for four irrigation circles. A new water delivery system was designed which required installation of a water reservoir and extension of an electrical power line. The reservoir was constructed at a cost of $5,294.82 and in January 1990, Michael Bernsen leased a portion of the property On January 17, 1990, Michael Bernsen contacted Big Bend regarding extension of the power line. He was told it would not be provided until the bankruptcy obligations and expenses of Paul Bernsen were paid. 1 On January 24, Paul Bernsen went to Big Bend's Mesa office "to get the misunderstanding straightened out".
to two potato farmers. Under the terms of the lease, Michael Bernsen was to receive one-half of the lessee's net crop proceeds as rent
On February 2, a Big Bend engineer went to Michael Bernsen's property where he met the irrigation system designer. He staked out the property. The engineer later prepared a work order which estimated the cost of the extension at $18,561. Big Bend then referred Michael Bernsen to its Ritzville office where he was referred to Big Bend's legal counsel.
At a meeting on February 5, Big Bend's counsel told Michael Bernsen he could not obtain a power line extension or power unless his father's bankruptcy obligations were paid. According to the minutes of a board of directors' meeting held February 22, Big Bend's attorney "was taking the position with Mr. Bernsen that Mr. Bernsen and the previous Bernsen Trust, Real West accounts and Eagle Lake Ranch were essentially the same individuals ... [and] ... Michael Bernsen did not qualify as a new member [of the cooperative]".
Michael Bernsen offered to pay the entire cost of the power line extension in advance of installation. Typically, only one-half of the payment was required in advance. When Big Bend again refused, Michael Bernsen commenced this action.
In mid-March 1990, Irrigation Specialists told Michael Bernsen a decision had to be made whether to go forward with the newly designed irrigation system or rehabilitate the old one. Michael Bernsen authorized rehabilitation. At that On April 12, the power hookup to the leased property was authorized. However, because of the unavailability of equipment and problems with the system, it was not fully operational until early May. There were no net proceeds from the potato crop.
time, both Michael Bernsen and Irrigation Specialists believed rehabilitation could be completed in time for potato planting. The most advantageous planting time was between April 5 and April 15
The reservoir Michael Bernsen constructed was of no value to the rehabilitated system which drew water from the South Columbia Basin Irrigation Project. In addition, the new system would have required 225 horsepower to operate. The rehabilitated system requires 400 horsepower.
On September 24, Michael Bernsen amended his complaint for rate discrimination to include (a) a claim for damages, (b) injunctive relief requiring Big Bend to provide electrical service upon the terms given other customers, and (c) attorney fees and costs.
In a bench trial, the court ruled in favor of Michael Bernsen and awarded $49,085.50 as compensatory damages. The trial court's $49,085.50 damage award included the following:
Extra Cost of Old System ($96,125 less $75,000) $21,125.00
Extra Power Cost 1990 8,750.00
Extra Power Cost 1991 8,750.00
Reservoir 5,294.82
DAMAGES FOR REHABILITATION
We address first the parties' contention the trial court erred in determining the cost of rehabilitating the old irrigation system over the cost of installing a new system. Michael Bernsen contends the unrefuted testimony established its cost at $61,921, not $75,000. In its cross appeal, Big Bend contends the trial court failed to include the $18,561 power line extension as part of the new system's cost.
The only testimony regarding the cost of the new system came from Brent Richeson of Irrigation Specialists. Mr. Richeson testified he prepared a detailed estimate of costs for The trial court's finding of $75,000 as the cost of the new system is erroneous because it rejects Mr. Richeson's uncontroverted testimony and fails to include the cost of the power line extension. Smith v. Pacific Pools, Inc., 12 Wash.App. 578, 582, 530 P.2d 658, review denied, 85 Wash.2d 1016 (1975); State ex rel. Coyle-Reite v. Reite, 46 Wash.App. 7, 11, 728 P.2d 625 (1986). The cost of the new system, if installed by Irrigation Specialists, would have been $61,921 plus $18,561 for the power line extension. 2 The "extra" cost incurred by Michael Bernsen in having to install a rehabilitated system, not a new system, was $15,643, not $21,125.
installing the new system. The cost was $61,921. Although he also stated he gave Michael Bernsen a "ball park" estimate of $70,000 to $75,000 when they first discussed the project, it was the practice of Irrigation Specialists not to provide a detailed estimate until the customer decided to go ahead
MITIGATION OF DAMAGES
We next consider whether the trial court erred in failing to award Michael Bernsen lost rent for 1990 from his lease on the basis he failed to mitigate his damages. The issue of mitigation was raised by the trial court sua sponte. The trial court concluded Michael Bernsen did not make the wrong choice, but failed to make a timely choice.
Michael Bernsen contends he had no duty to mitigate because Big Bend committed an intentional or continuing tort, and even if he had a duty to mitigate, Big Bend waived its right to assert the defense by not pleading it as an affirmative defense. In the alternative, Michael Bernsen contends he fulfilled his duty to mitigate by making a timely choice, and the trial court's finding to the contrary is not supported by substantial evidence.
(1) Applicability.
The doctrine of mitigation of damages, sometimes referred to as the doctrine of avoidable consequences, prevents recovery for those damages the injured party could have avoided by reasonable efforts taken after the wrong was committed. Young v. Whidbey Island Bd. of Realtors, 96 Wash.2d 729, 733-34, 638 P.2d 1235 (1982); Snowflake Laundry Co. v. MacDowell, 52 Wash.2d 662, 674, 328 P.2d 684 (1958); Walker v. Transamerica Title Ins. Co., 65 Wash.App. 399, 405, 828 P.2d 621 (1992). Generally speaking, the doctrine applies in both contract and tort cases. Compare Restatement (Second) of Torts § 918 (1979) with Restatement (Second) of Contracts § 350 (1981); Walker, at 405 n. 6, 828 P.2d 621; but see Hogland v. Klein, 49 Wash.2d 216, 221, 298 P.2d 1099 (1956) (); Desimone v. Mutual Materials Co., 23 Wash.2d 876, 162 P.2d 808 (1945) ().
Although we have found no authority in Washington on the issue of whether mitigation of damages applies in a rate discrimination case, and none has been cited, those jurisdictions deciding the issue have generally held it applicable. See 108 A.L.R. 1174. These decisions are consistent with Washington's recognition of the doctrine in both tort and contract cases. Although Michael Bernsen claims an exception applies to continuing and intentional torts, he neither pleaded nor proved Big Bend's action constituted a continuing or intentional tort.
(2) Waiver.
Having determined the doctrine of mitigation is applicable to a rate discrimination theory of liability, we turn to Michael Bernsen's contention the doctrine could not be asserted by Big Bend because of waiver.
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