Brook Village North Associates v. General Elec. Co., 81-1333

• Decision Date: 20 August 1982
• Docket Number: No. 81-1333,81-1333
• Citation: 64 A.L.R.Fed. 730,686 F.2d 66
• Parties: BROOK VILLAGE NORTH ASSOCIATES, et al., Plaintiffs-Appellants, v. GENERAL ELECTRIC COMPANY, Re-Entry and Environmental Systems Division, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 66

686 F.2d 66

64 A.L.R.Fed. 730

BROOK VILLAGE NORTH ASSOCIATES, et al., Plaintiffs-Appellants, v. GENERAL ELECTRIC COMPANY, Re-Entry and Environmental Systems Division, Defendant-Appellee.

No. 81-1333.

United States Court of Appeals First Circuit.

Argued June 8, 1982.

Decided Aug. 20, 1982.

J. Bradford Westgate, Nashua, N. H., with whom Winer, Pillsbury & Bennett, Nashua, N. H., was on brief, for plaintiffs-appellants.

Gerald R. Prunier, Nashua, N. H., with whom Prunier, Mazerolle & Frasca, Nashua, N. H., was on brief, for defendant-appellee.

Before COFFIN, Chief Judge, BOWNES, Circuit Judge, ROSENN, Senior Circuit Judge. ^*

ROSENN, Circuit Judge.

The primary question on appeal in this diversity suit is the effect to be given admissions that are deemed to be made under Rule 36 of the Federal Rules of Civil Procedure because of a party's failure timely to respond to a request therefor, and the limits, if any, on the discretion of a trial judge to permit withdrawal of an admission once trial has commenced. We must also decide whether plaintiffs are entitled to prejudgment interest.

The plaintiffs, Brook Village North Associates ("Brook Village") and First Equity Associates, Inc. ("First Equity"), instituted suit in the United States District Court for the District of New Hampshire, to recover damages for breach of contract in the purchase of modular housing. After a bench trial, the trial judge declined to give conclusive effect to pretrial admissions of the defendant, General Electric Co., Re-Entry and Environmental Systems Division ("GE") under Rule 36, although the admissions had not been amended or withdrawn as proof of damages. Instead, the court awarded plaintiffs a lower sum based on evidence produced by the defendant at trial. The court also refused to award prejudgment interest. The plaintiffs appeal from the judgment awarding them $149,328.69. We reverse in part and remand.

I.

In partial fulfillment of its mandate to see that adequate housing is available to all Americans, the Department of Housing and Urban Development established a program entitled "Operation Breakthrough" to encourage mass-produced low and moderate income housing. On or about October 1, 1971, as part of this program First Equity entered into an agreement as contractor with GE under which GE agreed to supply 160 units of factory-produced modular housing, for erection into apartments in Nashua, New Hampshire, under the sponsorship of Brook Village. ¹

The modules, consisting of flat roofs and fabricated rooms complete with interior fixtures, were manufactured by GE in King of Prussia, Pennsylvania, and delivered to New Hampshire in early 1972. First Equity, employing its own crew, installed cement foundations and erected the modules according to GE's specifications.

Shortly after erection began, serious leaks developed in the flat roofs. By May of 1972 it became apparent that the roofs manufactured by GE were unsatisfactory and would not be able to withstand the elements. GE therefore arranged, at its sole cost, with a New Hampshire roofing company to install a "built-up" roof covering the entire complex. This was completed in the latter half of 1972. In 1973 further roof leaks developed, which were initially repaired at GE's expense. In July of 1973, however, GE refused to fund any further roof repairs. Plaintiffs were required to hire contractors to perform additional roof repairs and eventually, to forestall further leaks, to install pumps on the roof to remove water which "ponded."

Problems also developed when the front facia sheets on the doors and drawers of the kitchen cabinets furnished by GE began delaminating. In an effort to solve this problem, GE furnished plaintiffs with handles to be placed on all of the cabinets to correct the problem and prevent further delamination. Plaintiffs maintain that because the delamination was widespread and not confined to the doors, the handles were not used. Eventually, they were lost.

Plaintiffs brought suit in December 1975 under warranty and tort theories to recover damages for the defective roofing and cabinets. With respect to both problems, plaintiffs claimed that replacement of the offending structures was the only adequate solution. On October 31, 1977, they filed their first requests for admissions, seeking to establish the genuineness of certain documents and letters and the truth of statements contained therein pertaining to liability and damages. After a period of more than nine months, on August 3, 1978, GE filed its reply to the requests for admissions. Brook Village immediately moved to strike GE's reply for untimeliness and the district court granted the motion. GE moved twice before trial as well as on the first day of trial for reconsideration of its request to allow late filing of answers to plaintiffs' requests for admissions or to strike the admissions; the court denied the motions and recognized the denial in its pre-trial order.

On conclusion of the trial, the district court held that under the applicable law of Pennsylvania, ² the Uniform Commercial Code (UCC), GE had violated implied warranties of merchantability and fitness for a particular purpose in supplying the defective roof. The court assessed damages at $120,000 (the figure which the court determined to be the cost of replacement) plus $29,328.69, representing monies spent by plaintiffs to maintain the roof in a state of repair for the years 1974-1978. ³ The court denied any recovery for the allegedly defective cabinets, concluding that "plaintiffs have failed to sustain their burden and are not entitled to recover on their claim of damages to the kitchen cabinets."

Plaintiffs then filed a motion under Fed.R.Civ.P. 59(e) to have the court amend its judgment. Plaintiffs sought reconsideration of both the amount assessed for the roof and the failure of the court to find liability for the kitchen cabinets. They also sought the addition of prejudgment interest to the award.

In its order denying plaintiffs' motion, the court rejected plaintiffs' argument that the court was bound by the prior admissions.

Had plaintiffs desired, they could have refrained from attempting to introduce at trial the testimony of (their experts), thus depriving the Court of the opportunity to observe these witnesses live and under examination and to determine their credibility in comparison with the proof adduced by the defendant. But, having chosen to proceed with these witnesses, the Court in its function as factfinder and pursuant to the provisions of Rule 36(b), Fed.R.Civ.P., is not bound to accept the admission as proof of damages. This is particularly true where, as here, "presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice him in maintaining his action or defense on the merits." (Citations omitted.)

In short, the Court finds and rules that it would be blatantly unfair to permit plaintiffs at this late date, after they had full opportunity to present the veracity of witnesses and weight of their testimony to the trial court, to fall back on documents marked in evidence on the basis that they were admitted and cannot be contested.

Brook Village North Associates v. General Electric Co., No. 75-362, typescript op. at 2-3 (D.N.H. Apr. 30, 1981). The court also held that under Pennsylvania law the plaintiffs were not entitled to prejudgment interest. This appeal followed.

II.

Plaintiffs argue that they are entitled, at a minimum, to recover damages established as of 1975 in letters deemed admitted as true when GE failed timely to respond to the request for admissions and the district court repeatedly denied defendant's pre-trial motions to allow its reply to be filed out of time. One of those letters, written by a roofing contractor, establishes that in 1975 the cost of replacing the defective roof was $194,720. Another letter, written by the manager of the kitchen division of Evans Products Company, reports that the lamination on the kitchen cabinet doors and drawer fronts in the complex is "totally unstable" and that the only solution is replacement throughout. It fixes the cost at $17,136 plus tax. Despite these admissions, plaintiffs had the writers of the letters testify, primarily for the purpose of establishing the increased cost of replacement at the time of trial. Plaintiffs' experts testified that the cost of replacing the roof had increased to $363,980, and the cabinets to $55,817.60. The district court allowed defendant to call an expert witness who testified that the cost of reroofing was $120,000, and the building manager who testified that he had only seen delaminated cabinets in some of the units. The court found the defendant's evidence more credible and awarded judgment in the lower amount for the roof and none for the kitchen cabinets.

A.

Rule 36 provides in relevant part:

(a) Request for Admission. A party may serve upon any other party a written request for the admission ... of the truth of any matters ... that relate to statements or opinions of fact or of the application of law to fact ....

... The matter is admitted unless, within 30 days after service of the request ... the party to whom the request is directed serves upon the party requesting the admission a written answer or objection ....

(b) Effect of Admission. Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission. Subject to the provisions of Rule 16 governing amendment of a pre-trial order, the court may permit withdrawal or amendment when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice him in maintaining his action or defense on the merits.

Under Rule 36 in its present...