Desco Corp. v. Harry W. Trushel Const. Co.

• Decision Date: 06 December 1991
• Docket Number: No. 19993,19993
• Citation: 413 S.E.2d 85,186 W.Va. 430
• Court: West Virginia Supreme Court
• Parties: DESCO CORPORATION, dba Colliers Industries, Plaintiff Below, Appellee, v. HARRY W. TRUSHEL CONSTRUCTION COMPANY and Fire Foe Corporation, Defendants Below, Appellees. FIRE FOE CORPORATION, Third-Party Plaintiff Below, v. INDUSTRIAL RISK INSURERS, Third-Party Defendant Below.

Page 85

413 S.E.2d 85

186 W.Va. 430

DESCO CORPORATION, dba Colliers Industries, Plaintiff Below, Appellee, v. HARRY W. TRUSHEL CONSTRUCTION COMPANY and Fire Foe

Corporation, Defendants Below, Appellees.

FIRE FOE CORPORATION, Third-Party Plaintiff Below, v. INDUSTRIAL RISK INSURERS, Third-Party Defendant Below.

No. 19993.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 11, 1991.

Decided Dec. 6, 1991.

Syllabus by the Court

1. "Compensatory damages recoverable by an injured party incurred through the breach of a contractual obligation are those as may fairly and reasonably be considered as arising naturally--that is, according to the usual course of things--from the breach of the contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of its breach." Syllabus Point 2, Kentucky Fried Chicken of Morgantown, Inc. v. Sellaro, 158 W.Va. 708, 214 S.E.2d 823 (1975).

2. Kentucky Fried Chicken of Morgantown, Inc. v. Sellaro, 158 W.Va. 708, 214 S.E.2d 823 (1975), authorizes two categories of damages in a breach of contract action. The first is those directly flowing from the contract breach. As to these damages, there is no requirement that the parties must have actually anticipated them because they are a natural consequence of the breach. The second category is indirect or consequential damages that arise from the special circumstances of the contract. In order to recover these damages, the plaintiff must show that at the time of the contract the parties could reasonably have anticipated that these damages would be a probable result of a breach.

3. Whether contract damages are direct or consequential is a question of law for the trial court. However, whether special circumstances exist to show that consequential damages were within the reasonable contemplation of the contracting parties is ordinarily a question of fact for the jury.

4. " ' "The finding of a trial court upon the facts submitted to it in lieu of a jury will be given the same weight as the verdict of a jury and will not be disturbed by an appellate court unless the evidence plainly and decidedly preponderates against such finding." Syl. pt. 7, Bluefield Supply Company v. Frankels [Frankel's] Appliances, Inc., 149 W.Va. 622, 142 S.E.2d 898 (1965).' Syl. pt. 1, Burns v. Goff, 164 W.Va. 301, 262 S.E.2d 772 (1980)." Syllabus Point 2, Shrewsbury v. Humphrey, 183 W.Va. 291, 395 S.E.2d 535 (1990).

5. The doctrine of assumed or incurred risk is based upon the existence of a factual situation in which the act of the defendant alone creates the danger and causes the injury, and the plaintiff voluntarily exposes himself to the danger with full knowledge and appreciation of its existence.

A. Richard Bailey, Elaine M. Rinaldi, Cozen & O'Connor, Philadelphia, Pa., for appellant.

Douglas McKay, Paul M. McKay, John D. McKay, McKay & McKay, Wheeling, for appellee Fire Foe Corp.

Jeffrey A. Holmstrand, Bachmann, Hess, Bachmann & Garden, Wheeling, for appellee Harry W. Trushel Const. Co.

MILLER, Chief Justice:

Desco Corporation (Desco), doing business as Colliers Industries, appeals a final order of the Circuit Court of Hancock County, dated August 20, 1990, denying its motion for a new trial on its negligence cause of action and limiting Desco's damages on its breach of contract action to the cost of completing installation of a sprinkler system. Desco had sought to recover approximately $2,000,000 when its new warehouse and inventory were destroyed by a fire. Desco contends that the damages were caused because of the delay in installing the sprinkler system.

I. Facts

Desco owned and operated a factory in Weirton, West Virginia, which manufactured and distributed garage door hardware, metal caulking guns, and joist hangers. In 1986, Desco had a substantial increase in business, and it needed additional storage space.

Consequently, on July 22, 1986, Desco entered into a written contract with Harry W. Trushel Construction Company (Trushel) to build a 30,000-square-foot warehouse adjacent to Desco's manufacturing plant. The contract required Trushel to design and install a sprinkler system as fire protection for the warehouse. The original contract deadline was December 31, 1986, but, because of construction delays, the parties agreed to extend the completion date until February, 1987.

Trushel subcontracted with Fire Foe Corporation (Fire Foe) to design and install the sprinkler system. Desco's property damage insurer, Industrial Risk Insurers (IRI), required Fire Foe to submit its design plans to IRI for approval. Moreover, after the sprinkler system was installed, IRI insisted on conducting a field test on the fire protection system before certifying it as fit for operation. As required, Fire Foe obtained IRI's approval for the system design.

By the beginning of 1987, the warehouse was substantially completed. Fire Foe began the actual installation of the sprinkler system in January, 1987, and, even though the system was not operational, Fire Foe last worked at the job site on March 9, 1987. Nonetheless, Desco began moving inventory into the warehouse as early as January, 1987. From March, 1987, until June, 1987, Desco maintains that it made several contacts with both Trushel and Jack Kelly Excavating Company, a contractor hired directly by Desco, in an effort to get the system operational. Moreover, realizing the risks associated with placing inventory in a warehouse which did not have a fire protection system, Desco instituted a 24-hour fire watch, which required the warehouse supervisor to check the building every few hours. Notwithstanding these efforts, a fire broke out near the northwest wall of the warehouse on June 14, 1987. The fire spread rapidly and caused approximately $2 million in damages.

After IRI paid Desco monies owed under its fire insurance policy on the warehouse, it brought this action as subrogee of Desco against Trushel, Fire Foe, and Jack Kelly Excavating, alleging negligence, breach of contract, and breach of warranty. The breach of warranty claim was later abandoned. Shortly thereafter, Fire Foe impleaded IRI as a third-party defendant. On August 28, 1989, the trial court denied IRI's motion for summary judgment.

At trial, two reasons were advanced as to why the sprinkler system was not functional. Desco contended that before the system could be activated, an air compressor had to be hooked up. Although the air compressor was hooked up on March 9, 1987, after Fire Foe had left the job site, Fire Foe never returned to activate the sprinkler system. Trushel and Fire Foe argued that there was a defective post-indicator valve (PIV) and that until that valve was replaced, the system could not be activated. Replacement of the PIV was the responsibility of Jack Kelly Excavating, who had originally installed the valve. Because the PIV was never replaced, Fire Foe never returned to the job site to activate the system.

After Desco presented its case-in-chief, the court directed a verdict for IRI against Fire Foe on the third-party complaint. Moreover, because Desco and Trushel stipulated Trushel had breached the contract, the court directed a verdict for Desco on the breach of contract action. The parties further stipulated that Desco sustained $2,178,030 worth of damages.

The parties agreed to have the court decide the amount of contract damages in lieu of submitting this issue to the jury. Consequently, the court instructed the jury exclusively on the negligence issue. Over Desco's objection, the trial court gave an instruction on the doctrine of assumption of risk and refused to further charge the jury that it could consider the reasonableness of Desco's actions when determining whether it had assumed the risk. The jury returned a verdict allocating fault among the parties as follows: Desco--55 percent, Trushel--30 percent, Fire Foe--15 percent, and Jack Kelly Excavating--0 percent. ¹

On August 20, 1990, the trial court awarded Desco contract damages only in the amount necessary to complete the installation of the sprinkler system and rejected its claim to recover the $2,000,000 worth of fire loss damage.

II.

We initially address the contract damage claim. Desco's argument is straightforward i.e., that the damages it suffered were within the reasonable contemplation of the parties. The defendants disagree.

Our rule for damages as a result of a breach of contract is that recovery may be obtained for those damages which either arise naturally from the breach or may reasonably have been within the contemplation of the parties at the time they made the contract. We articulated this general rule in Syllabus Point 2 of Kentucky Fried Chicken of Morgantown, Inc. v. Sellaro, 158 W.Va. 708, 214 S.E.2d 823 (1975):

"Compensatory damages recoverable by an injured party incurred through the breach of a contractual obligation are those as may fairly and reasonably be considered as arising naturally--that is, according to the usual course of things--from the breach of the contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of its breach."

Sellaro authorizes two categories of damages in a breach of contract action. The first is those directly flowing from the contract breach. As to these damages, there is no requirement that the parties must have actually anticipated them because they are a natural consequence of the breach. The second category is indirect or consequential damages that arise from the special circumstances of the contract. In order to recover these damages, the plaintiff must show that at the time of the contract the parties could reasonably have anticipated that these damages would be a probable result of a breach.

We recognized consequential damages in Lewis v. Welch Wholesale Flour &...