Employers' Fire Ins. Co. v. Love It Ice Cream Co.

• Decision Date: 05 October 1983
• Docket Number: No. A7906-02629,A7906-02629
• Citation: 670 P.2d 160,64 Or.App. 784
• Parties: The EMPLOYERS' FIRE INSURANCE COMPANY, a Massachusetts corporation, Appellant-Cross-Respondent, v. LOVE IT ICE CREAM CO., a corporation, Respondent-Cross-Appellant. ; CA A21553.
• Court: Oregon Court of Appeals

Page 160

670 P.2d 160

64 Or.App. 784

The EMPLOYERS' FIRE INSURANCE COMPANY, a Massachusetts corporation, Appellant-Cross-Respondent, v. LOVE IT ICE CREAM CO., a corporation, Respondent-Cross-Appellant.

No. A7906-02629; CA A21553.

Court of Appeals of Oregon.

Argued and Submitted Dec. 3, 1982.

Decided Oct. 5, 1983.

I. Franklin Hunsaker, III, Portland, argued the cause for appellant-cross-respondent. With him on the briefs were Mary T. Danford, Douglas G. Houser, and Bullivant Wright, Leedy, Johnson, Pendergrass & Hoffman, Portland.

Michael J. Esler and Kim T. Buckley, Portland, argued the cause for respondent-cross-appellant. On the briefs were John W. Stephens and Esler & Schneider, Portland.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

WARREN, Judge.

Plaintiff appeals and defendant cross-appeals from a judgment order entered in favor of defendant, a corporation engaged in the manufacturing and marketing of ice cream products. Plaintiff is defendant's insurer under a fire insurance policy. This appeal arises out of a declaratory judgment action filed by plaintiff, alleging that defendant is not entitled to recover for a claimed fire loss, because it intentionally caused the fire and made intentional misrepresentations concerning the cause of the fire and the amount of the loss. Defendant raised three counterclaims: breach of contract, wilful and malicious interference with prospective economic advantage and bad faith refusal to settle. Defendant requested compensatory and punitive damages, attorney fees and prejudgment interest.

Plaintiff moved to strike defendant's tortious interference and bad faith counterclaims on the ground that they failed to state a claim for relief. The trial court granted the motions. Defendant amended its answer, removing the stricken counterclaims. In its answer to defendant's breach of contract counterclaim, plaintiff moved to dismiss it on the grounds that defendant lacked the capacity to sue and that the counterclaim was barred by the statute of limitations. The trial court denied the motion. After a jury trial, the court entered a judgment for defendant for approximately $127,000, plus attorney fees and prejudgment interest at 6 percent per annum.

Plaintiff assigns as error the trial court's denial of its motion to dismiss defendant's breach of contract counterclaim and the award of prejudgment interest. Defendant asserts that the trial court erred by setting the wrong rate for prejudgment interest and by granting the motion to strike the bad faith and tortious interference counterclaims. Defendant also asserts that we should assess a 10 percent penalty against plaintiff under ORS 19.160 for bringing an appeal without probable cause. We consider these issues in turn.

Plaintiff argues that the trial court should have dismissed defendant's breach of contract counterclaim, because defendant lacked the capacity to file the counterclaim before the time had expired for bringing an action on a fire insurance policy. The fire insurance policy contained the one-year period for bringing an action mandated by ORS 743.660:

"A fire insurance policy shall contain a provision as follows: 'No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.' "

The facts applicable to defendant's argument are undisputed. The fire occurred on January 9, 1979. Plaintiff filed this action in June, 1979. In November, 1979, defendant filed suit in federal court, raising the same claims it raised later in the present action as counterclaims. The federal action was stayed pending the outcome of this action. In February, 1980, defendant filed its counterclaims. Defendant was a delinquent corporation under former ORS 57.779 (repealed by Or.Laws 1981, ch. 633, § 83) from October, 1978, to October, 1980, when it was involuntarily dissolved under ORS 57.585. In January, 1981, defendant was reinstated as a corporation in good standing under ORS 57.585(3). In March, 1981, the court allowed defendant to file its second amended answer that alleged that it had been reinstated and the three counterclaims.

Whether or not defendant's status as a delinquent corporation precluded it from filing counterclaims in February, 1980, or its federal court action tolled the running of the one-year period, we conclude that defendant was not barred from filing its counterclaims in March, 1981. At that time, defendant was not a delinquent corporation, so it had legal capacity to sue. Defendant's counterclaims arose out of the subject matter contained in the complaint which was filed less than one year after the fire. Therefore, the counterclaims were not time barred, because they relate back to the filing of plaintiff's complaint. Lewis v. Merrill, 228 Or. 541, 549, 365 P.2d 1052 (1961); Carter v. Wolf Creek Hwy., 54 Or.App. 569, 573-74, 635 P.2d 1036 (1981).

Plaintiff argues that the trial court erred in awarding defendant prejudgment interest.

"The controlling rule for the allowance of prejudgment interest is found in Public Market Co. v. Portland, 171 Or 522, 625, 130 P2d 624, 138 P2d 916 (1943), which held it can be allowed only

" ' * * * [w]here "the demand is of such a nature that its exact pecuniary amount was either ascertained, or ascertainable by simple computation, or by reference to generally recognized standards such as market price," and where "the time for which interest, if allowed, must run,--that is, a time of definite default or tort-feasance,--can be ascertained." ' (Quoting 1 Sedg. on Damages (9th Ed.), 571, § 300; emphasis in original)." Arden-Mayfair v. Patterson, 46 Or.App. 849, 857, 613 P.2d 1062, rev. den. 290 Or. 149 (1980).

The parties agree that interest, if allowed, should run from July 23, 1979.

Plaintiff contends that the amount due under the policy was not easily ascertainable, because it contested its liability for coverage and defendant's claim for lost profits at trial and because some of the items destroyed in the fire could not be valued by market price. Defendant's proof of loss and breach of contract counterclaim contained claims for three kinds of coverage under the policy: casualty loss, extra expenses incurred to continue normal business operations and lost profits. Plaintiff attempted to avoid liability for the entire contract by claiming that defendant intentionally caused the fire and made intentional misrepresentations. The fact that liability for the entire amount is contested, however, does not preclude an award of prejudgment interest. McKean v. Bernard, 54 Or.App. 540, 547-48, 635 P.2d 673 (1981); Carlson v. Blumenstein, 54 Or.App. 380, 384-85, 635 P.2d 380 (1981), mod. on other grounds, 293 Or. 494, 651 P.2d 710 (1982). That plaintiff contested defendant's claim for lost profits is not determinative, because the jury awarded damages only for casualty loss and extra expenses. According to defendant, the amount of the casualty loss and extra expenses was not contested by plaintiff at trial. In its briefs, plaintiff does not challenge that contention or point to specific disputes at trial as to the value of the claimed losses or expenses. We decline to search the record to determine whether any such disputes existed. Therefore, we hold that the trial court did not err in concluding that defendant was entitled to prejudgment interest.

We conclude, however, that defendant's contention on cross-appeal is correct and that the trial court erred in setting the rate for the prejudgment interest at 6 percent per annum from July 23, 1979, until the date of judgment. The version of ORS 82.010 in effect on July 23, 1979, provided for prejudgment interest at a rate of 6 percent per year. That statute was amended, effective July 25, 1979, to increase the rate of interest to 9 percent per annum. Judgment in this case was entered after July 25, 1979. The contract here was not a contract for the repayment of money owed to another, for which the interest rate at the time the contract was entered into governs. Graham v. Merchant, 43 Or. 294, 311-13, 72 P. 1088 (1903). Therefore, defendant was entitled to prejudgment interest at a rate of 6 percent per year for July 23 and 24, 1979, and 9 percent per year from July 25, 1979, until the date of the judgment. See Graham v. Merchant, supra; Illingworth v. Bushong, 61 Or.App. 152, 157, 656 P.2d 370 (1982), rev. allowed 294 Or. 613, 661 P.2d 549 (1983).

In its cross-appeal, defendant asserts that the trial court erred in dismissing its bad faith and tortious interference counterclaims. Defendant relied essentially on the following allegations for both counterclaims:

"18. Instead of performing its obligations under the insurance policy, plaintiff * * * filed this action, seeking a declaratory judgment cancelling said insurance obligations. Plaintiff * * * caused the Complaint herein to be filed without probable cause and with knowledge that the fire was not intentionally caused. * * *

"19. The action was brought for the sole purpose of delaying payment of defendant's claims. * * *

" * * *

"21. Plaintiff's dilatory tactics were made willfully, maliciously, and intentionally for the purpose of interfering with defendant's business, and preventing defendant from resuming its business, thereby disabling defendant from asserting valuable rights under the insurance policy, including the cost of replacing equipment and leasehold improvements, business interruption and extra expenses of continuing business thereby depriving defendant of the benefits of insurance coverage it intended to purchase when it paid the agreed premiums.

"22. Plaintiff's actions were willful and malicious or with reckless disregard for the rights of defendant. Exemplary damages should be assessed against plaintiff in the amount of $1,000,000.00."

In its bad...