Ferraro v. Southern Cal. Gas Co.

• Decision Date: 11 February 1980
• Citation: 102 Cal.App.3d 33,162 Cal.Rptr. 238
• Court: California Court of Appeals Court of Appeals
• Parties: Anthony FERRARO, Jack A. Ferraro, Mary C. Ferraro, George C. Ferraro, Nedra A. Ferraro, Geraldine A. Moreno and Harry W. Moreno, Plaintiffs, Appellants and Cross-Respondents, v. WILLIAM LYLES CONSTRUCTION COMPANY, Southern California Edison Company and Southern California Gas Company, Defendants, Respondents and Cross-Appellants. Civ. 53972. *

Page 238

162 Cal.Rptr. 238

102 Cal.App.3d 33

Anthony FERRARO, Jack A. Ferraro, Mary C. Ferraro, George C. Ferraro, Nedra A. Ferraro, Geraldine A. Moreno and Harry W. Moreno, Plaintiffs, Appellants and Cross-Respondents, v. WILLIAM LYLES CONSTRUCTION COMPANY, Southern California Edison Company and Southern California Gas Company, Defendants, Respondents and Cross-Appellants.

Civ. 53972. ^*

Court of Appeal, Second District, Division 5, California.

Feb. 11, 1980.

Hearing Denied April 17, 1980.

Lawrence J. Moreno, Beverly Hills, and Stephen R. Cosel, Los Angeles, for plaintiffs, appellants and cross-respondents.

Cohen, England, Whitfield & Osborne and Thomas B. Osborne, Oxnard, and Lawler, Felix & Hall, Erwin E. Adler and Anthony R. Delling, Los Angeles, for defendant, respondent and cross-appellant Southern California Gas Co.

STEPHENS, Associate Justice.

This is an appeal arising out of a suit for property damages. A judgment of zero dollars in damages was entered on behalf of appellants following a jury verdict of $91,081.12 in their favor due to deductions for a prior settlement at the end of the liability phase of the trial with the major tortfeasors, and for a previous insurance settlement and subrogation agreement between appellants and their insurance carrier. Appellants contend that the damages awarded were inadequate as a matter of law, that the court erred in refusing to give a "collateral source" jury instruction and that the court abused its discretion by failing to set aside a stipulation between the parties which allowed $65,500 to be deducted from the verdict as representing fire insurance proceeds. Respondent Southern California Gas Company (hereinafter Gas Company), the only defendant remaining at the damage phase of the trial William Lyles Construction Company (hereinafter Lyles) and Southern California Edison Company (hereinafter Edison) having settled with plaintiffs at the end of the liability phase cross-appeals on the failure of the trial court to award it costs and the awarding of costs, instead, to appellants.

The property damage claim filed by appellants in early February 1976 arose out of an explosion and fire which destroyed three structures in Oxnard beach on September 4, 1974. Appellants had purchased the property about one year before the explosion for $64,225 for the land, a two-bedroom and den house built in the 1920's or 1930's and a store built in the early 1940's which had an attached storeroom with a bachelor apartment overhead. Existing leases entitled appellants to receive a total of $560 per month in rent for the three units. Appellants' beachfront property is situated where Oxnard beaches "Hollywood-By-The-Sea" and "Hollywood Beach" meet. A zoning ordinance was passed some time prior to appellants' acquisition of the property which had the effect of making the structures on the land a nonconforming use and which prevented appellants from rebuilding all three structures on the same location.

On September 4, 1974, a backhoe operator was working under Lyles supervision, who had contracted to lay a new electrical line for Edison near the appellants' property. The backhoe operator accidently pulled loose a gas service connection which resulted in gas percolating into the ground. It eventually entered the store and ignited. The resulting explosion destroyed the structures.

After the explosion, appellants settled their claims with their fire insurance carrier, Safeco Insurance Company. They received the upper limit for damage to structures and trade fixtures, $70,000 and $2,600 for damage to personal property. As part of their settlement with Safeco, appellants subrogated their right to recovery in such amounts as follows: "IN CONSIDERATION OF the payment of this sum, I/we hereby subrogate the company, to the amount of such payment, to all my/our rights of recovery for such loss or expense and I/we hereby further agree, upon demand, to execute all documents required of me/us and to cooperate with said company in prosecuting all actions to effect such recovery, and the company is hereby authorized to commence and prosecute any necessary action or proceedings in my name, or in its own, or in the name of any person or persons to whom it may assign its claim hereunder, for the purpose of effecting collection of the amount above mentioned."

Thereafter, on August 18, 1975, Safeco filed its complaint against Edison, Lyles and the Gas Company. On February 6, 1976, appellants also filed a complaint against Edison and Lyles and various other defendants. The Gas Company was added as a "Doe" defendant about six months later. Consistent with their subrogation agreement with Safeco, appellants alleged in their complaint that they had received insurance benefits in the amount of $70,000 from Safeco. They did not, however, attempt to join Safeco in the action, nor did Safeco seek to join. Defendants in two other actions based upon the same explosion (Davis Communications, Inc. and Oxnard Cablevision, Inc.) moved on May 16, 1977, to have their cases consolidated, which motion was granted. Trial began on September 14, 1977. At the conclusion of the liability phase, the jury determined that Edison and Lyles, its contractor, were 85 percent at fault and that the Gas Company was 15 percent at fault. At the beginning of the damage phase of the trial, appellants settled their claim with Edison and Lyles for $35,000. The damage phase was continued as to the remaining defendant, the Gas Company, with extensive testimony as to fair market value of the property and the various factors utilized to make that determination, which included such factors as comparable sales, rental income, reconstruction cost, the impact of the zoning restrictions, appreciation from market forces and what the highest and best use of the property would be.

After approximately three and one-half weeks of testimony in the damages phase of the trial, counsel for the Gas Company began his closing argument to the jury. After reviewing the claims of damages, he noted that the evidence had shown that "$70,000.00 has already been received" by appellants. He therefore contended that there was a problem with "double recovery." Counsel for appellants objected and there was an in-chambers conference during which the trial judge noted that appellants had raised the issue at the outset of the litigation by putting the fact of their insurance recovery in their complaint. However, it became clear that what appellant's counsel was particularly concerned about was that respondent should not be allowed to make statements that tended to equate the receipt of insurance proceeds with the receipt of workers' compensation benefits. Therefore, it was agreed that the judge would caution the jury that the two were not the same. At this time appellant's counsel also asked the judge to give along with the cautionary statement a definition of collateral source. The court declined, saying that he would wait until such an instruction was actually offered. Once back in the courtroom, the court instructed the jury that, "[t]he objection was that the argument to the extent that it seeks to compare the legal principles which apply to workmen's compensation to a situation involving fire insurance is incorrect, and the Court sustains the objection." Then, without objection from appellants, the Gas Company argued to the jury that appellants, having received $70,000 worth of insurance proceeds, "are not entitled to get paid for the same thing twice."

The following court day, a three-day weekend intervening, appellants sought to preclude the Gas Company from further arguing about the receipt of insurance benefits and asked the court to include an instruction to the jury defining collateral source and instructing it that the jury should make no deduction for the recovered insurance proceeds. ¹ When the trial court refused to give such an instruction, a stipulation was entered into by counsel for appellants and respondent wherein it was agreed that the court could deduct the sum of $65,500 from any damage verdict rendered in favor of appellants: "The jury shall fix the full amount of damages as to Morenos et al. without any deduction for the $70,000 fire insurance proceeds. The court shall then deduct the sum of $65,500 ($70,000 - $4,500) and the judgment shall be entered for the resulting amount. The $4,500 represents the costs to Morenos et al. in recovering the $70,000." The judge accepted the stipulation. When argument resumed before the jury, counsel for the Gas Company retracted his previous argument to the jury regarding the problem of double payment, explaining, ". . . On Friday in discussing the damage suffered by the landowners, the Ferraros and Morenos, I asked you to reduce whatever damages you found by the $70,000 of insurance that was paid to them. You are no longer to do that. [ P] You are to find what you determine to be the damages suffered by the Morenos and the Ferraros, and with respect to that insurance coverage or insurance payment the court at the appropriate time in an appropriate manner takes that into consideration." ² After lengthy deliberations, the jury returned with a verdict in appellants' favor of $91,081.12, but the ultimate judgment entered on December 19, 1977, was zero due to the previously mentioned deductions for insurance proceeds and settlement.

On January 30, 1977, the court heard appellants' motion for a new trial and motion to tax costs, as well as respondent's motion to tax costs. On February 2, 1977, the trial court denied appellants' motion for a new trial and respondent's motion to tax costs, but granted appellants' motion to tax costs. This appeal and cross-appeal followed.

Prior to filing a respondent's brief, respondent filed a motion to dismiss the appeal in which it argued that appellants had split their cause of action and that, therefore, their appeal should be dismissed. On July 18, 1979, we...