Goodyear Tire & Rubber Co. v. Holmes

• Decision Date: 06 October 2008
• Docket Number: No. 07SC263.,07SC263.
• Citation: 193 P.3d 821
• Parties: The GOODYEAR TIRE & RUBBER COMPANY, Petitioner v. Gary S. HOLMES, Respondent.
• Court: Colorado Supreme Court

193 P.3d 821

The GOODYEAR TIRE & RUBBER COMPANY, Petitioner v. Gary S. HOLMES, Respondent.

No. 07SC263.

Supreme Court of Colorado, En Banc.

October 6, 2008.

Wells, Anderson & Race, LLC, Mary A. Wells, L. Michael Brooks, Jr., Sarah Smyth O'Brien, Ballard Spahr Andrews & Ingersoll, LLP, Roger P. Thomasch, Denver, Colorado. Garfield & Hecht, David L. Lenyo, Chad J. Schmit, Aspen, Colorado. Attorneys for Petitioner.

Holland & Hart LLP, Stephen G. Masciocchi, David L. Black, Denver, Colorado, Holland & Hart LLP, William W. Maywhort, Colorado Springs, Colorado, Attorneys for Respondent.

Sullan², Sandgrund, Smith & Perczak PC, Ronald M. Sandgrund, Leslie A. Tuft, Jennifer A. Seidman, Denver, Colorado, Attorneys for Amicus Curiae Homeowners Against Deficient Dwellings (HADD).

Benson & Associates PC, Jesse Howard Witt, Denver, Colorado, Attorney for Amicus Curiae Colorado Trial Lawyers Association.

Justice MARTINEZ delivered the Opinion of the Court.

I. Introduction

Gary Holmes's vacation home was damaged when a rubber hose that was part of an embedded heating system began to leak in 1993. After the hose continued to leak for several years, despite numerous repairs, Holmes replaced the entire heating system in 2001 and 2002. In a suit against the manufacturer of the hose, The Goodyear Tire & Rubber Company ("Goodyear"), Holmes sought and recovered the costs of replacing the heating system. Holmes also moved for prejudgment interest under section 5-12-102, C.R.S. (2008), as of the date of the installation of the hose in 1991, but the motion was denied. On appeal, the court of appeals held that Holmes could recover prejudgment interest on replacement costs damages from the installation of the heating system in 1991. Holmes v. Goodyear Tire & Rubber Co., No. 04CA2177, slip op. at 20, 2007 WL 537760 (Colo.App. Feb.22, 2007) (not published pursuant to C.A.R. 35(f)).

We granted certiorari and we now reverse. We hold that where the plaintiff recovers replacement costs damages, prejudgment interest accrues from the date when he incurred the replacement costs. Replacement costs damages are measured as of the date of replacement, which occurs some time after the plaintiff suffers an injury to his property. Therefore, the damages award accounts for the time value of money between the time of the injury and the time at which damages are measured. Consequently, the plaintiff loses the time value of money only after he incurs the replacement costs. Therefore, the date when the plaintiff incurs the replacement costs is when his money or property is "wrongfully withheld," and prejudgment interest under section 5-12-102(1)(b) accrues from that date.

II. Facts and Procedural History

In 1991, Holmes had a hydronic radiant heating and snowmelt system installed at his vacation home. The heating system was manufactured and sold by Heatway Radiant Floors and Snowmelting ("Heatway")¹ and it included Entran II rubber hoses, designed and manufactured by Goodyear. The heating system circulated hot fluid through the Entran II hoses embedded under the floors and in walls, thereby heating the home and melting the snow on the sidewalk and driveway.

In the winter of 1993-1994, the heating system in Holmes's home began to leak, and it leaked frequently in the subsequent heating seasons. Holmes had the heating system repaired numerous times, but the leaks continued. In 2001 and 2002, Holmes replaced the heating system in its entirety. Holmes calculated the costs of the replacement at $1.3 million. In addition, he incurred out of pocket expenses related to the replacement.

In the meantime, Holmes filed an action for damages against Heatway and later added claims against Goodyear. The trial court granted summary judgment in favor of Goodyear, but the court of appeals reversed the order and remanded for trial. Holmes v. Goodyear Tire & Rubber Co., No. 99CA0843, slip op. at 7 (Colo.App. Nov. 2, 2000) (not published pursuant to C.A.R. 35(f)).

On remand, Holmes filed an amended complaint asserting, as pertinent here, claims against Goodyear for negligence, strict products liability for design defect, and violation of the Colorado Consumer Protection Act ("CCPA"). Before trial, judgments were entered against Goodyear in several other Entran II cases. Upon Holmes's motion for partial summary judgment, the trial court ruled that Goodyear was collaterally estopped from relitigating the issues of negligence and the defective nature of the Entran II hose. Accordingly, the jury trial in this case proceeded to address the CCPA claim and to determine the issues of causation and damages with respect to the negligence and strict liability claims.

The jury returned a verdict for Goodyear on the negligence and CCPA claims and found for Holmes on the strict liability design defect claim. The jury awarded Holmes $577,295 for "reasonable repair and/or replacement costs" and $55,642 for "other reasonable costs or losses." The jury apportioned twenty percent of the fault to Holmes, twenty percent to Goodyear, and sixty percent to Heatway and another non-party at fault. The trial court then entered a judgment against Goodyear in the amount of $126,587.40, representing Goodyear's share of the replacement costs damages and the damages for other costs and losses.

Holmes subsequently filed a post-trial motion seeking $209,788 in prejudgment interest. In his motion, Holmes argued that the court should award prejudgment interest from the date when the claim first arose and not from the date when Holmes paid to repair or replace the system. Therefore, Holmes requested prejudgment interest from the date of installation of the Entran II hose in his home. The trial court awarded interest from the time of installation of the heating system. However, because the court ruled on the motion after the time limit provided for in C.R.C.P. 59(j), the motion was deemed denied by operation of that Rule.

Holmes appealed, arguing again that prejudgment interest should be awarded from the date of installation of the heating system. The court of appeals held that Holmes was entitled to prejudgment interest and that because the trial court's order purporting to award the interest was void, the case had to be remanded to the trial court to amend the judgment to include prejudgment interest. Holmes, No. 04CA2177, slip op. at 16. With respect to replacement costs damages, the court of appeals relied on our decision in Mesa Sand & Gravel Co. v. Landfill, Inc., 776 P.2d 362 (Colo.1989), and several court of appeals' cases, and held that "under the particular facts of [the] case, prejudgment interest ... should run from the date the defective hose was installed, because it was the date Holmes was wronged." Holmes, No. 04CA2177, slip op. at 20. While the court expressed concern that "the broad construction adopted by [Mesa and the other cited] cases is to some extent in tension with the plain language of section 5-12-102(1)(b)," the court concluded it was not at liberty to depart from our interpretation of the statute in Mesa.² Id. at 20-21.

We granted certiorari to review the court of appeals' ruling concerning prejudgment interest on replacement costs.³

III. Analysis

Prejudgment interest in actions that do not involve personal injury is governed by section 5-12-102, C.R.S. (2008). Subsection (1)(b) provides a statutory rate of interest for money or property wrongfully withheld: "Interest shall be at the rate of eight percent per annum compounded annually for all moneys or the value of all property after they are wrongfully withheld or after they become due to the date of payment or to the date judgment is entered, whichever first occurs." § 5-12-102(1)(b), C.R.S. (2008) (emphasis added). Thus, prejudgment interest accrues upon "wrongful withholding" of money or property. In the case before us, we must determine when "wrongful withholding" occurred.

Statutory interpretation is a question of law that we review de novo. Mishkin v. Young, 107 P.3d 393, 396 (Colo.2005). When the statutory language is unambiguous, we give effect to the plain and ordinary meaning of the statute without resorting to other rules of statutory construction. Stamp v. Vail Corp., 172 P.3d 437, 442-43 (Colo. 2007). Although the term "wrongful withholding" may be difficult to apply in some circumstances, its plain language meaning is clear. "Wrongful withholding" indicates that the aggrieved party lost or was deprived of something to which she was otherwise entitled. Therefore, despite the parties' disagreement on this point, we perceive no ambiguity.

We had opportunity to consider section 5-12-102(1)(b) in Mesa, 776 P.2d at 363. Some courts, including the court of appeals below, have subsequently understood Mesa to stand for the proposition that the "wrongful withholding" occurs on the date the party is "wronged."⁴ However, this reliance is misplaced, as we have never before had opportunity to address the distinction between the "wrong" and the point of "wrongful withholding." In contrast, the issue in Mesa was whether the prevailing party in a breach of contract case was entitled to recover prejudgment interest under section 5-12-102(1)(b).⁵ Mesa, 776 P.2d at 362.

In Mesa, an excavation company and a customer entered into a contract whereby the company was required to excavate gravel from a specified site for the customer. Id. at 363. The customer later discovered that the company was not excavating the site fully, in violation of the contract. Id. The customer prevailed in a breach of contract suit and requested prejudgment interest. Id. The court of appeals held that the customer was not entitled to recover prejudgment interest under section 5-12-102(1)(b). Id.

Looking at language of section 5-12-102(1)(b), we first considered whether "wrongful withholding" required proof of tortious action. Id. at 364. After we concluded that tortious conduct was not necessary, we addressed whether a mere breach of...