Village Development Co. v. Filice

• Decision Date: 27 August 1974
• Docket Number: Nos. 6759,6596,s. 6759
• Citation: 90 Nev. 305,526 P.2d 83
• Parties: VILLAGE DEVELOPMENT CO., Appellant, v. Gennaro A. FILICE and Merle Filice, Respondents. Gennaro A. FILICE and Merle Filice, Appellants, v. VILLAGE DEVELOPMENT CO., a corporation, and G.R. Campbell, Respondents.
• Court: Nevada Supreme Court

Page 83

526 P.2d 83

90 Nev. 305

VILLAGE DEVELOPMENT CO., Appellant, v. Gennaro A. FILICE and Merle Filice, Respondents.

Gennaro A. FILICE and Merle Filice, Appellants, v. VILLAGE DEVELOPMENT CO., a corporation, and G.R. Campbell,

Respondents.

Nos. 6759, 6596.

Supreme Court of Nevada.

Aug. 27, 1974.

Rehearing Denied Nov. 5, 1974.

McDonald, Carano, Wilson & Bergin, Reno, for Village development co.

Cox, Cummins, Rinehart & Lamphere, Martinez, Cal., and Sinai and Sinai, Reno, for Gennaro and Merle Filice.

Breen, Young, Whitehead & Hoy, Chartered, Reno, for G. R. Campbell.

OPINION

GUNDERSON, Justice:

Appealing a judgment entered upon a jury verdict for $99,157.41 compensatory and $50,000 punitive damages, occasioned by selling respondents Gennaro and Merle Filice a residential building lot situated in the flood plain of a mountain stream, the appellant in Case No. 6759, Village Development Co., contends the district court erred in these ways, among others:

(1) in denying Village Development Co. a summary judgment after granting one to its sales agent, G. R. Campbell;

(2) in instructing the jury concerning the Filices' claim of negligence; and

(3) in permitting the jury to award punitive damages.

In addition to evidence of negligence imputable from Campbell, we think the record contains substantial evidence to show Village Development Co. negligently failed to warn the Filices that the proposed location of their home was unsafe and not the building site Village Development Co. contemplated when subdividing the land. Accordingly, perceiving no prejudical error in presenting negligence issues to the jury, we affirm the compensatory damage award. However, perceiving no misconduct of sufficient magnitude to warrant imposition of punitive damages, we reverse that portion of the judgment.

Second Creek, at Incline Village, Lake Tahoe, is usually quite narrow. However, according to studies one John Webster Brown made for Washoe County, and according to the Filices' expert witness Jones, the width of the stream will vary readically under various storm conditions of given 'return frequencies.' As the record explains, a 'return frequency' is the statistically calculated chance that a given run-off volume will occur. A 100-year storm would be expected once every 100 years; a 25-year storm, every 25 years. There would be a 4% chance of a 25-year storm, in any given year. These are merely statistics. A 5-year storm could occur every year for 5 consecutive years, or oftener.

Witness Brown's study included a calculation made approximately 100 feet upstream from the property Village Development Co. sold to the Filices, determining the creek would spread westerly from the mid-point of its bed, 56 and 39 feet under 100 and 25-year return frequencies, respectively. Using Brown's data, witness Jones calculated the same westerly spread at the Filice property. According to Jones, the entire area occupied by the Filice house, constructed on the property Village Development Co. sold them, lay within the drainageway for the 5-year storm. In other words, statistically, one cognizant of the danger might expect the home to be inundated on an average of once every 5 years.

Responsible officers of Village Development Co. knew at least generally of the danger. While employed as the corporation's vice president, Raymond Smith designed the subdivision. He described the central portion of the property, where respondents built their home, as being below the 'first terrace' adjacent to the street. Smith testified he believed the flood plain extended 'up to the first terrace,' and Jones confirmed this belief, testifying:

'This whole area in here, from somewhere near the rear property line to where the ground approaching the street evens up, has every appearance of what I would determine a creek bed, although I can certainly see that people investing in this property would think of the smaller 'v' perhaps as being just the creek bed, because this is the part of the whole width, which would be occupied by the water most of the time and, in fact, a small babbling creek coming down to the property.'

However, despite a westerly spread of more than 56 feet under the 100-year storm condition (almost equally bad in a 5-year storm), and despite Smith's knowledge of the area's flood plain character, Village Development Co. imposed no building restrictions other than one requiring that building plans be submitted to its Architectural Control Committee. Apparently, a county ordinance imposes a 30-foot setback requirement, applicable to the front of the property. The record reflects that the creek bed is actually in front of this setback line for most of its course through the property. The developer provided no warning of the condition on any document or map.

Knowing the flood hazard, Village Development Co. envisioned the highest possible site. Smith, its designer and vice president, testified he customarily designed lots with building sites in mind, and that for the property sold the Filices he contemplated construction on the 'terrace' adjacent to the road. However, admittedly he informed no one of this, although he recognized the potentiality of inundation from the creek. He said he considered that 'the building sites close to the road, in which the normal building site is located, would escape flood damage. " ¹ (To build on what Smith called the 'normal building site,' the Filices would have had to apply for a zoning variance, relieving them of setback requirements, another fact never revealed to them.)

Village Development Co.'s president, Arthur Wood, likewise testfied that although he believed the home would have escaped damage if built on the 'terrace' as he also thought advisable, he never told the Filices his thoughts concerning this proper building site. In short, the corporation's highest management personnel failed to warn of the danger although they well knew the Filices were planning to build in the flood plain, as evidence now to be summarized shows.

The record reflects that during a Christmas holiday at Lake Tahoe, the Filices met Campbell, the sales agent, and explained to him a desire for a building lot affording seclusion, tree cover, and a creek-side setting. About a week later, Campbell telephoned the Filices at their home in Orinda, California, telling them he had property he thought met their desires. Ultimately, the Filices purchased the property Campbell suggested, after he took them to it, directed their attention to the low, flat area beside the creek, and assured them that 'he had lived there for some years and that he had talked with other people and that the creek never varied more than a few inches, reason by season, year by year.'

The Filices retained a local architect to prepare plans. However, before construction, the plans had to be approved by Village Development Co.'s Architectural Control Committee, established pursuant to restrictions contained in every deed. When the Filices' plans were submitted, this committee consisted of Mr. Wood, Mr. Harold Tiller, and Mr. Leonard Bowser. Customarily, plans were primarily reviewed by Bowser, an employee of Village Development Co. who testified to being a licensed land surveyer in California and Nevada, and a member of the Nevada State Board of Registered Engineers. The explanation for Bowser's primary role in reviewing plans was his engineering background. The committee's approval was indicated with his initials. By virtue of the recorded restrictions, the committee had power to withhold approval upon reasonable dissatisfaction with location of the structure upon the building site. ² It seems that during its review, the Architectural Control Committee discussed the proposed location of the Filices' home. and Wood urged Bowser to tell them to build higher on the lot. ³ Although Bowser testified he did not recall this conversation with Wood, he remembered approving the Filices' plans. Village Development Co.'s former vice president, Smith, testified he believed an architectural review provision should take into account protection of a residence from a possible flood. Still, despite recognized potentiality of flooding to the property sold to the Filices, it seems clear the corporation's Architectural Control Committee approved their plans with no warning whatever.

On August 25, 1967, the Filice residence was destroyed by a flow of water carrying a great amount of mud, trees and other debris. In briefs and oral argument, Village Development Co.'s counsel dwell on the supposed fact that the particular storm which destroyed the dwelling was of unusual size. Yet, according to testimony in the record, had the house been inundated by any of the many floods reasonably to be anticipated, substantial destruction was to be anticipated, even without taking into account the inevitable debris such flood waters contain.

1. Where no basis exists to charge an employer, other than vicarious liability for the imputed negligence of its agent, courts often have held that a judgment on the merits in the agent's favor bars further action against the employer. Kraft v. Montgomery Ward & Co., 220 Or. 230, 315 P.2d 558, 348 P.2d 239, 248 (1959); Brink v. Martin, 50 Wash.2d 256, 310 P.2d 870, 871 (1957); Spruce v. Wellman, 98 Cal.App.2d 158, 219 P.2d 472, 474--475 (1950); Freeman v. Churchill, 30 Cal.2d 453, 183 P.2d 4, 8 (1947). Here, however, contrary to Village Development Co.'s contention, this rule could find no application; for as indicated above there is ample evidence of the corporaion's negligence, independent of any on the part of its agent Campbell. Cf. Eckleberry v. Kaiser Foundation Northern Hospitals, 226 Or. 616, 359 P.2d 1090, 1096--1097 (1961).

2. Village Development Co. further contends the teial court erred by refusing to give its proposed Instruction E, which contains language taken from Sections 352 and 353 of the American Law Institute's 'Restatement of...