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COURT OF APPEALS DECISION DATED AND FILED August 3, 2011 A. John Voelker Acting Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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APPEAL and CROSS-APPEAL from a judgment of the circuit court for Waukesha County: Ralph m. ramirez, Judge. Affirmed.
Before Brown, C.J., Neubauer, P.J., and Kessler, J.
¶1 PER CURIAM. This is an appeal and a cross-appeal in a case involving property loss due to a fire in a warehouse storage building owned by Starla Development, LLC. Starla and West Bend Mutual Insurance Company appeal from a judgment in favor of Great Lakes Dart Mfg. Co., Inc. and Northern Insurance Company of New York, arguing that dismissal was required because there are multiple possible causes of the fire and there is insufficient evidence of negligence and causation. Great Lakes and Northern cross-appeal, challenging the amount of the damages the jury awarded. We affirm the judgment.
¶2 Lawrence W. Katz formed Starla Development,
LLC in 1999 for the purpose of purchasing the building that is the subject of
this appeal. Katz, fifty percent owner
of Starla Development, was the person who knew the most about the building
because, prior to purchasing it in 2001, Katz had been employed by the previous
owners of the building and had worked in the building “virtually every day”
from 1990 to 1999.
¶3 On December 15, 2004, a fire occurred at the
building. At the time of the
fire, Great Lakes, one of Starla’s tenants, stored game tables and equipment in
the building. Northern Insurance, Great
Lakes’ insurer, paid Great Lakes $815,318 to replace the inventory lost as a
result of the fire.
¶4 Subsequently,
Great Lakes and Northern sued Starla and its insurer, West Bend Mutual, for the
losses sustained as a result of the fire.
¶5 Starla
and West Bend moved the court, in limine, to preclude any inference that Starla
had been negligent or that any conduct on the part of Starla was a cause of the
fire. They argued that Great Lakes and Northern
had not produced, and would not produce, any evidence of the cause of the fire,
and that there were multiple possible causes of the fire, several of which
would not impose liability on Starla and West Bend. The motion was based upon Merco
Distribution Corp. v. Commercial Police Alarm Co., Inc., 84 Wis. 2d
455, 267 N.W.2d 652 (1978).
¶6 A
four day trial began on February 16, 2010. Great Lakes and Northern contended that the
fire was electrical in origin. Katz and
several other witnesses testified in support of their claim.
¶7 In
2002, Katz asked for a tax reassessment on the building because, as he put it,
“[v]irtually every metal surface and support in the building is rusted and/or
corroded to the extent that replacement is needed within the near future.” Katz wrote a letter in 2002 to his Starla partners
to share with them what he planned to tell the tax assessor. In the letter, he stated that the over one-half
million dollar assessment was equal to or substantially less than what Starla
would have to spend to make the building usable:
[G]iven the purchase price of the property and contents, some $160,000 in December of 2001, and the tremendous costs in bringing the structure and land into usable condition, it is our firm belief that the assessed valuation of the building by your office in the sum of $509,700 is equal to or substantially less than the cost we anticipate having to spend to bring the building into usable habitable condition.
¶8 Great
Lakes Dart salesman Nicholas Voden testified that in 2004, when he was
considering leasing storage space in the building, he set up a meeting with
Katz in which he specifically asked about the roof and Katz told him “it is
new.” Katz admitted in his testimony
that he did not tell Voden that the roof had failed.
¶9 City
of Muskego tax assessor, Laura L. Mecha, testified that her department received
a letter from Katz disputing the building’s assessment; attached to Katz’s letter
was a construction company’s proposal for work to bring the building up to a useable
condition. Among a list of projects, the
proposal included the need to “[r]epair electrical and piping feeds.”
¶10 On
April 30, 2002, Mecha and the city’s mayor met with Katz to consider reassessment
and tour the building. Katz testified
that he was truthful to Mecha when he stated that the building was in an unusable
condition and would require more money than its assessed value to make it
usable.
¶11 After
this meeting, Starla’s 2002 tax assessment value for the building was reduced
from over one-half million dollars to zero.
Mecha testified that one of the factors she considered in reducing the
assessed value of the building to zero was the condition of the electrical
system.
¶12 In
June 2002, despite Katz’s claimed unusable condition of the building, Starla began
leasing the building out to a variety of tenants.
¶13 In
August 2002, Katz wrote a letter to his two partners in which he stated that
“[o]ur insurance coverage is effective June 11th, 2002. Since that date we have had HVAC, electrical,
plumbing, roofing, and other assorted problems with the building.”
¶14 In
2003, Mecha became aware that Katz was putting the building to commercial
use. She said, “We were concerned in
that, you know, here the building was led to believe to be not functional. It was being utilized, so we raised [] the
assessment [from zero the year before to $257,200].”
¶15 Thereafter,
in April 2003, Katz called the assessor’s office to complain about the raised
assessment. Stuart Hamel, a contracted
commercial appraiser within the office, met with Katz. Among other building issues, Katz represented
to Hamel that “the electrical was shot.” Hamel subsequently lowered the assessment from
$257,200 to $97,500.
¶16 Zarko
Pelicaric, a tenant in Starla’s warehouse from July 2004 until the time of the
fire, testified that he observed lights located on the west wall of the
warehouse sparking during rain events “many times; not just once or twice,
probably a number of times.” He further
testified that he informed Katz about the sparking lights.
¶17 Michael
McFayden, a delivery truck driver, testified that he was at the building on
December 15, 2004, at the time the fire broke out. He testified that before the fire broke out,
he was walking through the building and heard “like a snapping sound, like a
piece of plastic breaking or a loud click.” At that time the lights “went off briefly” and
then came back on. Shortly after he left
the building and as he was pulling away with his tractor, something caught his
eye that “looked like a fire.” He went
to take a look and could “see there was a fire in the building towards the
ceiling.”
¶18 Michael
Quick, a special agent with the Department of Justice, Bureau of Alcohol, Tobacco,
Firearms and Explosives, testified that he eliminated all other possible causes
of the fire except electrical.
¶19 Greg
Eggum, a fire investigator for EFI Global, testified that “this fire was caused
by a failure in the light or the electrical system or a combination of it all
in the southwest wall, second bay.” He
further testified that in “[a] large fire such as this, it is not uncommon that
the element that started the fire is destroyed, gone, or disappeared, and
cannot be examined by any credible engineer.”
¶20 At
the close of trial, the jury found both sides to be negligent: Starla, sixty percent negligent and Great
Lakes Dart, forty percent negligent. The
jury also found each side’s negligence was a cause of the damage to Great Lakes
Dart’s property. It awarded Great Lakes
Dart and Northern $803,000 to compensate for damages incurred as a result of
the December 15, 2004 fire.
Standard of Review
¶21 Our
review of a jury’s verdict is narrow. Betterman v. Fleming Cos., Inc.,
2004 WI App 44, ¶15, 271 Wis. 2d
193, 677 N.W.2d 673. We will
sustain a jury verdict if there is any credible evidence to support it. Id. In applying this narrow
standard of review, we consider the evidence in a light most favorable to the
jury’s determination. Id. It is the jury’s role, not an appellate court’s,
to balance the credibility of witnesses and the weight given to the testimony
of those witnesses. Id. To that end, we
search the record for credible evidence that sustains the jury’s verdict, not
for evidence to support a verdict that the jury could have reached but did not.
Id.
¶22 The
standard of review in this case is even more stringent because the circuit
court approved the jury’s verdict by denying all motions after the verdict. See id.,
¶16. We afford special deference to a
jury determination in those situations in which the trial court approves the
jury’s finding. Id. In such cases, we will not overturn the jury’s
verdict unless there is such a complete failure of proof that the verdict must
be based on speculation. Id.
Law and Discussion
Starla and West Bend’s Appeal
¶23 The
elements of a cause of action for negligence are (1) a duty of care on the part
of the defendants, (2) a breach of that duty, (3) a causal connection between
the conduct and the injury, and (4) an actual loss or damage as a result of the
injury. Transporation Ins. Co., Inc. v. Hunzinger Constr. Co., 179
Wis. 2d 281, 293, 507 N.W.2d 136 (Ct. App. 1993).
¶24 If
defendant’s conduct forseeably created an unreasonable risk to others,
defendant was negligent. See Morgan v. Pennsylvania Gen. Ins. Co., 87 Wis. 2d 723, 732, 275 N.W.2d 660 (1979).
¶25 The
existence of negligence is a mixed question of law and fact. Id. As
a general rule, negligence is a jury question. Id. The
trial court, as well as an appellate court, however, has the authority to
decide the preliminary question of law of whether a jury question on the issue
of negligence has been presented. See id.
at 732-33. To hold that a person
or entity is not negligent as a matter of law, the court must be able to say
that no properly instructed, reasonable jury could find, based upon the facts
presented, that the defendants failed to exercise ordinary care. See id.
¶26 The
test of cause in Wisconsin is whether the defendant’s negligence was a
substantial factor in contributing to the result. Merco, 84 Wis. 2d 458. There may be more than one substantial
causative factor in any given case. Id. at
459. Apportionment of negligence is also
generally a jury question. Morgan,
87
Wis. 2d at 736. Causation is a fact; the
existence of causation frequently is an inference to be drawn from the
circumstances by the trier of fact. Merco,
84
Wis. 2d at 459.
¶27 Starla and West Bend argue that Great Lakes
and Northern failed to introduce sufficient credible evidence of both the
negligence and causation elements of the negligence cause of action. Starla and West Bend cite to a
myriad of cases to support their position that there was insufficient evidence
of Starla’s negligence and the cause of the fire; we are not persuaded. There
was sufficient credible evidence of ongoing electrical problems up and to the
time of the fire; it was reasonable for the jury to find that Starla, as
the owner of the building, failed to exercise ordinary care and was therefore
negligent in its maintenance of the building’s electrical components. See Morgan, 87 Wis. 2d at 732.
¶28 With regard to cause, Starla and West Bend insist that there were multiple possible causes of the fire, several of which would not impose liability on Starla and West Bend and, therefore, Merco instructs that we must hold as a matter of law that no jury could reasonably find that Starla’s negligence caused the fire. We disagree; this is not a Merco case.
¶29 In Merco, an alarm company contracted to provide burglar alarm services to Merco Distributing Corporation. Merco, 84 Wis. 2d at 456. Merco was in charge of setting the alarm at closing. Id. at 457. Testimony was that it had done so. Id. The alarm company’s normal procedure, if it does not receive a closing signal from a customer, is to call the customer’s place of business to see if someone was working late. Id. If no one answers, it then calls the persons on a list provided by the customer to notify the customer that the alarm has not been set. Id. The alarm company called the client building but did not call anyone else. Id.
¶30 Sometime
between 5:00 p.m. December 4 and 8:00 a.m. December 5, Merco’s warehouse was
burglarized. Id. at 458. At 6:25 p.m.
on December 4, the alarm company received notice that the telephone lines that
connected Merco’s alarm system, as well as those of several other customers, to
the alarm company’s office, were out of order. Id. at 457. After learning that the telephone lines were
out, the alarm company made no effort to contact Merco employees. Id. The
telephone line breakdown was the result of two days of steady rain. Id. So
many lines were and had been out of
order that the alarm company’s employees were overworked and unable to follow
the normal customer notification procedures.
Id. at 457-58.
¶31 After
being burglarized, Merco successfully sued the alarm company for its loss. There was nothing in the trial court record
to indicate either when the burglary occurred or when the phone lines were
repaired. Id. at 459. The supreme court speculated as to
the possible causation scenarios and ultimately concluded that because there was
no credible evidence upon which the trier of fact could base a reasoned choice
between possible inferences, any finding of causation would be in the realm of
speculation and conjecture. Id. at
459-61.
¶32 The
supreme court held that Merco failed
to remove the issue of causation from the realm of speculation by establishing
facts affording a logical basis for the inference that the loss occurred
because the alarm company failed to notify Merco that the alarm system was not
functioning. Id. at 460-61. The court reversed the judgment and remanded
with directions to the trial court to enter judgment in favor of the alarm
company and to dismiss Merco’s complaint.
Id. at 461.
¶33 Here, unlike in Merco, the jury was not left to speculate by being presented with possibilities of cause with no basis to choose among those possibilities. Rather, the jury had before it a plethora of credible evidence to establish that the cause of the fire was electrical, even if there was no direct evidence of exactly what in the electrical system caused the fire: in 2002, Katz described the building in a letter stating, “Virtually every metal surface and support in the building is rusted and/or corroded to the extent that replacement is needed within the near future”; in 2002, a construction company’s proposal for work to bring the building up to a useable condition included the need to “[r]epair electrical and piping feeds”; Muskego’s tax assessor testified that one of the factors she considered in reducing the assessed value of the building to zero was the condition of the electrical system; in 2003, Katz represented to a commercial appraiser from the tax assessor’s office that “the electrical was shot”; a tenant in the building from July 2004 until the December 15, 2004 fire testified that during rain events he would often see lights sparking and that he had reported this to Katz; on the date of the fire, moments before the fire started, a delivery truck driver saw problems with the building lights and heard a snapping sound; a fire investigator testified that the fire was caused by a failure in the light or the electrical system or a combination of it all, and further testified that it is not uncommon that the element that started the fire is destroyed, gone, or disappeared, and cannot be examined by any credible engineer; and a special agent with the Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives testified that he eliminated any causes of the fire other than electrical.
¶34 Again,
the question on appeal is whether the evidence is sufficient to support the
finding of causation made by the trier of fact. Id. at 459. Upon this record, it plainly is.
Great
Lakes’ and Northern’s Cross-Appeal
¶35 Maryln
Hempel, part owner of Great Lakes, testified on behalf of Great Lakes and
Northern. Hempel used a chart to explain
the damages calculations she performed to the jury. In the chart, Hempel included $1,443,317 as
her calculation for the fair market value of destroyed property (i.e., cost of
goods x 150% markup = $865,990 + cost of goods, $577,327 which equals the total
marked up value of goods, $1,443,317). Hempel
testified that Great Lakes’ large customers, like Target, JCPenney and Dunhams,
had their own warehouses which had already been fully stocked with Great Lakes’
goods for the Christmas season. She further testified that even though the
fire occurred only ten days before Christmas, Great Lakes’ own warehouse, plus
two leased warehouses, were full of inventory. Hempel testified that after the fire, Great
Lakes was able to replenish its inventory so that it was able to meet all
orders for the next year’s Christmas holiday season. Finally, Hempel admitted that the only
nonspeculative information to prove lost sales were canceled orders for six
game tables due to the fire.
¶36 Curtis
Reynolds, a certified public accountant, testified on behalf of Starla and West
Bend. Based upon his review of Hempel’s
deposition testimony and the documents produced by Great Lakes and Northern in
support of their damage claim, it was his opinion that an award of $803,000 would
put Great Lakes and Northern back in the position that they would have been in
if the fire had not occurred. He
testified that if Great Lakes and Northern were paid for the marked-up value of
the goods, “they would be paid twice for the same loss” and this would put them
in a position that is better than they would have been in if the loss had not
occurred. Specifically, Reynolds
explained why Great Lakes’ calculations represented a “double dip or double
accounting”:
[T]he cost of the product and the freight … pays them to replace the product and bring it back into their possession and gives them the ability to sell that product to their customers again. And if they make that sale to their customers … then they’ve had the benefit of that sale and have earned their markup.
And if they’re paid for the retail markup here in addition to them making the sales, there’s a double dip or double accounting.
¶37 Again,
there was sufficient credible evidence to support the jury’s damages award. It appears the jury accepted Reynold’s
opinion that an award of $803,000 would put Great Lakes and Northern back in
the position that they would have been in if the fire had not occurred. The jury was given an appropriate instruction
telling it that compensation for destroyed inventory “is measured by the fair
market value of the property at the time and place of its destruction.” This permitted the jury to award lost profits,
but pursuant to the instruction, Great Lakes and Northern had to show that
there were willing buyers at the time. Great
Lakes and Northern did not present evidence to the amount of lost sales
claimed. Besides the proof of lost
profit for six game tables, they offered no proof other than Hempel’s
speculation of lost sales.[1]
¶38 From
the evidence before it, the jury could have reasonably concluded that Great
Lakes’ and Northern’s claimed markup included the costs of goods sold, plus
fifty percent of the cost of goods sold, in addition to the costs of the goods
themselves, that this was actually counting the same thing twice and putting Great
Lakes and Northern in a better position than they would have been in if no fire
occurred.
Conclusion
¶39 On
all issues before the jury there is sufficient credible evidence to support its
verdict.
¶40 No
costs awarded to either party.
By the Court.—Judgment
affirmed.
This opinion will not
be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] Hempel’s “Summary of Damages” chart also listed “[a]ccounting costs for calculating the loss” to be $50,318. It was reasonable for the jury to reject this unsupported calculation; we need say no more about this.