Patton v. Mut. of Enumclaw Ins. Co.

296 Or.App. 266

438 P.3d 441

Lowell E. PATTON, Plaintiff-Respondent,

v. MUTUAL OF ENUMCLAW INSURANCE COMPANY, a Washington corporation, Defendant-Appellant,andHopp Insurance Agency, Inc., an Oregon corporation, and Randy W. Hopp, Defendants.

A162134

Court of Appeals of Oregon.

Argued and submitted March 28, 2018.

February 27, 2019

Thomas M. Christ argued the cause for appellant. Also on the briefs were Julie A. Smith and Cosgrave Vergeer Kester LLP, Portland.

Kathryn H. Clarke argued the cause and filed the brief for respondent.

Before Ortega, Presiding Judge, and Powers, Judge, and Brewer, Senior Judge.

ORTEGA, P. J.

This insurance coverage case is before us for a third time. In the first appeal, we reversed a judgment that awarded plaintiff damages on his breach of contract claim, and remanded for a new trial. Patton v. Mutual of Enumclaw Ins. Co. , 238 Or. App. 101, 242 P.3d 624 (2010), rev. den. , 349 Or. 654, 249 P.3d 542 (2011) ( Patton I ). In the second appeal, we reversed and remanded the case again because the trial court erred in granting a motion for summary judgment by defendant Mutual of Enumclaw Insurance Company (MOE). Patton v. Mutual of Enumclaw Ins. Co. , 266 Or. App. 154, 337 P.3d 874 (2014), rev. den. , 337 Or. 874 (2015) ( Patton II ). On that second remand, the case proceeded to trial, and the jury returned a verdict in favor of plaintiff, awarding him $ 2.556 million in damages. The court entered a judgment awarding damages in that amount, along with $ 1.023 million in prejudgment interest and $ 1.382 million in attorney fees.

MOE appeals and raises four assignments of error, all of which challenge the award of prejudgment interest and attorney fees. We reject, without written discussion, MOE’s third and fourth assignments of error—that is, its challenges to the court’s award of attorney fees and costs—and write only to address MOE’s first two assignments of error. MOE first asserts that the trial court erred in ruling that issue preclusion barred it from challenging plaintiff’s entitlement to prejudgment interest. Second, MOE argues that the trial court erred in concluding that plaintiff was entitled to prejudgment interest under ORS 82.010(1)(a) because the amount owed and the date from which interest should run were not easily ascertainable. We agree, based on the circumstances of this case, that the trial court erroneously applied the doctrine of issue preclusion. Further, in reviewing the court’s award of prejudgment interest for legal error, Tasaki v. Moriarty , 233 Or. App. 51, 55, 225 P.3d 68 (2009), we conclude that the trial court lacked a basis on this record for an award of prejudgment interest because the record does not establish a readily ascertainable date from which such interest should run. Accordingly, we reverse the award of prejudgment interest and otherwise affirm the judgment.

We offer a limited description of the relevant procedural and background facts for purposes of this appeal, but a more detailed recitation of the facts can be found in Patton I and Patton II . Patton I , 238 Or. App. at 101, 242 P.3d 624 ; Patton II , 266 Or. App. at 154, 337 P.3d 874.

Plaintiff’s house burned down on November 8, 2001. Patton I , 238 Or. App. at 105, 242 P.3d 624. He notified MOE that he intended to take advantage of the policy’s replacement cost endorsement and that he was considering rebuilding. Id. That endorsement stated, in part, that, in the event of loss, MOE agreed to pay

"not more than the lesser of:

"1. The replacement cost of that part of the building damaged for like construction and use on the same premises; or

"2. The necessary amount required to repair or replace the damaged building."

Id. at 104, 242 P.3d 624. The policy further explained how covered losses were to be settled:

"(4) We will pay no more than the actual cash value of the damage unless:

"(a) actual repair or replacement is complete; or

"(b) the cost to repair or replace the damage is both:

"(i) less than 5% of the amount of insurance in this policy on the building; and"(ii) less than $ 2,500.

"(5) You may disregard the replacement cost settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis."

Id.

Plaintiff received several replacement cost estimates—between $ 1.544 million and $3.858 million—but MOE reminded plaintiff that, under the policy, he could not recover the replacement cost until the reconstruction was complete and that plaintiff had two years from the date of loss to bring action against MOE. Id. at 105-06, 242 P.3d 624. Nevertheless, MOE paid plaintiff $ 1.14 million on February 27, 2003—in addition to the $ 600,000 that MOE paid plaintiff after he reported the fire—and notified plaintiff that if the replacement cost exceeded that amount after reconstruction was completed, it would reevaluate plaintiff’s claim to determine if MOE should pay the difference based on the terms of the policy. Id. at 109, 242 P.3d 624.

Plaintiff entered into a construction contract to rebuild the home for an estimated cost of $ 3.8 million and, right before the second anniversary of the fire, he filed a complaint alleging, among other things, that MOE breached the contract when it failed to pay the replacement cost beyond the $ 1.7 million that MOE had already advanced. Id. at 110, 242 P.3d 624. Because construction had not yet begun, the court put the case into abatement. Id. at 112, 242 P.3d 624. Two years later, the case proceeded to trial even though plaintiff had not fully completed the construction. Id. In ruling on some of the parties’ pretrial motions, the court limited trial "to the question of whether the new house was of like construction and use [and] *** exclude[d] evidence of the amount that plaintiff had paid for the house that burned[.]" Id .

During the trial, plaintiff sought a directed verdict, arguing that there " ‘is no evidence in the record that this house is not like construction and use,’ " and the court allowed the motion after concluding that the replacement cost endorsement in the policy had been modified by letters MOE sent to plaintiff. Id. at 116, 242 P.3d 624. The court entered a judgment in favor of plaintiff for an award of $ 3.23 million, the amount that plaintiff spent to rebuild the house at that time, less the $ 1.7 million that MOE had already advanced, and included an award of prejudgment interest and attorney fees and costs. Id. at 116-17, 242 P.3d 624. MOE appealed, raising several assignments of error, but only challenged the damage award. In reversing and remanding this case, we concluded that

"the policy’s provisions relating to the recovery of replacement costs are straightforward and not ambiguous. *** Thus, the completion of construction is a condition for recovery of replacement costs."

Id. at 120, 242 P.3d 624.

On remand, MOE filed a motion for summary judgment, arguing that plaintiff’s claim was untimely because " ‘the terms of the insurance policy operated collectively to require completion of reconstruction before the end of the second year following the date of loss.’ " Patton II , 266 Or. App. at 164, 337 P.3d 874. MOE acknowledged that the policy did not specifically " ‘say that in *** so many words,’ " but maintained that " ‘that is the plain import of what it does say.’ " Id. (Emphases in original.) The court granted MOE’s motion, and, on appeal, we reversed and remanded, concluding that "MOE’s policy does not specify an express limit *** within which repair or replacement must be completed[.]" Id. at 169, 337 P.3d 874. (Emphasis in original.) On remand, the case proceeded to trial where the jury was asked to determine the cost to rebuild the same house that burned.

At the second trial, plaintiff asserted that the cost to rebuild the same house could not be known but maintained that it would have cost more than he spent to rebuild the home of like construction and use—that is, more than the $ 3.23 million that plaintiff spent. One of plaintiff’s witnesses stated that he could not "put a dollar figure on the cost to rebuild the [same] house." Another witness for plaintiff concluded that no one "can look at the materials available [to rebuild the house] *** and actually come up with a number to reconstruct the same house[;] it would always be wrong." In contrast, defendant presented evidence that the estimated cost to rebuild the exact same house was $ 1.88 million and, therefore, the cost to rebuild or replace the same home was less than the cost of rebuilding one of like construction.

The jury concluded that "the necessary amount required to replace the damaged house [would not] have been equal to or greater than the [$ 3.23 million] that [plaintiff] spent to build the house that was actually built." Instead, the jury determined that the amount to rebuild the same house would have been $ 2.556 million. Plaintiff prepared and filed a proposed judgment, which included an award of damages for $ 816,831 (the difference between what the jury awarded and what MOE had already paid) and an award of prejudgment interest of $ 1.23 million, dating back to February 27, 2003.

To provide context for the parties’ contentions in this appeal from the ensuing judgment, we pause briefly to explain how prejudgment interest is awarded. " ‘[I]n the absence of an agreement to pay interest, interest can be recovered only in those circumstances authorized by statute.’ " Strawn v. Farmers Ins. Co. , 353 Or. 210, 239, 297 P.3d 439 (2013) (quoting Dowling v. Albany Planing Mill , 238 Or. 425, 431, 395 P.2d 143 (1964) ). Here, the trial court relied on ORS 82.010(1)(a), which authorizes an award of interest on "all moneys after they become due[.]" Whether a court can award prejudgment interest "usually reduces to whether the amount due was readily ascertainable." Strawn , 353 Or. at 239, 297 P.3d 439. That generally means that prejudgment interest is only awarded when "the exact amount is ascertainable or easily ascertainable by simple...