Village Development Co. v. Filice

526 P.2d 83, 90 Nev. 305, 1974 Nev. LEXIS 385

• Court: Nevada Supreme Court
• Decided: August 27, 1974
• Docket: 6759, 6596
• Status: Published

Opinions

OPINION

By the Court,

Gunderson, J.:

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 prejudicial 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 radically under various storm conditions of given “return frequencies.” As the record explains, a “return frequency” is the statistically calculated chance that a given runoff 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 percent 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 drainage-way 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 testified 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, season 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 Bow-ser, an employee of Village Development Co. who testified to being a licensed land surveyor 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 fell 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 testimqny 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., 348 P.2d 239, 248 (Ore. 1959); Brink v. Martin, 310 P.2d 870, 871 (Wash. 1957); Spruce v. Wellman, 219 P.2d 472, 474-475 (Cal.App. 1950); Freeman v. Churchill, 183 P.2d 4, 8 (Cal. 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 corporation’s negligence, independent of any on the part of its agent Campbell. Cf. Eckleberry v. Kaiser Foundation Northern Hospitals, 359 P.2d 1090, 1096-1097 (Ore. 1961).

2. Village Development Co. further contends the trial 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 Torts,” concerning a land vendor’s duty to warn the purchaser of concealed danger.⁴ Our brother Thompson, who agrees, apparently also thinks the trial court should have instructed in the language of Section 351.

Concerning the court’s instructions relating to a land vendor’s liability, at the outset we note that it may be questioned whether any claim of error has properly been preserved for review. NRCP 51 declares no party may assign the giving or failure to give an instruction as error, unless in objecting thereto he states “distinctly the matter to which he objects and the grounds of his objection.” A general objection made by Village Development Co.’s counsel (i.e. that the trial court’s Instruction No. 24 was “not a proper statement of the applicable law” and that proposed Instruction E was) arguably failed to comply with NRCP 51. See, for example, Apperwhite v. Illinois Central Railroad Company, 239 F.2d 306, 310 (8 Cir. 1957): “Moreover, the objection made to the charge, that is was ‘not the true law’, did not comply with Rule 51 of Fed. Rules Civ. Proc., and, in reality, the point is not properly preserved for our review.” However, we prefer to pass any issue of this kind, and to treat the merits of the issues that concern our dissenting brother.

As noted, Chief Justice Thompson believes the jury should have been instructed in the language of Section 351, which recites the rather obvious and here inapplicable rule that a vendor has no liability for a condition “which comes into existence after the vendee has taken possession.” In this case, clearly, the dangerous condition of the property, i.e. its location within the flood plain of Second Creek, came into existence before and not after transfer of possession.

In a unanimous opinion, less than three months ago, this court reiterated the universally recognized principle that “[a]n instruction need not be given when there is no proof in the record to support it.” Singleton v. State, 90 Nev. 216, 220, 522 P.2d 1221, 1223 (1974). As another court recently said in facts closely analogous to those here concerned: “There can be no error in refusing to instruct on a proposition of law that has no application to the facts of the case.” Williams v. Goodman, 29 Cal.Rptr. 877, 885-886 (1963). Quite to the contrary under many authorities, it would have been improper, and might have been prejudicial error, to instruct on the legal principles stated in Section 351. For example, in a unanimous in bank opinion the California Supreme Court recently said that generally: “Even though an instruction is couched in proper language it is improper, if it finds no support in the evidence, and the giving of it constitutes prejudicial error if it is calculated to mislead the jury.” Solgaard v. Guy F. Atkinson Company, 491 P.2d 821, 826 (Cal. 1971).⁵ Thus, we fail to see how absence of an instruction on conditions arising after transfer could be prejudicial error.

Next, we turn to the trial court’s refusal to give proposed Instruction E, containing language from Sections 352 and 353 of the Restatement. Section 352 states that as to conditions existing when the vendee takes possession, the vendor only has liability as stated in Section 353. Section 353(1) goes on to declare that a vendor who conceals or fails to tell his vendee of any condition, natural or artificial, involving unreasonable risk, is liable to the vendee and others on the land with consent if:

“(a) the vendee does not know or have reason to know of the condition or the risk involved, and

“(b) the vendor knows or has reason to know of the condition, and realizes or should realize the risk involved, and has reason to believe that the vendee will not discover the condition or realize the risk.”

So far as we can perceive (and there has been no attempt to show otherwise), the trial court’s Instruction No. 24 told the jury all of this.⁶ Although counsel for Village Development Co. has vaguely complained that Instruction No. 24 imposes “strict liability,” it seems to us that, like the Restatement’s Section 353(1), Instruction No. 24 declares liability exists only if (a) it does not appear the vendee will realize the danger, and (b) the vendor knows or has reason to know of the danger. Moreover, in the usual way, the trial court instructed the jury that contributory negligence on the part of the Filices would bar any recovery. Thus, concerning any linguistic difference between Sections 352 and 353(1), and the court’s Instruction 24, the words of our brother Thompson in Duran v. Mueller, 79 Nev. 453, 386 P.2d 733 (1963), seem apposite:

“As a general proposition the number of instructions to be given is discretionary with the court. If one instruction adequately covers a given theory of liability or defense, it is preferable that the court refuse additional instructions relating to the same theory, though couched in different language.” 79 Nev. at 460; 386 P.2d at 737. In accord, see opinion of Thompson, C. J., in Eikelberger v. State ex rel. Dep’t Hwys., 83 Nev. 306, 429 P.2d 555 (1967).⁷

Finally, we note appellant’s proposed Instruction E concluded with language from Section 353(2) of the Restatement, to wit:

“If the vendor actively conceals the condition, the liability stated in Subsection (1) continues until the vendee discovers it and has reasonable opportunity to take effective precautions against it. Otherwise the liability continues only until the ven-dee has had reasonable opportunity to discover the condition and to take such precautions.”

In the instant case, the record does not indicate the Filices had reason to anticipate danger, before their home was destroyed. Nothing indicates they had “a reasonable opportunity to take effective precautions”; indeed, nothing establishes “effective precautions” were possible once Village Development Co. permitted the Filices to build their home in the floodplain. Moreover, as noted, a contributory negligence instruction was given in the usual form. Therefore here, so far as we can see, an instruction in the language of Section 353(2) was not essential to performance of the jury’s duty. Cf. American Cas. v. Propane Sales & Service, 89 Nev. 398, 513 P.2d 1226 (1973).

As appellant, of course, Village Development Co. has the burden of demonstrating prejudicial error. Meinhold v. Clark County School Dist., 89 Nev. 56, 61, 506 P.2d 420, 423 (1973). In our view, this burden has not been met, in regard to the court’s instructions concerning land vendors’ duties.

3. We have considered appellant’s other assignments of error, and believe none require discussion, except for Village Development Co.’s contention that its conduct does not warrant punitive damages, which we believe has merit.

The record contains evidence to show negligence and unconscionable irresponsibility. Still, after careful consideration and extensive debate, we find insufficient evidence to support a finding of “oppression, fraud or malice, express or implied.” NRS 42.010. We have heretofore sustained awards of punitive damages where evidence showed the wrong was willful, and damage either intended or a necessary consequence. Here, however, the evidence does not to us appear quite sufficient to meet our previously established requirement that more must be shown than malice in law, and that there must be substantial evidence of malice in fact. See: Nevada Credit Rating Bureau v. Williams, 88 Nev. 601, 503 P.2d 9 (1972); Nevada Cement Company v. Lemler, 89 Nev. 447, 514 P.2d 1180 (1973).

In view of the foregoing, therefore, in Case No. 6759 the judgment for compensatory damages is affirmed, and the judgment for punitive damages is reversed. In Case No. 6596, the Filices have appealed a summary judgment absolving Campbell of liability and, as well, a summary judgment precluding trial against any defendant on a theory of strict liability. In accord with statements of the Filices’ counsel that Case No. 6596 was docketed in this Court solely in anticipation of the appeal in Case No. 6759, Case No. 6596 is hereby dismissed. As to both appeals, the parties will bear their own costs.

Mowbray, Batjer, and Zenoff, JJ., concur.

1 Inter alia, Smith testified: “Q. And so, could it be said that you did think of the potentiality of some inundation to the creek, but the building sites close to the road were high enough that it wouldn’t be affected by such a flooding? A. Yes. Q. Mr. Smith, did you ever convey your thought in that regard to anyone? A. No.”

2 The recorded restrictions stated:

“Committee approval may be withheld ... (b) because, of the reasonable dissatisfaction of the Committee with the location of the structure on the building site . . .”

3 Wood testified:

“Q. Sir, do you recall, that when Mr. Filice’s plans were submitted to the Architectural Control Committee, did you discuss it? A. They were discussed. Q. They were discussed. Now, is it true, Mr. Wood, that, in reviewing Mr. Filice’s plan for approval, in the Architectural Control Committee, you urged Mr. Bowser to tell Mr. Filice to build higher on the lot? A. Yes. ... Q. All right. Do you know whether Mr. Bowser conveyed your thoughts, in that regard to the Filices? A. I do not know. Q. Or any agent of the Filices? A. I do not know.”

4 Village Development Co.’s proposed Instruction E recited:

“Except as stated below, a vendor of land is not hable for physical harm caused to his vendee while upon the land after the vendee has taken possession by any dangerous condition, whether natural or artificial, which existed at the time that the vendee took possession:

“(1) A vendor of land who conceals or fails to disclose to his ven-dee any condition, whether natural or artificial, which involves unreasonable risk to persons on the land, is subject to liability to the vendee or his subvendee for physical harm caused by the condition after the vendee has taken possession, if,

“(a) the vendee does not know or have reason to know of the condition or the risk involved, and

“(b) the vendor knows or has reason to know of the condition, and realizes or should realize the risk involved, and has reason to believe that the vendee will not discover the condition or realize the risk.

“(2) If the vendor actively conceals the condition, the liability stated above continues until the vendee discovers it and has reasonable opportunity to take effective precautions against it. Otherwise the liability continues only until the vendee has had reasonable opportunity to discover the condition and to take such precautions.”

In Kimberlin v. Lear, 88 Nev. 492, 495, 500 P.2d 1022 (1972), this court recognized that failure to disclose a concealed condition involving unreasonable danger, which the vendee may not discover, may render the vendor liable for resulting injury to the vendee and others upon the land with the vendee’s consent. However, although the majority opinion alluded to Section 353 of the Restatement, it of course never suggested-that a court must always advise the jury of every limitation upon the vendor’s liability which the American Law Institute’s abstract recapitulation of the law includes. Nor does our Kimberlin decision mandate only instructions in the words which the American Law Institute saw fit to employ.

5 In accord, see also:

Clawson v. Stockton Golf and Country Club, 34 Cal.Rptr. 184, 191 (Cal.App. 1963): “It is clear, of course, that the court must instruct only on material issues disputed by relevant and conflicting evidence . . . and it is erroneous to instruct on issues resolved by undisputed evidence.”

DeGeorge v. Crimmins, 62 Cal.Rptr. 394, 396 (Cal.App. 1967): “Such instructions, unrelated to the issues, and unsupported by the evidence, in our opinion, were likely to confuse and mislead the jury. . . . ‘An instruction if not applicable to the facts proved and the issues raised by the pleadings may easily mislead the jury.’ [Citing authorities].”

Decker v. Korth, 219 F.2d 732, 738 (10 Cir. 1955): “Instructions must be predicated on the evidence. They may not deal with general or abstract propositions not immediately connected with and applicable to the facts before the jury.”

Popejoy v. Hannon, 231 P.2d 484, 489 (Cal. 1951): “The evidence is uncontradicted that, when the lumber started to fall, Popejoy was on the hyster and operating it to the mutual benefit of Sugerman and the Hannons. The record, therefore, includes no evidence which would justify giving the instructions requested by the Hannons to the effect that the invitation to Popejoy to be upon the premises excluded his operation of the hyster.”

6 Instruction No. 24 recited as follows:

"One who designs, develops and sells a lot in a residential subdivision directly or through a third person, for another to buy and use for the construction of a residence which the developer knows or has reason to know is dangerous or is likely to be dangerous for that use, has a duty to use reasonable care to give warning of the dangerous condition of the lot or of facts which make it likely to be dangerous to those whom he should expect to use the lot. A failure to fulfill that duty is negligence. If, however, the developer has reason to believe that the user of the lot will realize its dangerous condition, he has no duty to warn.

“A lot is unreasonably dangerous if it is dangerous to an extent beyond that which would be contemplated by the ordinary purchaser who purchases it, with the ordinary knowledge common to the community as to its characteristics.” (Emphasis added.)

7 Also in accord, see:

Ginnis v. Mapes Hotel Corp., 86 Nev. 408, 415, 470 P.2d 135, 139 (1970): “Appellant complains the given portion [of a proposed instruction] is couched in negative terms, while the omitted portion imports the positive duty. While we would have been inclined to state the invitor’s duty in positive rather than negative terms, the trial court did not commit error in refusing to do so. [Citing authorities.]”

Southern Pacific Co. v. Watkins, 83 Nev. 471, 493, 435 P.2d 498, 512 (1967): “A reading of these instructions shows that the jury was adequately instructed in this case. It is not error to refuse instruction where its substance is adequately covered in other instructions. [Citing authorities.]”

Cucamonga County Water Dist. v. Southwest Water Co., 99 Cal. Rptr. 557, 573 (Cal.App. 1971); Wright v. Marzo, 427 F.2d 907, 910-911 (10 Cir. 1970); Arkwright Mutual Insurance Co. v. Philadelphia Electric Co., 427 F.2d 1273, 1277 (3 Cir. 1970); Shaw v. Lauritzen, 428 F.2d 247, 251 (3 Cir. 1970); Wolff v. Commonwealth of Puerto Rico, 341 F.2d 945, 946 (1st Cir. 1965); Alexander v. Kramer Bros. Freight Lines, Inc., 273 F.2d 373, 375 (2 Cir. 1959).