Lead Opinion
Deseo Corporation (Deseo), doing business as Colliers Industries, appeals a final order of the Circuit Court of Hancock County, dated August 20, 1990, denying its motion for a new trial on its negligence cause of action and limiting Desco’s damages on its breach of contract action to the cost of completing installation of a sprinkler system. Deseo had sought to recover approximately $2,000,000 when its new warehouse and inventory were destroyed by a fire. Deseo contends that the damages were caused because of the delay in installing the sprinkler system.
I.
Facts
Deseo owned and operated a factory in Weirton, West Virginia, which manufactured and distributed garage door hardware, metal caulking guns, and joist hangers. In 1986, Deseo had a substantial increase in business, and it needed additional storage space.
Consequently, on July 22, 1986, Deseo entered into a written contract with Harry W. Trushel Construction Company (Trush-el) to build a 30,000-square-foot warehouse adjacent to Desco’s manufacturing plant. The contract required Trushel to design and install a sprinkler system as fire protection for the warehouse. The original contract deadline was December 31, 1986, but, because of construction delays, the parties agreed to extend the completion date until February, 1987.
Trushel subcontracted with Fire Foe Corporation (Fire Foe) to design and install the sprinkler system. Desco’s property damage insurer, Industrial Risk Insurers (IRI), required Fire Foe to submit its design
By the beginning of 1987, the warehouse was substantially completed. Fire Foe began the actual installation of the sprinkler system in January, 1987, and, even though the system was not operational, Fire Foe last worked at the job site on March 9, 1987. Nonetheless, Deseo began moving inventory into the warehouse as early as January, 1987. From March, 1987, until June, 1987, Deseo maintains that it made several contacts with both Trushel and Jack Kelly Excavating Company, a contractor hired directly by Deseo, in an effort to get the system operational. Moreover, realizing the risks associated with placing inventory in a warehouse which did not have a fire protection system, Deseo instituted a 24-hour fire watch, which required the warehouse supervisor to check the building every few hours. Notwithstanding these efforts, a fire broke out near the northwest wall of the warehouse on June 14, 1987. The fire spread rapidly and caused approximately $2 million in damages.
After IRI paid Deseo monies owed under its fire insurance policy on the warehouse, it brought this action as subrogee of Deseo against Trushel, Fire Foe, and Jack Kelly Excavating, alleging negligence, breach of contract, and breach of warranty. The breach of warranty claim was later abandoned. Shortly thereafter, Fire Foe im-pleaded IRI as a third-party defendant. On August 28, 1989, the trial court denied IRI’s motion for summary judgment.
At trial, two reasons were advanced as to why the sprinkler system was not functional. Deseo contended that before the system could be activated, an air compressor had to be hooked up. Although the air compressor was hooked up on March 9, 1987, after Fire Foe had left the job site, Fire Foe never returned to activate the sprinkler system. Trushel and Fire Foe argued that there was a defective post-indicator valve (PIV) and that until that valve was replaced, the system could not be activated. Replacement of the PIV was the responsibility of Jack Kelly Excavating, who had originally installed the valve. Because the PIV was never replaced, Fire Foe never returned to the job site to activate the system.
After Deseo presented its case-in-chief, the court directed a verdict for IRI against Fire Foe on the third-party complaint. Moreover, because Deseo and Trushel stipulated Trushel had breached the contract, the court directed a verdict for Deseo on the breach of contract action. The parties further stipulated that Deseo sustained $2,178,030 worth of damages.
The parties agreed to have the court decide the amount of contract damages in lieu of submitting this issue to the jury. Consequently, the court instructed the jury exclusively on the negligence issue. Over Desco’s objection, the trial court gave an instruction on the doctrine of assumption of risk and refused to further charge the jury that it could consider the reasonableness of Desco’s actions when determining whether it had assumed the risk. The jury returned a verdict allocating fault among the parties as follows: Deseo — 55 percent, Trushel — 30 percent, Fire Foe — 15 percent, and Jack Kelly Excavating — 0 percent.
On August 20, 1990, the trial court awarded Deseo contract damages only in the amount necessary to complete the installation of the sprinkler system and rejected its claim to recover the $2,000,000 worth of fire loss damage.
II.
We initially address the contract damage claim. Desco’s argument is straightfor
Our rule for damages as a result of a breach of contract is that recovery may be obtained for those damages which either arise naturally from the breach or may reasonably have been within the contemplation of the parties at the time they made the contract. We articulated this general rule in Syllabus Point 2 of Kentucky Fried Chicken of Morgantown, Inc. v. Sellaro,
“Compensatory damages recoverable by an injured party incurred through the breach of a contractual obligation are those as may fairly and reasonably be considered as arising naturally — that is, according to the usual course of things— from the breach of the contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of its breach.”
Sellaro authorizes two categories of damages in a breach of contract action. The first is those directly flowing from the contract breach. As to these damages, there is no requirement that the parties must have actually anticipated them because they are a natural consequence of the breach. The second category is indirect or consequential damages that arise from the special circumstances of the contract. In order to recover these damages, the plaintiff must show that at the time of the contract the parties could reasonably have anticipated that these damages would be a probable result of a breach.
We recognized consequential damages in Lewis v. Welch Wholesale Flour & Feed
Co.,
Sellaro cited Lewis, as well as Section 330 of the Restatement of Contracts (1932),
“(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
“(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach
(a) in the ordinary course of events, or
(b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.”3
Under a variety of fact patterns courts have considered whether the damages sought can be said to have followed normally from the contract breach or whether the damages were consequential or special in the sense that they did not naturally follow the breach where the defendant was
For example, in Emery v. Caledonia Sand & Gravel Co., Inc.,
The cost of restoration was not a major issue in Emery; instead, the parties litigated over the plaintiffs’ claim that for three years they lost the value of the hay crop that could have been grown on the land had there been sufficient top soil. The court found that these damages were within the reasonable contemplation of the parties under the restoration provisions of the contract because topsoil replacement was required. The New Hampshire court quoted from its earlier case of Johnson v. Waisman Bros.,
In Olson v. Quality-Pak Company,
An excavating contractor who dug trenches for a sewer line and backfilled them was held liable in Olson Plumbing & Heating, Inc. v. Douglas Jardine, Inc.,
In Strong v. Commercial Carpet Co., Inc.,
In A. Brown, Inc. v. Vermont Justin Corp.,
Finally, the Virginia Supreme Court in Richmond Medical Supply Co., Inc. v. Clifton,
The Virginia Supreme Court reversed, holding that whether consequential damages were within the contemplation of the parties was a question of fact for the jury: “Whether claimed damages are direct or consequential is a question of law for the trial court. Whether special circumstances were within the contemplation of the parties so as to justify the recovery of consequential damages is a question of fact for the jury.”
We have not had occasion to consider this evidentiary rule. Our cases concerning contract damages have not emphasized the distinction between direct and consequential damages. However, we have applied this rule even though we have not adopted its precise terminology in a syllabus point. We believe that the foregoing rule set out in Richmond Medical Supply Co., Inc. v. Clifton, supra, is a sound one, and we adopt it.
Therefore, we hold that whether contract damages are direct or consequential is a question of law for the trial court. However, whether special circumstances exist to show that consequential damages were within the reasonable contemplation of the contracting parties is ordinarily a question of fact for the jury.
In this case, the parties agreed to have the judge resolve whether the fire loss was within the contemplation of the parties. The trial court expressed some amazement over this request because it thought the issue one for the jury.
“Trushel, by contracting to install a sprinkler system in the new building with the knowledge that the purpose of the system was to contain fires, had to realize that if a fire occurred before the system was operable, a significant loss could occur. And, in fact, the evidence at trial was that the large and destructive fire which did occur would not have happened had Trushel performed its promise to have an operable sprinkler system in the new warehouse by February, 1987.”6
First, there was no evidence to demonstrate that the risk of fire was substantially greater than in the ordinary manufacturing and storage business. Second, there is evidence to suggest that the fire was not accidental. Several witnesses concluded that the fire was of an incendiary origin, but were unable to state how it occurred or who had caused it. Trushel could not be reasonably expected at the outset of the contract to foresee these events.
Consequently, we conclude that the trial court’s factual findings do not constitute reversible error under our traditional rule stated in Syllabus Point 2 of Shrewsbury v. Humphrey,
“ ‘ “The finding of a trial court upon the facts submitted to it in lieu of a jury will be given the same weight as the verdict of a jury and will not be disturbed by an appellate court unless the evidence plainly and decidedly preponderates against such finding.” Syl. pt. 7, Bluefield Supply Company v. Frankels [Frankel’s] Appliances, Inc.,149 W.Va. 622 ,142 S.E.2d 898 (1965).’ Syl. pt. 1, Burns v. Goff,164 W.Va. 301 ,262 S.E.2d 772 (1980).”
III.
Deseo assigns two errors concerning the negligence claim that was submitted to the jury. The first error involves the validity of the court’s instruction to the jury on assumption of the risk. The instruction was based on Deseo moving its inventory into the new warehouse when it knew the sprinkler system was not operable. Deseo makes two arguments against the instruction.
A.
The first is a foreseeability argument. Deseo claims that it was not foreseeable that a fire would occur when it moved the inventory into the warehouse. What Deseo focuses on is the language contained in our doctrine of assumption of risk, which requires the plaintiff to have full knowledge and appreciation of the risk. Our traditional formulation is found in Hollen v. Linger,
In this case, the dangerous condition or the risk assumed was the storage of flammable material in a warehouse with an inoperable fire sprinkler system. Deseo was aware of the inoperable sprinkler system before it moved its inventory into the warehouse. It was also aware that a substantial portion of its inventory was flammable. The risk of damage by fire without
In an analogous case, Skarpness v. Port of Seattle, 52 Wash.2d 490,
“The [plaintiffs] of their own free will, selected the frame shed which they knew to be devoid of the fire protection devices required by the ordinance. Indeed, the trial court found that the danger of the situation was apparent to both the plaintiffs and the defendant. The [plaintiffs] voluntarily assumed the liability.”52 Wash.2d at 494-95 ,326 P.2d at 750 .
With regard to foreseeability of an actual fire, Deseo misperceives the nature of the risk. It is true, as Deseo argues, that assumption of the risk is not available where the risk is only a remote possibility.
For example, in Wright v. Valan,
Other cases illustrate that the precise cause of harm arising from the risk need not be anticipated by the parties. In MacLachlan v. Lutz,
The lessors argued that the doctrine of assumption of the risk did not apply because the actual cause of the fire was the negligence of the lessees’ employee. The lessors claimed that they could not have reasonably foreseen the employee’s negligence, and, therefore, the defense of assumption of the risk was not available. The MacLachlan court rejected this argument:
“Of course, ignition of the spraying compound is not directly attributable to absence of a proper spray booth. But the subject of this action, the ‘risk’ here involved, is the damage to lessors’ building. In the inspector’s expert opinion, that loss was caused by the absence of a spray booth.”249 Cal.App.2d at 759-60 ,57 Cal.Rptr. at 836 .
Just as the spray booth would have prevented the lessor’s building damage in MacLachlan, so would have an operable sprinkler system saved Desco’s building and inventory. The risk Deseo assumed was substantial damage to its inventory because the building did not have a sprinkler system.
In Golden ‘B’ Products, Inc. v. Clark Equipment Co.,
We conclude that the trial court was correct in giving an assumption of the risk instruction against Deseo.
B.
Desco’s second argument on the assumption of the risk issue is that the trial court failed to include language in its instruction that would require the jury to assess the reasonableness of Desco’s conduct. Desco’s objective was accomplished through the court’s instructions that advised the jury to apportion the degree of relative fault between Deseo and the defendants.
When we adopted the rule of comparative assumption of the risk in King v. Kayak Manufacturing Corp.,
“ ‘In the event you should find the plaintiff guilty of fault which proximately contributed to his or her injuries, you should compare the plaintiff’s fault to the combined negligence of the other parties to the accident and determine the degree of the plaintiff’s fault expressed as a percentage of 100 percent....’”9
Here, the court incorporated this concept in its assumption of the risk instruction when it advised the jury “to take the combined fault which caused the damages to be 100% and then apportion the fault between the parties.” Under this principle, DESCO was free to argue the reasonableness of its conduct with regard to its fault as compared to that of the defendants. We find no merit in this assignment of error.
As we earlier pointed out, the court deemed that the defenses of contributory negligence and assumption of the risk were available against the plaintiff Deseo. See note 1, supra. In a special interrogatory, the trial court asked the jury to divide Desco’s total fault between assumption of the risk and contributory negligence. This interrogatory is unnecessary so long as Desco’s fault equals 50 percent or more. A further breakdown may tend to confuse the jury, and we do not encourage it.
IV.
For the foregoing reasons, the judgment of the Circuit Court of Hancock County is affirmed.
Affirmed.
Notes
. Because both assumption of the risk and contributory negligence were asserted against Des-eo, the jury was asked to divide Desco’s total fault between its assumption of risk and contributory negligence components. The jury allocated 75 percent as assumption of the risk and 25 percent as contributory negligence. For the reasons more fully developed in Part III(B), infra, we find this additional breakdown unnecessary.
. Section 330 of the Restatement provided:
"In awarding damages, compensation is given for only those injuries that the defendant had reason to foresee as a probable result of his breach when the contract was made. If the injury is one that follows the breach in the usual course of events, there is sufficient reason for the defendant to foresee it; otherwise, it must be shown specifically that the defendant had reason to know the facts and to foresee the injury.”
. Paragraph 3 of Section 351 enables a court to limit damages if justice so requires: “A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.”
.We dealt with a similar situation in Cummins Engines of W.Va., Inc. v. Park Corp.,
. The trial court’s disbelief at the parties’ decision is expressed in the August 20, 1990 final order: “Why this two million dollar issue was left to the Court to resolve can only be answered by counsel for Deseo and Trushel. Clearly, the resolution of the issue requires the Court to determine factual issues which would have been determined by a jury."
. The following language is also found in the August 20, 1990 order:
“In resolving the issue presented the Court accepts as correct plaintiffs claim that:
”1. During negotiations and at the time of the contract formation, Trushel knew the pur*437 pose behind Desco’s need for a warehouse expansion.
"2. Trushel was aware that plaintiff required the additional warehouse to accommodate the increased inventory resulting from plaintiffs productivity plans.
“3. Trushel was aware that the new warehouse would be utilized to store plaintiffs inventory.
"4. The specific purpose of the new sprinkler system was to minimize damage to Des-co’s property in the event of a fire.
"5. Trushel understood that Deseo required fire protection for the protection of its building as well as the inventory and equipment to be stored in the new warehouse.”
. As the trial court stated in its final order: “Trushel had no reason to foresee that after February, 1987 plaintiff would suffer a destructive fire as a probable result of his breach of contract.”
. Deseo cites Newark Insurance Co. v. Davis,
. At the end of the proposed instruction, we made this statement:
"In those cases where both comparative assumption of risk and contributory negligence are found to be jury questions, the phrase ‘contributory negligence or assumption of risk’ could be inserted in the first paragraph, and the phrase 'plaintiffs negligence or fault’ used throughout the remaining portion of the instruction."182 W.Va. at 283 n. 17,387 S.E.2d at 518 n. 17.
.We decline to address in any detail Desco’s other assignment of error that the trial court should have granted summary judgment for IRI on Fire Foe’s third-party claim. This claim was based on IRI’s requirement that Fire Foe submit its sprinkler system design for approval before installation. IRI also wanted to certify the system after it was installed. At trial, the court did direct a verdict for IRI. Deseo argues that its insurance carrier, being a third-party defendant, prejudiced the jury. However, plaintiffs counsel disclosed the subrogation aspect in his opening statement. For this reason, we find no reversible error. See Coffindaffer v. Coffindaffer,
Dissenting Opinion
dissenting:
I respectfully dissent from the majority’s opinion. The majority correctly sets out that “[o]ur rule for damages as a result of a breach of contract is that recovery may be obtained for those damages which either arise naturally from the breach or may reasonably have been within the contemplation of the parties at the time they made the contract.”
‘Trushel, by contracting to install a sprinkler system in the new building with the knowledge that the purpose of the system was to contain fire, had to realize that if a fire occurred before the system was operable, a significant loss could occur. And in fact, the evidence at trial was that the large and destructive fire which did occur would not have happened had Trushel performed its promise to have an operable sprinkler system in the new warehouse by February, 1987.’1 (emphasis added)
Id. 186 W.Va. at-,
The trial court limited Desco’s damages on its breach of contract action to the cost of completing installation of a sprinkler system and refused to award damages to Deseo which occurred when its new warehouse and inventory were destroyed by a fire.
Although the trial court enunciated both of the standards set forth in the majority opinion in his opinion order, it seems obvious from the trial court’s reasoning therein that the trial court mistakenly believed that damages for breach of contract were limited to those arising naturally from the breach. The majority does not attempt to reconcile the trial court’s inconsistent findings, but upholds its conclusions on the theory that damages to the warehouse and inventory were not consequential because at the time of formation of the contract, these damages “could [not] reasonably have [been] anticipated” as being “a probable result of a breach [of the contract].” Id. at Syl. Pt. 2. Interestingly, however, the majority reaches this result by relying primarily on cases upholding Desco’s position. See Lewis v. Welch Wholesale Flour & Feed Co.,
Quite simply stated, in order to recover consequential damages, “special circumstances [must] exist to show that consequential damages were within the reasonable contemplation of the contracting parties.”
Based upon the foregoing reasons, I dissent.
. This as well as additional findings of fact of the trial court included in the majority opinion supra at footnote 6 support the conclusion of this dissent.