Title: Western Community Ins v. Burks Tractor

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

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IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 44372 
 
WESTERN COMMUNITY INSURANCE  
COMPANY, Subrogee of DNJ, INC.,  
Subrogor, and DNJ, INC., an Idaho  
Corporation, 
 
           Plaintiffs-Appellants, 
v. 
 
BURKS TRACTOR COMPANY, INC., an  
Idaho Corporation, and KRONE NA, INC., a  
Delaware Corporation, 
  
           Defendants-Respondents. 
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Boise, November 2017 Term 
 
Filed: September 6, 2018 
 
Karel A. Lehrman, Clerk 
 
Appeal from the District Court of the Fifth Judicial District of the State of Idaho,  
Twin Falls County.  Hon. G. Richard Bevan, District Judge. 
 
The judgment of the district court is affirmed. 
 
 
Saetrum Law Offices, Boise, for appellants.  Rodney Saetrum argued. 
 
 
Brady Law Chartered, Boise, for respondent Burks Tractor Company, Inc.   
            Michael G. Brady argued. 
 
Coleman, Ritchie & Cluff, Twin Falls, for respondent Krone NA, Inc.  Philip R. 
Dupont argued. 
 
                     _______________________________________________ 
 
HORTON, Justice. 
Western Community Insurance Company (Western Community) appeals the district 
court’s decisions to dismiss Western Community’s Idaho Consumer Protection Act (ICPA) 
claims as a subrogee of DNJ, Inc. (DNJ) and to deny Western Community’s motion for a new 
trial against respondents Krone North America, Inc. (Krone) and Burks Tractor Company, Inc. 
(Burks). Western Community, as insurer of DNJ, compensated DNJ for the loss of a Krone X 
1100 Forage Chopper (chopper) due to fire. After issuing a payment to DNJ, Western 
 
 
 
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Community sought recovery from Krone and Burks on alternative theories of breach of express 
warranty, breach of the covenant of good faith, and violations of the ICPA. Western Community 
contends that the district court erred when it held that a subrogee cannot bring ICPA claims in 
the absence of an express contractual provision providing for subrogation of such claims. 
Western Community also argues that the district court erred in denying its motion for a new trial 
based upon Burks’ assertion of new legal and factual defenses shortly before trial and by failing 
to instruct the jury on its theory of liability based on agency. We affirm. 
I. 
FACTUAL AND PROCEDURAL BACKGROUND 
DNJ purchased the chopper from Burks. The chopper was manufactured by Krone and 
was the subject of two warranties,  the New Equipment Limited Warranty and the Krone North 
America Crown Guarantee. On October 15, 2012, the chopper was completely destroyed by fire. 
Western Community, DNJ’s insurer, paid DNJ $440,779 for the loss of the chopper. Western 
Community then brought this subrogation action in which it advanced theories of breach of 
express warranties found in two separate warranties provided by Krone, breach of the covenant 
of good faith, and violations of the ICPA.  
In response to motions to dismiss from Krone and Burks, the district court dismissed 
Western Community’s ICPA claims against each, holding that “a subrogee may not sue under 
the ICPA absent an express agreement . . . .” Although all parties’ pleadings identified Burks as 
the owner of the chopper when it was sold to DNJ, shortly before trial Krone informed the 
district court and Western Community that the chopper actually had been owned by Krone. 
Western Community filed a Third Amended Complaint that reflected this new information. In 
response, Burks filed an answer that included several new affirmative defenses. Western 
Community filed a motion to strike the new defenses. The district court denied the motion to 
strike, finding that the amendments did not prejudice Western Community.  
The case proceeded to jury trial. Following Western Community’s case-in-chief, the 
district court entered a directed verdict for Burks due to lack of privity. At the close of trial, the 
district court denied Western Community’s request for a jury instruction on agency because this 
theory was not within the scope of the pleadings. The jury then found for Krone on all counts, 
answering four special interrogatories. The jury found: (1) Krone did not breach the express 
 
 
 
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terms of the New Equipment Limited Warranty; (2) Krone did not breach the express terms of 
the Krone North America Crown Guarantee; (3) Krone did not violate a duty of good faith with 
respect to the New Equipment Limited Warranty; and (4) Krone did not violate a duty of good 
faith with respect to the Krone North America Crown Guarantee. Thereafter, Western 
Community filed motions for reconsideration and a new trial. The district court denied both 
motions in a memorandum decision filed June 24, 2016. Western Community timely appealed. 
II. STANDARD OF REVIEW 
This Court exercises free review over issues or questions of law and matters of statutory 
interpretation. Guzman v. Piercy, 155 Idaho 928, 934, 318 P.3d 918, 924 (2014). The same 
standard of review applies when this Court interprets the language of an unambiguous contract. 
Potlatch Educ. Ass’n v. Potlatch School Dist. No. 285, 148 Idaho 630, 633, 226 P.3d 1277, 1280 
(2010).  
We review the discretionary decisions of a trial court for abuse of discretion.  
When this Court reviews an alleged abuse of discretion by a trial court the 
sequence of inquiry requires consideration of four essentials. Whether the trial 
court: (1) correctly perceived the issue as one of discretion; (2) acted within the 
outer boundaries of its discretion; (3) acted consistently with the legal standards 
applicable to the specific choices available to it; and (4) reached its decision by 
the exercise of reason. 
Lunneborg v. My Fun Life, ___ Idaho ___. ___. 421 P.3d 187, 194 (2018). “A party alleging 
error on appeal must also show that the alleged errors were prejudicial. Alleged errors not 
affecting substantial rights will be disregarded.” Baughman v. Wells Fargo Bank, N.A., 162 
Idaho 174, 179, 395 P.3d 393, 398 (2017).  
III. 
ANALYSIS 
Western Community argues that the district court erred when it dismissed its ICPA claim 
and by denying its motion for new trial. All parties seek an award of attorney fees on appeal. We 
address these issues in turn. 
A. The district court erred by dismissing Western Community’s ICPA claim but this 
error was harmless. 
The district court concluded that Western Community, as subrogee, could not bring 
DNJ’s statutory ICPA claims as a matter of law. In reaching this conclusion, the district court 
 
 
 
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relied on Trinity Universal Insurance Company of Kansas v. Ohio Casualty Insurance Company, 
312 P.3d 976 (Wash. Ct. App. 2013). The district court held that “a subrogee may not sue under 
the ICPA absent an express agreement, transferring the insured’s statutory rights under the ICPA 
to the subrogee.” As the district court’s holding was based on a question of law, we exercise free 
review over this decision. We hold that the district court’s reliance on Trinity was misplaced and 
its corresponding conclusion was error.  
We have described subrogation as follows: “where one advances money to pay the debt 
of another to protect his own rights . . .  a court of equity substitutes him in place of the creditor 
as a matter of course, without any express agreement to that effect.” May Trucking Co. v. Int’l 
Harvester Co., 97 Idaho 319, 321, 543 P.2d 1159, 1161 (1975) (quoting Williams v. Johnston, 92 
Idaho 292, 298, 442 P.2d 178, 184 (1968)). In this way, “[s]ubrogation is the substitution of one 
person in the place of another with reference to a legal right.” Presnell v. Kelly, 113 Idaho 1, 3, 
740 P.2d 43, 45 (1987) (citing City of New York Ins. Co. v. Tice, 152 P.2d 836, 839 (Kan. 1944)). 
In International Equipment Service, Inc. v. Pocatello Industrial Park Company, 107 Idaho 1116, 
1119, 695 P.2d 1255, 1258 (1985), we explained that “the doctrine of subrogation encompasses a 
complete substitution of rights: ‘Subrogation, in its broadest sense, is the substitution of one 
person for another, so that he may succeed to the rights of the creditor in relation to the debt 
or claim and its rights, remedies and securities.’ ” (emphasis added) (quoting Houghtelin v. 
Diehl, 47 Idaho 636, 639, 277 P. 699, 700 (1929)). In short, subrogation allows the subrogee “to 
step into the shoes of the loser and recover from the wrongdoer.” Id. (quoting Transit Cas. Co. v. 
Spink Corp., 156 Cal. Rptr. 360, 365 (Cal. Ct. App. 1979)).  
The procedural history in Trinity is markedly different than the instant case. There, 
Trinity Universal Insurance Company of Kansas  (Trinity) defended and settled a personal injury 
claim made against an insured of Ohio Casualty Insurance Company (Ohio). Trinity sued Ohio 
for subrogation, equitable contribution, and bad faith under two statutes, including Washington’s 
version of the Consumer Protection Act. Ohio failed to appear and Trinity obtained a default 
judgment for defense and indemnification costs and treble damages for the statutory claims. In 
order to obtain a tactical advantage with regard to Ohio’s ability to seek relief from the 
 
 
 
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judgment, Trinity then waited for more than a year before attempting to collect on the judgment. 
Trinity, 312 P.3d at 980.  
On appeal, the Washington Court of Appeals rejected Ohio’s efforts to set aside the 
default judgment. It also affirmed the judgment for costs Trinity paid in defending and 
indemnifying its insured, id. at 987, but considered whether Trinity had standing to assert the 
subrogor’s Consumer Protection Act claims. The Trinity court concluded that Trinity was not 
subrogated to its insured’s statutory claims. In so holding, the court looked to the policy’s 
subrogation clause, which provided: “If the insured has rights to recover all or part of any 
payment we have made under this Coverage Form, those rights are transferred to us.” Id. at 986.  
The court concluded that because Trinity had not made payments under the policy for  
harm caused by the Consumer Protection Act violations, the language of the policy did not cause 
those claims to be subrogated.  Id. Thus, the Trinity court’s analysis was based upon the policy 
language. While we agree with this approach, we do not find it to govern the decision presented 
in this appeal.   
First, the clear language of DNJ’s policy permits Western Community to pursue its ICPA 
claims in a subrogation action. The policy provides: “If any person or organization to or for 
whom we make payment under this coverage part has rights to recover damages from another, 
those rights are transferred to us to the extent of our payment.” The ICPA claims were an 
alternative theory which Western Community advanced in an effort to recover the sums which it 
had paid to DNJ. In Trinity, the subrogated insurer was attempting not merely to recover its 
payments on behalf of its insured, it was attempting to recover treble damages under the statutory 
claims, which would have generated a windfall for the subrogated insurer. Thus, we conclude 
that the district court erred in its reliance on Trinity.  
However, this Court “must disregard all errors and defects that do not affect any party’s 
substantial rights.” I.R.C.P. 61. When an error does not affect the substantial right of a party, the 
error is harmless. Myers v. Workmen’s Auto Ins. Co., 140 Idaho 495, 504, 95 P.3d 977, 986 
(2004). As previously noted, the jury specifically found that Krone did not breach the express 
terms or the implied covenant of good faith of either warranty.  
 
 
 
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At trial, Burks and Krone’s theory was that the fire which destroyed the chopper resulted 
from accumulated debris, which would mean that the damage was not covered by either of 
Krone’s warranties. Evidently, the jury found this to be persuasive, as the jury’s answers to the 
special interrogatories indicate the jurors’ acceptance of the theory. Because Western 
Community’s ICPA claims were merely an alternative theory of recovery to its warranty and 
implied covenant claims and did not rely on facts different from those upon which the contract-
based theories relied, the district court’s error did not affect the resulting judgment. Therefore, 
the district court’s error in dismissing the ICPA claims was harmless. 
B. The district court did not err in denying Western Community’s motion for a new 
trial. 
Western Community identifies three errors which it contends entitled it to a new trial. 
Western Community argues that the district court erred by: (1) allowing Burks and Krone to 
change their position on ownership of the chopper and privity mere days before trial; (2) 
dismissing its claims against Burks by way of a directed verdict; and (3) failing to instruct the 
jury on its theory that Burks was acting as Krone’s agent.  
We review a district court’s decision on a motion for a new trial for an abuse of 
discretion. Myers, 140 Idaho at 506, 95 P.3d at 988. “The burden of showing the trial court 
abused its discretion rests with the appellant.” Cummings v. Stephens, 160 Idaho 847, 853, 380 
P.3d 168, 174 (2016) (quoting Walker v. Boozer, 140 Idaho 451, 456, 95 P.3d 69, 74 (2004)).   
1. The district court did not abuse its discretion by denying Western Community’s 
motion to strike and permitting Burks to assert new legal and factual defenses 
before trial. 
During a hearing regarding several motions in limine, it came to light that the chopper 
was actually owned by Krone—not Burks as all parties had previously believed. Western 
Community filed a Third Amended Complaint that reflected this new information. In response, 
Burks filed an amended answer that included several new affirmative defenses reflecting the new 
factual information. Western Community filed a motion to strike the new defenses which the 
district court denied because it found that the amendments did not prejudice Western 
Community. Western Community now argues that the district court erred by allowing the 
defendants to change their position on privity and then entering a directed verdict for defendant 
 
 
 
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Burks for lack of privity. Both Burks and Krone argue that Western Community should have 
performed more extensive discovery on the ownership of the chopper.1  
 
The district court explained that the changes regarding the issue of privity did not 
prejudice Western Community. As the district court noted, privity was a central issue to the 
ongoing litigation. As the plaintiff, Western Community knew or “should have known it was 
incumbent on them to prove privity with each defendant as part of their case in chief.”  
When this issue was raised, the district court recognized that the issue was one of 
discretion. The district court’s decision was within the bounds of its discretion and the district 
court decided the motion by application of the correct legal standard: whether the new defenses 
prejudiced Western Community. Finally, the district court clearly articulated the reasons for its 
decision. We are unable to conclude that the district court abused its discretion by denying 
Western Community’s motion to strike. 
2. The district court did not err in entering a directed verdict for Burks. 
The district court entered a directed verdict for Burks on the ground that Western 
Community had not established privity between DNJ and Burks. In reviewing a decision on a 
motion for a directed verdict, “this Court applies the same standard the trial court applied when 
originally ruling on the motion.” Enriquez v. Idaho Power Co., 152 Idaho 562, 565, 272 P.3d 
534, 537 (2012) (citing Weinstein v. Prudential Prop. & Cas. Ins. Co., 149 Idaho 299, 315, 233 
P.3d 1221, 1237 (2010)). Therefore, this Court exercises free review over the question of 
“whether there was sufficient evidence to justify submitting the claim to the jury, viewing as true 
all adverse evidence and drawing every legitimate inference in favor of the party opposing the 
motion for a directed verdict.” Id. (quoting Todd v. Sullivan Constr. LLC, 146 Idaho 118, 124, 
191 P.3d 196, 202 (2008)). 
The district court asked Western Community to identify evidence that established privity 
between DNJ and Burks. Western Community pointed to the facts that: (1) Burks signed the 
purchase order, (2) the warranty contracts required Burks to work with purchasers in submitting 
a claim, and (3) the Extended Warranty used the term “dealer.” However, as the district court 
                                                 
1 These arguments advocate a position that would unnecessarily increase litigation costs. Both Burks and Krone’s 
answers admitted that the chopper was owned by Burks. Although they now argue that Western Community failed 
to adequately investigate, if fault is to be ascribed, the fault lies in Burks and Krone’s answers.  
 
 
 
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pointed out, uncontroverted trial testimony established that Krone owned the chopper and was 
responsible for all decisions regarding the warranties. Thus, we agree with the district court that 
Western Community failed in its burden of showing privity with regard to Burks. Because 
privity was a required element for the good faith and warranty claims,2 the directed verdict was 
appropriate because Western Community had failed to present evidence as to a required element 
of the claims. 
Further, any error was rendered harmless by the jury’s decision. As the district court 
explained: “The jury had to determine whether the chopper was destroyed by a defect that should 
have been covered under either warranty, and they found that it was not. The jury’s conclusion 
did not depend on who was seated at the defense table.” According to the jury’s findings, the 
destruction of the chopper was not covered by either of the warranties. Which party would be 
responsible if the destruction was covered by the warranties was rendered irrelevant by the jury’s 
determination that the warranties did not cover the loss.  
3. The district court did not abuse its discretion by refusing to instruct the jury 
regarding agency. 
The determination whether a requested jury instruction is supported by the evidence is 
committed to the discretion of the district court. Craig Johnson Const., L.L.C. v. Floyd Town 
Architects, P.A., 142 Idaho 797, 800, 134 P.3d 648, 651 (2006) (citing State v. Elison, 135 Idaho 
546, 552, 21 P.3d 483, 489 (2001)). “Clearly, a requested jury instruction need not be given if it 
is either an erroneous statement of the law, adequately covered by other instructions, or not 
supported by the facts of the case.” Id. (citing State v. Eastman, 122 Idaho 87, 89, 831 P.2d 555, 
557 (1992)).  
The district court’s decision clearly articulated the governing legal standard and 
recognized the issue as one of discretion. The district court explained why the evidence did not 
                                                 
2 The district court decided, as a matter of law, that privity of contract is required for both implied and express 
warranty claims. This determination, while factoring into the district court’s decision, is not a focus of this appeal. It 
should be noted that although the Court has recognized that privity of contract is required for implied warranty 
actions, Salmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Co., 97 Idaho 348, 354–55, 544 P.2d 306, 312–13 
(1975), the district court correctly recognized that this Court has never answered the question of whether privity is 
required for express warranty actions. See State v. Mitchell Constr. Co., 108 Idaho 335, 337, 699 P.2d 1349, 1351 
(1984). Because Western Community has not appealed this part of the district court’s decision, we do not address 
this issue further. 
 
 
 
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support an agency instruction and agency was not within the scope of the pleadings. The district 
court further noted that “the evidence did not show any independent warranty or representation 
by Burks for which Krone could have been liable as principal.” This analysis by the district court 
shows adherence to the applicable legal standards and the exercise of reason. Accordingly, we 
find no abuse of discretion in the district court’s decision not to instruct the jury regarding 
agency.  
As there is no merit to Western Community’s three claims of legal error, the district court 
did not err by denying its motion for new trial.  
C. Burks and Krone are entitled to attorney fees and costs on appeal. 
Western Community, Burks, and Krone all argue that they are entitled to attorney fees on 
appeal under Idaho Code section 12-120(3). This provision mandates an award of attorney fees 
to the prevailing party where the gravamen of the suit involves a commercial transaction. Garner 
v. Povey, 151 Idaho 462, 469, 259 P.3d 608, 615 (2011). Burks and Krone are the prevailing 
parties on appeal and are therefore entitled to reasonable attorney fees and costs incurred in this 
appeal.  
IV. CONCLUSION 
 
We affirm the judgment of the district court. Burks and Krone are awarded attorney fees 
and costs on appeal.  
 
Chief Justice BURDICK, and Justices Pro Tem TROUT and MELANSON CONCUR.  
JONES, J. sat, but did not participate due to his untimely death.