Court Opinion

ID: 2675070
Source: CourtListenerOpinion
Date Created: 2014-05-20 17:00:18.739215+00
Date Added: 2024-06-11T09:27:51.621473
License: Public Domain

NOT PRECEDENTIAL

        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT
                  _____________

                       No. 13-2631
                      _____________

           ARCH INSURANCE COMPANY
                  As Subrogee of
              FAIRFIELD TOWNSHIP
         VOLUNTEER FIRE COMPANY NO. 1,
                                                  Appellant

                             v.

        CAROL & DAVE’S ROADHOUSE, INC.;

                             v.

                   DEAN CALDWELL
                    _____________

     On Appeal from the United States District Court
          for the Western District of Pennsylvania
              District Court No. 2:11-cv-00801
    District Judge: The Honorable Terrence F. McVerry

     Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                      May 13, 2014

Before: SMITH, VANASKIE, and SHWARTZ, Circuit Judges

                   (Filed: May 20, 2014)
                            _____________________

                                   OPINION
                            _____________________

SMITH, Circuit Judge.
      Arch Insurance Company (“Arch”) filed this subrogation action against

Carol & Dave’s Roadhouse, Inc. (“Carol & Dave’s”), seeking to recover damages

in the amount of insurance benefits that Arch paid to its insured, Fairfield

Township Volunteer Fire Company No. 1 (“Fairfield”), after a fire destroyed a

building on Fairfield’s premises. Arch alleges the fire was caused by the negligent

actions of Carol & Dave’s employees, who were catering a wedding reception in

Fairfield’s fire hall. While attempting to light a stove in the fire hall’s kitchen,

Carol & Dave’s employees opened the valve of a propane gas line that was

uncapped and not connected to any kitchen appliance. On a subsequent attempt to

light the stove, the escaping propane ignited, causing a fire which ultimately

destroyed the building.

      During the course of this litigation, Arch made a self-executing disclosure

on March 27, 2011, listing its damages, including $563,158.28 (actual cash value

(“ACV”) of the building); $126,525.39 (personal property); and $3,825.00 (extra

expense). On October 24, 2012, Arch filed a pretrial statement listing the

replacement cost of the building ($1,309,268.03) as its measure of damages instead

of the ACV.

                                         2
      Prior to trial, Carol & Dave’s filed a motion in limine asking the Court to

permit Arch to present evidence only as to the building’s ACV as set out in the

March 27, 2011 disclosure, and to not allow evidence as to the building’s

replacement cost. The District Court granted the motion on February 19, 2013,

concluding that, under Babich v. Pittsburgh & New England Trucking Co., 563
A.2d 168 (Pa. Super. Ct. 1989) and other Pennsylvania authorities, the proper

measure of damages for a destroyed building is the decrease in fair market value

(“FMV”) of the property. The Court rejected Arch’s argument that this case fell

within the exception recognized in Pennsylvania Department of Transportation v.

Estate of Crea, 483 A.2d 996, 1001 (Pa. Commw. Ct. 1997) (allowing plaintiff to

use replacement cost for collapsed bridge because there was no “value in the

market place” for a public bridge that is a component part of a highway system).

      Jury selection was originally scheduled for March 11, 2013, but was

postponed after the District Court learned that significant unresolved issues

remained as to the measure of damages and the evidence which could be produced

to establish those damages. Arch contended it should be permitted to introduce

evidence as to the repair cost of the building and argued that the burden of proof

would then shift to Carol & Dave’s to show that the FMV was less than the cost of

repairs. Alternatively, Arch argued it should be allowed to present the testimony of

Fire Chief Kevin Stiffler (“Stiffler”) to establish the FMV of the building.

                                          3
      Carol & Dave’s responded to Arch’s arguments and also moved for partial

summary judgment on the damages issue, arguing that Arch had failed to produce

any evidence that would be admissible for the purpose of establishing the

building’s FMV. On April 16, 2013, the District Court issued an order consistent

with its February 19, 2013 decision, and held that Arch would be limited to

recovery of the reduction in FMV of the destroyed building. The Court rejected

Arch’s “novel burden-shifting theory,” noting that Arch “has the burden to prove

its damages.” The Court further held that Stiffler would be able to testify as to the

building’s FMV only “if Arch is able to lay a proper foundation as to his

knowledge of the real value of real estate in the vicinity[] and his particular

knowledge of the value of the Fairfield building before and after the fire.” The

Court then instructed Arch to file a “proffer of Fire Chief Stiffler’s qualifications to

testify as to FMV.”

      Arch filed the requested proffer on April 26, 2013. Arch claimed that Stiffler

would testify that the replacement cost of the structure was $1,309,268.03, and that

this amount should be reduced by 50 percent for depreciation, resulting in a FMV

of $654,634.01. In addition to the fact that this proposed calculation began with the

building’s replacement cost, which the District Court had previously rejected as a

basis for damages, the proffer did not demonstrate that Stiffler possessed any

knowledge of real estate in the area, nor did it explain how he was qualified to

assign a percentage of depreciation.

                                           4
      In view of these deficiencies, on May 7, 2013, the District Court issued an

order stating that “Stiffler will not be permitted to testify as to the FMV of the

Fairfield Fire Company building.” Because Arch had not presented any other

evidence establishing the FMV of the building, the District Court granted partial

summary judgment in favor of Carol & Dave’s on the claim for damages to the

building. The case then proceeded to trial and the jury found Carol & Dave’s to be

55% negligent for the fire. The jury awarded damages only for personal property

and extra expenses in amounts that were stipulated to by the parties before trial.

Arch timely appealed.1

      We find no error in the District Court’s refusal to allow Fire Chief Stiffler to

testify regarding the FMV of the destroyed property. Under Pennsylvania law,

three types of witnesses may testify as to the market value of damaged property:

(1) the owner of the property, (2) expert witnesses, or (3) persons with knowledge

and experience qualifying them to form a reasonably intelligent judgment as to

value. Westinghouse Air Brake Co. v. City of Pittsburgh, 176 A. 13, 15 (Pa. 1934).

Arch asks us to treat Stiffler as an “owner” of the Fairfield building, which would

lower the burden for admissibility because owners may testify as to a property’s

1
        The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We review a district court’s
evidentiary rulings for abuse of discretion, Donlin v. Philips Lighting N. Am. Corp., 581
F.3d 73, 80 (3d Cir. 2009), including its admissions or exclusions of evidence, United
States v. Versaint, 849 F.2d 827, 831 (3d Cir. 1988), and admissions of lay opinion
testimony, United States v. Stadtmauer, 620 F.3d 238, 260 (3d Cir. 2010). Our review of
the District Court’s interpretation and application of Pennsylvania law is plenary. Salve
Regina Coll. v. Russell, 499 U.S. 225, 239 (1991).
                                           5
value despite not “possess[ing] all the qualifications that would be required of

others who testify as to value.” Id. But Stiffler is not the building’s owner, and we

see no reason to treat him as such. Arch has not identified any authority

establishing that Stiffler’s qualifications should be evaluated under the more

lenient standard applied to individuals with an ownership interest. The District

Court did not abuse its discretion by requiring Arch to demonstrate that Stiffler

possessed the requisite qualifications before allowing him to testify regarding the

building’s FMV. Because Arch failed to lay the proper foundation, the District

Court acted properly in excluding Stiffler’s testimony.2

      Further, the District Court did not err by limiting Arch’s recovery to the

FMV of the building instead of its replacement cost. Pennsylvania law is clear that

“the measure of damages for injury to property is the cost of repairs where that

injury is repairable; however, where the injury is characterized as permanent [as

when a building is completely destroyed], the measure of damages becomes the

decrease in the fair market value of the property.” Babich, 563 A.2d at 170.

“Repair and replacement costs are irrelevant when the damage is permanent, only

the reduction in market value can be considered.” Id. The exception to this rule

recognized in Crea and Pennsylvania Department of General Services v. United

2
        Arch also contends that Stiffler should have been permitted to testify as a person
with knowledge and experience qualifying him to form a reasonably intelligent judgment
as to value. See Westinghouse, 176 A. at 15. Arch’s proffer, however, fails to show that
Stiffler had knowledge or experience concerning the actual FMV of the building or the
values of similar property in the area. Therefore, the District Court correctly barred him
from testifying about the building’s FMV.
                                            6
States Mineral Products Co., 898 A.2d 590, 599 (Pa. 2006), is inapplicable

because this is not a situation where there is no value in the market place for the

destroyed property.

      The FMV was the appropriate measure of damages for the building

destroyed in the fire. Due to its litigation decisions, Arch failed to produce any

admissible or competent evidence to establish a market value for the building.

Without the necessary evidence, the District Court acted appropriately in granting

partial summary judgment in favor of Carol & Dave’s. For these reasons, we will

affirm.

                                        7