Portland General Electric Co. v. Taber
146 Or. App. 735, 934 P.2d 538, 1997 Ore. App. LEXIS 233 (1997)
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Rule of Law:
When a utility pole with no market value is negligently destroyed, the proper measure of damages is its undepreciated cost (original cost less accumulated depreciation), not the full cost of a new replacement pole.
Facts:
- Portland General Electric (PGE) owns approximately 235,000 wooden power poles, which it depreciates as a capital asset for tax and accounting purposes using a projected useful life of 37 years.
- Used wooden power poles have no market or salvage value.
- Until July 1, 1993, PGE calculated damages for destroyed poles using their undepreciated cost. After this date, PGE began invoicing for the full replacement cost of a new pole.
- On September 12, 1993, a vehicle insured by Farmers Insurance Company struck and damaged a 17-year-old PGE pole.
- On June 20, 1994, a pickup truck driven by Taber struck and damaged a 60-year-old PGE pole that was still fully functional.
- PGE sought to recover the full replacement cost for a new pole from both Taber and Farmers Insurance, which both parties disputed.
Procedural Posture:
- PGE sued Taber in a trial court to recover the full replacement cost of the damaged power pole.
- Farmers Insurance Company, representing its insured (Johnson) from a similar incident, successfully moved to intervene in the lawsuit.
- PGE moved for summary judgment, and defendants Taber and Farmers cross-moved for summary judgment on the dispositive issue of the correct measure of damages.
- The trial court granted summary judgment in favor of Taber and Farmers, holding that the 'undepreciated cost' method was the proper measure of damages.
- PGE, as appellant, appealed the trial court's grant of summary judgment to the Court of Appeals of Oregon.
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Issue:
Does the proper measure of damages for a negligently destroyed utility pole, which has no market value, consist of the full replacement cost of a new pole?
Opinions:
Majority - Haselton, J.
No. The proper measure of damages for a negligently destroyed utility pole with no market value is its undepreciated cost, not the full cost of a new replacement. The court's primary goal in assessing compensatory damages is to provide just compensation to the injured party without being unjust to the party compelled to pay. Since used power poles have no market value, an alternative valuation method is necessary. The 'full replacement cost' method would systematically overcompensate PGE in the aggregate, as it would always receive a new pole for a used one, creating a windfall. Conversely, the 'undepreciated cost' method, while imperfect, better approximates just compensation systemically across all power pole loss cases. It is just to hold PGE to the same 37-year useful life standard it employs for its own tax and accounting benefits, a principle supported by precedent like Ohio Power Co. v. Zemelka. PGE failed to justify why its historical method became unjust or why a different standard should apply for property loss valuation than for its own accounting.
Analysis:
This decision establishes the minority 'undepreciated cost' rule as binding precedent in Oregon for valuing destroyed utility property that lacks a market. It prioritizes achieving just compensation on a systemic, aggregate level rather than focusing on the potential for an inequitable result in an individual case (such as zero recovery for a fully-depreciated but functional pole). The ruling signifies that courts may hold plaintiffs to valuation methods they use for their own internal accounting and tax purposes, disfavoring damage models that appear to create a consistent windfall. This precedent will influence future property damage litigation in Oregon involving unique assets, encouraging the use of consistent and equitable valuation methodologies.
