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Full Opinion
ALYESKA PIPELINE SERVICE COMPANY, Appellant, Cross-Appellee,
v.
Whitten H. ANDERSON and Ronald R. Thomas, Appellees, Cross-Appellants.
Supreme Court of Alaska.
*516 Charles P. Flynn and Nelson G. Page, Burr, Pease & Kurtz, Inc., Anchorage, for appellant, cross-appellee.
Charles D. Silvey, Jr., Merdes, Schaible, Staley & DeLisio, Inc., Fairbanks, and Clyde O. Martz and Howard L. Boigon, Davis, Graham & Stubbs, Denver, Colo., for appellees, cross-appellants.
Before RABINOWITZ, C.J., CONNOR, BURKE and MATTHEWS, JJ., and DIMOND, Senior Justice.
OPINION
RABINOWITZ, Chief Justice.
This appeal is from a jury award for the unlawful taking of slate from the mining claim of Anderson and Thomas (hereinafter Anderson) by Alyeska during the construction of the Trans-Alaska Pipeline System. Alyeska asserts numerous specifications of error concerning the validity of Anderson's mining claim and the propriety of the damages awarded. Anderson cross-appeals from the court's failure to award prejudgment interest, the court's award of attorney's fees, and the court's directed verdict in favor of Alyeska on the issue of punitive damages. We conclude that none of the specifications of error in either the appeal or the cross-appeal have merit and thus affirm the judgment of the superior court.
In 1966, Anderson filed an unpatented mining claim at Mile 34.5 Elliot Highway, just north of Fairbanks. His mining claim is for building stone (green slate) alleged to possess distinct and special value. Anderson testified that the physical qualities which give this stone distinct and special value are its easy cleavability, distinctive streaks which permeate the stone, and the presence of fossils.
In 1975, one of Alyeska's subcontractors constructed a pipeline access road across Anderson's mining claim. Anderson discovered this and negotiated a lease for an access road right-of-way at an annual rental of $1,000. The lease contained a covenant against waste.
In 1976, employees of Price, a joint venture subcontractor for Alyeska, removed a quantity of rock for use in the pipeline construction. Wemmer, foreman of the crew that removed the slate, testified that he knew when he was removing the slate that it was not from one of Alyeska's designated materials locations. The designated location in that area was on a steep incline which was difficult to reach; attempts to use it had resulted in serious damage to several trucks. The slate deposit was easily accessible and was well-suited for use as material to support the pipeline structure. Wemmer testified that his supervisor had talked to a representative of the State Department of Highways who was also taking rock from this area and that the state representative had given authorization for taking the rock. Wemmer further testified that Alyeska's subcontractors had previously taken material from state rock sites after obtaining permission from the state. After Wemmer was informed by his supervisors that this rock should not have been taken, he proceeded to remove an additional six truck loads of rock.
Anderson requested payment for the taking of the rock and subsequently filed suit, alleging claims for relief sounding in both tort and contract, for conversion of the rock. The primary disputes at trial centered on two areas. Alyeska contested the validity of Anderson's mining claim, contending that the claim did not encompass a "valuable mineral deposit" as required by 30 U.S.C.A. § 22; Alyeska argued that absent a valid mining claim, Anderson had no right to damages on either a tort or a *517 contract rationale. The other primary area of contention was the extent of damages incurred, namely the quantity and value of the rock which was removed by Alyeska from Anderson's claim. By special verdict, the jury found that Anderson had "discovered a valuable mineral as defined in the instructions" and awarded Anderson compensatory damages in the amount of $1,911,429.40.
In this appeal Alyeska contends that the superior court's instructions pertaining to the issue of whether Anderson had located a valuable mineral deposit under federal law were inadequate and confusing; that the superior court should have granted its motions for summary judgment, directed verdict, and judgment n.o.v. on the theory that Anderson had failed to establish that he had a valid mining claim; that the trial should have been stayed pending determination by the Bureau of Land Management of the validity of Anderson's mining claim; and that the superior court's instructions allowing a harsh form of trespass-conversion damages were improper. As noted previously, Anderson has cross-appealed, claiming that the superior court should have awarded pre-judgment interest and greater attorney's fees, and that it erred in directing a verdict in Alyeska's favor on the issue of punitive damages.
I. Instructions Concerning the Validity of Anderson's Mining Claim.
To recover for the removal of the rock, Anderson was required to establish that he had a valid claim to it. Anderson's interest in the subject rock was based on his unpatented mining claim located on federal land. Alyeska, in an attempt to defeat his claim for damages, asserted that Anderson did not establish a valid mining claim.
To be valid under the provisions of 30 U.S.C.A. § 22, a mining claim must be one for "valuable mineral deposits."[1] Two complementary tests have been developed for determination of whether minerals are valuable: the prudent person test and the marketability test. See United States v. Coleman, 390 U.S. 599, 601-03, 88 S.Ct. 1327, 1329-1331, 20 L.Ed.2d 170, 174-75 (1968). These tests "are not distinct standards but are complementary in that the latter is a refinement of the former."[2]Id. at 603, 88 S.Ct. at 1330, 20 L.Ed.2d at 175. Basically, the prudent person test requires that "a person of ordinary prudence would be justified in the further expenditure of his labor and means, with a reasonable prospect of success, in developing a valuable mine."[3] The marketability test requires that "it must be shown that the mineral can *518 be `extracted, removed and marketed at a profit.'"[4]
In addition to the foregoing, since the only claimed use for the slate found in Anderson's claim is as building stone, it also comes under the Common Varieties Act, 30 U.S.C.A. § 611 (West 1971).[5] This act provides that:
No deposit of common varieties of sand, stone, gravel, pumice, pumicite, or cinders and no deposit of petrified wood shall be deemed a valuable mineral deposit within the meaning of the mining laws of the United States so as to give effective validity to any mining claim hereafter located under such mining laws: Provided, however, That nothing herein shall affect the validity of any mining location based upon discovery of some other mineral occurring in or in association with such a deposit. `Common varieties' as used in sections 601, 603, and 611 to 615 of this title does not include deposits of such materials which are valuable because the deposit has some property giving it distinct and special value... . [emphasis in original][6]
The Supreme Court, in United States v. Coleman, 390 U.S. 599, 605, 88 S.Ct. 1327, 1331, 20 L.Ed.2d 170, 176 (1968), determined from the legislative history of 30 U.S.C.A. § 611 that building stone was intended to be included within this section:
[W]e read 30 U.S.C. § 611, passed in 1955, as removing from the coverage of the mining laws `common varieties' of building stone, but leaving 30 U.S.C. § 161, the 1892 Act, entirely effective as to building stone that has `some property giving it distinct and special value' ... .
Thus, besides satisfying the marketability and prudent person tests, Anderson had the further burden of proving that the slate located in his claim had "distinct and special value."[7]
*519 Regarding these tests, the superior court instructed that:
Federal lands, unless otherwise appropriated, are open for entry and location of mining claims only as to valuable mineral deposits. The term `valuable mineral deposits' has a special meaning with respect to the type of material involved in this law suit. In order for the material involved in this law suit to be classified as a `valuable mineral deposit' it must have a distinct and special value.
In our view this instruction adequately described the relevant portion of 30 U.S.C.A. § 22.[8] The instruction also expressed the superior court's recognition that slate is a "common variety" mineral and that thus it must possess a "distinct or special value" to be the basis of a valid mining claim.
The superior court further instructed that:
In demonstrating that the type of material involved in this law suit has some special and distinct economic value, the plaintiff must show either (1) a unique quality which permits a use for the mineral for which other materials may not be used; or (2) if uses are the same, that some unique quality gives the mineral an economic advantage over competing stone, reflected either in higher price for the stone in question, or alternatively, in lower production costs. That is, the alleged unique quality must result in an economic advantage. In applying the foregoing standards, the inquiry is not limited to deposits of identical stone. Rather, inquiry is made to the availability and price of competing materials used for the same purposes.
This instruction correctly defines the term "distinct and special value." Further, the court gave the following instruction:
*520 In determining whether a deposit constitutes a valuable mineral deposit, two basic tests are utilized. First, there is the marketability test, which requires that a mineral be shown to be marketable at a profit, and moreover marketable at a profit comparable to that obtained by persons marketing competing materials. Secondly, there is a more generalized `prudent-man test': that a person of ordinary prudence would be justified in the further expenditure of his labor and means, with a reasonable prospect of success, in developing a valuable mine. Factors relevant to the foregoing considerations include (1) availability of other sources of material to meet market demand; (2) proximity of the material in question to market; (3) quality and quantity of the deposit; (4) accessibility of the deposit; (5) price and cost factors; and (6) actual utilization of the deposit.
We believe this instruction fairly summarized the prudent man and marketability tests.
It is to these three instructions that Alyeska took exception on the grounds that they were incomplete and misleading. The claim that the instructions were misleading is based on the contention that the instructions failed to make clear that the "distinct and special value" test was separate from the marketability and prudent person tests. Alyeska further argues that these instructions gave the jury the impression that it was necessary to satisfy only one general test, rather than several distinct tests. Alyeska made appropriate objections before the superior court and requested that its proposed instruction no. 3, describing the marketability and prudent person tests, be given instead of the instruction quoted above. Alyeska's proposed instruction was virtually identical to the one given by the superior court except for the addition of a prefatory sentence which reads: "In addition to a demonstration of economic advantage over competing stone, plaintiffs bear the burden of meeting two further basic tests."
We are of the view that the court's three instructions adequately informed the jury of the fact that the tests were separate. Considering the circumstances under which the instructions were given and their probable effect on the jury, we are convinced that failure to give this additional clarifying sentence did not result in jury confusion and, thus, that it did not affect Alyeska's substantial rights.[9]
Alyeska's other assertion of error concerning these instructions is that they were inadequate. It is claimed that the superior court's instructions failed to set forth relevant factors pertaining to the "distinct and special value" test and to make clear that certain other factors were to be excluded.
The first half of Alyeska's proposed instruction states that a finding of uniqueness must be based on factors beyond the fact that the material commands a higher price, or is subject to lower production costs, than competing decorative stone.[10]*521 According to Alyeska, the existence of abundant nearby deposits of identical stone without distinguishing features would negate uniqueness. In United States v. Heden, 19 IBLA 326, 339 (1975), it was held that "in comparison with the extremely large deposits of similar stone throughout the area, the stone herein concerned is not unique." Although the legal basis for Alyeska's proposed instruction is undeniable, there was not a sufficient factual basis to support the giving of the instruction in this case. No testimony was given that reflected that green slate was actually available anywhere else in the Fairbanks area for use as a building stone or that any had been placed on the Fairbanks building stone market. Thus, we find no error in the superior court's failure to give this portion of Alyeska's proposed instruction.
The second half of Alyeska's proposed instruction enumerates certain relevant and irrelevant factors regarding the uniqueness test. First, Alyeska asserts that the lack of a history of substantial sales tends to negate uniqueness. The question, as articulated in U.S. Minerals and McClarty,[11] is whether the subject green slate with its claimed properties of color and cleavability commands a higher price in the market or involves lower production costs than competing stone. Alyeska argues that it is therefore proper to consider anything which reflects on whether the green slate commands a higher price or otherwise offers a profit advantage. We think the jury should have been instructed that it could consider the sales history of this material in relation to the distinct and special value test and that the court erred in failing to so instruct. But, as discussed below, we are of the further view that the court's omission was harmless error.
Alyeska's proposed instruction also would have informed the jury factors such as location, accessibility, and proximity of the rock to market are irrelevant because "uniqueness" is dependent on the "inherent physical characteristics of the material in question."[12] In determining whether the green slate in issue generates greater profits than other building stone in the Fairbanks area, however, production costs must be considered. Location, accessibility, and proximity to market are relevant to a determination of whether the mineral possesses characteristics that make it more valuable than competing materials.[13] Thus, this portion of the proposed instruction is an incorrect statement of the law and was properly rejected by the superior court.
Finally, Alyeska's proposed instruction states that determination of the market for the stone must be made on the date of discovery of the mineral rather than at a subsequent time. This is a correct statement of law as to the test of marketability.[14] However, it is not clear that this requirement also applies to the uniqueness *522 test. In any event, because we believe that the superior court's instruction on the marketability test was adequate in this respect, we perceive no need to consider the issue in the context of the uniqueness test. We conclude that the superior court's omission of this portion of Alyeska's instruction was not error.
Thus, the only portion of Alyeska's proposed instruction which should have been given is that which related to the evidence of sales history. The jury was instructed to consider the "actual utilization" of the claim and other relevant factors and was fully apprised of the limited sales Anderson had made of the mineral as well as other information relevant to the question of marketability. While an additional instruction further setting forth relevant methods of determining marketability would have been helpful, we cannot conclude that its omission affected substantial rights of Alyeska. We therefore find that any error in the superior court's instructions to the jury was harmless.
II. Superior Court's Refusal to Determine Factual Issues.
As its second specification of error Alyeska contends that Anderson presented insufficient evidence to demonstrate a valid mining claim upon which he could maintain claims for relief. Alyeska therefore argues that the superior court should have granted its motions for summary judgment or directed verdict, or ordered a judgment n.o.v. It is abundantly clear that the validity of Anderson's mining claim is an issue of fact and that Alyeska's motion for summary judgment was correctly denied since there existed material issues of fact regarding the validity of the claim. See Wickwire v. McFadden, 576 P.2d 986, 987 (Alaska 1978). But a determination of the correctness of the superior court's refusal to direct a verdict or enter a judgment n.o.v. requires that we review the evidence as it relates to the applicable tests we have previously discussed.[15]
*523 The first question is whether the green slate located in Anderson's claim has distinct and special value, and is thus outside the ambit of the Common Varieties Act. The alleged inherent special qualities of this rock are almost identical to those asserted in U.S. Minerals.[16] The question of whether the rock in Anderson's claim is distinct and special therefore turns upon whether it commands a higher price or yields higher profits than other decorative building stone available in the Fairbanks market. The marketability and prudent person tests require, in addition to that determination, that at the time of discovery a prudent person would have been justified in developing the mine and would have had a reasonable prospect of financial success in the venture. The contested factual questions relevant to these tests center on whether there was a market for Anderson's slate.
The record shows that Jack Pruitt, a local stone mason, had used some of Anderson's rock in the construction of a church in Fairbanks prior to the filing of Anderson's claim. The two claim owners, Anderson and Thomas, had also used the stone to build fireplaces for their homes, and Thomas had covered the front of his house with the stone shortly after the claim was filed in 1966. In 1967 or 1968 Anderson sold five or six tons of stone at a price of $80 per ton to the Fox Roadhouse. This sale resulted in a total profit of approximately $160. Apparently acting without knowledge of Anderson's claim, Warren Stearns, another local stone mason, quarried five tons of rock for his own fireplace during this period. Anderson also placed several tons of stone on consignment with Fairbanks Sand and Gravel. At the time of trial, Fairbanks Sand and Gravel had sold less than two tons of the stone at $85 per ton, for which Anderson received $50 per ton. Additionally, there was a sale made to Wally Burnett in the summer of 1978 of approximately twenty-six tons; Burnett extracted the stone himself and paid Anderson $40 per ton.
As Alyeska repeatedly observes, the only marketing of the slate in the first ten years of Anderson's claim was one sale of five to six tons which resulted in a profit of approximately $160. Alyeska points to this single sale as suggesting that there is no market for the slate. Alyeska also notes that at Fairbanks Sand and Gravel, the only Fairbanks retail outlet for building stone, Anderson's slate sells for $85 per ton while Fox marble sells for $100 to $150 per ton and Shaw Creek rock sells for $120 per ton. Alyeska argues that Anderson's slate does not possess special and distinct features since it is used only for building stone and fails to command a higher price than competing stone.
However, as McClarty v. Secretary of Interior, 408 F.2d 907, 909 (9th Cir.1969), demonstrates, reduced production costs could result in increased profits and could thus qualify the mineral as having a distinct and special value. Here, the evidence taken in the light most favorable to Anderson suggests that he could earn a profit for his stone higher than those earned by competitors. Anderson sold approximately twenty-six tons of rock for $40 per ton to Burnett without incurring any overhead costs. Fairbanks Sand and Gravel was keeping several tons of Anderson slate on consignment, of which they had sold 1.85 tons for $85 per ton. Anderson received $50 per ton from this arrangement and testified that he could bring the stone to market for $15 per ton.[17] Thus, Anderson was capable of making a profit of from $35 *524 to $40 per ton, as compared to the quarry owners' profits of $15 per ton for Fox marble and $25 per ton for Shaw Creek rock. Therefore, we conclude that there was evidence indicating that Anderson had a profit advantage sufficient to warrant a jury's finding that Anderson's slate possessed a distinct and special value. Given this conclusion we hold that the superior court did not err in denying Alyeska's motions for a directed verdict and judgment n.o.v.
Concerning the prudent person and marketability tests, lack of sales constitutes evidence that Anderson's rock was not marketable in 1966. However, as previously noted, it is unnecessary for Anderson to show actual profitable sales, but only that the rock could have been marketed at a profit.[18] A recent Interior Board of Land Appeals decision notes that there may be a variety of acceptable reasons why a marketable mining claim is not being profitably pursued at any given time. United States v. Williamson, 45 IBLA 264, 285 (1980). In this case, Anderson testified that his new job had made him unavailable to actively mine the claim and develop a market. Other testimony before the jury suggests a valid finding of marketability. Anderson estimated that his slate could capture one third of the building stone market; a Fairbanks stone mason testified that he thought it could capture one half of the market. An employee of Fairbanks Sand and Gravel, when asked whether Anderson's stone was marketable, stated: "It's marketable. I don't know how much. Time will tell. Our idea is to give people their choice." Jack Pruitt, a local stone mason, testified: "There has not been too much of the [slate] marketed ... [n]ot because it is not a marketable rock... . It just has not gone over... ."
We think the foregoing evidence, taking such evidence in the light most favorable to Anderson, warrants the conclusion that reasonable persons could differ as to the outcome of the prudent person and marketability tests. Thus, we conclude that the superior court did not err in allowing the jury to make a determination of whether this was a valid mining claim.
III. Refusal to Stay Trial Pending the Department of the Interior's Determination of the Validity of Anderson's Mining Claim.
One month prior to trial Alyeska moved for a stay pending the outcome of an investigation by the Bureau of Land Management of the validity of Anderson's mining claim. This motion, and a subsequent motion to stay this appeal, were denied.
By February 1980 all that had occurred by way of administrative action by the Bureau of Land Management was the issuance of an initial report which recommended that "contest action seeking to declare the Greenstone # 1 Claim null and void, ab initio, be initiated." Alyeska claims that the superior court should have stayed proceedings in this lawsuit until the United States Government and the Secretary of the Interior were able to make a final determination of the validity of Anderson's mineral claim. Alyeska supported its motion only by affidavits which asserted that a validity determination would be forthcoming.
Mindful of the long delay that might be necessary for final adjudication in a federal contest action of Anderson's mining claim,[19] we are of the opinion that the issue of a mining claim's validity is not subject exclusively *525 to administrative determination. Of significance here is 30 U.S.C.A. § 53 (West 1971) which provides:
No possessory action between persons, in any court of the United States, for the recovery of any mining title, or for damages to any such title, shall be affected by the fact that the paramount title to the land in which such mines lie is in the United States; but each case shall be adjudged by the law of possession.[20]
Our reading of the record indicates that the superior court denied Alyeska's motion for a stay on the basis that 30 U.S.C.A. § 53 permitted the maintenance of Anderson's action.
Duguid v. Best, 291 F.2d 235 (9th Cir.1961), cert. denied, 372 U.S. 906, 83 S.Ct. 713, 9 L.Ed.2d 716 (1963), dealt with a situation similar to the present one. That case involved a trespass action in which owners of a mining claim alleged partial ouster as a consequence of the construction of an irrigation district. In its opinion the Ninth Circuit stated:
We are satisfied from our review of the authorities and the provisions of Section 53, Title 30 U.S.C.A. supra, that appellants resorted to the proper forum in instituting their action in the Superior Court of the State of California, in and for the County of Butte, against the irrigation district to recover damages for the alleged trespass of the irrigation district on the possessory interest of appellants in the mining claim. Under the express language of said Section 53 the paramount title of the United States to the land in which such mining claim lies is not affected by such lawsuit, and the rights of the parties to such lawsuit must be adjudged by the law of possession. We recognize that there is a dispute between the parties as to the nature of appellants' possessory interest. In the district court appellants alleged they are owners of a perfected claim, and on motion for summary judgment appellees assert that the claim of appellants was not perfected because of lack of discovery and the non-mineral character of the lands.
In exercising jurisdiction to determine the possessory interests as between appellants and the irrigation district, the state court may be required to determine the mineral or non-mineral character of the land and the question of whether discovery has been made, where such a determination is necessary to settle the controversy before it. We agree with the view of the California courts that it is not improper for state courts to make such a determination but such determination affects only the possessory interests of the litigants and has no effect upon the paramount title of the government.[21]
Id. at 239 (citations omitted).
One of the grounds advanced by Alyeska in support of its motion for a stay is that "primary jurisdiction" is in the Department of the Interior. The doctrine of primary jurisdiction was discussed in G & A Contractors, Inc. v. Alaska Greenhouses, Inc., 517 P.2d 1379, 1382-83 (Alaska 1974) (footnote omitted). There we said:
The legal theory which forms the touchstone of appellants' argument is founded on the administrative law doctrine of primary jurisdiction. We are instructed by Professor Davis that the doctrine of primary jurisdiction deals with the question of whether a court or an administrative agency should make the initial decision on a given issue. 3 K. Davis, Administrative Law Treatise § 19.01 at 2 (1958). Its purpose is to help a court decide whether it should refrain *526 from exercising its jurisdiction until after the agency has determined some question or an aspect of some question arising in the proceedings before the court. The operational concept underlying the doctrine is the need for an orderly and reasonable coordination of the work of agencies and courts. Whatever the agency's expertise, opines Davis, the court should not act on a subject peculiarly within the agency's specialized field without first taking into account what the agency has to offer. Otherwise, litigants who are subject to the agency's continuous regulation may become victims of uncoordinated and conflicting requirements.
This, of course, is hardly to say that the courts must in each and every case defer to an agency determination. For implicit in the concept of orderly and reasonable coordination is the requirement that the question of deferring to agency expertise be decided with reference to the unique facts of each case.[22]
As Anderson notes, there is no exclusive or primary agency jurisdiction over cases like the present one since Congress has, by virtue of its enactment of 30 U.S.C.A. § 53, granted specific authority to the courts to decide possessory actions involving mining claims. Further, we think it significant that at the time the superior court acted on Alyeska's motion for stay it had no indication as to when a decision on the validity of Anderson's claim would be forthcoming from the Bureau of Land Management.[23] Thus, we conclude that the superior court did not misapply the doctrine of primary jurisdiction and that its refusal to grant a stay was appropriate in the circumstances.[24]
IV. Instruction on the "Harsh" Form of Damages.
Alyeska contends that the superior court erred in instructing the jury on a "harsh" form of damages in regard to its alleged conversion of rock from Anderson's claim. Alyeska first asserts that such an instruction is inconsistent with the superior court's grant of a directed verdict against Anderson's claim for punitive damages.[25] The court instructed the jury as to both the harsh and mild rules of trespass-conversion damages. It based its instructions on Alaska Placer Co. v. Lee, 553 P.2d 54, 57-58 (Alaska 1976) (footnotes omitted), where we stated:
When a trespasser removes minerals from the land of another, there are two generally accepted rules of damages: a `mild' rule for good faith trespassers and a `harsh' rule for willful trespassers. The mild rule provides that a good faith trespasser must pay the owner damages based either on a royalty rate or on the market value of the minerals less cost of extraction. Thus, the nonwillful trespasser may receive credit for the mining expenses involved in the conversion.
The harsh rule for intentional trespassers operates as a form of punitive damages, with the goal of deterrence. The owner may recover the market value of the converted minerals without offset or *527 deduction for the trespasser's mining costs.
`Good faith,' in the context of trespass on mineral claims, has been defined as an `honest and reasonable belief' that the taking is rightful; and `honest intention' not to take `unconscientious advantage of another.' The United States Supreme Court has stated that good faith in this context is `something more than the trespasser's assertion of a colorable claim to the converted minerals.' In the instant case, the trial court found that the Lees were good faith trespassers and applied the `mild' rule of damages.[26]
It is apparent from the superior court's ruling that it concluded that the harsh rule of damages for trespass-conversion cases, while punitive in nature, is distinct from what we normally understand to be punitive damages. One distinguishing feature is the burden of proof appropriate to the two situations. In a determination of the appropriateness of the harsh form of damages, it is the defendant trespasser who must prove that the trespass was not willful in order to demonstrate that the mild form of damages is applicable.[27]Alaska Placer Co. v. Lee, 553 P.2d 54, 58 (Alaska 1976). On the other hand, as the superior court stated, the normal rule is that the burden of proof as to punitive damages is upon the party seeking the recovery of the same. D. Dobbs, Handbook on the Law of Remedies § 3.9 (1973).
Another distinguishing feature between harsh conversion damages and punitive damages also concerns burden of proof. The quantum of evidence necessary to support punitive damages was set forth in Sturm, Ruger & Co., Inc. v. Day, 594 P.2d 38, 46 (Alaska 1979), on reh. 615 P.2d 621 (Alaska 1980). There we stated:
In Bridges v. Alaska Housing Authority, 375 P.2d 696, 702 (Alaska 1962), this court noted that in order to recover punitive or exemplary damages, the plaintiff must prove that the wrongdoer's conduct was `outrageous, such as acts done with malice or bad motives or a reckless indifference to the interests of another.' Actual malice need not be proved. Rather, `[r]eckless indifference to the rights of others, and conscious action in deliberate disregard of them ... may provide the necessary state of mind to justify punitive damages.' Restatement (Second) of Torts, § 908 (Tent.Draft No. 19, 1973).
Thus, in order to go to the jury on the issue of punitive damages, Anderson was obliged to adduce evidence to show that Alyeska's conduct was "outrageous," as defined in Sturm, Ruger. The superior court concluded that Anderson did not produce sufficient evidence to permit an instruction on punitive damages.
This is not inconsistent with the court's instruction on the harsh form of conversion-trespass damages. Alyeska had the burden of proving that the trespass was not willful to avoid an instruction on the harsh form of damages. The court determined that Alyeska did not meet this burden of proof. It concluded that reasonable persons could differ as to whether Alyeska had acted in good faith when it removed the rock from Anderson's claim, and a jury question was thus presented on this question of fact. Thus, we find no error in the superior court's instruction concerning the harsh form of trespass-conversion damages.
Alyeska further contends that the superior court's instructions in regard to conversion damages were misleading in that they failed to inform the jury that the harsh rule of damages was in essence a *528 form of punitive damages. Alyeska asserts that the superior court erred in refusing to give its proposed instruction setting forth the elements of state of mind requisite to an award of punitive damages. As we have noted, the elements which must be proven to justify an award of punitive damages are more stringent than those necessary for the imposition of the harsh form of damages in a mining trespass-conversion action. Thus, we conclude that there was no error in the superior court's rejection of this instruction.[28]
V. Remittitur and Motion for New Trial.
Alyeska claims that the award of $1,911,429.40 is punitive and is "so far in excess of any reasonable amount" that the superior court should have ordered a remittitur or a new trial. The standard applicable to review of the superior court's decision on remittitur or new trial was set forth in Sturm, Ruger & Co., Inc. v. Day, 594 P.2d 38, 48 (Alaska 1979) (citation omitted), on reh. 615 P.2d 621 (Alaska 1980), as follows:
We have previously held that the decision to order a remittitur or a new trial rests within the sound discretion of the trial court. We will not interfere with the trial court's decision unless we are `left with a firm conviction on the whole record that the trial judge made a mistake in refusing to order a remittitur or grant a new trial.' City of Nome v. Ailak, 570 P.2d 162, 173 (Alaska 1977) (footnote omitted), and where intervention on our part is necessary to prevent a miscarriage of justice.
Anderson argues that, if the jury applied the harsh rule of damages, the award was well within the range indicated by evidence pertaining to the amount and value of the rock taken from his claim. He also submits that the award would be consistent even with the mild rule of damages. After reviewing the evidence we have concluded that the award was not excessive.
Alyeska argues further that the limited market for decorative stone must be considered in determining whether the damages were excessive and that it would take decades for the local market to absorb the amount of building stone which was taken by Alyeska. Alyeska requested no instruction concerning this view and has cited no cases in support of it. Regardless of the market for building stone, Alyeska needed the stone for pipeline construction and by its tortious conduct created a separate market for the stone in the amount it used. Alyeska did not submit any evidence in mitigation of the damages. Thus, we conclude that the superior court did not err in refusing to order a remittitur or a new trial.[29]
VI. Prejudgment Interest.
Anderson, in his cross-appeal, specifies as error the superior court's failure to award prejudgment interest. Anderson moved for an award of prejudgment interest from the date he instituted his action against Alyeska. After extensive briefing, the court denied the motion on the ground that "under the facts and circumstances of this case, an award of pre-judgment interest would do an injustice."
In State v. Phillips, 470 P.2d 266, 274 (Alaska 1970), in regard to prejudgment interest, we said:
*529 For a cause of action to accrue, one party must have breached a duty to the other, and the other must have been injured. At the moment the cause of action accrued, the injured party was entitled to be left whole and became immediately entitled to be made whole. Whenever any cause of action accrues, therefore, the amount later adjudicated as damages is immediately `due' in the sense of AS 09.50.280 and AS 45.45.010(a). All damages then whether liquidated or unliquidated, pecuniary or nonpecuniary, should carry interest from the time the cause of action accrues, unless for some reason peculiar to an individual case such an award of interest would do an injustice.
This subject was subsequently elaborated on in Haskins v. Shelden, 558 P.2d 487, 494-95 (Alaska 1976) (footnotes omitted), where we said:
Prejudgment interest is in the nature of compensation for use by defendant of money to which plaintiff is entitled from the time the cause of action accrues until the time of judgment. It is not meant to be an additional penalty.
Prejudgment interest is not to be awarded where its award would do an injustice. However, it is only in the most unusual cases that prejudgment interest is not proper. One such unusual case is where the award of such interest would result in a double recovery.
Thus, the question on review is whether this case falls within the narrow class of cases in which an award of prejudgment interest is inappropriate. We conclude that the superior court was correct in its determination that an award of prejudgment interest to Anderson would work an injustice. The jury's award of damages was based on the value of the rock as decorative building stone. The superior court could therefore have reasonably concluded that the jury's award was substantially higher than the amount Alyeska would have paid for the material for use in construction of the pipeline. Since, as Alyeska notes, it would have taken decades for Anderson to market the rock as building stone, it cannot be said that Anderson suffered a loss of income at the time it was wrongfully removed. Because Anderson suffered no loss of income and was adequately compensated for the losses he incurred, the superior court was justified in denying prejudgment interest.
VII. Attorney's Fees.
Anderson requested attorney's fees in the amount of $224,000.22, pursuant to Civil Rule 82(a)(1).[30] Alyeska argued that this case was governed by Rule 82(a)(2),[31] which allows the court to award fees "commensurate with the amount and value of legal services rendered" when the amount of the recovery is not an accurate criterion for making the determination. The superior court requested an itemization from Anderson of counsel's time and costs and, after reviewing it awarded $100,000 in attorney's fees.
The superior court gave the following explanation for its award of attorney's fees:
*530 Plaintiffs requested attorney's fees as the prevailing party pursuant to Alaska Civil Rule 82 in the sum of Two Hundred Twenty-four Thousand Dollars and Twenty-two cents ($224,000.22). Plaintiff, pursuant to a request of the Court, filed an itemization of time expended, showing approximately 400 hours spent in connection with this matter. The Court feels that even at $100 per hour for a billing rate, the total attorney's fees on a time basis would only be Forty Thousand ($40,000) Dollars. The Court feels that the formula of Alaska Civil Rule 82 is disproportionate to the actual attorney's fees but in light of the jury verdict, and effort expended, a deviation from the formula of Rule 82 is appropriate and therefore, attorney's fees of One Hundred Thousand ($100,000) Dollars is awarded.
Anderson argues that the superior court erred in determining that a deviation from the Rule 82(a)(1) formula was indicated.
We have required the trial court to state its reasons for making an award of attorney's fees which varies from the schedule in Rule 82(a)(1). Miller v. McManus, 558 P.2d 891, 893 (Alaska 1977); Fairbanks Builders, Inc. v. Sandstrom Plumbing & Heating, Inc., 555 P.2d 964, 966 (Alaska 1976); Patrick v. Sedwick, 413 P.2d 169, 179 (Alaska 1966). Because the superior court did state reasons for its deviation from the Rule 82(a)(1) schedule, our task on review is to determine whether the resulting award was an abuse of discretion. "Abuse of that discretion is established only by a `manifestly unreasonable' award." Haskins v. Shelden, 558 P.2d 487, 495 (Alaska 1976).
Anderson attacks only a portion of the superior court's reasoning, focusing on the statement that "the formula of Alaska Civil Rule 82 is disproportionate to the actual attorney's fees." Counsel has an existing contingent fee arrangement with Anderson that calls for fees of approximately 40% of the difference between the damages awarded by the jury and the costs incurred in pursuing the action. Anderson's counsel, then, stands to earn an attorney's fee of approximately $750,000, and for that reason contends th