American Ins. Co. v. Midwest Motor Express, Inc.

• Decision Date: 01 October 1996
• Docket Number: No. 950411,950411
• Parties: The AMERICAN INSURANCE COMPANY, a corporation, Plaintiff, Appellee, and Cross-Appellant, v. MIDWEST MOTOR EXPRESS, INC., Defendant, Appellant, and Cross-Appellee. Civil
• Court: North Dakota Supreme Court

Page 182

554 N.W.2d 182

The AMERICAN INSURANCE COMPANY, a corporation, Plaintiff, Appellee, and Cross-Appellant, v. MIDWEST MOTOR EXPRESS, INC., Defendant, Appellant, and Cross-Appellee.

Civil No. 950411.

Supreme Court of North Dakota.

Oct. 1, 1996.

R. Richard Maixner (argued), and Orell D. Schmitz (appearance), of Schmitz, Moench & Schmidt, Bismarck, for plaintiff, appellee, and cross-appellant.

Randall J. Bakke (argued), of Smith Bakke Hovland & Oppegard, Bismarck, for defendant, appellant, and cross-appellee.

MARING, Justice.

Midwest Motor Express, Inc. [Midwest] appeals from a memorandum decision dismissing its counterclaim against the American Insurance Company [American] for excess retrospective premiums it allegedly paid American because, the trial court found, the counterclaim was barred by the statute of limitations, and from a later memorandum decision denying Midwest's post-trial motion. American cross-appeals from the memorandum decision dismissing its complaint against Midwest because, the trial court found, American failed to prove its claim for an alleged deficiency in retrospective premiums paid by Midwest. We affirm the dismissal of both American's complaint and Midwest's counterclaim. ¹

Midwest is a Bismarck-based transport company with drivers and other employees working in Minnesota. Minnesota, unlike North Dakota, has a private workers compensation insurance system. Midwest purchased its Minnesota workers compensation insurance coverage from American for the years 1981 through 1991. The workers compensation insurance policy involved in this case provided coverage for the 1981 calendar year only and included a retrospective premium endorsement. Midwest paid an estimated annual premium for each one-year policy. But under the retrospective premium endorsement, the premium was adjusted either upward or downward during the ensuing years depending on the workers compensation payments made to workers injured during the one-year policy period. This resulted in either a yearly payment being made by Midwest to American or refunds being made by American to Midwest. In addition, when Midwest owed premiums on another year's workers compensation policy, but American owed Midwest money under the retrospective premium adjustment on the 1981 policy, American would issue a credit for that amount, thus reducing the total amount owed by Midwest.

After making retrospective premium adjustments in July of 1989, 1990, and 1991, American claimed Midwest owed, after offsets, $75,766 on the 1981 policy. Midwest did not pay, and in August 1993, American brought this lawsuit to collect the retrospective premium from Midwest. Midwest counterclaimed, asserting that it was entitled to an offset or retrospective premium reimbursement from American of $88,476 based on a revised final audit conducted in 1982 or 1983 and which "cleared [American's] books" in July 1984. American asserted Midwest's counterclaim was barred by the statute of limitations.

Following a bench trial, the court dismissed both American's complaint and Midwest's counterclaim. The court ruled that, because American had destroyed its audit records under the company's record retention and destruction schedule, American had "failed to prove the basis for the charges claimed and hence its claim has not been proved by the greater weight of the evidence." The trial court also ruled that, because the amount Midwest claimed it was owed became due in 1982, Midwest's counterclaim was barred by the six-year statute of limitations under N.D.C.C. § 28-01-16(1). The court reasoned that the account between the parties created by the periodic retrospective premium adjustments was a "simple open account" rather than a "mutual open, and current" account within the meaning of N.D.C.C. § 28-01-37, under which Midwest's claim for relief would be deemed to have accrued "from the time of the last item proved in the account on either side."

Midwest moved to amend the court's findings under N.D.R.Civ.P. 52(b), to alter or amend the judgment under N.D.R.Civ.P. 59, and for relief from the judgment based on fraud, misrepresentation, or other misconduct of an adverse party under N.D.R.Civ.P. 60. Midwest argued that its counterclaim was not time barred because its breach of contract action did not accrue under N.D.C.C. § 28-01-16(1) until American brought this lawsuit. Midwest also asserted that principles of equitable estoppel prevented application of the statute of limitations to bar its counterclaim.

The trial court denied Midwest's motion. The court ruled that the statute of limitations applied because Midwest "discovered its claim in 1984, or in the exercise of reasonable diligence should have discovered its claim no later than 1986." The trial court found American did not "mislead" Midwest and there was "no proof" of equitable estoppel. These appeals followed.

I

In its cross-appeal, American asserts the trial court erred in concluding that the foundational requirements had not been met under N.D.R.Ev. 803(6) for the introduction of trial exhibits documenting the periodic retrospective premium adjustments. Most of the documents are "retrospective premium reports" American prepared to send to Midwest which stated the amounts Midwest's account was being credited or debited for premiums owed for a certain time period. Others summarize the figures for various years. Contrary to American's argument, the record shows that the trial court admitted the documents into evidence but simply found them, at the time of its decision, insufficient from an evidentiary standpoint to support American's claim against Midwest.

Although the trial court stated in its memorandum decision that the foundational requirements for the exhibits had not been met, this appears to have been an alternative ruling because the court considered the documents and stated they "prove[d] nothing," and continued to analyze the other evidence presented before concluding American had failed to establish its claim by a preponderance of the evidence. Moreover, the court explained during trial:

"I'll tell you what I'll do, I will allow it into evidence, but the weight it is going to get depends on how you support the figures. This being a court case I don't want to get real technical with the rules of evidence. If this were a jury case, I would not let this into evidence."

Because the trial court allowed the document into evidence, the proper inquiry on appeal is not whether the foundational requirements for admitting business records under N.D.R.Ev. 803(6) were satisfied, but whether the court's finding that American failed to prove by a preponderance of the evidence the amount allegedly owed by Midwest is clearly erroneous. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if this court is left with a definite and firm conviction that a mistake has been made. Sargent County Bank v. Wentworth, 547 N.W.2d 753, 758 (N.D.1996).

Midwest challenged the method used by American in calculating the retrospective premiums from the outset of this lawsuit. Although the documents contain various figures for the relevant years, they do not explain how the amounts were calculated, or what data or formula was used to arrive at the amounts. American's witnesses had no knowledge of how the premiums were calculated or what formula was used. Although one witness testified about the method American used to prepare the records, the records were only summaries of other records which might have established the basis for the retrospective premium charges. Those records, the trial court noted, were destroyed by American in 1987 as part of its internal records retention and destruction schedule, and consisted of the underwriting and audit files, which the court believed "would have revealed important factors which impacted on the retrospective premium claimed."

The trial court may assess the reliability of documentary evidence in light of the testimony of witnesses. See Schmidt v. Schmidt, 432 N.W.2d 860, 864 (N.D.1988). Evidence admissible under N.D.R.Ev. 803(6) need not be accepted by the court "as an absolute fact or as prima facie evidence of a fact." Pulkrabek, Inc. v. Yamaha Intern. Corp., 261 N.W.2d 657, 660 (N.D.1977). The trial court simply was not persuaded by American's evidence in this case. The court's finding that American failed to prove its claim for retrospective premiums by a preponderance of the evidence is not clearly erroneous. We conclude the trial court did not err in dismissing American's complaint.

II

Midwest asserts the trial court erred in dismissing its counterclaim on the basis it was barred by the six-year statute of limitations under N.D.C.C. § 28-01-16(1). Midwest contends its counterclaim is not time barred because the account between the parties was a mutual, open account as defined by N.D.C.C. § 28-01-37:

"When claim for relief upon open account accrues. In an action brought to recover a balance due upon a mutual open, and current account, when there have been reciprocal demands between the parties, the claim for relief is deemed to have accrued from the time of the last item proved in the account on either side."

In Everson v. Partners Life Ins. Co., 268 N.W.2d 794, 796 (N.D.1978), we adopted the definition of "mutual account" given in In re Vicen's Estate, 1 Wis.2d 193, 83 N.W.2d 664, 667 (1957):

" '... an account wherein are set down by express or implied agreement by the parties concerned a connected series of debit and credit entries of reciprocal charges and allowances, where the parties intend that the individual items of the account shall not be considered independently, but as a continuation of a related series, and that the account shall be kept open and subject to a shifting balance as additional related entries of debits and credits are made thereto, until it shall suit the convenience of either pa...