Brooks Realty, Inc. v. Aetna Ins. Co.

• Decision Date: 23 March 1967
• Docket Number: No. 40050,40050
• Citation: 276 Minn. 245,149 N.W.2d 494
• Parties: BROOKS REALTY, INC., Respondent, v. AETNA INSURANCE COMPANY et al., Defendants and Third-Party-Plaintiffs, Appellants, v. BROOKS UPHOLSTERING COMPANY, Inc., Third-Party-Defendant.
• Court: Minnesota Supreme Court

Page 494

149 N.W.2d 494

276 Minn. 245

BROOKS REALTY, INC., Respondent, v. AETNA INSURANCE COMPANY et al., Defendants and Third-Party-Plaintiffs, Appellants, v. BROOKS UPHOLSTERING COMPANY, Inc., Third-Party-Defendant.

No. 40050.

Supreme Court of Minnesota.

March 23, 1967.

Syllabus by the Court

1. Ordinarily, the granting or denial of a new trial based on recantation of testimony of witnesses is left to the sound discretion of the trial court and will not be reversed on appeal unless it appears that the testimony is of such a serious nature that a different result is almost sure to follow if the testimony had been as the witness, after trial, says it should have been.

2. In an action on a stated-value fire insurance policy, if a building is totally destroyed the insured recovers the stated value in the policy without reference to actual value. If the building is partially destroyed the insured recovers the actual loss, whatever that is. If the evidence conclusively establishes that the actual loss is more than the insurance, it is proper to direct a judgment for the full amount of the insurance. If the evidence is in dispute it is for the jury to determine what the actual loss is.

3. In determining the actual loss of a partially destroyed building we adopt the broad-evidence rule under which the actual loss is determined by considering all evidence logically tending to establish what the loss was. In so doing the value of the building at the time of the fire, the cost of reconstruction, cost of removing debris, amount of salvage, and any other evidence logically bearing upon the loss may be considered by the jury.

4. In granting a new trial on the issue of damages solely, the court erred in considering the reproduction cost of the building only to the exclusion of other pertinent evidence that the jury could have considered in determining what the actual loss was.

Dorsey, Owen, Marquart, Windhorst & West, Henry Halladay and Curtis Forslund, Minneapolis, for appellants.

Robins, Davis & Lyons, and Harding A. Orren, Minneapolis, for respondent.

OPINION

KNUTSON, Chief Justice.

This is an appeal from a judgment.

The case arises out of the partial destruction by fire of a building in Minneapolis on February 17, 1962. The building was owned by Brooks Realty, Inc., hereinafter called Realty, and the contents of the building were owned by Brooks Upholstering Company, Inc., hereinafter called Upholstering, which was engaged in a furniture manufacturing business. Thirty separate insurance policies issued by 15 insurance companies covered loss from fire on the building, its contents, and for business interruption. Eight of these policies covered the building, with a maximum protection of $250,000. Proofs of loss for the building, its contents, and for business interruption were duly filed, and all claims were rejected by the insurance companies on the grounds that the building was destroyed by arson and that the risk of loss had been increased as a result of facts that will be herinafter related.

Both corporations were almost entirely owned and managed by the Brooks family. Mrs. Esther Brooks, aged 79 at the time of the trial, was president and treasurer of Realty and owned over half of the outstanding voting stock. Other shares were owned by her daughter, Ruth Brooks, who was secretary of Realty, and her sons, Milton Brooks and Edward Brooks. Esther Brooks owned a few shares as trustee for the children of Edward Brooks. Edward Brooks was vice president and had the final decision in corporate affairs. Esther's husband, Albert Brooks, owned one share but took no part in the business. Nonvoting stock of Realty was also owned by Esther Brooks for Edward Brooks' three children and by Milton and Ruth Brooks. Esther, Albert, Ruth, Edward, and Milton Brooks constituted the board of directors of Realty.

Edward Brooks owned half of Upholstering and was chief executive officer. The only nonfamily member of the corporation was Donald Fairley, who in 1960 became president of Upholstering, succeeding Edward Brooks, who thereafter was chairman of the board of directors. Esther Brooks was treasurer and owned about 30 percent of Upholstering stock. Ruth Brooks, who was secretary, and Milton Brooks owned most of the remaining shares, a few being owned by Albert Brooks. Except for Milton, who was not a director, the above were directors of Upholstering.

The two corporations maintained joint offices in the building which burned. The books of Realty were kept in a safe in Mrs. Esther Brooks' office in the building, which office she shared with Edward Brooks. Esther did not do any active work in the office but was present in a consulting capacity, merely so that her advice could be asked on certain matters. She would come to the office around 9:30 or 10 a.m. and leave at 2 or 2:30 p.m. Edward Brooks testified that she would greet customers and sign checks, as well as open the mail.

One of the employees of Upholstering, Charles R. Rottach, also served Realty in the upkeep of the building. He was the maintenance and boilerman and directly in charge of the sprinkler system intended to protect the building, its contents, and the business against loss by fire. It was his responsibility to get the sprinkler system fixed if something went wrong with it. He was also responsible for locking the building on Saturdays, and he would fix windows and doors in the building when they needed fixing.

As a result of the fire three separate actions were started--one by Realty to recover for damage to the building; a second by Upholstering to recover for loss of the contents of the building; and a third by Upholstering to recover for business-interruption loss. Motions were made to consolidate the three actions but they were denied by the trial court. The action brought by Realty went to trial first. The jury found that (1) plaintiff did not intentionally set the fire; (2) plaintiff did not intentionally increase the risk of loss by fire; (3) the building was not a total loss; and (4) plaintiff's damages from the partial loss did not exceed $250,000, and assessed plaintiff's damages at $122,600.

Thereafter, post-trial motions were made for judgment notwithstanding the verdict or for a new trial by defendants. Plaintiff moved for judgment for the face amount of the policies notwithstanding the verdict.

While these motions were pending, Charles R. Rottach, who at the trial had testified that he had accidentally knocked the head off one of the sprinklers and had thereafter shut off the sprinkler system but that the officers of the company knew nothing about this, recanted and said he had lied during the trial; that he had informed Edward Brooks, as well as Don Johnson, his superior, that the sprinkler system had been shut off, and had been told by Mr. Brooks not to have it fixed. Thereupon the motion for judgment notwithstanding or for a new trial was amended so as to allege newly discovered evidence. In the meantime the suit brought by Upholstering for loss of the contents of the building went to trial. The jury there found that plaintiff did not intentionally set the fire but that it did intentionally increase the risk of loss, and returned a verdict for defendants. In that trial Rottach testified substantially as he had deposed after the first trial. These matters will be more fully discussed later. The trial court in the Realty case denied the motion of defendants for judgment notwithstanding the verdict and granted plaintiff's motion for judgment for the full amount of the policies, also providing that if its order were reversed, a new trial would be granted on the issue of damages only. While the court did not specifically rule on defendants' motion for new trial on all issues, denial of that motion is implicit in the order granting a new trial on the issue of damages only.

So far as we know the action for damages due to business interruption has not yet been tried.

Essentially the questions for review here are: (1) Did the court abuse its discretion in denying a new trial on the grounds of newly discovered evidence based on the recantation of Rottach's testimony after the trial? (2) Did the court err in setting aside the jury's verdict and granting judgment notwithstanding for the full amount of the policies or, if that action were reversed, a new trial on the issue of damages only? (3) Did the court err in denying defendants' motion for new trial based upon errors in the rejection or admission of evidnce that will later be discussed?

The appeals in the Realty and Upholstering cases were consolidated for hearing here but will be discussed in separate opinions except in so far as they relate to each other.

1. Ordinarily, the granting or denial of a new trial based on the recantation of testimony of a witness is left to the trial court and will not be reversed on appeal unless it appears that the testimony is of such a serious nature that a different result is almost sure to follow if the testimony had been as the witness, after the trial, says it should have been. While no definite rule is available on this subject and the courts are not at all in harmony as to what should be the result, it is apparent that each case must stand or fall on its own facts. ¹

The Minnesota law on the subject of granting a new trial upon the grounds of newly discovered evidence based upon the perjured testimony of witnesses is to be found in 14 Dunnell, Dig. (3 ed.) § 7127b.

A somewhat analogous criminal case is State v. Thompson, 273 Minn. 1, 139 N.W.2d 490, where one of the main witnesses after trial confessed that he had committed perjury. In that case a hearing was held before the trial judge in which the witness was examined, and, based upon the examination, the court concluded that the witness had told the truth in the first place. In the instant case the court denied defendants' application to have Rottach testify under oath before the...