Harlan Sprague Dawley, Inc. v. S.E. Lab Group, Inc.

• Decision Date: 28 December 1994
• Docket Number: No. 49A05-9310-CV-375,49A05-9310-CV-375
• Citation: 644 N.E.2d 615
• Parties: HARLAN SPRAGUE DAWLEY, INC., Appellant-Plaintiff, v. S.E. LAB GROUP, INC., Appellee-Defendant.
• Court: Indiana Appellate Court

Page 615

644 N.E.2d 615

HARLAN SPRAGUE DAWLEY, INC., Appellant-Plaintiff, v. S.E. LAB GROUP, INC., Appellee-Defendant.

No. 49A05-9310-CV-375.

Court of Appeals of Indiana,

Fifth District.

Dec. 28, 1994.

Rehearing Denied Feb. 23, 1995.

Transfer Denied June 13, 1995.

Thomas A. Withrow, B. Keith Shake, Scott S. Morrisson, Henderson, Daily, Withrow & Devoe, Indianapolis, for appellant.

Robert A. Smith, Gary C. Messplay, Bishop Smith & Bishop, Indianapolis, for appellee.

OPINION

BARTEAU, Judge.

Harlan Sprague Dawley, Inc. (HSD) brings this appeal alleging that the trial court committed error in calculating prejudgment interest. S.E. Lab Group, Inc. (S.E. Lab) cross-appeals, alleging the trial court erred by excluding the testimony of its expert witness. We heard oral argument on December 6, 1994.

FACTS

HSD breeds rats and mice in various strains that it sells to researchers for use in laboratory testing. ¹ The market price of the animals within each strain depends upon factors such as sex, size and age of the animals.

HSD uses an automatic watering system to supply the animals with drinking water. S.E. Lab sold automatic water valves to HSD for use at three HSD facilities. These valves failed and many of HSD's animals died by drowning or dehydration. S.E. Lab shipped higher quality valves to HSD and HSD's employees installed them. However, these valves also failed. HSD eventually purchased replacement valves from another manufacturer and sued S.E. Lab. The jury found S.E. Lab liable.

At trial, HSD claimed that it sustained damages in three areas, totalling $755,600. First, it paid the cost of the replacement valves, $93,923. Second, it incurred labor costs of $74,810 due to the faulty valves. Third, the 175,371 destroyed animals, the number of which the parties stipulated, had a market value of $586,867. The jury awarded HSD $755,600.

The parties reserved the computation of prejudgment interest to the trial court in post-trial proceedings. After a hearing, the court entered a final judgment in the amount of $777,738.00, which included prejudgment interest calculated only on the damages attributable to the replacement valves.

ISSUES

The parties raise two issues on appeal and cross-appeal, which we restate as:

(1) Whether the trial court erred by not calculating prejudgment interest based on the jury's entire award.

(2) Whether the trial court erred by excluding the testimony and exhibits of S.E. Lab's expert witness.

PREJUDGMENT INTEREST

HSD argues on appeal that the trial court should have included the damages attributable to the destroyed animals and its labor expenses in its prejudgment interest calculation.

HSD asks that we review de novo the trial court's award of prejudgment interest, based on language found in Indiana cases stating that "an award of prejudgment interest is generally not considered a matter of discretion." Dale Bland Trucking, Inc. v. Kiger (1992), Ind.App., 598 N.E.2d 1103, 1106, trans. denied; Sand Creek Country Club v. CSO Architects (1991), Ind.App., 582 N.E.2d 872, 876. However, in previous cases we have reviewed the award of prejudgment interest under the abuse of discretion standard. See, e.g., Wayne Township v. Lutheran Hosp. of Fort Wayne, Inc. (1992), Ind.App., 590 N.E.2d 1130, 1133-34, trans. denied; Nimet Indus. Inc. v. Joy Mfg. Co. (1981), Ind.App., 419 N.E.2d 779, 782; Board of Sch. Trustees v. Indiana Educ. Employment Relations Bd. (1980), Ind.App., 412 N.E.2d 807, 810-11.

The cases cited by HSD hold that prejudgment interest is not a matter of discretion only after the trial court determines that the damages can be ascertained by mathematical computation. Kiger, 598 N.E.2d at 1106; Sand Creek, 582 N.E.2d at 876. "An award of prejudgment interest rests on a factual determination and this Court may only consider the evidence most favorable to the appellee." Board of Sch. Trustees, 412 N.E.2d at 811. Our standard of review is for an abuse of discretion, focusing on the trial court's threshold determination of whether the facts satisfy the test for prejudgment interest.

Our supreme court established our test for the award of prejudgment interest in N.Y., Chicago & St.L.Ry. Co. v. Roper (1911), 176 Ind. 497, 96 N.E. 468:

The true test to be applied as to whether interest should be allowed before judgment in a given case or not is ... whether the injury and consequent damages are complete and must be ascertained as of a particular time and in accordance with fixed rules of evidence and known standards of value, which the court or jury must follow in fixing the amount, rather than be guided by their best judgment in assessing the amount to be allowed for past as well as for future injury or for elements that cannot be measured by any fixed standards of value.

176 Ind. at 507, 96 N.E. at 472. Prejudgment interest is justified where there has been an unreasonable delay in the payment of an amount ascertainable in accordance with fixed rules of evidence and accepted standards of valuation. Northern Ind. Public Serv. Co. v. Stokes (1992), Ind.App., 595 N.E.2d 275, 279.

The parties stipulated to the number of animals in each strain that were destroyed, but did not stipulate to the value of the animals. HSD calculated its animal loss damages using its July, 1989 price list. When cleaning up the dead animals, HSD separated the destroyed animals by strain but failed to segregate the animals by price category within each strain. In order to calculate the lost market value, HSD assigned an age of 4 to 5 weeks for all the destroyed animals, which placed all the animals in the second lowest price category. HSD deducted from its calculation an estimated 25% to account for animals that it could not sell at market value. ²

Similarly, HSD did not keep complete records of its labor costs attributable to the failed valves. HSD offered the estimates of its supervisors and workers when its records were not specific on the amount of labor HSD spent dealing with the faulty valves.

S.E. Lab refuted these calculations as being speculative and unascertainable by calculation, rendering prejudgment interest unavailable. S.E. Lab also offered expert testimony on the damages attributable to the dead animals. However, the trial court excluded the expert's testimony and exhibits from evidence.

The fact that S.E. Lab disputed HSD's method of computing damages does not preclude an award of prejudgment interest. "The crucial factor in determining whether damages in the form of prejudgment interest are allowable is whether the damages were ascertainable in accordance with fixed rules of evidence and accepted standards of valuation." Hammes v. Frank (1991), Ind.App., 579 N.E.2d 1348, 1357, trans. dismissed. While damages that are the subject of a good faith dispute cannot allow for an award of prejudgment interest, Stokes, 595 N.E.2d at 279, damages can still be ascertained through accepted standards of valuation and fixed rules of evidence regardless of which party's method of computation the jury selects. ³

In Brane v. Roth (1992), Ind.App., 590 N.E.2d 587, reh'g denied, trans. denied, shareholders brought an action against the directors of a corporation for losses sustained. The directors argued that the shareholders's calculation of damages was incorrect because their computation did not comply with generally accepted accounting practices. The trial court agreed that the plaintiffs failed to follow generally accepted accounting practices, but awarded prejudgment interest nonetheless because the damages were ascertainable by calculation through fixed rules of evidence and accepted standards of valuation. We affirmed the trial court's reasoning and upheld the award of prejudgment interest.

Similarly, the fact that S.E. Lab disagrees with HSD's method of calculation does not preclude an award of prejudgment interest. As the Seventh Circuit correctly reasoned in Simmons v. Pinkertons, Inc. (7th Cir.1985), 762 F.2d 591:

Indiana's "fixed and ascertainable" standard [does not mean] that whenever more than one figure representing damages--in this case the value of inventory--could have been adopted, no prejudgment interest may be awarded.... In many cases prejudgment interest had been allowed even though the fact finder had to use some degree of judgment in measuring damages.... Thus, we interpret Indiana's standard to mean only that damages must be ascertainable as of a particular time (not actually ascertained prior to trial) according to known standards of value (not liquidated amounts).

762 F.2d at 607-08 (emphasis by circuit court) (citations omitted).

The rationale behind this rule can be found in the 1911 Roper decision, in which our supreme court stated In the class of cases, therefore, where the damage is complete, and the amount of the loss is fixed as of a particular time, there is--there can be--no reason why interest should be withheld merely because the damages are unliquidated. There are certain cases of unliquidated damages where interest cannot be allowed. In all personal injury cases, cases of death by wrongful act, libel, slander, false imprisonment, malicious prosecution, assault and battery, and all cases where the damages are incomplete and are peculiarly within the province of the jury to assess at the time of the trial, no interest is permissible. But this is so because the damages are continuing and may even reach beyond the time of trial.

Roper, 176 Ind. at 506-07, 96 N.E. at 472.

The Roper court explained that a variety of damages, generally arising in cases such as personal injury, defamation and false imprisonment, do not allow for the recovery of prejudgment interest. In cases of that nature, the jury must rely solely upon its own acumen and prudence, when weighing evidence in the absence of passion and prejudice, to determine the extent of an injury such as pain and suffering, damaged reputation or mental anguish. That class of damages is peculiarly within the...