Iowa-Des Moines Nat. Bank v. Schwerman Trucking Co.

• Decision Date: 23 January 1980
• Docket Number: No. 62992,IOWA-DES,62992
• Citation: 288 N.W.2d 198
• Parties: MOINES NATIONAL BANK, Executor of the Estates of James V. Hauser and Ellen V. Hauser, deceased, Appellee, v. SCHWERMAN TRUCKING CO. and Dean R. Sayre, Appellants.
• Court: Iowa Supreme Court

Page 198

288 N.W.2d 198

IOWA-DES MOINES NATIONAL BANK, Executor of the Estates of James V. Hauser and Ellen V. Hauser, deceased, Appellee, v. SCHWERMAN TRUCKING CO. and Dean R. Sayre, Appellants.

No. 62992.

Supreme Court of Iowa.

Jan. 23, 1980.

Richard G. Santi of Ahlers, Cooney, Dorweiler, Haynie & Smith, Des Moines, for appellants.

Lex Hawkins and Glenn L. Norris of Hawkins & Norris, Des Moines, and William N. Dunn of Dunn Law Firm, Eldora, for appellee.

Considered by REYNOLDSON, C. J., and UHLENHOPP, HARRIS, McGIVERIN, and LARSON, JJ.

REYNOLDSON, Chief Justice.

This is a wrongful death case in which liability was admitted.

On August 28, 1975, a truck owned by defendant Schwerman Trucking Co. and driven by defendant Dean R. Sayre collided with an automobile occupied by James V. Hauser and his wife, Ellen V. Hauser, killing them instantly. Following a trial on damages the jury brought in a $327,835.83 verdict for the James V. Hauser estate and a $120,186.10 verdict for the Ellen V. Hauser estate. Defendants appeal and we reverse and remand for new trial.

James and Ellen were both fifty-one years old at the time of their deaths. They were survived by three adult children: Andrew, age 26; Catherine, age 24; and Mary, age 19. Both James and Ellen were reared in Eldora, Iowa. James attended Iowa State for two and one-half years, majoring in electrical engineering. After military service he returned to Eldora in 1947 to work in his father's feed store. In the same year he married Ellen, who had graduated from Grinnell College and had taught in the Newton school system in the 1946-47 school term.

In 1951 when James bought his father's interest in the feed business it had a $36,000 net worth. Under his direction the enterprise expanded and diversified rapidly. In 1963 it was incorporated as International Supply Company (ISC), apparently to permit earnings to be retained for expansion at a lower tax rate.

By the time this tragedy occurred, ISC was engaged in feed manufacturing, had a monopoly on the elevator business in Eldora, and was involved in the production of swine breeding stock. James and Ellen owned 87 percent of the stock; the remaining shares had been given to the three children. James served as president and manager of the corporation, Ellen as secretary. They received salaries for these services. They also had other sources of income from various investments and holdings: an apartment building; the Brickman Farm Corporation, in which Ellen was a shareholder by gift and served as corporate bookkeeper; and some interest income.

There was much evidence from which the jury could have concluded both decedents were enterprising, ambitious, morally upright, responsible parents and community leaders. They displayed good business judgment and lived conservatively. James was an innovator and a nationally recognized leader in his business. His time, attention and managing talent were devoted to the day-to-day operations of ISC.

Plaintiff's expert appraised the fair market value of ISC as of the date of deaths at $255,000. For federal estate tax purposes Internal Revenue Service valued the decedents' stock at $249,246, making the total corporate stock value approximately $286,020. The corporation then was employing thirteen persons in addition to the decedents.

By the time James and Ellen were killed they had paid for the college educations of Andrew and Catherine, who were both self-sufficient. Mary was beginning her sophomore year at the University of Iowa. Decedents had been paying her annual college expenses, estimated at $4500 to $4700 per year.

In this appeal defendants assert that (1) trial court erred in permitting plaintiff-executor to introduce evidence of anticipated increases in the net worth of ISC on the element of lost accumulation to decedents' estates; (2) an instruction on the element of lost earning capacity erroneously permitted the jury to consider evidence of future loss of profits; (3) trial court erred in permitting the jury to consider loss of services as an element of damages, erred in failing to give defendants' requested instruction thereon, and in any event the amount awarded was excessive; (4) trial court erred in failing to grant a new trial following an alleged prejudicial remark made by plaintiff's counsel during closing argument; (5) trial court erred in failing to grant defendants' motion for directed verdict based on plaintiff's failure to prove decedents' level of personal consumption expenditures; (6) trial court erred in not permitting defendants to show the wrongful death awards would not be subjected to state inheritance or federal estate taxes; (7) the verdicts were excessive and based upon passion and prejudice; and (8) the cumulative effect of the assigned errors was denial of a fair trial and verdicts which failed to render substantial justice.

I. Admissibility of evidence of anticipated increases in net worth of closely held corporation.

One of the elements of damage in a wrongful death action is the present worth or value of the estate which decedent would reasonably be expected to have saved and accumulated as a result of his or her efforts between the time of death and the end of his or her natural life had he or she lived. Haumersen v. Ford Motor Co., 257 N.W.2d 7, 16-17 (Iowa 1977); Schmitt v. Jenkins Truck Lines, Inc., 170 N.W.2d 632, 661 (Iowa 1969); Brophy v. Iowa-Illinois Gas & Electric Co., 254 Iowa 895, 897, 119 N.W.2d 865, 866 (1963); See § 613.15, The Code. Relevant on this issue is evidence disclosing decedent's age and life expectancy, characteristics and habits, health, education or opportunity for education, general ability, other occupational qualifications, industriousness, intelligence, manner of living, sobriety or intemperance, frugality or lavishness, and other personal characteristics that are of assistance in securing business or earning money. Ehlinger v. State, 237 N.W.2d 784, 792 (Iowa 1976); Schmitt, 170 N.W.2d at 655.

In this case plaintiff introduced expert testimony which projected decedents' corporate salaries over anticipated working years, with appropriate adjustments for taxes and present value, to assist the jury in arriving at an anticipated accumulation had they lived out normal lives. But of course this was not a true reflection of earning power, especially for James, as earnings were left in the family corporation for its expansion and growth.

Plaintiff's expert economist attempted to meet this hiatus by projecting the net worth of ISC as "(t)he future value of the ownership position in the company, based on James and Ellen Hauser continuing to operate the company . . . in the manner in which they'd operated it in the previous 25 years." The projected values, assuming a continuation of the past 8.15 percent annual company growth rate, were calculated to decedents' assumed ages sixty-five and seventy. Reduced to present value, these computations resulted in value increases for the combined estates of $256,934 and $346,202 to ages sixty-five and seventy, respectively. Plaintiff-executor makes no assertion the alleged error in admission of this testimony was not preserved by defendants' limine motion to exclude it, which was overruled. State v. O'Connell, 275 N.W.2d 197, 202 (Iowa 1979); See Nepple v. Weifenbach, 274 N.W.2d 728, 732 (Iowa 1979).

These parties have found no authority for or against thus projecting growth of corporate net worth as bearing on the accumulation issue, nor has our research produced any. Both cite injury and death cases involving issues of profits as reflecting diminution or extinction of earning capacity. We agree the injury decisions are apposite here.

The general rule as to profits, stated in an Annotation found at 45 A.L.R.3d 345, 353 (1972), is:

(W)here the profits from a business enterprise result primarily from the personal endeavors, skill, and attention of the owner, rather than from his investment of capital or from the labor of other persons, such business profits are a proper factor to consider in the determination of the business owner's lost earnings or earning capacity in personal injury and wrongful death actions.

The polestar injury case in Iowa is Mitchell v. Chicago, Rock Island & Pacific Railway, 138 Iowa 283, 290-91, 114 N.W. 622, 625 (1908), where this court wrote:

The loss of future profits in plaintiff's business could not be taken into account in estimating the damages he had suffered. And evidence of past profits was not admissible as tending to show what his profits in the future would be likely to be, but for the injury. It does not follow, however, that proof of the character of business the person injured has been engaged in, and the amount of his yearly accumulations for a considerable period prior to the injury, when these mainly are due to his personal efforts, may not be shown for some other purpose. Often his earning capacity in the past can be proved in no other way. Where the party injured has worked for wages or on salary, evidence of the amount received is uniformly admitted. But plaintiff always had conducted a business of his own, attending to it personally and without any considerable assistance, and had never received wages. In such a case, how shall the financial loss due to the impairment of the earning capacity be shown? Quite naturally, as was done in the case at bar, by proving the character of the business, the amount of time given to it, what the returns had been, and from these, in connection with the capital invested, a fair idea of the party's earning power at the time of the accident may be inferred. Such evidence indicates the character and value of the service the party was capable of rendering immediately before the injury, precisely as proof of employment at some occupation at wages or a salary would have done. Of course, the fact that some capital is made use of is an important consideration, and must be taken into...