Jim's Hot Shot Service, Inc. v. Continental Western Ins. Co., 10577

• Decision Date: 28 June 1984
• Docket Number: No. 10577,10577
• Citation: 353 N.W.2d 279
• Parties: JIM'S HOT SHOT SERVICE, INC., Plaintiff, Appellant and Cross-Appellee, v. CONTINENTAL WESTERN INSURANCE COMPANY, Defendant, Appellee and Cross-Appellant, and Sun West Insurance Agency, Defendant. Civ.
• Court: North Dakota Supreme Court

Page 279

353 N.W.2d 279

JIM'S HOT SHOT SERVICE, INC., Plaintiff, Appellant and Cross-Appellee, v. CONTINENTAL WESTERN INSURANCE COMPANY, Defendant, Appellee and Cross-Appellant and Sun West Insurance Agency, Defendant.

Civ. No. 10577.

Supreme Court of North Dakota.

June 28, 1984.

Rauleigh D. Robinson, Bismarck, for plaintiff, appellant and cross-appellee Jim's Hot Shot Service, Inc.

Fleck, Mather, Strutz & Mayer, Bismarck, for defendant, appellee and cross-appellant Continental Western Ins. Co.; argued by Thomas A. Mayer.

Zuger & Bucklin, Bismarck, for defendant Sun West Ins. Agency. No appearance.

ERICKSTAD, Chief Justice.

The plaintiff, Jim's Hot Shot Service, Inc. (Hot Shot) filed this action in the District Court of Burleigh County alleging that the defendants, Continental Western Insurance Company (Continental) and Sun West Insurance Agency (Sun West), negligently destroyed its delivery service business. The case was tried before a jury which determined that Hot Shot suffered total damages of $1,500,000; that Continental's negligence caused 70 percent of the damages suffered by Hot Shot; that Hot Shot's contributory negligence caused 30 percent of the damages it suffered; and that Sun West was not negligent.

On November 4, 1983, the district court entered an order granting Continental's motion for a new trial on the issue of damages but denying Continental's motion for a new trial on the issue of proximate cause. An Amended Judgment on Jury Verdict was entered on November 7, 1983, awarding Hot Shot $1,050,000 plus interest and costs against Continental. An Amended Judgment was entered on November 9, 1983, dismissing Hot Shot's action against Sun West. On November 22, 1983, the district court entered an Order Partially Vacating Judgments under which the court vacated the damage award provided under the November 7, 1983, Amended Judgment on Jury Verdict, in accord with its November 4, 1983, order granting Continental a new trial on the issue of damages.

Hot Shot filed an appeal from the amended judgments and the order partially vacating judgments through which it has raised, in essence, the following sole issue:

(1) Whether or not the district court abused its discretion in awarding Continental a new trial on the issue of damages.

Continental filed a cross-appeal through which it has raised, in essence, the following two issues:

(1) Whether or not the trial court abused its discretion in refusing to grant Continental a new trial on the issue of proximate cause.

(2) Whether or not the trial court improperly instructed the jury on the measure of damages.

Neither party to this appeal disputes the jury determination that Continental and Hot Shot were negligent on a 70 percent/30 percent apportionment basis, respectively. Also, neither party disputes the jury determination that Sun West was not negligent, and the amended judgment dismissing Hot Shot's action against Sun West has not been appealed.

We affirm that part of the district court's orders of November 4, 1983, and of November 22, 1983, granting Continental a new trial on the issue of damages; we reverse that part of the court's orders denying Continental's request for a new trial on the issue of proximate cause; and we remand the case to the district court for a new trial on the issues of damages and proximate cause.

During 1980, Jim Mosbrucker commenced a "hot shot" or quick delivery service in the Williston Oil Basin which was subsequently incorporated as Jim's Hot Shot Service, Inc. As a prerequisite to commencing the delivery service, Mosbrucker obtained a certificate of convenience and necessity from the North Dakota Public Service Commission as well as an interstate certificate from the Interstate Commerce Commission. Mosbrucker also obtained insurance required for operating a hot shot delivery service from the Continental Western Insurance Company.

During July, 1981, Continental negligently caused a statement to be filed with the North Dakota Public Service Commission erroneously stating that Hot Shot's insurance coverage had been cancelled for nonpayment of premiums. The Public Service Commission suspended Hot Shot's certificate of authority on November 23, 1981, but approximately three weeks later the PSC reinstated the certificate upon receiving Continental's confirmation that Hot Shot did have liability insurance coverage. Prior to the reinstatement of Hot Shot's certificate the Oil Patch Hotline, a trade publication in the Williston Oil Basin, reported on December 3, 1981, that Hot Shot's certificate of authority had been suspended for lack of insurance coverage. Hot Shot ceased to operate during December, 1982. Hot Shot filed this action for damages, during September, 1982, asserting that Continental's negligent actions caused Hot Shot to lose customers thereby ultimately destroying its entire business.

On appeal, Hot Shot asserts that the district court abused its discretion in granting Continental a new trial on the issue of damages. We disagree.

A trial court may grant a new trial where it appears that excessive damages have been given under the influence of passion or prejudice. Rule 59(b)(5), N.D.R.Civ.P. The trial court may also grant a new trial if the evidence is insufficient to justify the verdict. Rule 59(b)(6), N.D.R.Civ.P. In Cook v. Stenslie, 251 N.W.2d 393 (N.D.1977), Justice Sand, writing for the majority, stated that the standard for determining what constitutes an excessive verdict varies but generally includes one or more of the following:

"[T]he amount is so unreasonable and extreme as to indicate passion or prejudice on the part of the jury; the award is so excessive as to be without support in the evidence; the jury verdict is so excessive as to appear clearly arbitrary, unjust, or such as to shock the judicial conscience, 22 Am.Jur.2d Damages § 366." [Case cites omitted.] 251 N.W.2d at 396.

A Rule 59(b), N.D.R.Civ.P., motion for a new trial is addressed to the sound discretion of the trial court, and the trial court's decision to grant a new trial will not be disturbed on appeal unless a manifest abuse of discretion is shown. Okken v. Okken, 325 N.W.2d 264 (N.D.1982). In making its determination, the trial court may, within limits, weigh the evidence and judge the credibility of the witnesses to determine whether or not the verdict is against the weight of the evidence. Okken, supra.

Hot Shot asserted that through the negligent acts of Continental its delivery operation was destroyed. David Eckroth, a certified public accountant, testified on Hot Shot's behalf that the book value of the corporation was $77,784 but that the total value of the corporation was $514,497. Allen Wolfe, a certified public accountant testifying on Continental's behalf, stated that Hot Shot had "book value tangible assets" of $29,000. He concluded, "beyond that, I would have a very difficult time assigning value to this company." The jury verdict was far in excess of the amount of damages supportable by the testimony of the certified public accountants that testified as expert witnesses on this issue.

Jim Mosbrucker, Hot Shot's sole owner, testified with regard to Hot Shot's value for purposes of affixing damages. Mosbrucker testified that in his opinion the corporation was worth $4,500,000. Mosbrucker obtained that figure by multiplying Hot Shot's 1981 gross revenue of approximately $450,000 times a factor of 10. However, Mosbrucker conceded on cross-examination that during 1981 the corporation's taxable income, as shown on its federal tax return, was approximately $68,000 and that its net profit after taxes was approximately $58,000.

During direct examination, Mosbrucker explained the method he used for arriving at his opinion of the corporation's value:

"Q. Jim, in your complaint, you alleged that you have sustained damages to your company of three million dollars; is that right?

"A. That's right.

"Q. What makes you think so?

"A. I am sorry. I don't understand your question.

"Q. Well, how have you arrived at that figure?

"A. Well, first of all, I went and I took our annual earnings, our income, and that was well over or right at 450 thousand dollars. I took that figure. I know of some other businesses that used a figure and compounded, and what they did was by annual earnings per year times ten. That would put us to like 4 1/2 million dollars.

So I don't think that I would have needed 4 1/2 million dollars in 1981, so that's where I would be satisfied with seventy-five percent of that."

During cross-examination, Mosbrucker further testified:

"Q. Now, yesterday, Mr. Mosbrucker, and, I think, earlier today, you explained to us how you arrived at the value of your business; correct?

"A. Yes.

"Q. And, as I understand, that was sort of an arithmetick [arithmetic] exercise in which you took your 1981 gross revenue of approximately 450 thousand dollars and multiplied that by ten.

"A. That's right."

This Court has recognized that an owner may testify as to the value of his property without qualification other than the fact of ownership. See, In Re Heart River Irrigation District, 78 N.D. 302, 49 N.W.2d 217 (1951). However, an owner's opinion of value is insufficient to support a value determination by the factfinder if it is given without a valid basis or is based upon improper facts or analysis. See, Rich v. Eastman Kodak Company, 583 F.2d 435 (8th Cir.1978); United States v. Sowards 370 F.2d 87 (10th Cir.1966); Hagin v. Powers, 140 Ga.App. 300, 231 S.E.2d 780 (1976); Arkansas State Highway Commission v. Geeslin, 247 Ark. 537, 446 S.W.2d 245 (1969); Ada Oil Company v. Logan, 447 S.W.2d 205 (Tex.Civ.App.1969); Ward v. Deck, 419 S.W.2d 286 (Mo.Ct.App.1967); Shelby County R-IV School District v. Herman, 392 S.W.2d 609 (Mo.1965).

Mosbrucker, in effect, derived his opinion of the corporation's value by capitalizing gross revenues by a factor of ten. He did not attempt to provide a rational basis for his...