Lively v. Rufus
| Decision Date | 16 June 2000 |
| Docket Number | No. 26651.,26651. |
| Citation | 533 S.E.2d 662,207 W.Va. 436 |
| Parties | Walter Alan LIVELY and Leslie W. Lively, Plaintiffs Below, Appellants, v. Robert J. RUFUS, Rufus & Rufus Accounting Corporation, and Danny R. Lester, Defendants Below, Appellees. |
| Court | West Virginia Supreme Court |
Christopher S. Smith, Hoyer, Hoyer, Smith & Miesner, Charleston, West Virginia, Attorney for the Appellants.
James M. Brown, Brown & Levicoff, P.L.L.C., Beckley, West Virginia, Attorney for the Appellees, Robert Rufus and Rufus & Rufus Accounting Corp.
John H. Shott, Shott, Gurganus & Williamson, Bluefield, West Virginia, Attorney for the Appellee, Danny R. Lester. DAVIS, Justice:
In an action alleging various counts of wrongdoing that resulted in the ultimate destruction of a business in which they held an ownership interest, Walter Alan Lively and Leslie Lively appeal from an order of the circuit court of Raleigh County denying their motion for a new trial. On appeal, the Livelys argue that the circuit court erred by limiting their damages to the equity value of the destroyed business, by utilizing a verdict form that allowed the jury to resolve the case by answering only a single interrogatory relating to damages, and by refusing to admit evidence of a settlement agreement for a purpose other than to prove the defendants' liability or the validity or amount of the Livelys claim. We conclude that the proper measure of damages for the destruction of an established business is the difference between the fair market value of the business before and after its destruction. In addition, we find that, generally, the verdict form used in a typical, nonbifurcated, civil trial should ask the jury to decide issues related to liability prior to determining issues of damages. Because the verdict form in the instant case permitted the jury to answer only a single interrogatory that was confusing and contrary to the law and the jury instructions given, the circuit court committed reversible error. Finally, we conclude that the circuit court did not err in refusing to admit into evidence the settlement agreement document offered by the Livelys. For these reasons, the instant case is affirmed in part, reversed in part and remanded for a new trial.
Although the trial in this case was lengthy, the jury made no determination of the defendants' liability. Thus, many of the facts relevant to the underlying dispute remain a matter of contention among the parties. The following is a general summary of the events that are essentially agreed to by the parties. Additional facts relevant to specific assignments of error will be provided in our discussions of those assignments.
Plaintiffs below and appellants herein, Walter Alan Lively (hereinafter "Alan Lively") and his father Leslie W. Lively (hereinafter "Les Lively"),1 were joint shareholders of a corporation known as Jetah, Inc. (hereinafter "Jetah").2 Jetah, in turn, owned and operated two Western Steer Steakhouse restaurants located in Beckley and Princeton, West Virginia, respectively.
One of the defendants below, and an appellee, Robert J. Rufus (hereinafter "Rufus"), a certified public accountant, is the sole shareholder of Rufus & Rufus Accounting Corporation, also a named defendant. Rufus performed various accounting and financial services for the Livelys and for assorted corporations in which the Livelys held an ownership interest, including Jetah.
In August, 1992, Alan Lively borrowed $50,000.00 from Geraldine Steinbrecher, another Rufus client. As a condition of the loan, Alan Lively was required to place a certain number of shares of Jetah stock in escrow. The escrow agent was Mr. W. Stanley James, a Huntington, West Virginia, lawyer and also a client of Rufus. In or about February, 1993, Alan Lively defaulted on the loan from Ms. Steinbrecher. By letter dated February 22, 1993, Mr. James notified Alan Lively that he was in default and that the stock would be sold. In June of 1993, the loan remained in default, but the Jetah shares remained in Mr. James' possession. Ultimately, Mr. James foreclosed and sold the Jetah shares to Rufus for $51,000.00. Thereafter, a dispute arose between the Livelys and Rufus over Rufus' ownership of the stock.3
Various meetings and discussions were apparently had in an effort to resolve the conflict between the Livelys and Rufus, and to address financial difficulties Jetah was then experiencing. During this time, Rufus asked Mr. Danny R. Lester (hereinafter "Lester"), an additional defendant below, appellee herein, and another of Rufus' clients, to independently manage the Beckley restaurant.4 Thereafter, Rufus sold his Jetah stock to Lester for $58,500.00.5
In August, 1993, a "Settlement and Indemnification Agreement" resolving the dispute surrounding Jetah was signed by the Livelys, Rufus, and Lester. Each signed the document in their individual capacities and as representatives of the various companies involved. However, Alan Lively had filed an action for personal bankruptcy. Therefore, the "Settlement and Indemnification Agreement" was subject to approval by the bankruptcy court. The agreement was rejected by the bankruptcy court and never took effect.
Meanwhile, Beckley National Bank (now Bank One)6 gave notice of its intent to foreclose on a 1.5 million dollar mortgage loan to Jetah, which was secured by the two restaurants and was personally guaranteed by the Livelys. Rufus and Lester then caused Jetah to file federal bankruptcy reorganization proceedings under Chapter 11.7 The bankruptcy action was later converted to liquidation proceedings under Chapter 7.8 After a period of time, the bankruptcy court authorized Beckley National to foreclose on Jetah's restaurant properties. Beckley National sold the Beckley property for $925,000.00, and received approximately $400,000.00 for the Princeton property. The Livelys assert that, after the foreclosure, they both remained personally liable for Jetah's debt of approximately $597,000.00, excluding interest, to Beckley National Bank. In addition, Alan Lively remained personally liable for Jetah's debt of $594,201.55 to Mrs. Lois Bowie, who held a second lien on Jetah's assets. Les Lively also remained personally liable for Jetah's debts to food vendors totaling $ 132,048.34.
In September, 1994, the Livelys' filed a civil action against Rufus, Rufus & Rufus Accounting Corporation, and Lester, alleging various causes of action arising from the above-described course of events. A jury trial was had and, after the conclusion of the evidence, the jury was presented with a verdict form that permitted it to cease deliberations if it concluded that Jetah's value was "zero or less" on June 17, 1993, the day that Rufus acquired the Jetah stock. The jury concluded that Jetah's value was zero on that date and reported back to the circuit court. The court then entered judgment in favor of the defendants', and the Livelys' filed a motion for a new trial. By order entered January 7, 1999, the circuit court refused the Livelys' motion. It is from this order that the Livelys now appeal.
With regard to our standard for reviewing a circuit court's order on a motion for a new trial, we have explained:
As a general proposition, we review a circuit court's rulings on a motion for a new trial under an abuse of discretion standard. In re State Public Building Asbestos Litigation, 193 W.Va. 119, 454 S.E.2d 413 (1994).... Thus, in reviewing challenges to findings and rulings made by a circuit court, we apply a two-pronged deferential standard of review. We review the rulings of the circuit court concerning a new trial and its conclusion as to the existence of reversible error under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review.
Tennant v. Marion Health Care Found., Inc., 194 W.Va. 97, 104, 459 S.E.2d 374, 381 (1995).
We have further explained that:
"Although the ruling of a trial court in granting or denying a motion for a new trial is entitled to great respect and weight, the trial court's ruling will be reversed on appeal when it is clear that the trial court has acted under some misapprehension of the law or the evidence." Syl. pt. 4, Sanders v. Georgia-Pacific Corp., 159 W.Va. 621, 225 S.E.2d 218 (1976).
Syl. pt. 1, Andrews v. Reynolds Mem'l Hosp., Inc., 201 W.Va. 624, 499 S.E.2d 846 (1997). Moreover, "[a]n appellate court is more disposed to affirm the action of a trial court in setting aside a verdict and granting a new trial than when such action results in a final judgment denying a new trial." Syl. pt. 4, Young v. Duffield, 152 W.Va. 283, 162 S.E.2d 285 (1968), overruled on other grounds by Tennant v. Marion Health Care Found., Inc., 194 W.Va. 97, 459 S.E.2d 374
. With due consideration for these standards, we proceed to review the substantive issues raised by the parties. Additional standards of review directed more specifically to individual assignments of error are discussed in connection with those assignments.
The Livelys' first argue that the circuit court erred in limiting their damages for the destruction of their business9 to the stock, or equity, value of the business.10 The specific ruling by the circuit court of which they complain prohibited them from arguing or presenting evidence of certain debts that were owed by Jetah and guaranteed by the Livelys. By not allowing them to present this evidence as a measure of damages, the Livelys' submit, the court unfairly limited their damages to the amount by which Jetah's assets exceeded its liabilities.11
The damages herein addressed are compensatory in nature. We have previously explained that:
Primarily, the aim of compensatory damages is to restore a plaintiff...
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