Pocatello Auto Color, Inc. v. Akzo Coatings, Inc., 21519

• Decision Date: 15 May 1995
• Docket Number: No. 21519,21519
• Citation: 127 Idaho 41,896 P.2d 949
• Parties: POCATELLO AUTO COLOR, INC., an Idaho Corporation, Plaintiff-Respondent-Cross Appellant, v. AKZO COATINGS, INC., dba Akzo Coatings America, Inc., and dba Sikkens Car Refinishes; and William Eastburn aka Bill Eastburn, Defendants-Appellants-Cross Respondents. Boise, December 1994 Term
• Court: Idaho Supreme Court

Page 949

896 P.2d 949

127 Idaho 41

POCATELLO AUTO COLOR, INC., an Idaho Corporation, Plaintiff-Respondent-Cross Appellant, v. AKZO COATINGS, INC., dba Akzo Coatings America, Inc., and dba Sikkens Car Refinishes; and William Eastburn aka Bill Eastburn, Defendants-Appellants-Cross Respondents.

No. 21519.

Supreme Court of Idaho,

Boise, December 1994 Term.

May 15, 1995.

Rehearing Denied June 30, 1995.

Justin Seamons, Twin Falls, for appellants, cross respondents.

Lloyd J. and Curtis R. Webb, Twin Falls, for respondent, cross-appellant. Lloyd J. Webb argued.

JOHNSON, Justice.

This is a breach of contract case in which the following rulings of the trial court are at issue:

1. the admission of testimony by the majority owner and president of a closely-held corporation concerning the loss of market value and profits of the corporation;

2. the denial of motions for a directed verdict and judgment not withstanding the verdict (n.o.v.);

3. the denial of a motion for new trial made under I.R.C.P. 59(a)(6);

4. the amount of attorney fees awarded pursuant to I.C. § 12-120(3);

5. the denial of attorney fees requested under I.C. § 12-121;

6. the denial of sanctions requested under I.R.C.P. 11(a)(1) and I.C. § 12-123; and

7. the award of prejudgment interest on a liquidated award to one party, even though there was an unliquidated award to the other party.

We affirm all of these rulings.

I.

THE BACKGROUND AND PRIOR PROCEEDINGS.

Pocatello Auto Color, Inc. (PAC), a closely-held corporation owned by Linda Yack and her husband, was the exclusive distributor in eastern and southcentral Idaho for Akzo Coatings, Inc. (Akzo), a manufacturer of automotive paint, pursuant to a wholesaler agreement (the agreement). Akzo terminated the agreement without giving PAC the ninety-day written notice specified in the contract. PAC sued Akzo for breach of contract, alleging that the breach had destroyed the marketability of its business. Akzo brought a counterclaim for breach of contract, alleging that PAC had failed to pay $36,460.07 due for paint Akzo had delivered pursuant to the agreement. The trial court granted Akzo summary judgment on this counterclaim, and awarded prejudgment interest, together with costs and attorney fees.

PAC's breach of contract claim went to trial. Akzo stipulated that it had breached the agreement's notice requirement for termination, but contended that PAC suffered no damages as a result of the breach. Linda Yack, owner of fifty-one percent of PAC's stock, testified that in her opinion PAC was worth $200,000 before Akzo's breach and worth nothing afterwards. She also testified that PAC could have made a profit of $50,000 during the fiscal year of Akzo's breach, based on the profit the company made during the first seven months of the fiscal year.

The trial court denied Akzo's motion for directed verdict, and the jury awarded PAC $147,000.00 in damages. The trial court denied Akzo's motions for judgment n.o.v. and for new trial, but reduced PAC's award by the amount of the judgment awarded on Akzo's counterclaim. The trial court also awarded PAC attorney fees pursuant to I.C. § 12-120(3).

Akzo appealed, and PAC cross-appealed. This Court assigned the case to the Court of Appeals, which reversed the trial court's denial of Akzo's motions for directed verdict and for judgment n.o.v., and affirmed the trial court's award of prejudgment interest to Akzo. This Court granted PAC's petition for review.

II.

THE TRIAL COURT DID NOT ABUSE ITS DISCRETION IN ADMITTING THE TESTIMONY OF

LINDA YACK CONCERNING PAC'S MARKET VALUE.

Akzo asserts that the trial court abused its discretion by allowing Linda Yack to give her opinion of PAC's market value. We disagree.

For more than eighty-five years, this Court has followed the rule that the owner of property is a competent witness concerning its value. E.g., Howes v. Curtis, 104 Idaho 563, 568, 661 P.2d 729, 734 (1983); Rankin v. Caldwell, 15 Idaho 625, 632-33, 99 P. 108, 110 (1908). An owner is competent to testify to the value of a going business without further qualification. Bancroft v. Smith, 80 Idaho 63, 67, 323 P.2d 879, 883 (1958). The owner's failure or inability to explain the basis for the value given may affect the weight to be given the testimony, but it does not disqualify the owner's opinion. Smith v. Big Lost River Irrigation Dist., 83 Idaho 374, 386, 364 P.2d 146, 158 (1961).

Akzo argues, however, that Linda Yack was not the owner of PAC's business, but only of fifty-one percent of its stock. Here, in addition to owning the majority interest in the company, with her husband owning the remaining shares, Linda Yack served as president of the corporation, travelled from her home in Utah to Pocatello weekly to attended to the affairs of the business, received the company's daily bookkeeping by mail, paid the suppliers, stepped in on the bookkeeper's request to help collect the accounts receivable, and provided the accountants with the information to prepare the company's tax returns and financial statements. Under these circumstances, Linda Yack was effectively the owner of the business, even though the business operated in a corporate form. She exercised the same dominion and control of the business that an individual owner of a business would. Therefore, it was appropriate for the trial court to consider her testimony concerning the market value of the business.

Akzo also challenges Linda Yack's testimony on the ground that she did not have any personal knowledge of the market value, as required by I.R.E. 602, pointing out her admission on cross-examination that she did not actually know the fair market value of PAC's business. We first note that Akzo's objection to Linda Yack's opinion testimony concerning PAC's fair market value was on "the grounds of lack of foundation. She's not an expert on the fair market value of her company." Akzo did not premise its objection on the personal knowledge requirement of I.R.E. 602. Accordingly, we address only the objection Akzo made.

Next, we note that in Beech v. American Sur. Co., 56 Idaho 159, 51 P.2d 213 (1935), the Court quoted the rule originally stated in Rankin v. Caldwell, 15 Idaho 625, 632, 99 P. 108, 110 (1908) "The general rule, that to qualify a witness to testify as to market value, a proper foundation must be laid showing the witness to have knowledge upon the subject, does not apply to a party who is testifying to the value of property which he owns. The owner of property is presumed, in a way, to be familiar with its value, by reason of inquiries, comparisons, purchases and sales. The weight of such testimony is another question, and may be affected by disclosures made upon cross-examination as to the basis for such knowledge, but this will not disqualify the owner as a witness."

56 Idaho at 166, 51 P.2d at 220 (emphasis added) (quoting Rankin, 15 Idaho at 632, 99 P. at 110).

It was for the jury to evaluate whether the weight of Linda Yack's testimony was affected by her admissions on cross-examination. The trial court did not abuse its discretion in admitting Linda Yack's testimony concerning the fair market value of PAC's business.

III.

THE TRIAL COURT DID NOT ABUSE ITS DISCRETION IN ALLOWING LINDA YACK TO

TESTIFY CONCERNING PAC'S LOSS OF PROFITS.

Akzo asserts that the trial court abused its discretion in admitting Linda Yack's testimony concerning PAC's loss of profit in the fiscal year when Akzo breached the agreement. We disagree.

This Court has held that a trial court does not abuse its discretion in finding an owner competent to testify concerning profits where the owner's testimony was based on "previous years of experience" and "personal knowledge of the market," and was substantiated by business records. Nora v. Safeco Ins. Co., 99 Idaho 60, 62, 577 P.2d 347, 349 (1978).

On appeal, Akzo challenges Linda Yack's testimony on the ground she did not have the personal knowledge required by I.R.E. 602. At trial, however, Akzo's objection was that she was not an expert because she was not an accountant. Therefore, we address only the objection preserved before the trial court.

In her testimony, Linda Yack took the profit indicated on PAC's financial report for the first seven months of the fiscal year, which was admitted in evidence without objection, and by extrapolation estimated the profit for the entire fiscal year. She did this by multiplying the profit for the first seven months by three, based on her experience that gross sales revenue for the first seven months would be equal to one-third of what the company would have grossed for the entire year, if Akzo had not breached the agreement. The trial court did not abuse its discretion in admitting this testimony.

Akzo points out that Linda Yack's testimony was depreciated on cross-examination because she did not know the percentage of gross sales represented by PAC's profits during the first seven months of the fiscal year. We first note that this cross-examination did not attack Linda Yack's opinion that gross sales revenue for the first seven months of the fiscal year would represent one-third of the gross sales revenue for the entire fiscal year. In any event, the jury had this cross-examination available to it in considering the weight to be given to Linda Yack's opinion. It did not affect the trial court's exercise of discretion in admitting her opinion of the loss of profits.

IV.

THE TRIAL COURT PROPERLY DENIED AKZO'S MOTIONS FOR DIRECTED VERDICT AND

JUDGMENT N.O.V.

Akzo asserts that the trial court should have granted Akzo's motions for a directed verdict and for judgment n.o.v. because there was not substantial evidence to support PAC's claims for loss of market value and loss of profits. We disagree.

Although there are two motions, one for directed verdict and the other for judgment n.o.v., we need make only one ruling because both are governed by the same standard. Quick v. Crane, 111 Idaho 759, 763, 727 P.2d 1187,...