Russell R. Schlegelmilch, Respondent, vs. Ralph C. Schlegelmilch, et al., Appellants.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA IN COURT OF APPEALS

C1-03-9

 

Russell R. Schlegelmilch,

Respondent,

 

vs.

 

Ralph C. Schlegelmilch, et al.,

Appellants.

 

Filed October 7, 2003

Affirmed as modified

Gordon W. Shumaker, Judge

 

Carver County District Court

File No. C6971446

 

 

 

Jody Winters, Gavin, Olson, Savre & Winters, 1017 Hennepin Avenue, Glencoe, MN 55336 (for respondent)

 

Robert A. Nicklaus, Eric J. Braaten, Nicklaus, Braaten & Hollenhorst, PLLC, 500 Pine Street North, Suite 200, Chaska, MN 55318 (for appellants)

 

            Considered and decided by Willis, Presiding Judge; Shumaker, Judge; and Stoneburner, Judge.

 

U N P U B L I S H E D   O P I N I O N

 

GORDON W. SHUMAKER, Judge

           

            On appeal after remand in this dispute regarding the dissolution of a family-farm partnership, appellants argue that the district court's findings on remand are clearly erroneous.  Appellants also argue that the district court abused its discretion as to the admission of expert-witness testimony and by not sanctioning respondent for spoliation of evidence, and that the district court erred when it awarded prejudgment interest.  Because we conclude the district court's findings are not clearly erroneous, except in one calculation, and the district court did not abuse its discretion or err, we affirm as modified.

FACTS

            Appellants Ralph and Marian Schlegelmilch and their son, respondent Russell Schlegelmilch, entered into a family-farm partnership agreement on January 31, 1983.  The record shows that the parties' partnership agreement stated:

Each of the partners shall have a fifty percent (50%) interest in and to all of the livestock and farm machinery, supplies, equipment and other personal property . . . [and] [t]he partners shall participate in the profits and losses of the partnership on a fifty-fifty basis until otherwise agreed by them.

 

In 1994 the partnership was dissolved.  After the dissolution, respondent sued appellants to force the sale and transfer of the partnership property to him.  In its March 2000 order, the district court found that the statute of frauds precluded a forced sale and transfer of the property, but awarded respondent $110,969.72, based in part on the partnership agreement and also under a theory of unjust enrichment.

On appeal to this court from the March 2000 order, the district court's order was affirmed in part, reversed in part, and remanded for the district court to

1.         [make a] finding regarding whether the September 1990 payment of $18,358.50 was income paid to appellant Ralph Schlegelmilch;

2.         [e]liminat[e] . . . the inconsistency between the findings that the partnership made improvements to the property worth $190,065 and the conclusion that respondent was entitled to $57,500 as compensation for his one-half interest in those improvements;

3.         [make a] determination of the amount of compensation due to appellants for partnership property retained by respondent, namely, the John Deere corn planter, the H & S self-unloading box, and the Dodge Ram pick-up truck; [and]

4.         find[] . . . the balance remaining in the partnership checking account at the time the partnership was dissolved and to determine how it is to be distributed.

 

Schlegelmilch v. Schlegelmilch, No. C1-00-951, 201 WL 69998, at *9 (Minn. App. Jan. 23, 2001 (Schlegelmilch I).

Before the remand hearing, the parties settled all of the issues but one, leaving the district court to resolve its findings as to the value of the property and its inconsistent conclusion as to respondent's one-half interest in the property. 

After considering the evidence on remand, the district court found that the depreciated value of the buildings, including improvements to the property, was $95,000 and that respondent's one-half interest was $47,500.  The district court ordered appellants to pay respondent a total of $119,372.82.  This sum reflects payment owed by appellants to respondent of $94,024.40 from previous agreements between the parties and the court's findings and conclusions of law on all issues; an award of prejudgment interest to respondent in the amount of $24,517.17; and costs and disbursements of $831.25 in favor of respondent.  This appeal followed.

D E C I S I O N

1.         District Court's Findings

Appellants argue that the district court's findings as to the value of the buildings are clearly erroneous and that the district court's conclusion awarding respondent $47,500 as his one-half interest is also erroneous. 

            On appeal, a district court's findings of fact are given great deference and will not be set aside unless clearly erroneous.  Minn. R. Civ. P. 52.01.  "Findings of fact are clearly erroneous only if the reviewing court is left with the definite and firm conviction that a mistake has been made."  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (quotation omitted).  If there is reasonable evidence to support the district court's findings of fact, we will not disturb those findings.  In re Estate of Sandstrom v. Wahlstrom,252 Minn. 46, 61, 89 N.W.2d 19, 28 (1958). 

Here, the district court in its amended order after remand concluded that the improvements to the real property of the partnership were valued at $190,065.  This sum is undisputed, and the district court provided detailed findings in support of its conclusion. 

Next, the court considered the depreciated value of the real property as ordered by this court, considering the testimony of an accountant, farm accounting practices, and the testimony of an appraiser.  The district court rejected the testimony of the accountant because "the evaluation subsequent to the remand demonstrate[s] that the amounts claimed on the depreciation schedules are based upon normal and customary accounting practices, but bear no practical relationship to actual depreciated value for the property."

The district court also considered farm accounting practices, but also rejected this evidence because it "provide[d] little guidance to the court in determining the value of the property other than for tax purposes [and that] it . . . bears little relationship to the contributions of the partners in sweat equity, real and personal property to the ongoing farming operation."

Finally, the district court turned to the evidence presented by "the various appraisals [that] provide[d] some insight into the values," noting that considerable differences of opinion existed.  The district court relied on appraiser John Radde's testimony that "the various buildings have a total estimated value of $70,000.00 and that the value remaining to the property by virtue of the tiling would be $25,000.00"  The district court concluded this $95,000 amount would be divided equally between the partners, and thus each would receive $47,500.  The district court reached its conclusion after considering all of the evidence presented, including various methods for arriving at a current value of the property.

The record supports the district court's determination of the depreciated value of the property, and the resulting determination of the parties' one-half interest reflects the depreciated value.  Thus, the district court's previous inconsistent conclusion that was the issue on remand is rectified.  The findings are not clearly erroneous, and they satisfy the order of this court.

On remand, the district court was also ordered to make a finding as to whether a payment of $18,358.50 was actually income paid to respondent, as the district court had previously found.  The parties agreed prior to the remand hearing that this was not income owed to respondent.  Appellants now argue that the district court erred in its order when it calculated the deduction of this sum from respondent's received income because the district court's subtraction is off by $3,000.

In its first order, the district court found that respondent received $234,782.45, because it had erroneously included the sum of $18,358.50 as income to respondent.  The district court, in attempting to correct this error, subtracted the $18,358.50 from the $234,782.45 and made a mathematical error by reducing the amount of income respondent received to $219,423.95.  The correct figure is $216,423.95.  We modify the award to reflect the correct calculation.  Minn. R. Civ. App. P. 110.05.

2.       Admission of Expert Testimony

Appellants next argue that a sufficient foundation was not established to support John Radde's expert testimony and that Radde's testimony was not credible. 

"A trial judge is given wide latitude in determining whether there is sufficient foundation upon which an expert may state an opinion."  Benson v. N. Gopher Enters., Inc., 455 N.W.2d 444, 446 (Minn. 1990).  It is for the district court to determine whether evidence has probative value, and "unless it is so remote in point of time or space as to be of no probative value and is so prejudicial that in all probability it did influence the outcome of the case," we will not reverse.  Atkinson v. Mock, 271 Minn. 393, 396, 135 N.W.2d 892, 894 (1965).  Here, appellants have failed to carry their burden to show how the district court abused its wide latitude of discretion in determining the sufficiency of the foundation for the testimony of Radde.  Appellant's assertion that Radde did not meet the rigid standards of the National Association of Appraisers for establishing market value is unsupported by caselaw or any other authority and, thus, is unpersuasive.  Rules of evidence govern the admissibility of evidence at trial, and the National Association of Appraisers Standards are not rules of evidence. 

The issue here is whether Radde's testimony was relevant. Relevant evidence is "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence."  Minn. R. Evid. 401.  Here, Radde's testimony was relevant because the appraisal information provided a basis from which market value could be derived and market value is necessary determination in this case.

As to the credibility of Radde, "due regard shall be given to the opportunity of the [district] court to judge the credibility of the witnesses."  Minn. R. Civ. P. 52.01.  It is for the finder of fact to say which opinion is right, and when there is credible evidence upon which the findings are based, this court is bound to it.  Dudovitz v. Shoppers City, Inc., 282 Minn. 322, 324, 164 N.W.2d 873, 875 (1969).  Here, the district court heard testimony from several witnesses, acknowledged that the testimony was conflicting, and relied on Radde's testimony as being the most credible. 

Appellants also argue that Radde's testimony was unsupported by facts.  If underlying findings of fact are sustainable, the district court's ultimate findings must be affirmed in the absence of a demonstrated abuse of the district court's broad discretion.  Maxfield v. Maxfield, 452 N.W.2d 219, 221 (Minn. 1990).  If there is reasonable evidence to support the district's findings of fact, we will not disturb those findings.  In re Estate of Sandstrom, 252 Minn. at 61, 89 N.W.2d at 28. 

Radde based his opinions as to the value of the improvements made to the property in part on University of Minnesota research; tables calculating yield; crop equivalency ratings; studies on average crop prices; rental rates; comparable sales of land with tile drainage; specific buildings and the usefulness of the buildings to generate income; and depreciation values using current construction costs, functional use and the location of the buildings on appellants' land, and the appreciated value of appellants' land. 

Because Radde's opinions are supported by facts that include crop prices, rental rates, comparable sales, and current construction costs, among other things, Radde's opinions have probative value, and the district court did not err in allowing the admission of Radde's testimony. 

3.         Spoliation of Evidence

This court applies an abuse of discretion standard of review to a district court's choice of a sanction for spoliation of evidence, and we will not reverse unless it is clear that no reasonable person would agree with the district court's decision.  Patton v. Newmar Corp., 538 N.W.2d 116, 119 (Minn. 1995).

Appellants argue that the district court abused its discretion when it failed to impose sanctions when respondent failed to comply with the district court's order compelling respondent to produce the farm-partnership checkbook and ledger of expenses for inspection because they were unable to prevent a speculative recovery as to the value of the extra income paid and to refute respondent's claim that he bought the silo and grain bins with his money.

A district court has inherent authority to impose sanctions for inadvertent or negligent destruction of evidence.  Id.  The propriety of a sanction is determined by the prejudice resulting to the opposing party.  Id.  In determining a sanction, the court should

examine the nature of the item lost in the context of the claims asserted and the potential for remediation of the prejudice.  One challenging the [district] court's choice of a sanction has the difficult burden of convincing an appellate court that the [district] court abused its discretiona burden which is met only when it is clear that no reasonable person would agree [with] the [district] court's assessment of what sanctions are appropriate.

 

Id. (quotation omitted).  The district court should determine if the evidence was in the exclusive control and possession of the party required to produce the evidence, whether opportunity was available to procure evidence adverse to an opponent, and whether the party failed to avail himself of existing opportunities.  Kmetz v. Johnson, 261 Minn. 395, 402-03, 113 N.W.2d 96, 101 (1962).  "[T]he party failing to avail himself of existing opportunities should not be permitted to complain."  Id. at 403, 113 N.W.2d at 101.  "[W]ith respect to documentary evidence . . . some effort must be made by a party to obtain this type of evidence from an opponent before an unfavorable inference can be drawn against the opponent for failure to produce it."  Id.

Here, the ledger was available to appellants at the first trial, and the court made copies of exhibits from the ledger.  The issue on remand was to "eliminat[e] . . . the inconsistency between the finding that the partnership made improvements to the property worth $190,065 and the conclusion that respondent was entitled to $57,500 as compensation for his one-half interest in those improvements."  Schlegelmilch I, 2001 WL 6998 at *9.  The information necessary for the district court to do as this court ordered was available without the ledger based on witness testimony and current information as to valuation.  Appellants provide no caselaw to support their argument that the district court's determination of a sanction is mandatory. 

The district court's decision not to impose sanctions for the spoliation of evidence was not an abuse of discretion because respondent was not in exclusive control of the evidence, appellants had access to the evidence prior to the remand hearing, the evidence was ascertainable from other sources, and sanctions in this case are permissive and not mandatory.

4.         Prejudgment Interest

"On appeal, questions of law governing prejudgment interest are reviewed de novo."  Peterson v. BASF Corp., 657 N.W.2d 853, 873  (Minn. App. 2003), review denied (Minn. Jan. 26, 2001).  Prejudgment interest may be awarded from the time of the commencement of an action.  Minn. Stat. § 549.09, subd. 1(b) (2002).  "Fact determinations underlying the application of the statute, such as whether the claim is liquidated, readily ascertainable, or unliquidated, will not be reversed unless clearly erroneous."  BASF Corp., 657 N.W.2d at 873.  Prejudgment interest is allowed on liquidated claims and unliquidated claims where the amount is readily ascertainable.  Id.   

Damages are readily ascertainable if they can be determined by "computation or reference to generally recognized standards such as market value and not where the amount of damages depended upon contingencies or upon jury discretion (as in actions for personal injury or injury to reputation)."  Potter v. Hartzell Propeller, Inc.,291 Minn. 513, 518, 189 N.W.2d 499, 504 (1971).  The requirement that damages be ascertainable is based on the theory that it would be unreasonable to require compensation "where defendant could not have readily determined the amount of damages himself either by computation or reference to generally recognized standards such as market value."  Id.  Here, the damages were readily ascertainable because they are tangible losses and could be determined by computation or reference to generally accepted standards of appraisal of property and the value of machinery and expenses.  Thus, the damages are subject to prejudgment interest. 

Because appellants fail to show how the district court erred, the district court's award of prejudgment interest is affirmed.

5.         Other Issues Raised

Appellants assert arguments in their brief challenging this court's decisions in Schlegelmilch I.  When a party does not seek review of this court's decision, that decision becomes the law of the case.  Burgmeier v. Bjur, 533 N.W.2d 67, 69 (Minn. App. 1995), review denied (Minn. Sept. 20, 1995).  Thus, any arguments raised now by appellants on issues already raised in the last appeal are beyond the scope of review of this appeal. 

Appellants also raise issues in their brief not raised at the district court or on appeal in Schlegelmilch I.  These issues are not properly before this court now because this court will generally not consider matters not argued and considered in the district court.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).

Affirmed as modified.