164 A.D.2d 558 | N.Y. App. Div. | 1991
OPINION OF THE COURT
In 1967, three brothers, Seymour, Alvin and Bertram Hadan, formed plaintiff, S.A.B. Enterprises, Inc., for the purpose of acquiring the assets and business of Brady’s Laundry and Dry Cleaning, a home laundry located in the Village of Athens, Greene County. Their family acquired a similar home laundry in Columbia County in 1963. Following the acquisition of Brady’s, plaintiff expended substantial sums in replacing equipment and substituting larger and more automated washers and ironers to convert Brady’s from a home laundry to a large-volume commercial linen laundry and linen supply operation for serving resort hotels and motels in the Catskill Mountains region. Plaintiff’s principal witness, Bertram Hadan, testified that by 1972 the laundry had been successful in acquiring as customers many of the major resorts in the area. During the peak summer season, the laundry was then using up to 30,000 gallons of water daily, which was obtained from the municipal water lines of defendant and paid for on a metered basis.
In July 1972, plaintiff first found that the water supply from defendant was often badly discolored and was permanently staining the fabrics during laundering. Repeated complaints to officials of defendant were responded to by recommendations to flush the lines before using the water. When this was unavailing, plaintiff brought in as consultants a local college
In the fall of 1973, plaintiff commenced this action against defendant for its expense of relaundering and replacing permanently stained linens and loss of business from displeased customers, asserting causes of action for negligence and breach of implied warranty of fitness of defendant’s water supply (see, UCC 2-1315). In November 1973, plaintiff closed its doors, claiming to have lost its entire clientele from dissatisfaction with the stained linens.
This case was first tried in 1981, ending in a mistrial on the court’s own motion for a lack of time at the end of the trial term to complete the proof. A second trial in 1982 ended when Supreme Court dismissed the action after ruling that plaintiff’s use of defendant’s water supply once it had discovered the impurities in July 1972 was contributory negligence as a matter of law. This court reversed, holding that an issue of fact was presented as to whether continued use of the water after such discovery, under plaintiff’s circumstances, constituted contributory negligence (see, S.A.B. Enters. v Village of Athens, 94 AD2d 915, appeal dismissed 60 NY2d 860). A third trial, in 1987, ended in a mistrial due to the sudden onset of illness of plaintiff’s then-counsel. Finally, upon this, the fourth trial of the action, the proof was completed and submitted to the jury. The jury found in plaintiff’s favor on both its negli
At the outset, we decline to consider the claim asserted on appeal by defendant’s special counsel that defendant was performing a governmental function in supplying water to plaintiff and, hence, was immune from tort liability in the absence of proof of a special relationship between it and plaintiff. Defendant clearly permitted the case to be tried and submitted to the jury on the basis that the traditional rule still applied, i.e., that a municipality, in supplying water through lines to local consumers for a volume-based fee, is exercising a proprietary function for which it may be subject to liability in tort (see, Canavan v City of Mechanicville, 229 NY 473). Accordingly, defendant failed to preserve this issue for appeal (see, Miller v Miller, 68 NY2d 871, 873; De Leon v New York City Tr. Auth., 50 NY2d 176, 179, n 1; Matter of State of New York v Avco Fin. Serv., 50 NY2d 383, 390-391). The distinction between governmental/proprietary functions has become blurred and has been eliminated in some contexts (see, Matter of County of Monroe [City of Rochester], 72 NY2d 338; County of Nassau v South Farmingdale Water Dist., 46 NY2d 794), but not as yet regarding municipal tort liability. On the state of this record, we should not reach the issue of abandonment of the distinction in the tort field by exercising our discretion to review in the interest of justice.
Defendant appears to have conceded on this appeal the sufficiency of the evidence of its negligence. However, defendant contends that the proof failed to establish that any negligence on its part was a proximate cause of plaintiffs loss of business and that the case should not have been submitted to the jury on the basis of purely circumstantial evidence of causation. We disagree. The jury’s specific finding of proximate cause should be upheld unless " 'there is simply no valid line of reasoning and permissible inferences which could possibly lead rational men to the conclusion reached by the jury on the basis of the evidence presented at trial’ ” (Dominguez v Manhattan & Bronx Surface Tr. Operating Auth., 46 NY2d 528, 532, quoting Cohen v Hallmark Cards, 45 NY2d 493, 499). There was direct evidence from testimony and
It follows from the foregoing that the jury’s verdict holding defendant liable on plaintiff’s negligence cause of action should be upheld. This renders academic defendant’s challenge to the jury’s award on plaintiff’s breach of warranty cause of action unless the imposition of the substantial prejudgment interest on the loss of business damages award could only have been made for the breach of warranty, and not on the award in plaintiff’s negligence cause of action. We have concluded that the better and prevailing weight of authority supports recovery of prejudgment interest for a tortious injury to plaintiff’s business, as "an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property” (CPLR 5001 [a]; see, Della Pietra v State of New York, 125 AD2d 936, 938, affd 71 NY2d 792; Phelps v A. R. Gundry, Inc., 23 AD2d 960, 961; cf., Brandt Corp. v Warren Automatic Controls Corp., 37 AD2d 563). Since plaintiff can thus properly obtain recovery of prejudgment interest on the jury’s award of damages in its negligence cause of action, it is unnecessary for us to review the validity of its recovery for breach of warranty.
Defendant’s remaining arguments are directed at overturning the jury’s award of damages in the amount of $975,000 for plaintiff’s loss of business. We find unpersuasive defendant’s first argument that damages should not have been awarded because plaintiff made no attempt to mitigate its
There is more substance to defendant’s alternative contention that the jury’s award for loss of business damages was excessive and based largely on speculative evidence. Since plaintiff’s claim was that defendant’s tortious acts totally destroyed its laundry business, the appropriaté measure of that element of damages here was the fair market value of the business before destruction (see, National Apparel Adj. Council v Dun & Bradstreet, 42 AD2d 58, 60, lv denied 33 NY2d 518; Jim’s Hot Shot Serv. v Continental W. Ins. Co., 353 NW2d 279 [ND]; Sawyer v Fitts, 630 SW2d 872 [Tex]; 22 Am Jur 2d, Damages, § 640, at 703). Plaintiff’s entire proof of the value of its destroyed business consisted of the testimony of Bertram Hadan. No documentary evidence on the value of the business, such as profit and loss statements, books and records or income tax returns, was introduced. Hadan testified that all such records were stored at the laundry premises after it was shut down and that the records were then lost or destroyed in 1977 when defendant razed the building. Kadan’s testimony was that there are two methods used in the industry for determining the value of a commercial laundry or of a particular linen wash or linen supply account. The method he emphasized and described in detail was to take two thirds of annual gross receipts and multiply the result by a factor of 3, 4 or 5, depending on various other factors. Hadan rejected consideration of net profits or losses for making such evaluation. At one or more points, he testified that plaintiff lost aggregate yearly gross receipts from its customers of $491,750. It seems evident that the jury relied on this evidence in fixing
In our view, the foregoing award was excessive and largely based on proof lacking a proper foundation. This State does follow the general rule that an owner of property, with a modicum of qualifying experience, may offer a lay opinion as to its value (see, Fassett v Fassett, 101 AD2d 604, 605; Irv-Bob Formal Wear v Public Serv. Mut. Ins. Co., 81 Misc 2d 422, 429, affd 86 Misc 2d 1006; see also, Park W. Mgt. Corp. v Mitchell, 47 NY2d 316, 329-330, cert denied 444 US 992; Fisch, New York Evidence § 372, at 255-256 [2d ed]). But "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” (Jim’s Hot Shot Serv. v Continental W. Ins. Co., supra, at 282).
There were serious weaknesses in Kadan’s testimony on value. As previously noted, it was based on a claimed industrywide method of appraising commercial laundries. The only experience with the use of this industry standard he described was in connection with the family’s purchase of the laundry in Columbia County in 1963 and the instant laundry in Greene County in 1967, plus vague references to unsuccessful negotiations to purchase three other laundries. However, Kadan also described the two laundries actually purchased by the family as home laundries at the time of acquisition, not commercial laundries for the value of which there was an alleged industrywide formula.
A second problem with the proof of business loss damages is that Kadan’s method of evaluating plaintiff’s business was based entirely on a factor of gross receipts, in effect capitalizing the gross receipts of the business enterprise to arrive at its worth, without proof of the extent of profits plaintiff earned on its gross revenues. The courts have generally rejected the use of gross receipts or gross profits as a means of establishing the value of a loss or injury to business interests (see, McRoberts Protective Agency v Lansdell Protective Agency, 61 AD2d 652, 655; Jim’s Hot Shot Serv. v Continental W. Ins. Co., 353 NW2d 279, supra; Mangham v Hall, 564 SW2d 465 [Tex]; Lovely v Burroughs Corp., 165 Mont 209, 527 P2d 557). While Kadan did opine that the worth of a commercial-type laundry business could be determined completely on the basis of gross receipts without reference to net profits or losses, it is noteworthy that he described his own role in establishing the
Lastly on damages, it is quite unclear from Kadan’s testimony as a whole whether the laundry’s gross receipts of $491,750, upon which his method of evaluation was totally based, represented his estimate of annual revenues, or instead, the aggregate revenues for the entire period from when the staining from the impurities in the water started in July 1972 to the final closing of the laundry in November 1975. Kadan testified both ways on an equal number of occasions. His last testimony on the subject was as follows:
"Q. Is it correct to state the 491,750 represents the total gross business that you estimate Brady’s Laundry did from July of 1972 through November of 1975?
"A. Yes, I believe so.”
Based upon the foregoing, we have concluded that the jury’s award of $975,000 for plaintiffs loss of business was excessive and cannot stand. Accordingly, the judgment must be reversed and a new trial ordered on the sole issue of damages.
Mahoney, P. J., Weiss, Mikoll and Yesawich, Jr., JJ., concur.
Amended judgment reversed, on the law, without costs, and matter remitted to the Supreme Court for a new trial on the issue of damages only.