Case Title: CAPSHAW v. SCHIECK

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2002-04-10T00:00:00Z

Document:
CAPSHAW v. SCHIECK 2002 WY 5444 P.3d 47Case Number: 01-35Decided: 04/10/2002
 APRIL TERM, A.D. 2002

                                                                                                                                   

GLORIA 
J. CAPSHAW and JUDY G.

CAPSHAW, 
a/k/a  JUDY G. ROESLER, 

Appellants(Defendants),

v.

E. TIM 
SCHIECK; DIANE E. SCHIECK;

JOHN D. 
KERNS; ALLYSON A. KERNS;

and 
ROCKY MOUNTAIN CEMENTERS, INC., 

Appellees(Plaintiffs).

Representing 
Appellants: 

            
Georg Jensen of the Law Offices of Georg Jensen, Cheyenne, 
Wyoming.

 Representing 
Appellees: 

            
David A. Drell of Vlastos, Brooks, Henley & Drell, P.C., Casper, 
Wyoming.

  

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

  

            
VOIGT, Justice. 

[¶1]      Gloria J. Capshaw 
and Judy G. Capshaw (the sellers) sold all of the shares in Rocky Mountain 
Cementers, Inc. (the corporation), a Wyoming corporation, to E. Tim Schieck, 
Diane E. Schieck, John D. Kerns, and Allyson A. Kerns (the buyers) on March 2, 
1996.  The buyers chose to purchase 
the corporation, rather than its assets, based on the corporation's July 31, 
1994, tax return that showed a net operating loss (NOL) carry forward of 
$203,614.00.1  The Internal Revenue Service (IRS) 
audited the corporation in 1998 for the 1994-1995 tax year.  Based on this audit, the IRS disallowed 
certain deductions, which reduced the NOL carry forward.2  The buyers requested indemnification 
from the sellers under the indemnification clause of the Stock Purchase 
Agreement for any damages resulting from the NOL carry forward reduction.  When the sellers refused to indemnify 
the buyers, this lawsuit followed.  
The trial court conducted a trial in May 2000, and awarded the buyers 
judgment against the sellers in the amount of $32,160.75.  The sellers appealed.  We affirm, but remand for entry of a 
judgment consistent herewith.

ISSUES

[¶2]      We will address 
the issues as they have been stated by the sellers as 
appellants:

            
1.         
May the court allow testimony regarding future profits without 
foundation, based on conjecture and speculation over the objection of the 
appellants for lack of foundation and best evidence?

            
2.         
May the court award a judgment for damages against the defendants based 
in part on losses claimed due to the filing of an incorrect or fraudulent tax 
return by the plaintiffs?

            
3.         
May the court award judgment for future damages for loss of future tax 
benefits when the plaintiff[s] put on no evidence regarding the amount of any 
future taxable income?

FACTS

[¶3]      The buyers 
entered into a Stock Purchase Agreement with the sellers on February 20, 
1996.  Closing occurred on March 2, 
1996, at which time the stock certificates were transferred to the buyers.  The sellers sold all their stock in the 
corporation to the buyers for $250,000.00.  
Prior to the sale, the buyers inspected the corporation's financial 
records.  The corporation's July 31, 
1994, tax return reflected a NOL carry forward of $203,614.00.  When the sellers confirmed that the 
corporation had the NOL carry forward, the buyers chose to purchase the 
corporation rather than its assets.

[¶4]      The Stock 
Purchase Agreement provided, among other things:

            
1.         
PURCHASE PRICE.

            
The total purchase price for the sale and purchase of the stock and 
outstanding interests of Sellers in Rocky Mountain shall be Two Hundred Fifty 
Thousand Dollars ($250,000).  The 
parties agree that this purchase price is tied to the financial condition of 
Rock Mountain as of January 31, 1996 as reflected by the financial records as of 
that date.  . . 
.

            
* * *

            
5.         
REPRESENTATIONS AND WARRANTIES.

            
Sellers represent and warrant as follows:

            
* * *

            
D.        All 
books and records of the corporation have been supplied to the Purchasers for 
the purpose of entering into this transaction and said books and records are 
true and accurate.  The financial 
statements which have been provided to Purchasers are true and accurate and 
fairly represent the financial condition and operation of the corporation . . 
..

            
* * *

            
6.         
INDEMNITY.

            
Sellers shall indemnify the Purchasers and hold Purchasers harmless from 
and against any loss or damage occasioned by any act of the corporation, its 
officers, directors and stockholders, including attorney's fees and costs 
related to the same prior to March 1, 1996.

[¶5]      In 1997, the IRS 
audited the corporation.  It 
determined that improper classifications of payments had been made by the 
sellers prior to the February 20, 1996, Stock Purchase Agreement, and additional 
tax, interest, and penalties were owed that amounted to $7,713.66.  The buyers paid this amount, and 
requested indemnification from the sellers.  The sellers made full payment to the 
buyers on November 5, 1997.

[¶6]      In April 1998, 
the IRS informed the buyers that it was conducting another audit of the 
corporation.  As a result of the 
audit, the IRS disallowed many of the deductions made in the corporation's July 
31, 1994, tax return, which disallowance reduced the NOL carry forward.  The corporation's accountant testified 
at the trial that the deductions were disallowed because there were no 
supporting documents in the corporation's financial records to justify 
them.

[¶7]      On April 21, 
1998, the buyers requested that the sellers reimburse them for any damages 
sustained as a result of the NOL carry forward reduction.  The sellers refused, and the buyers 
initiated this lawsuit on March 23, 1999.  
The buyers' Motion for Summary Judgment was heard at a final pretrial 
conference on May 19, 2000.  The 
trial court found no genuine issue of material fact on the issue of 
indemnification, and granted partial summary judgment in favor of the buyers, 
finding the sellers liable for their breach of the agreement for indemnification 
of the tax loss.  The trial court 
found genuine issues of material fact remained regarding the amount of damages 
due to the buyers, the buyers' duty to mitigate damages, and the sellers' 
counterclaims.

[¶8]      The trial court 
conducted a trial on damages on May 30 and 31, 2000.  A Final Order and Judgment filed October 
9, 2000, granted the buyers judgment against the sellers in the amount of 
$32,160.75.  The sellers appealed 
the Final Order and Judgment.

THE 
EVIDENTIARY RECORD

[¶9]      The damages trial 
was not reported, so no transcript is available.  Instead, the parties have, pursuant to 
W.R.A.P. 3.03, submitted a Statement of Proceedings.  Because the nature and extent of the 
trial evidence is fundamental to this appeal, we will quote nearly verbatim the 
relevant portions of the Statement of Proceedings:

            
5.         
That Neal M. Johnson, CPA, the Plaintiff Rocky Mountain Cementers, Inc.'s 
accountant, testified that the Internal Revenue Service disallowed the following 
deductions from the Corporation's Form 1120 for the tax year ending July 31, 
1995.

            
Amount Disallowed:

            
Officers' Compensation                               
$9,600.00

            
Repairs and maintenance                            
$3,587.00

            
Bad debt reduction                                       
$22,794.00

            
Interest expense                                            
$15,000.00

            
Depreciation expense                                  
$21,595.00

            
Utility expense                                               
$6,000.00

            
Costs of goods sold                                     
$84,592.00

            
Non-employee compensation                     
$9,500.00

            
Wages                                                                     
$(12,035.00)

            
Total Adjustment:                                      
$160,633.00

            
Mr. Johnson testified that the basis for the disallowance of such 
deductions was the lack of any supporting documents for such deductions in the 
Corporation's financial records.

            
6.         
Neal Johnson, CPA testified that Rocky Mountain Cementers, Inc.'s 1996 
tax return for the year ending July 31, 1997 reflected profit income of 
$88,346.  That as the Corporation's 
accountant, he utilized $88,346 of the net operating loss carry forward to 
offset said income.  Mr. Johnson 
testified that the 1997 tax return for the Corporation for the year ending July 
31, 1998 reflected income of $176,692 of which he was only able [to] utilize 
$5,702 of net operating loss deduction due to the adjustments made by the 
Internal Revenue Service.

            
7.         
That the Plaintiffs' expert, Richard Shamley, CPA, testified that the 
reduction of the loss carry forward resulted in a tax loss of $50,086.  This testimony was based upon the manner 
in which the Plaintiff Rocky Mountain Cementers, Inc.'s prior accountant, Neal 
Johnson, CPA, had prepared the July 31, 1997 and July 31, 1998 tax returns.  . . .  In cross-examination, Mr. Shamley 
admitted that he would not have prepared the returns in the same manner and that 
he would have prepared the returns in accordance with the restrictions under IRC 
§ 382 (26 U.S.C.S. 382) and he knew of no way in this case that the requirements 
of § 382 could be avoided.  Mr. 
Shamley further testified that in reviewing the tax returns of the Corporation, 
that such returns showed that Rocky Mountain Cementers, Inc. had shown a profit 
three out of four years since the Stock Purchase Agreement.  That the year the Corporation did show a 
loss, there was considerable equipment purchased.  That based on the past profits, he would 
anticipate future profits for the Corporation wherein a net operating loss carry 
forward could be utilized.

            
[8.]       
That E. Tim Schieck and John D. Kerns, the president and vice president 
of Rocky Mountain Cementers, Inc., respectively testified that they fully 
expected the Corporation to make a profit in the future.  That both testified for the current 
year, the Corporation had a net profit of approximately $110,000.  As a result, both testified that they 
believed that the Corporation had been damaged to the extent of approximately 
$50,000.  This testimony was allowed 
over the defendants['] objections as to foundation.  On cross examination Mr. [Schieck] 
admitted that the company had filed an amended tax return in conjunction with 
the July 31, 1999 tax return, which reflected an operating loss of $67,329.00 
. . ..  The subsequent 
admission of trial exhibit E, reflected an actual tax refund of 
$26,259.00.

            
9.         
That both expert witnesses, Richard Shamley, CPA, and Dennis Howard, CPA, 
testified that § 382 of the Internal Revenue Code applied to the plaintiff-tax 
payer in this case.  Mr. Howard 
testified regarding the operative part of the IRC Section which applied to this 
case and recited the mechanical application of the statute to the facts of this 
case and testified that applying § 382 of the Internal Revenue Code to the sale 
resulted in a limitation of the amount of the loss carry forward which could be 
used in each year.  Mr. Howard 
testified that the amount of such limitation was $14,125 per year, pro-rated in 
the first year to $5,885.  . . 
.  Dennis Howard testified further 
that applying the limitations on the amount of loss carryforward which could be 
claimed to the actual tax returns, after the $160,633 adjustment to the loss 
carry forward was deducted, that since the time of the sale there was no net 
change in any tax consequences to the plaintiff-taxpayer through the July 31, 
1999 tax year, and that of the $42,981 remaining loss carryforward, that $8,846 
of such loss remained to be used in FYE July 31, 2000, if there was any net 
income.  . . .  Mr. Howard further testified that and 
the court found that if the total of $14,125 in loss carryforward could be used 
against FYE 7-31-00 income the future loss for such year would be $662.51.  Both experts testified that unless the 
company has taxable income in the future there would be no future 
damages.

            
10.       
That the Plaintiff Diane E. Schieck, the treasurer for the Corporation, 
testified that she handled the day-to-day bookkeeping activities for the 
Corporation.  Ms. Schieck testified 
that as of April 30, 2000, the Corporation had income of approximately 
$110,000.  She further testified 
that she anticipated additional income through the end of the Corporation's tax 
year.  Such testimony was allowed 
over the defendants' objection to foundation and best 
evidence.

            
11.       
That the Defendants' expert, Dennis Howard, CPA testified regarding the 
maximum damages which could be sustained based upon the Plaintiff Rocky Mountain 
Cementers, Inc. generating at least $14,125 of net taxable income in every year 
from the year 2001 through 2010.  
Mr. Howard testified that based upon the historical average tax rate 
calculated by him and the use of 9% for the capitalization rate for 
determination of the present value of the MAXIMUM future losses, Mr. Howard 
calculated the MAXIMUM future damages at $11,438.80.  Mr. Howard also testified that the 
present value of the MAXIMUM future damages would only be . . . $8,680.98 if a 
capitalization rate of 15% were to be used.

CONTRACT 
DAMAGES

[¶10]   In an action for breach of 
contract, the damages awarded are designed to put the plaintiff in the same 
position as if the contract had been performed, less proper deductions.  JBC of Wyoming Corp. v. City of 
Cheyenne, 843 P.2d 1190, 1195 (Wyo. 1992).  The plaintiff has the burden of 
producing sufficient evidence to prove his damages.  Wagon Wheel Village, Inc. v. 
Harris, 993 P.2d 323, 325 (Wyo. 1999).  "Damages must be proven with a 
reasonable degree of certainty, and a court may not resort to speculation or 
conjecture in determining the proper amount to award.'"  Sannerud v. Brantz, 879 P.2d 341, 345 (Wyo. 1994) (quoting Cottonwood Valley Ranch, Inc. 
v. Roberts, 874 P.2d 897, 899 (Wyo. 1994)).

DISCUSSION

May the 
court allow testimony regarding future profits without foundation, based on 
conjecture and speculation over the objection of the appellants for lack of 
foundation and best evidence?

[¶11]   The sellers' primary argument is 
that the trial court erred by allowing the testimony of the buyers and the 
buyers' CPA regarding the amount of the corporation's future profits.  The sellers contend that the trial court 
should have sustained their objections under W.R.E. 701, for lack of foundation, 
and under W.R.E. 1002, for lack of best evidence, as no documentation regarding 
the books and records of the corporation were offered into evidence to support 
the witnesses' speculations.

[¶12]   The Statement of Proceedings 
indicates that two certified public accountants testified as experts for the 
buyers and sellers at trial.  The 
Statement of Proceedings does not specify whether the buyers who testified did 
so as expert witnesses.  With 
nothing more in the record, we assume that they testified as lay witnesses.  W.R.E. 701 states:

If the 
witness is not testifying as an expert, his testimony in the form of opinions or 
inferences is limited to those opinions or inferences which are (a) rationally 
based on the perception of the witness and (b) helpful to a clear understanding 
of his testimony or the determination of a fact in issue.

This 
Court has stated that "[i]t was the intent of the framers of the Rules of 
Evidence to considerably relax the prohibition against receipt of opinion 
testimony both by expert and lay witnesses.  Generally, the rules should be liberally 
construed to allow the admission of such evidence."  McCabe v. R.A. Manning Const. Co., 
Inc., 674 P.2d 699, 705 (Wyo. 1983).

[¶13]   The question of allowing or 
excluding evidence is a question for the trial court to decide.  Brockett v. Prater, 675 P.2d 638, 
641 (Wyo. 1984).  A trial court's ruling will not be 
overturned without a clear showing of an abuse of discretion.  Id.  In determining whether there has been an 
abuse of discretion, "the ultimate issue is whether or not the court could 
reasonably conclude as it did.'"  
Vaughn v. State, 962 P.2d 149, 151 (Wyo. 1998) (quoting Gaines 
v. Doby, 794 P.2d 566, 570 (Wyo. 1990)).  The burden is on the appellant to show 
such abuse.  Blake v. State, 
933 P.2d 474, 477 (Wyo. 1997).

[¶14]   Without a transcript, it is 
impossible to determine what foundation may have been laid for the challenged 
testimony.  However, some foundation 
for the opinions is contained in the Statement of Proceedings.  Therefore, we accept the trial court's 
findings as to the admissibility of this evidence.  Salt River Enterprises, Inc. v. 
Heiner, 663 P.2d 518, 520 (Wyo. 1983).  We cannot say that it was an abuse of 
discretion for the trial court to have admitted the buyers' lay opinions as to 
future profits.

[¶15]   The sellers also contend that this 
testimony violated W.R.E. 1002.  
W.R.E. 1002 states:  "To 
prove the content of a writing, recording, or photograph, the original writing, 
recording, or photograph is required, except as otherwise provided in these 
rules or by statute."  W.R.E. 1001 
defines writings and recordings as consisting of "letters, words, sounds, or 
numbers, or their equivalent, set down by handwriting, typewriting, 
printing, photostating, photographing, magnetic impulse, mechanical or 
electronic recording, or other form of data compilation[.]"  (Emphasis added.)

[¶16]   There is nothing in the trial 
court's findings or in the Statement of Proceedings to suggest that the buyers' 
testimony was given to prove the contents of a writing.  Rather, the testimony was offered as 
opinions on the likelihood of future profits.  W.R.E. 1002 does not apply to such 
testimony, so it was not error for the trial court to overrule the sellers' 
objection.

[¶17]   The sellers' statement of this 
first issue is limited to the admission of testimony regarding future profits of 
the corporation.  In their appellate 
brief, however, the sellers also contend that it was error for the trial court 
to allow Neal Johnson, the corporation's accountant, to testify that the NOL 
carry forward reduction amount was $160,633.00.  Their major concern is that Neal 
Johnson's statement as to the amount of the reduction is reflected in the one 
documentary piece of evidence produced by the buyers.  This was a copy of the revised audit 
report made by the IRS, which itemized the adjustments made to income.  The amount came to $160,633.00, to which 
the IRS then deducted a previous NOL of $84,370.00, to arrive at a total 
adjustment for year ending July 31, 1995, of $76,263.00.  This value equaled the corporation's 
taxable income for the year, a loss of $76,263.00, so the corrected income was 
$0.00, and no taxes were due.  This 
evidence, not the evidence concerning future profits, is the primary focus of 
the sellers' W.R.E. 1002 argumentthe best evidence of the NOL carry forward 
reduction would be the IRS audit report.

[¶18]   Once again, the limitations 
inherent in having a statement of the proceedings, rather than a transcript, 
make it impossible to determine the exact basis for the trial court's 
evidentiary rulings.  Some 
information may be discerned from the known facts.  For instance, Neal Johnson was not 
giving an opinion as an expert witness; rather, he was testifying as a fact 
witnessthe corporation's accountant.  
Further, his testimony detailed the nine separate expenses that had been 
disallowed by the IRS, including the separate amount for each expense.  While we know from the scant record that 
the sellers objected to this testimony on the basis of foundation and the best 
evidence rule, we do not know what foundation may have been laid, nor what 
writings, if any, may have been utilized to produce the individual numbers, nor 
do we know why the trial court overruled the objections.  What is most odd, given the nature of an 
objection under W.R.E. 1002, is the fact that the IRS examination report 
detailing the $160,633.00 NOL reduction had been received into evidence as 
Plaintiffs' Exhibit 13.  It is hard 
to comprehend a best evidence objection under these circumstances.  The sellers have not met their burden of 
showing that the trial court abused its discretion in admitting this 
testimony.

May the 
court award a judgment for damages against the defendants based in part on 
losses claimed due to the filing of an incorrect or fraudulent tax return of the 
plaintiffs?

[¶19]   This issue is founded in the 
testimony of the buyers' expert, Richard Shamley, CPA.  Mr. Shamley estimated the buyers' tax 
loss at $50,086.00.  He admitted, 
however, that this estimate was based upon the corporation's 1997 and 1998 tax 
returns, which were not completed in accordance with IRC § 382.  The sellers' expert, Dennis Howard, CPA, 
agreed that the tax returns did not follow the Internal Revenue Code.  Nevertheless, the trial court utilized 
the $50,086.00 figure in determining the buyers' damages.  That is the error now 
alleged.

[¶20]   The sellers' expert, using the same 
$160,633.00 NOL carry forward reduction relied upon by the buyers' expert, but 
using what he considered to be the correct IRS procedures, calculated the 
buyers' damages to be $12,101.31.  
The trial court found that both opinions were "based upon valid and 
thoughtful accounting approaches to the projection of any loss attributable to 
the reduction of the said net operating loss carry forward of Rocky Mountain 
Cementers, and therefore, should be given equal consideration."  The trial court then averaged the two 
computations, awarding damages in the amount of 
$31,093.65.

[¶21]   We agree with the sellers that this 
computation was in error.  When 
evaluating the validity of a trial court's judgment, we consider only the 
evidence and inferences favorable to the party for whom the judgment was 
rendered.  Sun Land & Cattle 
Co. v. Brown, 394 P.2d 387, 389 (Wyo. 1964).  When this Court does not have a properly 
authenticated transcript before it, it must accept the trial court's findings of 
fact upon which it bases any decisions regarding evidentiary issues.  Salt River Enterprises, Inc., 663 P.2d  at 520.  On the other hand, "[t]he factual 
findings of a judge are subject to a broader scope of review than a jury 
verdict, and the appellate court may examine all of the properly admissible 
evidence in the record."  R.C.R., 
Inc. v. Rainbow Canyon, Inc., 978 P.2d 581, 586 (Wyo. 1999).

[¶22]   The trial court found that, "[t]he 
reduction in the net operating loss carry forward of Rocky Mountain Cementers 
resulting from the Internal Revenue Service audit directly and proximately 
caused a loss to the Schiecks/Kerns and Rocky Mountain Cementers."  It went on to find that, "[t]he 
testimonies of E. Tim Schieck and John D. Kerns, the President and Vice 
President/Treasurer of Rocky Mountain Cementers respectively, reflect the 
Schiecks/Kerns' calculation of their loss to be approximately $50,000, based 
upon a reduction in the net operating loss carry forward of approximately 
$160,000."  The trial court 
concluded:

Competent 
and persuasive evidence was presented at trial to establish that the 
Schiecks/Kerns and Rocky Mountain Cementers have proven by a preponderance of 
the evidence that they suffered a loss as a result of the reduction of the net 
operating carry forward represented to be available to Rocky Mountain Cementers 
in its 1994 U.S. Corporation Income Tax Return for the tax year beginning August 
1, 1994, ending July 31, 1995; that the Capshaws expressly agreed to indemnify 
the Schiecks/Kerns and Rocky Mountain Cementers from "any loss or damage 
occasioned by any act of the corporation, its officers, directors and 
shareholders"; and that accordingly, the Capshaws are liable to the 
Schiecks/Kerns and Rocky Mountain Cementers for a reasonable value to be 
attributed to the loss sustained by the reduction of the net operating loss 
carry forward . . ..

(Emphasis 
in original.)

[¶23]   There was sufficient evidence in 
the record that allowed the trial court to conclude as it did as to future 
profits.  The buyers' CPA expert 
testified that the corporation's tax returns showed a profit for three of the 
last four years.  He further 
testified that the one year showing a loss was due to extensive equipment 
purchase.  Based on this past 
performance, the CPA expert expected the corporation to be profitable in the 
future.  The corporate officers 
provided similar testimony.  It was 
reasonable for the trial court to conclude that the corporation would have 
future profits, and that it would suffer a loss as a result of the NOL carry 
forward reduction.

[¶24]   It was not reasonable, however, to 
accept the buyers' expert's damage computation where even the buyers' expert 
agreed that the computation was based on an improper application of the Internal 
Revenue Code by the corporate accountant.  
IRC § 382 states, in part:

            
(a)  General rule.The 
amount of the taxable income of any new loss corporation for any post-change 
year which may be offset by pre-change losses shall not exceed the section 382 
limitation for such year.

            
(b)  Section 382 
limitation.For purposes of this section

            
(1)  In 
general.Except as otherwise provided in this section, the section 382 
limitation for any post-change year is an amount equal to

            
(A)  the value of the old 
loss corporation, multiplied by

            
(B)  the long-term tax-exempt 
rate.

* * 
*

            
(e)       
* * *

            
(1)  In 
general.Except as otherwise provided in this subsection, the value of the 
old loss corporation is the value of the stock of such corporation . . 
..

26 
U.S.C.A. § 382 (1988).

[¶25]   Applying the above to the instant 
case, the value of the corporation equals the value of the stock, which is 
$250,000.00.  If this amount is 
multiplied by the long-term tax exempt rate of 5.65% for 1996,3 the maximum amount of NOL carry 
forward that could be utilized in a tax year would be $14,125.00, prorated in 
the first year (1996 tax return) to $5,885.00.4  For each successive year, the exemption 
amount would be $14,125.00.

[¶26]   For the 1996 tax year ending July 
31, 1997, the corporation's accountant improperly applied a NOL carry forward 
amount of $88,346.00 rather than the prorated amount of $5,885.00 as allowed by 
the federal government.  The buyers' 
CPA expert testified that the reduction of the NOL carry forward resulted in a 
tax loss of $50,086.00.  This 
testimony was based upon the manner in which the corporation's accountant 
prepared the 1996 and 1997 tax returns.  
Because the corporation accountant's methods were incorrect (for the 1996 
tax return he should have applied a NOL carry forward of $5,885.00 not 
$88,346.00, and for the 1997 return, he should have applied $14,125.00 rather 
than $5,702.00), the CPA expert's calculations of $50,086.00 cannot be 
accurate.  We find that the trial 
court erred in concluding that the CPA expert's accounting methods and 
calculations were correct, and his analysis should not have been utilized in 
calculating the damage award.  The 
balance of the evidence leads to the conclusion that the opinion of the sellers' 
expertthat, assuming $160,633.00 as the NOL carry forward reduction, the 
buyers' loss would be $12,101.31is correct.  The judgment must be reduced to that 
amount.5

May the 
court award judgment for future damages for loss of future tax benefits when the 
plaintiff[s] put on no evidence regarding the amount of any future taxable 
income?

[¶27]   This is a sufficiency of the 
evidence issue.  In such case, we do 
not substitute ourselves for the trial court as a finder of fact; instead, we 
defer to the trial court's findings unless they are unsupported by the record or 
erroneous as a matter of law.  
Kendrick v. Barker, 2001 WY 2, ¶ 12, 15 P.3d 734, 738-39 (Wyo. 
2001).  We assume that the evidence of the 
prevailing party is true, and give to it every favorable inference.  Id. at 738.  We do not consider the contrary 
evidence.  Town of Wheatland v. 
Bellis Farms, Inc., 806 P.2d 281, 284 (Wyo. 1991) (quoting Sun Ridge 
Development, Inc. v. City of Cheyenne, 787 P.2d 583, 589 (Wyo. 
1990)).  The findings of the trial court are 
affirmed if there is any evidence to support them.  Bowker v. Bowker, 795 P.2d 1215, 
1218 (Wyo. 1990); 
Pine Creek Canal No. 1 v. Stadler, 685 P.2d 13, 19 (Wyo. 
1984).

[¶28]   At the risk of being redundant, we 
will state yet again that a W.R.E. 3.03 statement of the proceedings is not as 
helpful as a transcript when evaluating evidentiary issues.  And, pursuant to Salt River 
Enterprises, Inc., 663 P.2d  at 520, we 
must once again give greater deference to the trial court's determinations.  In so doing, we find that the Statement 
of Proceedings contains sufficient evidence to substantiate the trial court's 
conclusion that the corporation will have sufficient future profits to sustain 
damage by virtue of the NOL carry forward reduction.  Specifically, according to the Statement 
of Proceedings, Neal Johnson testified that the corporation's 1996 tax return 
reflected "profit income" of $88,346.00.  
He further testified that the 1997 tax return showed income of 
$176,692.00.  The president and 
vice-president of the corporation testified that, for the current year, the 
corporation had a profit of $110,000.00, and that they "fully expected the 
Corporation to make a profit in the future."  The corporate treasurer's testimony 
confirmed the current income of $110,000.00, and she also testified that 
additional income through the end of the year was anticipated.  The buyers' expert testified that the 
corporation had made a profit in three of the four years since the purchase and 
that, in the one year showing a loss, there was considerable equipment 
purchased.  He also testified that, 
based on past profits, he would expect future profits sufficient to utilize a 
NOL carry forward.  This testimony, 
taken together, was sufficient to support the finding that the corporation would 
make profits in the future.

CONCLUSION

[¶29]   The trial court did not abuse its 
discretion in admitting testimony as to future profits and use of the NOL carry 
forward.  In addition, there was 
sufficient evidence of future profits to sustain a judgment in favor of the 
sellers.  The trial court erred, 
however, in relying upon the opinion of the buyers' expert in determining the 
amount of damages, where even that expert agreed that his opinion was based upon 
an incorrect tax return computation.  
The evidence supports a damage award of $12,101.31.  This case is remanded to the trial court 
for entry of a judgment in that amount in favor of the 
buyers.

FOOTNOTES

  1A net operating 
loss is the excess of allowable deductions over gross income computed under the 
law in effect for the loss year.  
2002 Master Tax Guide ¶ 1176 at 347 (CCH 2001).  
Under Internal Revenue Code (IRC) § 382, a corporation may use a 
specified amount of the loss to offset income for a given year, thereby reducing 
the corporation's taxes for that year.  
Generally, losses can be carried back for two years preceding the loss 
and carried forward for twenty years following the loss.  Losses occurring prior to August 6, 
1997, could be carried back for three years and carried forward for fifteen 
years.  2002 Master Tax Guide, 
supra, ¶ 1179 at 348.

  2The trial court 
found the amount of the reduction to be $160,633.00.  That finding is one of the issues in 
this appeal.

  3Federal 
long-term, tax exempt rate (highest of January, February, or March 1996).  4 Standard Fed. Tax Rep., Net 
Operating Loss Deduction, ¶¶ 12,002-12,014 (CCH 2002).

  4The 
corporation's tax year is from August 1 to July 31.  Therefore, for the first year, the 
prorated exemption would be for five months, August through December.  To arrive at $5,885.00, multiply 5/12 
times the yearly exemption of $14,125.00.

  5This case is 
remanded to the trial court for modification rather than recalculation of the 
damages, as the trial court has already concluded that $12,101.31 is a valid 
assessment of damages.