Opinion ID: 2064965
Heading Depth: 1
Heading Rank: 4

Heading: evidence of damages and their measure

Text: A trustee is required to dispose of trust property on the most advantageous terms which it is reasonably possible for him to secure for the benefit of those whom he represents. State ex rel. Ebke v. Board of Educational Lands and Funds, 154 Neb. 244, 47 N.W.2d 520. The trial court found the measure of damages was the difference between the price for which the property was sold and its fair and reasonable market value at the time of the sale. This standard conforms with the statement of the court in State ex rel. Ebke v. Board of Educational Lands and Funds, supra , and with the general rule relating to damages in like cases. 90 C.J.S. Trusts § 299, p. 465. The pertinent portions of the bulk reinsurance contract are as follows. New Union does, by the agreement to reinsure, assume all the outstanding insurance contracts, etc., in force of Old Union. The effective date of the bulk reinsurance agreement is as of the close of business on December 31, 1972. Finevest Services, Inc. became the trustee for policyholders of the assets to be distributed to them. 14. The distributable surplus to policyholders of Union, the amount of the dividend, shall be computed and is hereby defined as follows: (a) The surplus as regards policyholders as shown on the Annual Statement of Union filed with the Nebraska Department of Insurance for the year ended December 31, 1972. (b) Plus the ceding commission to be received from New Union in an amount equal to the policyholders' equity in the unearned premium reserve shown on such Annual Statement; such equity to be determined by Union with the assistance of an independent certified public accountant and such figure to be submitted to the Director, Nebraska Department of Insurance. In the event the Director of the Nebraska Insurance Department disapproves said amount, then such equity shall be that as determined by the Director. (c) Plus the value of all non-admitted assets appraised at their fair market value as of December 31, 1972. (d) Plus or minus the difference between the value of all real estate shown on said Annual Statement and the appraised fair market value of said real estate. Said appraisal to be made by an unaffiliated, trained appraiser. (e) [P]lus or minus the difference between the December 31, 1972, book value and the market value of all bonds owned by the Company as shown by said Annual Statement. (f) Minus the amount of expenses incurred by Union as a direct result of this Bulk Reinsurance Agreement. The controversy over valuation relates both to an overall valuation and to three specific items which the plaintiff claims were not considered or not properly valued in determining the price. All would, of course, affect the final amount of policyholders' surplus which, under the statutes, was required to be distributed. We first mention briefly the matter of the specific items. No valuation was assigned to agency forcethat is, the availability and loyalty of functioning independent agents who were selling policies for Old Union. The evidence supports the conclusion that agency force did have a value and in fact was indispensible to the functioning of Old Union and New Union. The evidence shows considerable time and expense were incurred, with active participation by Berkley and Gerleman, in selling the sale to Old Union's more than 500 agents. In 1972, the agents produced for Old Union net premiums of $8,192,874.45. In that year Old Union had a net underwriting gain of $1,054,812.35. An explanation of the other two specific items subject to dispute would require a more extended discussion than is necessary for the purposes of this opinion. The dispute essentially relates to the determination of the ceding commission which was to be paid and whether or not certain reserves were overstated and, on that account, the policyholders' surplus was undervalued, all of which would result in a windfall to New Union. A great deal of expert testimony focused on these items, but the question is ultimately one of valuation. Finally, the parties presented evidence of an overall valuation founded upon conflicting premises. One of the appellants' experts arrived at a valuation of $7,883,000 by averaging three figures representing various approaches, including Touche Ross' audited value of $8,300,000. This expert stated that his purpose was to make an evaluation of the fairness of the dividend declared to Union policyholders. He did not value agency force because it, he said, is reflected in the premiums paid. This expert was employed by Berkley, and he acknowledged that in 1972 Old Union had a statutory underwriting income of $1,054,812, and that this was a very important factor to any investor. The appellants' second expert was also employed to evaluate the fairness of the $8,300,000 dividend. It is clearly inferable from his testimony that his evaluation was founded upon an assumed situation where the mutual would be converted into a stock company and the policyholders were going to be issued stock in the new company. That is not what was happening here, where the contract amounted to a sale with new owners taking over. It is also plainly inferable from his testimony that he was focusing on an assumed market for shares of individual shareholders and not the sale of an entire company. He arrived at a valuation of $6,600,000. This expert also was hired by Berkley. One of the appellee's experts used a price earnings multiple and allowed for the fact that control of the corporation was being acquired. He arrived at a maximum valuation of $22,131,000 and a minimum valuation of $12,786,000, depending upon the earnings multiple used and what premium above market was assigned for acquisition of control. The appellee's other expert directed most of his testimony to a discussion and demonstration that the ceding commission was not properly computed and that the reserves previously mentioned were overstated and therefore policyholder surplus undervalued. The appellants argue the testimony of an expert (presumably their own) cannot be arbitrarily disregarded and therefore the court erred in computing damages by its own method. The court determined valuation by multiplying an adjusted book value by 1.5. In so doing, it accepted some portions of the expert testimony and rejected others. This he was entitled to do under our law. Testimony of expert witnesses is not treated any differently in the fact-finding process than that of witnesses generally when it comes to determining the weight and credibility of the testimony. See, NJI No. 1.42; Brown v. Globe Laboratories, Inc., 165 Neb. 138, 84 N.W.2d 151. The rule is not changed merely because the fact finder is the judge and not the jury. The finding of damages by the court was within the range of the evidence, was not arbitrary, and, indeed, may have been conservative.