Thursday, November 5, 2015

Spalding v. Stewart Title Guar. Co.

Opinion handed down May 12, 2015
Landowner, Randy Spalding, sued titled insurer, Stewart Title Guaranty Company, for breach of contract and vexatious refusal to pay an insurance claim relating to a defective title sold to Spalding.[1]  Spalding purchased 419 acres with plans to construct a lake development within the area.[2]  However, a third party owned the title to one of the 419 acres, preventing the lake development.[3]  In response to the sale of the defective title, Stewart assessed $10,000 of damages pursuant to their title insurance policy, which Spalding alleged was inadequate.[4]  After a jury trial, the trial court entered an amended judgment for Spalding for over $1,100,000.[5] Stewart Title appealed the judgment contending various errors by the trial court.[6]  The Supreme Court of Missouri affirmed the trial court’s judgment, holding that Spalding’s claim was not barred by a five-year statute of limitations, expert testimony from Spalding’s appraiser regarding damages was admissible, and the jury was not confused or misled by jury instructions on damages.[7]  This Summary will address the issue of admitting the appraisers of damages as expert testimony.

I.  Facts and Holding
Randy Spalding contracted to buy 419 acres of property in Lake Winnebago, Missouri.[8] Stewart Title Guaranty Company (“Stewart Title”) issued Spalding a title insurance policy in the amount of $1,700,000.[9]  The policy insured Spalding against loss or damage sustained or incurred due to “any defect in or lien or encumbrance of the title.”[10] 
Soon after purchasing the acreage, Spalding began an extensive process of developing the land into lakefront properties and lake-access lots.[11]  During the first year of planning, Spalding received a phone call from a Paul Estes claiming ownership of a one-acre tract of land at the bottom of the proposed lake development, which would prevent development of the proposed lake properties.[12]  Estes requested payment of $387,000 for the acre.[13]  Spalding made a claim under the insurance policy for the defective title and asserted damages sustained due to a defect in title.[14] 
Stewart Titled measured the loss as the difference between the value of the property without the one-acre tract and the value of the property with the one-acre tract.[15]  Following this calculation, Stewart Title appraised the value of Estes’s one-acre tract as $10,000 and compensated Spalding that amount as resolution of the claim.[16]  Spalding contested the $10,000 payment and requested Stewart Title purchase the one-acre tract for $387,000 as remedy, but Stewart title refused to change its evaluation of the claim.[17] 
With the dispute unresolved, Spalding filed suit against Stewart Title, asserting breach of contract and vexatious refusal to pay in regard to a title insurance policy.[18]  At the trial, an expert calculated the amount of damages by considering a development plan that included parcels never insured under the insurance plan or owned by Spalding.  After a jury trial, the trial court denied Stewart Title’s judgment notwithstanding the verdict and entered judgment for Spalding for $1,000,000 on the policy and $191,150 for penalties and attorney fees.[19]  Stewart Title appealed the trial court’s decision, alleging the court erred because the policy was barred by the statute of limitations for breach of contract and evidence regarding the damages sustained from the defective title was inadmissible expert testimony.[20]  The Supreme Court of Missouri affirmed the trial court’s judgment and its decision to admit expert testimony regarding the value of damages.[21] 
II.  Legal Background
        This Summary will focus on the issue of admissibility of the expert testimony. Missouri’s statute governing the admission and exclusion of expert testimony states that admissible expert testimony must meet four requirements: (1) the expert witness must be qualified; (2) the testimony must assist the trier of fact; (3) the expert’s testimony must be based on facts or data of a type reasonably relied on by other experts in the field; and (4) the facts or data used by the expert must be reasonably reliable.[22] 
In Kivland v. Columbia, the Supreme Court of Missouri reversed a trial court’s decision to exclude expert testimony that a suicide was caused by pain suffered after an unsuccessful spinal surgery.[23]  In Kivland, a patient’s family sued the surgeon for wrongful death after the patient committed suicide following extreme pain caused by an unsuccessful spinal surgery.[24]  The Supreme Court of Missouri noted that though the statutory factors must be considered, the degree to which the factors are met is irrelevant.[25]  Because the expert testimony was based on a reasonable degree of medical certainty and was presented by a qualified, board-certified psychiatrist, the information was beneficial to the jury in determining whether the death was caused by the surgery.[26]  Further, the court stressed that the existence of flaws or incredibility in an expert’s testimony is not for the circuit court to consider: “It does not matter if the circuit court disagrees with the expert’s opinion and believes suicide was the decedent’s voluntary decision. . . .  The circuit court is not the trier of fact in this case.”[27] 
        In terms of expert projections, like the projection Spalding’s appraiser made in assessing the property’s value, Missouri courts look beyond the statutory factors to whether the projection is too speculative.  In Chmieleski v. City Products Corporation, the Missouri Court of Appeals for the Western District reversed a trial court’s admission of  projected expert testimony, holding that it was too speculative because it considered lost future profits of a variety store.[28]  These profits were not “sufficiently definite and certain” for jury consideration.[29]  The court noted that these figures were subject to various contingencies and were based on available facts.[30]  Further, the court stressed the expert’s lack of specialized expertise regarding variety store operations and the economic conditions of the store’s location.[31]  The court’s exclusion of this projected expert testimony emphasized the importance of scrutinizing an expert’s reliability of facts and data.[32]
III.  Instant Decision
        The Supreme Court of Missouri held that Spalding presented sufficient evidence to support the jury’s determination of damages for breach of contract, because the expert’s testimony satisfied Missouri’s statutory requirement for admission of expert testimony.[33]  Though the expert considered a development plan that included parcels never insured under the insurance plan or owned by Spalding, the evaluation was still admissible because it provided a reasonable basis for the fact-finder to determine the damages.[34] 
In response to Stewart Title’s contentions that the appraisal included non-owned, uninsured property and an outdated lake development plan, the court stressed the importance of cross-examination and jury consideration.[35]  First, the court noted that the inclusion of non-owned and uninsured parcels in the evaluation was for the jury to consider because Stewart Title had the opportunity to cross-examine.[36]  The court reasoned that Stewart Title’s cross-examination extensively addressed the inclusion of these uninsured and non-owned parcels, as well as expert’s acknowledgment of changing values based on these properties was established and considered by the jury.[37]  The court then noted that whether Spalding could financially develop the land himself was irrelevant to the appraisal; instead, the mere market possibility of the development was enough for the evaluation.[38]  Finally, the court deemphasized the potential factual weaknesses in the experts appraisal and reiterated the importance of juries by noting that “as a general rule, ‘any weakness in the factual underpinnings of the expert’s opinion . . . goes to the weight that testimony should be given and not its admissibility.”[39]  The court held that, despite potential weaknesses in the “factual underpinnings” of the expert’s testimony, the record established that the testimony was neither speculative, unreliable, nor unsupported by evidence, because the appraisal was subjected to extensive cross-examination, and the jury considered the underpinnings.[40]
IV.  Comment
        The court’s decision to affirm the trial court’s admissibility of expert testimony appears sensible considering the events at trial and the historical deference to jury consideration and judgment.  However, the court’s reliance on the general rule that any weakness in expert testimony should go to the weight, rather than the admissibility, of evidence might not always lead to such rational results.  Though the court initially addressed the statutory factors for admitting the expert testimony, analysis through these factors was not prevalent in the opinion.  Instead, the court emphasized the importance of cross-examination and jury consideration when permitting such broad latitude to the admissibility of expert testimony.  However, expert testimonies often present complex information that requires sufficient facts and data, which might be difficult to convey in a jury trial.  This complexity gets even more difficult when the expert testimonies involve significant conjecture and projections and somewhat undervalues the consideration actual reliability of facts and data required by the admissibility statute.  Considering Chmieleski and Kivland, the qualification and relevant expertise of the expert appears more determinative than the existence of speculation and projections.
        While cross-examination and jury deliberation provide sufficient safeguards to flawed expert opinions, this becomes increasingly difficult when the opinions are predominantly projections.  The challenge of exposing the flaws of an expert testimony on cross-examination is potentially more burdensome when addressing an expert’s projection.  Other than highlighting to a jury the speculation of the opinion, a cross-examining attorney is somewhat limited while the expert is given excessive leeway.  However, despite potentially extreme applications and abuses, this case appropriately reinforces the importance of cross-examination and jury deliberation.
                                                                                – Mark Ohlms

[1] Spalding v. Stewart Title Guar. Co., 463 S.W.3d 770, 775 (Mo. 2015) (en banc).
[2] Id. at 773.
[3] Id.
[4] Id. at 774.
[5] Id. at 775.
[6] Id.
[7] Id. at 783.
[8] Id. at 772.
[9] Id.
[10] Id. at 772-73.
[11] Id. at 773.
[12] Id. 
[13] Id.
[14] Id.
[15] Id. at 724.
[16] Id.
[17] Id.
[18] Id. at 775.
[19] Id.
[20] Id. at 772.
[21] Id. at 783.
[22] Mo. Rev. Stat. § 490.065 (2014).
[23] Kivland v. Columbia Orthopaedic Grp., LLP, 331 S.W.3d 299, 302 (Mo. 2011) (en banc).
[24] Id.
[25] Id. at 311.
[26] Id. at 312.
[27] Id. at 313.
[28] Chmieleski v. City Products Corp., 660 S.W.2d 275, 297 (Mo. Ct. App. 1983).
[29] Id. at 298.
[30] Id.
[31] Id. at 299.
[32] Id.
[33] Spalding, 463 S.W.3d at 780.
[34] Id. at 778.
[35] Id. at 779.
[36] Id. at 779.
[37] Id. at 780.
[38] Id. 
[39] Id.
[40] Id. at 777-80.