Langham, Langston & Burnett v. Thomas B. Blanchard, Trustee of the Estate of Lone Star Sulphur Corporation, Bankrupt

TUTTLE, Circuit Judge

(dissenting).

Because of the effect which I think the majority opinion may have on limiting our right to review the acts of referees in bankruptcy relating to the admission of expert testimony, I must respectfully dissent.

I would reject without hesitation, and assume that the majority of the Court would also, the flat statement quoted from Wigmore as to the right of review of the action of a trial court in refusing to receive testimony from a proffered expert. This Court rejected it as recently as Roth v. Bird, 5 Cir., 239 F.2d 257 . Moreover all of the citations given in the opinion of the majority, except the one quoted from Mutual Life Insurance Company of New York v. Treadwell, 5 Cir., 79 F.2d 487 , give the true limitations on the Wigmore pronouncement. I think it may be taken as clear that there is no difference of opinion as between the majority here and the writer of this dissent as to the true rule. That rule I think is best stated for our Court in the Roth case, supra.

“Notwithstanding the court’s broad discretion in such situation, however, we think its ruling is still reviewable where, as here, rejection of a witness’ competency results from the application of an erroneous legal standard as to the nature and extent of the prior experience required to give such testimony probative value. Here, the court required Irving to show some previous experience, either in loading the Wingate or some vessel almost exactly like it, in order to express before the jury his opinion that negligent loading caused its loss, even though the witness several times stated that the same stability factors upon which he relied were applicable generally to vessels of the Wingate type. We think that ruling was too strict and unrealistic, and that all of appellees’ objections went only to the weight, rather than the admissibility, of Irving’s testimony, which was for the jury.” Roth v. Bird, 5 Cir., 239 F.2d 257, 262 .

I think it clear that the referee erred as a matter of law in ruling that the expert was not qualified. This is made evident from the quotation of that part of the testimony that is contained in the majority opinion. If the question of valuation tendered by appellants here had been the value of the sulphur plant as an existing plant, I would agree that we could not reverse the referee’s refusal to permit Stephenson to testify on such a point. Here, however, he was tendered as an expert as to the value of the parts of the plant entirely aside from their utility as part of an entire operation. *536 His testimony was to the effect that the movable parts, even though removed as far as 100 miles from the site, had a value greatly in excess of the sum necessary to cause the alleged bankrupt to be solvent at the time of the alleged preference. Not only did Stephenson testify that he had long experience in dealing with chemical machinery and equipment, which he testified was much the same whether used in a sulphur plant or in a different type of chemical plant, but more important and what to me demanded the Court’s recognition of his qualifications, he testified that he had experience purchasing, designing and estimating costs of identical types of equipment for use in sulphur plants themselves. Since the question was Stephenson’s qualification as an expert on the fair market value of the separate items of equipment if removed from the site, the referee’s test, which the majority also seems to consider the proper one— that is, whether he had ever appraised an existing sulphur plant—was, it seems to me, utterly irrelevant. In the New York and Colorado Mining case, supra, quoted in the majority opinion, the Court pointed out that the expert there, though unqualified to testify as to the rental value of a silver mine, was qualified to testify as to the “value of machinery.” 130 U.S. 611, 620 , 9 S.Ct. 665, 668 .

In a field in which opinion evidence is traditionally relied on to establish facts, such as in the field of valuations, it would seem to me that such an obvious error in determining the qualifications of an expert should be corrected under the clearly erroneous rule.

I am also of the opinion that evidence that the same plant was leased within a few months of the hearing to other parties and placed in operation as a going sulphur plant was relevant to the value at the time in issue. I think evidence of this fact should have been admitted and considered by the referee if it had been offered. It was certainly as relevant as evidence of the amount bid at the sale by the referee in bankruptcy, which is certainly no evidence of fair market value at any time. Liberty National Bank of Roanoke, Va., v. Bear, 265 U.S. 365, 370 , 44 S.Ct. 499 , 68 L.Ed. 1057 . However, since this evidence was tendered only on a motion to reopen proceedings for reception of newly discovered evidence, I would not say that it was an abuse of discretion for the court to deny this motion.

I would reverse the judgment and remand the case for a new hearing before the referee, on which the opinion evidence of the expert witness and the evidence of later use would be received and given such weight as it merits.

Rehearing denied:

TUTTLE, Circuit Judge, dissenting.