                                                                                07/10/2018
               IN THE COURT OF APPEALS OF TENNESSEE
                          AT KNOXVILLE
                               May 30, 2018 Session

 PREMIER IMAGING/MEDICAL SYSTEMS, INC. v. COFFEY FAMILY
                  MEDICAL CLINIC, P.C.

                  Appeal from the Circuit Court for Scott County
                       No. 9058    John D. McAfee, Judge

                           No. E2017-02186-COA-R3-CV

This appeal arises from a breach of contract action. Premier Imaging/Medical Systems,
Inc. (“Premier”) contracted with Coffey Family Medical Clinic, P.C. (“CFMC”), an
organization formed by Dr. D. Bruce Coffey, M.D. (“Dr. Coffey”), for a five year
servicing contract (“the Contract”) under which Premier would provide service for a CT
Scanner (“the Scanner”). Pioneer Health Services of Oneida (“Pioneer”) and Dr. Coffey
later entered into an agreement whereby Pioneer assumed certain obligations, apparently
including the Contract. At CFMC’s request, Premier began billing Pioneer. Pioneer
eventually stopped making payments under the Contract. Premier sued CFMC in the
Circuit Court for Scott County (“the Trial Court”) to recover on the remainder of the
Contract. CFMC argued that Pioneer became a substituted obligor under a theory of
novation. After trial, the Trial Court held that CFMC failed to prove novation, awarded
Premier $89,166.60 for the twenty months remaining on the Contract, and granted
prejudgment interest of ten percent from the end of the Contract for a total of
$105,534.70. CFMC appeals. We hold, inter alia, that the Trial Court did not err in
holding that CFMC was unable to meet its burden of proving that novation, implied or
otherwise, occurred. We affirm the judgment of the Trial Court.

  Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
                                  Case Remanded

D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which CHARLES D.
SUSANO, JR. and JOHN W. MCCLARTY, JJ., joined.

Dudley W. Taylor, Knoxville, Tennessee, for the appellant, Coffey Family Medical
Clinic, P.C.

John R. Cheadle, Jr. and Mary Barnard Cheadle, Nashville, Tennessee, for the appellee,
Premier Imaging/Medical Systems, Inc.
                                       OPINION

                                     Background

       The material facts of this case largely are undisputed. Dr. Coffey formed CFMC
in 2003. Premier is in the business of servicing medical imaging equipment. In
November 2010, the Contract was signed between CFMC and Premier. Premier was to
service the Scanner used by CFMC for five years at a rate of $53,500.00 per year,
payable at $4,458.33 per month. The effective date of the Contract was January 1, 2011.
The Contract permitted customer cancellation “due to documented quality of service
issues only.”

       In November 2013, Dr. Coffey and Pioneer executed a physician employment
agreement, effective January 1, 2014. Dr. Coffey, in his capacity as landlord, and
Pioneer as tenant also entered into a lease for real property dated December 12, 2013. As
part of this agreement, Pioneer assumed certain contractual liabilities among which was
the Contract. Premier was not a party to this particular agreement. Prior to January
2014, CFMC, or Dr. Coffey, paid on the Contract to Premier. CFMC requested that
Premier begin billing Pioneer. Premier and Pioneer engaged in correspondence over the
matter. Premier’s President, Robin West (“West”), responded in part: “I assume when
you purchased [CFMC] you assumed their liabilities” and “[w]e will send future invoices
to [Pioneer] unless we can come to some kind of equitable agreement.” In February
2014, Dr. Coffey, on CFMC letterhead, sent a letter to Premier purporting to cancel the
Contract between CFMC and Premier. Premier and CFMC never executed a written
document to modify the Contract. Pioneer made the monthly payments under the
Contract only for the months of January, February, March and April 2014.

       This arrangement quickly collapsed. In May 2014, CFMC sold the Scanner. In
April 2015, Pioneer terminated both Dr. Coffey’s employment agreement and the lease
arrangement. Premier stopped getting paid on the Contract, and there no longer was a
scanner to service. In January 2017, Premier sued CFMC in the Trial Court.

      This matter was tried in November 2017. The principal testimony came from
West, Premier’s president. West testified, in part, as follows:

      Q. So would there have been anything for you to object to as far as Coffey
      Family Medical claiming that they are no longer on the hook for this
      contract and Pioneer should be?
      A. No. I never intended to let Coffey Medical off the hook.
      Q. But were they ever asking you to do that?
      A. No, they did not.
                                           -2-
THE COURT: You were just told to bill them?
THE WITNESS: I was told to bill Pioneer by Coffey.
THE COURT: To send the bill to Pioneer?
THE WITNESS: Yes.
BY MS. CHEADLE:
Q. And you left Coffey Family Medical’s name on each of those bills; is
that correct?
A. Yes, I did.

                                    ***

Q. You say you never intended to let Coffey Family Medical off, but you
never did tell them that, did you?
A. The contract was in place. I had no reason to tell them that.
Q. I understand, but when they asked you to now bill Pioneer, and Pioneer
wrote you and said that we’ve taken over the practice, you didn’t object to
that, did you?
A. Didn’t object to -- how can I object to them taking over the practice?
Q. Just answer the question. Then you can add whatever you want.
A. Ask the question in a way that I can answer it. I -- I’m -- I don’t follow
you.
Q. You never -- you sent the letter, we just talked about that, saying, Okay,
I assume you took over. This can’t be cancelled?
A. Right.
Q. So -- but -- so is there anything in writing that said, but we’re keeping
Coffey Family Medical on the hook?
A. Nothing other than the original contract, no.
Q. Okay. All right. And you never billed Coffey Family Medical Center
again after these letters and you started your billing to Pioneer, did you?
A. No. I let my attorney handle that after that.
Q. Okay. What, in your opinion, was the CT machine worth at the time
you did your last work?
A. You’re asking me to be an appraiser, and I -- I hadn’t seen the machine
in probably two years prior to that.
Q. Okay.
A. I sent people in, you know.
Q. But you’ve got all this money in it, right? You put 100,000 in the
machine in the tube or something like that, right?
A. Right.
Q. So you think it would be worth 3 or 400,000?

                                     -3-
       A. No. The thing about medical equipment is, it depreciates very rapidly. I
       mean, if you don’t scan with it a lot and you don’t get your money back off
       the patients, it’s a losing proposition. You never recover -- I mean, they
       depreciate so fast it would -- it would make -- make you sick if you were
       buying that as an investment. It’s not -- I mean, you have to get the money
       out of the patient.

       Tony Taylor (“Taylor”), Pioneer CEO, testified as well. Taylor testified to
discussions with Premier regarding a possible transfer of the Contract rights and
obligations to a CT machine in Aberdeen, Mississippi. According to Taylor, the
negotiations fell through because Premier insisted on a contract either for “three-year and
it would have cost $345,000 or a five-year would have been a half a million dollars at
105,000 a year.”

        Following trial, the Trial Court found in favor of Premier and instructed Premier’s
counsel to prepare the order. The Trial Court telephoned Premier’s counsel directing the
inclusion of certain findings of fact and conclusions of law, and faxed Premier’s counsel
these supplemental findings and conclusions. The Trial Court subsequently informed
CFMC’s counsel as to what happened. In December 2017, the Trial Court entered its
final judgment. The Trial Court found as follows:

               This cause came on to be heard on November 1, 2017, upon Premier
       Imaging / Medical Systems, Inc.’s (“Premier”) suit to recover the balance
       due on a five (5) year Periodic Maintenance Contract/General Agreement
       upon which Premier was to provide periodic maintenance, service and parts
       for a “General Electric QX/I Lightspeed CT with H1 gantry”, a CT scanner,
       owned by defendant, Coffey Family Medical Clinic, P.C. (“CFMC”). Prior
       to the hearing, the parties filed a joint stipulation of facts and documents
       that are not in dispute. It is undisputed that Premier contracted with CFMC
       on January 1, 2011, for a five (5) year servicing contract for $53,500.00 per
       year, payable at $4,458.33 per month. The parties agreed that the amount
       still owing on the contract is $89,166.60. CFMC asserts that there [h]as
       been a novation and that a third party, Pioneer Health Services of Oneida
       (“Pioneer”), should be liable for the balance due.
               Robin West, Premier’s president, testified that Premier utilizes three
       (3) or five (5) year contracts to spread the risk and costs associated with
       servicing and maintaining equipment. CFMC elected to enter into a five
       (5) year contract with Premier. Mr. West testified that Premier expended
       $400,000.00 to service and maintain CFMC’s CT scanner. Premier has
       only received $188,621.52 in payments. Mr. West testified that Premier
       likely would not have renewed the contract with CFMC due to the fact that
                                            -4-
Premier was not making a profit on the contract. It is undisputed that
CFMC never notified Premier of any quality of service issues. Mr. West
testified that in January 2014, Premier was notified by CFMC to begin
billing a third party, Pioneer. Premier introduced invoices that were sent to
Pioneer listing CFMC’s name and address as the “Ship To” address. Mr.
West testified that Pioneer attempted to cancel the underlying contract on
behalf of CFMC through a letter dated January 17, 2014, from Pioneer’s
CEO, Tony Taylor. Premier first learned of Pioneer’s arrangement with
CFMC upon receipt of Mr. Taylor’s January 17, 2014, letter. Premier
introduced Mr. West’s January 27, 2014, letter responding to Pioneer
confirming that Premier had an active five (5) year service agreement with
CFMC that could only be cancelled due to documented quality of service
issues. Premier received four (4) payments from Pioneer for CFMC’s
monthly obligations for January 2014 to April 2014. Pioneer paid the
January 2014 payment to Premier on April 30, 2014, the February 2014
payment to Premier on June 9, 2014, and the March and April 2014
payments to Premier on June 30, 2014. Each of the invoices that Pioneer
paid listed CFMC as the ship to address. Mr. West testified that Premier
never discharged, nor had the intent to discharge, CFMC from the original
service contract of January 1, 2011. Mr. West testified that Premier never
entered into, nor had the intent to enter into, a contract with Pioneer. Mr.
West testified that twenty (20) months remained due on the underlying
service contract.
        Alan Ray Godfrey, service manager and engineer for Premier,
testified for Premier. Mr. Godfrey testified that he routinely provided
services to CFMC on Premier’s behalf pursuant to the underlying contract.
Mr. Godfrey testified that Premier had expended costs of $400,000.00 to
service and maintain CFMC’s CT scanner. Premier introduced Mr.
Godfrey’s work order for February 21, 2014, which details the services
provided by Premier on CFMC’s CT scanner. Mr. Godfrey testified that at
the time of the February 21, 2014, service, CFMC’s CT scanner was not
being used by CFMC. Mr. Godfrey testified that when he attempted to
schedule the next quarterly service with CFMC, Mr. Godfrey was informed
by CFMC that the CT scanner had been sold. The last service that Premier
was able to perform on CFMC’s CT scanner was February 21, 2014,
because CFMC sold its CT scanner on May 20, 2014.
        Tony Taylor, prior CEO of Pioneer and administrator of the Scott
County Hospital when Pioneer operated the hospital, testified pursuant to a
subpoena from CFMC. Mr. Taylor testified that Pioneer entered into a
physician employment agreement with Dr. Coffey, CFMC’s principal, with
an effective date of January 1, 2014, for a four (4) year term. Mr. Taylor
                                     -5-
testified that Pioneer also entered into a lease agreement with Dr. Coffey to
lease Dr. Coffey’s real property in which he conducted CFMC’s medical
practice with an effective date of January 1, 2014, for a four (4) year term.
Mr. Taylor testified that Pioneer, pursuant to the terms of the lease
agreement, agreed to assume certain medical diagnostic leases,
maintenance contracts, and other liabilities during the term of the lease,
including the service contract that is the subject of this lawsuit. Mr. Taylor
testified that Pioneer never intended to use CFMC’s CT scanner. Mr.
Taylor testified that Pioneer’s intention was to have Dr. Coffey direct all
patients to Pioneer’s hospital for any needed CT scans. Mr. Taylor testified
that Dr. Coffey was aware or should have been aware that Pioneer never
intended to use CFMC’s CT scanner, since Dr. Coffey was under a
directive from Pioneer to begin referring any and all patients needing CT
scans to Scott County Hospital. Mr. Taylor confirmed that Pioneer
attempted to cancel the original service agreement between Premier and
CFMC in a letter dated January 17, 2014, Mr. Taylor sent to Premier. In a
follow-up letter from Premier to Pioneer dated January 27, 2014, Premier
confirmed “an active service agreement” existing between Premier and
CFMC.
        Premier billed and accepted four payments (January-April 2014)
from Pioneer. Pioneer paid the service payment for January 2014 on April
30, 2014; Pioneer paid the service payment for February 2014 on January 9,
2014; and Pioneer paid the service payments for March and April 2014 on
June 30, 2014. The billing statements of January-April 2014 were also
shipped to CFMC. Mr. Taylor testified that Pioneer made four (4) of the
monthly payments on the underlying contract for the months of January
2014 to April 2014. Mr. Taylor testified that Pioneer never required CFMC
to sell CFMC’s CT scanner. Mr. Taylor testified that Pioneer terminated
Dr. Coffey’s employment on April 30, 2015. Mr. Taylor testified that
Pioneer terminated the lease agreement for Dr. Coffey’s medical practice
office building on April 30, 2015. Mr. Taylor testified that Pioneer never
intended to enter into a contract with Premier.
        Charsley Coffey, CFMC’s current office manager and Dr. Coffey’s
spouse, testified for CFMC. Ms. Coffey testified that CFMC sold the CT
scanner on May 20, 2014, for $24,000.00. Ms. Coffey testified that none of
the proceeds received from the sale of the CT scanner was paid to Premier.
        The Court finds that there was not a novation. The burden of proof
is on the party asserting novation. A novation is never presumed. It must
be established by a clear and definite intention on the part of all concerned.
CFMC failed to show clear evidence that there was a clear and definite
intention on the part of all parties to extinguish the underlying contract and
                                     -6-
to enter into a new contract. CFMC has failed to show that Premier
discharged CFMC from its obligation. The totality of the facts and
circumstances clearly do not show the assumption of such extinguishment
and acceptance by Premier. Premier and Pioneer both confirm that neither
had an intent to enter into a new contract. The Court finds that CFMC was
not discharged from its obligation to Premier based upon the following
facts: (1) Premier’s invoices continued to list CFMC’s name and address as
the ship to location; (2) Robin West’s letter of January 27, 2014, to Pioneer
confirmed that Premier still had an active service agreement with CFMC;
(3) Dr. Coffey’s letter of February 7, 2014, to Premier attempting to cancel
the contract confirms that CFMC was aware that CFMC was still
responsible since CFMC was attempting to cancel the contract to which
CFMC was a party, and CFMC acknowledges that CFMC was the
originating party to the contact; (4) Mr. Taylor testified that CFMC was
aware that there was never an intention by Pioneer to use CFMC’s CT
scanner after January 2014; and (5) Pioneer admits and confirms that it
never intended to enter into a contract with Premier. Thus, CFMC failed to
show clear evidence showing a total discharge of the original service
contract and an express agreement by Premier to accept a new obligation in
place of the old contract, or such facts and circumstances that clearly show
the assumption of such extinguishment and acceptance by Premier. The
underlying obligation was never extinguished, and CFMC’s obligation to
Premier remained in effect. The Court finds that CFMC is indebted to
plaintiff on the servicing contract, and that judgment should enter in favor
of Premier against CFMC.
        The Court further finds that CFMC is indebted to Premier for pre-
judgment interest at the rate of 10 percent per annum from December 31,
2015, to the date of trial. The Court finds that Dr. Coffey, CFMC’s alter-
ego and principal, knew that Pioneer never intended to use CFMC’s CT
scanner. Dr. Coffey had the obligation and responsibility to at least bring
the parties together to work out the remaining twenty (20) months owed on
the underlying service cont[r]act. At a minimum, Dr. Coffey had an
obligation to renegotiate the lease agreement with Pioneer, aware that
Pioneer would never use CFMC’s CT scanner. The Court finds that CFMC
sold the CT scanner and failed to pay any of the proceeds to Premier, when
there was still an active servicing contract in effect.
        It is, accordingly, ORDERED, ADJUDGED AND DECREED that
defendant, Coffey Family Medical Clinic, P.C., pay to plaintiff, Premier
Imaging / Medical Systems, Inc., the sum of $89,166.60, plus pre-judgment
interest from December 31, 2015, to the date of trial in the amount of
$16,368.10, for a total of $105,534.70; to accrue post-judgment interest at
                                     -7-
      the rate of 6.25 percent per annum, pursuant to T.C.A. § 47-14-121. The
      costs of this cause are assessed to CFMC; for all of the foregoing execution
      may issue. This is a final judgment, pursuant to Rule 54.02, Tennessee
      Rules of Civil Procedure, there being no just reason for delay.

CFMC timely appealed to this Court.

                                        Discussion

        Although not stated exactly as such, CFMC raises the following issues on appeal:
1) whether the Trial Court exercised its independent judgment in entering the final
judgment drafted by prevailing counsel after engaging in ex parte communications with
said counsel; 2) whether the Trial Court erred in declining to find novation between the
parties when Premier, according to CFMC, accepted Pioneer as a substitute obligor and
stopped billing CFMC; 3) whether the Trial Court erred in its measure of damages when
no additional services were performed after February 2014; and 4) whether the Trial
Court erred in awarding prejudgment interest when it failed to articulate its reasoning
either for the award or the interest rate of 10%.

       Our review is de novo upon the record, accompanied by a presumption of
correctness of the findings of fact of the trial court, unless the preponderance of the
evidence is otherwise. Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727
(Tenn. 2001). A trial court’s conclusions of law are subject to a de novo review with no
presumption of correctness. S. Constructors, Inc. v. Loudon County Bd. of Educ., 58
S.W.3d 706, 710 (Tenn. 2001).

        We first address whether the Trial Court exercised its independent judgment in
entering the final judgment drafted by prevailing counsel after engaging in ex parte
communications with said counsel as set out earlier in this Opinion. CFMC asserts, in a
respectful fashion, that the final judgment reflects a cherry-picked version of the case
favorable to Premier and not the Trial Court’s own independent judgment. Regarding the
necessity that judicial decisions be rendered independently, our Supreme Court has
stated:

      The essential purposes of courts and judges are to afford litigants a public
      forum to air their disputes, and to adjudicate and resolve the disputes
      between the contending parties. To carry out these purposes, judges must
      arrive at their decisions by applying the relevant law to the facts of the case.
      Because making these decisions is a high judicial function, a court’s
      decisions must be, and must appear to be, the result of the exercise of the
      trial court’s own judgment.
                                            -8-
Smith v. UHS of Lakeside, Inc., 439 S.W.3d 303, 312 (Tenn. 2014) (citations and
quotation marks omitted).

       The Trial Court declined to incorporate a transcript of its oral ruling into the final
judgment. Normally, we would therefore confine ourselves to the Trial Court’s written
judgment in conducting appellate review. However, as CFMC questions the
independence of the order itself, we deem it appropriate to examine the Trial Court’s oral
ruling to determine whether CFMC’s argument is meritorious. The Trial Court
articulated orally its rationale for deciding as it did as follows:

       THE COURT: All right. Well -- and again, the issue is novation, and I
       think counsel pointed out a significant portion of the letter dated 27, 2014,
       from Mr. West to Mr. Taylor where he clearly indicates that we have an
       agreement with CFMC for five years. And he makes that -- and again,
       novation is just simply the substitution of a new contract for an old one.
       The new contract extinguishes the rights and the obligations that were in
       effect under the old agreement. In a novation situation, the original debtor
       here, which would be CFMC, has to be totally, totally released from their
       obligation, which is transferred here in this case, it’s argued, to Pioneer.
       All parties must agree to that. I can’t find that in the record. I can’t find
       that this was a total release. The argument that somehow or another
       Premier agreed to substitute or to relieve CFMC of their legal obligation
       under the Service Agreement by accepting payments from Pioneer
       somehow or another released CFMC, I cannot see that, nor can I agree to
       that. And therefore, the Court is finding, based upon the facts and
       circumstances and the totality of the case of the facts presented, that a
       novation does not exist in this case, and therefore, the original contract or
       the obligation between CFMC and Premier is still valid. And therefore, the
       Court’s going to award the judgment for the plaintiff in this matter for the
       20 months, which was the $89,166.60. Furthermore, the Court’s going to
       award the prejudgment interest of 10 percent from the end of the contract
       for a number of reasons. Although it’s discretionary for the Court, it’s clear
       from the record that Dr. Coffey knew that the machine was never going to
       be used in January, and there should have been some obligation on his
       behalf. Whether that’s warranted in cases, I don’t know, but there should
       have been some obligation or responsibility on Dr. Coffey’s part to at least
       bring these parties together and just say, Look, I’m no longer going to use
       this machine, and I still owe 20 months. And Pioneer, you and -- before I
       enter into this lease agreement with you, then you need to sit down with
       Premier and work this out, because I can’t go -- you know, I’m hung on this
                                             -9-
      thing. I’m hung here for 20 more months, and if you all don’t work this
      out, then we’re going to have to renegotiate the lease agreement. I think
      Dr. Coffey had some obligation and responsibility in that context. And
      furthermore, he sold the machine for roughly about $24,000 and nothing
      was ever paid to Premier. And perhaps if that had been done, maybe I
      would have reconsidered the granting of the prejudgment interest in this
      case. But because of the machine being sold and because Dr. Coffey
      knowing fully and was apprised of the facts and circumstances of his
      obligation to Premier that he should have done something more in this
      matter in reference to Pioneer and Premier to try to have a binding novation
      concerning the parties in this matter. So that will be the order of the Court.

       Party-prepared orders are permitted under two conditions: (1) “the findings and
conclusions must accurately reflect the decision of the trial court” and “the record must
not create doubt that the decision represents the trial court’s own deliberations and
decision.” Smith, 439 S.W.3d at 316. An order prepared by counsel must reflect the trial
court’s own independent judgment as expressed by the trial court. The Trial Court made
it abundantly clear, inter alia, that it found no novation, and why. In our view, the final
judgment in this case reflects sufficiently the Trial Court’s own independent judgment.
We would, however, caution trial courts against ex parte communications, and this is so
even when the trial court subsequently notifies the other side of the communication as
happened here. We find no reversible error with respect to the entry of the final
judgment.

        We next address whether the Trial Court erred in declining to find novation
between the parties when Premier, according to CFMC, accepted Pioneer as a substitute
obligor and stopped billing CFMC. With respect to novation, this Court has discussed it
as follows:

      “A novation is a contract substituting a new obligation for an old one[,]”
      thereby extinguishing the existing contract. Blaylock v. Stephens, 258
      S.W.2d 779, 781 (Tenn. Ct. App. 1953); see also Pac. E. Corp. v. Gulf Life
      Holding Co., 902 S.W.2d 946, 958-59 (Tenn. Ct. App. 1995). The four
      essential elements of a novation are: “(1) a prior valid obligation, (2) an
      agreement supported by evidence of intention, (3) the extinguishment of the
      old contract, and (4) a valid new contract.” Brown v. Columbia Precast,
      LLC, No. M2010-00971-COA-R3-CV, 2011 WL 2976891, at *7 (Tenn. Ct.
      App. July 21, 2011) (citing Burchell Ins. Servs., Inc. v. W. Sizzlin
      Steakhouse of Dyersburg, No. E2003-01001-COA-R3-CV, 2004 WL
      1459398, at *3 (Tenn. Ct. App. June 29, 2004)). A novation is never
      presumed; rather, it must be established by a “ ‘clear and definite intention
                                           -10-
       on the part of all concerned....’ ” Johnson City Elec. Supply Co., Inc. v.
       Elec. Inc., CA No. 81, 1986 WL 3885, at *3 (Tenn. Ct. App. Apr. 1, 1986)
       (quoting Jetton v. Nichols, 8 Tenn. App. 567, 574 (Tenn. Ct. App. 1928)).
       A novation need not be shown by express words, because the evidence
       supporting the parties’ intent to agree on a novation “may be implied from
       the facts and circumstances attending the transaction and the parties’
       subsequent conduct.” Cumberland Cnty. Bank v. Eastman, No. E2005-
       00220-COA-R3-CV, 2005 WL 2043518, at *4 (Tenn. Ct. App. Aug. 25,
       2005) (citing In re Edward M. Johnson & Assoc., 61 B.R. 801, 806 (Bankr.
       E.D. Tenn. 1986)). The party asserting the novation has the burden of
       proving a novation is intended. Rhea v. Marko Constr. Co., 652 S.W.2d
       332, 334 (Tenn. 1983).

TWB Architects, Inc. v. Braxton, LLC, No. M2013-02740-COA-R3-CV, 2014 WL
5502401, at *4 (Tenn. Ct. App. Oct. 30, 2014), Rule 11 appl. perm. appeal denied Feb.
12, 2015.

      Premier states that it never intended to relieve CFMC under the Contract. In
support of its contention, Premier notes the absence of a written agreement to that effect,
as well as the “ship-to” locations identifying CFMC on invoices mailed to Pioneer.
Furthermore, West testified that he never intended to let CFMC “off the hook.” CFMC
argues in response that novation was implicit in Premier’s billing of Pioneer, and that
Premier’s actions at the time are more significant than their later denials.

       CFMC is correct that novation need not be express. However, it is incumbent
upon the proponent of novation to prove one occurred. The Trial Court found that
“CFMC failed to show clear evidence that there was a clear and definite intention on the
part of all parties to extinguish the underlying contract and to enter into a new contract.”
Based on this record, Premier accepted payments on the Contract from Pioneer simply
because it wanted to continue being paid on the Contract, not because it intended to
extinguish the underlying contract with CFMC.           It made no difference to Premier
whether the payments originated from CFMC or Pioneer. Premier never manifested an
intention to extinguish the underlying contract with CFMC. While novation may be
implied, it still requires “clear and definite intention” from all parties to extinguish the
underlying contract. Additionally, the Trial Court found that Pioneer confirmed “that it
never intended to enter into a contract with Premier.” In this case, no such clear and
definite intention was proven by CFMC. We affirm the Trial Court’s decision that there
was no novation.

       We next address whether the Trial Court erred in its measure of damages when no
additional services were performed after February 2014. CFMC acknowledges that 20
                                            -11-
months remained on the Contract for a remaining balance of $89,166.60. However,
CFMC argues that this figure is not the correct assessment of damages. CFMC argues
that Premier being relieved of its obligation to service the Scanner actually was
advantageous to Premier. Premier spent upwards of $400,000 servicing the Scanner. In
CFMC’s estimation, if history were any guide, CFMC may have spared itself a cost of
some $200,000 by not servicing the Scanner for the remaining term of the Contract.
CFMC argues also that Premier failed to mitigate its damages.

        The purpose of assessing damages in a breach of contract case is to place the
plaintiff, as nearly as possible, in the same position he would have been in had the
contract been performed. Adams TV of Memphis, Inc. v. Comcorp of Tennessee, Inc., 969
S.W.2d 917, 922 (Tenn. Ct. App. 1997); Action Ads, Inc. v. William B. Tanner Co., Inc.,
592 S.W.2d 572, 575 (Tenn. Ct. App. 1979). The injured party, however, is not to be put
in a better position than he would have been in by recovery of damages for breach of the
contract. Adams TV, 969 S.W.2d at 922.

       CFMC recognizes in its appellate brief that whether Premier would have incurred
costs going forward comparable to the ones it earlier had incurred is “unknown to all of
us, including the trial court” and is only a “reasonable inference.” This uncertainty
contrasts with the stipulated and easily calculable balance owing under the plain terms of
the Contract. Had CFMC continued to adhere to the Contract, it would have paid
Premier $89,166.60. It is unduly speculative to guess what future costs Premier would
have incurred in servicing the Scanner pursuant to the Contract, or indeed whether a
hypothetical transfer may have mitigated Premier’s losses. What we do know is that
CFMC sold the Scanner midway through the term of the Contract and prevented Premier
from performing its obligations under the Contract. The Contract allowed CFMC to
cancel only for documented quality of service issues, which are not presented here. We
find no reversible error in the Trial Court’s award of damages to Premier of $89,166.60.

       The final issue we address is whether the Trial Court erred in awarding
prejudgment interest when it failed to articulate its reasoning either for the award or the
interest rate of 10%. Regarding prejudgment interest, this Court has stated:

               “An award of prejudgment interest is within the sound discretion of
       the trial court and the decision will not be disturbed by an appellate court
       unless the record reveals a manifest and palpable abuse of discretion.”
       Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998) (citing
       Spencer v. A-1 Crane Serv., Inc., 880 S.W.2d 938, 944 (Tenn. 1994); Otis
       v. Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn. 1992)). The
       purpose of prejudgment interest “is to fully compensate a plaintiff for the
       loss of the use of funds to which he or she was legally entitled, not to
                                           -12-
      penalize a defendant for wrongdoing.” Myint, 970 S.W.2d at 927. In
      Tennessee, several principles guide trial courts in exercising their discretion
      to award prejudgment interest. “Foremost are the principles of equity.” Id.;
      Tenn. Code Ann. § 47-14-123. The trial court must decide whether the
      award of prejudgment interest is fair, given the particular circumstances of
      the case. Myint, 970 S.W.2d at 927. Additionally, “[t]he certainty of the
      plaintiff’s claim is but one of many nondispositive facts to consider when
      deciding whether prejudgment interest, is, as a matter of law, equitable
      under the circumstances.” Id. at 928.

SecurAmerica Business Credit v. Southland Transportation Co., LLC., No. W2015-
00391-COA-R3-CV, 2016 WL 1292087, at *7 (Tenn. Ct. App. April 1, 2016), no appl.
perm. appeal filed.

      The range in which prejudgment interest may be set is addressed by statute as
follows:

      Prejudgment interest, i.e., interest as an element of, or in the nature of,
      damages, as permitted by the statutory and common laws of the state as of
      April 1, 1979, may be awarded by courts or juries in accordance with the
      principles of equity at any rate not in excess of a maximum effective rate of
      ten percent (10%) per annum; provided, that with respect to contracts
      subject to § 47-14-103, the maximum effective rates of prejudgment
      interest so awarded shall be the same as set by that section for the particular
      category of transaction involved. In addition, contracts may expressly
      provide for the imposition of the same or a different rate of interest to be
      paid after breach or default within the limits set by § 47-14-103.

Tenn. Code Ann. § 47-14-123 (2013).

       Premier initially sought $174,832.10 based on an erroneous recital in the Contract
providing it ran from January 1, 2011 through December 31, 2016 for a six year term
rather than a five year term as everyone agrees was the actual term. Premier later
conceded that the correct figure is $89,166.60 for the 20 months remaining on the
Contract. CFMC argues, among other things, that this uncertainty over the claim
precludes an award of prejudgment interest and that the rate of 10% is excessive and
unfounded.

       In our view, any discrepancy appears to be one merely of tabulation rather than an
inherent uncertainty over the claim. There is no dispute over what remains owing for 20
months under the Contract, even though CFMC disputes that as the proper calculation of
                                           -13-
damages. In any event, as cited in the precedent above, certainty of a claim is but one
nondispositive fact to consider when deciding whether to award prejudgment interest.
The dispositive question is whether it is fair under the circumstances of the case.

       The Trial Court found that CFMC “sold the CT scanner and failed to pay any of
the proceeds to Premier, when there was still an active servicing contract in effect.”
CFMC, in selling the Scanner midway through the term of the Contract and effectively
bolting on the Contract, pulled the rug out from underneath Premier. The Trial Court had
a legitimate basis on which to conclude it is equitable that Premier should be
compensated fully for loss of the use of funds to which it was entitled.

        The rate of 10% chosen by the Trial Court is high indeed but within the law. We
note that the Trial Court, to CFMC’s benefit, ordered that the 10% interest did not start
until the contract end date of December 31, 2015 rather than from the date each separate
monthly payment was due. We are mindful that the decision to award prejudgment
interest and at the rate it did subject to statutory limit was a discretionary matter for the
Trial Court. We find no palpable or manifest abuse of discretion in the Trial Court’s
decision to award prejudgment interest at 10% to Premier. We affirm the judgment of the
Trial Court in its entirety.

                                        Conclusion

       The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
Appellant, Coffey Family Medical Clinic, P.C., and its surety, if any.

                                          ____________________________________
                                          D. MICHAEL SWINEY, CHIEF JUDGE

                                            -14-


195 N.W.2d 218 (1972)
188 Neb. 105
Bernard L. STAUFFER, Appellant,
v.
C. L. WEEDLUN, Director of the Department of Motor Vehicles of the State of Nebraska, et al., Appellees.
No. 38028.
Supreme Court of Nebraska.
March 10, 1972.
*220 Phillips & Murphy, Lincoln, for appellant.
Clarence A. H. Meyer, Atty. Gen., James J. Duggan, Asst. Atty. Gen., Lincoln, for appellees.
Heard before WHITE, C. J., and SPENCER, BOSLAUGH, SMITH, McCOWN, NEWTON, and CLINTON, JJ.
CLINTON, Justice.
The plaintiff, Bernard L. Stauffer, received from the defendant, the Director of the Department of Motor Vehicles of the State of Nebraska, notice under the provisions of section 39-7,130, R.R.S.1943, of revocation of his license to operate a motor vehicle. The ground of revocation was the accumulation of 12 or more point violations under sections 39-7,128 and 39-7,129, R.R.S.1943. The notice of revocation was dated December 30, 1970, and contained the information required by section 39-7,130, R.R.S.1943. On January 7, 1971, plaintiff, pursuant to the provisions of that statute, filed his petition on appeal in the district court for Lancaster County and that court issued a restraining order and stay of revocation which remained in effect until the hearing on the merits. After the hearing the district court held the revocation valid and reinstated the order of revocation. Plaintiff then perfected his appeal to this court. We affirm.
The evidence in this case tends to show the present livelihood of the plaintiff depends upon his continued ability to use and drive an automobile in the occupation in which he is engaged. There is no evidence in the record to show the plaintiff in fact was required to physically surrender *221 his license or that he, prior to the trial on the merits, suffered any damage on account of the order of revocation.
The principal issue in this case is whether sections 39-7,129 and 39-7,130, R.R.S. 1943, violate the due process clauses of Article I, section 3, Constitution of Nebraska, and the Fourteenth Amendment to the Constitution of the United States. Plaintiff relies upon Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90, decided May 24, 1971, in which the Supreme Court of the United States held, insofar as is pertinent here: (1) Suspension of an issued driver's license involves state action that adjudicates important interest of the licensee and such license may not be taken away without procedural due process; (2) procedural due process, in connection with suspension of a driver's license pursuant to state safety responsibility law, is satisfied by an inquiry limited to the determination whether there is reasonable possibility of judgment in amounts claimed being rendered against the licensee; and (3) except in emergency situations due process requires that when the state seeks to terminate an interest such as a driver's license it must afford notice and opportunity for hearing appropriate to the nature of the case before termination becomes effective. The court in that case held the motor vehicle safety responsibility law of Georgia was unconstitutional because it did not meet the requirements of notice and opportunity to be heard, and the plaintiff here asserts that sections 39-7,129 and 39-7,130, R.R.S.1943, are deficient in these same respects. Section 39-7,129, R.R.S.1943, provides in part: "Whenever it shall come to the attention of the Director of Motor Vehicles that any person has, as disclosed by the records of such director, accumulated a total of twelve or more points within any period of two years, as set out in section 39-7,128, the director shall summarily revoke ... the license...." Section 39-7,130, R.R.S.1943, provides that within 24 hours after revocation the Director of the Department of Motor Vehicles shall notify the person of such revocation and this statute prescribes the manner of service and the contents of such notice. This section also provides that if the person fails to surrender the license as directed the Director shall forthwith direct any peace officer or authorized representative of the Director to secure possession of such license.
This court has heretofore in a case involving revocation under the motor vehicle Financial Responsibility Act held because an operator's license was not property and because it was a mere privilege the due process clause of the Constitutions did not apply to proceedings for its revocation. Hadden v. Aitken, 156 Neb. 215, 55 N.W.2d 620, 35 A.L.R.2d 1003. Such holding is obviously contrary to Bell v. Burson, supra, and to the extent that Aitken holds the due process provisions do not apply to proceedings for revocation of a motor vehicle driver's license under the motor vehicle Financial Responsibility Act that case is overruled.
There still remain however the questions whether (1) due process has been satisfied under the facts in this particular case and (2) whether the holding in Bell v. Burson, supra, is applicable to revocation for point violation under the aforementioned sections of the statutes.
Since the decision in Bell v. Burson, supra, the Supreme Court of the United States has decided on November 9, 1971, Jennings v. Mahoney, 404 U.S. 25, 92 S.Ct. 180, 30 L.Ed.2d 146, a case arising under the financial responsibility law of the State of Utah. In that case the motorist claimed: "Utah's statutory scheme falls short of these requirements in two respects: (1) by not requiring a stay of the Director's order pending determination of judicial review, the scheme leaves open the possibility of suspension of licenses without prior hearing; (2) in confining judicial review to whether the Director's determination is supported by the accident reports, and not affording the motorist an opportunity to offer evidence and cross-examine *222 witnesses, the motorist is not afforded a `meaningful hearing.'" The court stated: "There is plainly a substantial question whether the Utah statutory scheme on its face affords the procedural due process required by Bell v. Burson. This case does not however require that we address that question. The District Court in fact afforded this appellant such procedural due process. That court stayed the Director's suspension order pending completion of judicial review, and conducted a hearing at which appellant was afforded the opportunity to present evidence and cross-examine witnesses." Jennings v. Mahoney, supra, applies here. We hold that under the circumstances of this case the plaintiff was in fact afforded due process.
We also choose to place our holding upon an additional ground. A revocation for traffic violations under the point system of our statutes involves a substantially different situation than revocation under the financial responsibility acts. The financial responsibility acts are founded upon the premise the motorist involved in an accident may be at fault. In Bell v. Burson, supra, the court held before the driver's license and registration of the motorist could be revoked there must be a determination made at a hearing "appropriate to the nature of the case" that there is a reasonable possibility he is in fact at fault. It is evident that the danger which the court wishes to guard against was an unreasonable possibility of wrongfully depriving the motorist of a valuable entitlement. Under the point system of revocation as established by our statutes, is there a reasonable possibility of error and are the procedural safeguards which are inherent in the system such as afford an opportunity to correct before irreparable damage occurs such errors as might happen? The answers to these questions require an examination of the statutory scheme and an analysis of the possible mistakes against which protection should be afforded under procedural due process.
Section 39-7,128, R.R.S.1943, prescribes the number of points to be assessed against the licensee for each conviction under the various categories of violations. Section 39-7,129, R.R.S.1943, as already noted, provides for revocation of the license if there is an accumulation of 12 or more points within a 2-year period. Section 39-794, R.R.S.1943, specifies the duties of the tribunals in which the traffic conviction takes place with reference to entry of judgment in such case and together with section 39-795, R.S.Supp., 1969, requires the forwarding of an abstract of the convictions to the Director of the Department of Motor Vehicles. Such abstracts must be upon a standard form prepared and furnished to the tribunals by the Director as authorized and required in section 39-796, R.S.Supp., 1969. These standard forms as they were used in this case are in the record. These set forth the date of violation; the date of hearing; the name and address of the motorist; his date of birth; his operator's license number; the vehicle number; the docket and page number of the proceedings in the court; the judgment of conviction including fine and costs; the plea; a description of the offense; the name of the enforcing agency and the officer's name; the date of any appeal from the judgment or the date the appeal was dismissed if that is the case; and a form of certificate for the judge, clerk, or magistrate to sign.
Every motorist is of course charged with notice of the contents of the statutes specifying the points assessed for the various violations. For every offense he has or is afforded an opportunity for hearing. He therefore is charged by law with knowledge that his license is in jeopardy and at all times is charged by law with notice of the state of his record as it pertains to the points charged against him.
In the foregoing setting, what are the facts with reference to which error might be made? They would seem to be these: *223 (1) Improper determination of the number of points assessed for a given conviction; (2) incorrectly determining the 2-year period; (3) incorrect addition of the points; and (4) misidentification of the motorist. The information required to be set forth in the abstracts of conviction is entirely adequate to readily determine the matters required. These determinations in the system outlined are simple ministerial matters and are so characterized by the statute, section 39-796, R.S.Supp., 1969, and by this court. Bradford v. Ress, 167 Neb. 338, 93 N.W.2d 17. This characterization is more than a mere euphemism. They truly seem to be merely ministerial. While error might occur in one or more of these items, the likelihood certainly is not very great. There is of course in the system no latitude for discretion nor does it require any factual determinations in the judicial, quasi-judicial, or administrative law sense. There are no inferences to be drawn.
We eliminate from consideration, of course, such matters as completely void judgments as would be the case of no process being served upon the motorist and no appearance by him. We also eliminate such things as fraudulent records of conviction or fraudulent abstracts. We are not required to assume on the appeal that any agency of government will indulge in such practices. Cf. Bourjois, Inc. v. Chapman, 301 U.S. 183, 57 S.Ct. 691, 81 L.Ed. 1027.
If errors do occur, or if there should be fraud, or an absolutely void judgment, what remedy is afforded? Section 39-7,130, R.R.S.1943, provides for an appeal from an order of revocation to the district court and authorizes the judge to stay the order of revocation pending the appeal. This court has also held that the procedures authorized by section 60-420, R.R.S.1943, are available. Durfee v. Ress, 163 Neb. 768, 81 N.W.2d 148. Both procedures contemplate a full evidentiary hearing. Under the statutes no fact finding of the Director is binding on the courts. In this context is due process lacking under sections 39-7,129 and 39-7,130, R.R.S.1943? We believe not.
We think that in a very real sense the essential facts have been determined in the judicial proceedings in connection with each conviction. In a very real sense the Director acts only ministerially. The resultthe revocationflows from the operation of the statute upon the already judicially determined facts, that is, the series of convictions of traffic offenses. Of these the motorist already has knowledge. Of their effect point-wise he is charged by law with knowledge just as with any other case of knowledge of the law. These circumstances do, in our opinion, make the procedures applicable to revocation of a driver's license for an accumulation of points for traffic offense conviction clearly distinguishable from revocation under the financial responsibility law as in Bell v. Burson, supra. The financial responsibility statutes in effect create without any hearing a presumption of fault. This, if we understand the footing of Bell v. Burson, supra, is their constitutional deficiency. Such a situation does not exist in the case here involved. We hold that under the statutory scheme of Nebraska no notice and hearing were required before the issuance of the order of revocation.
The Supreme Court of the United States, in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287, has recently said: "The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be `condemned to suffer grievous loss,' Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring), and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication. Accordingly, as we said in Cafeteria & Restaurant *224 Workers Union, etc. v. McElroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961), `consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action.' See also Hannah v. Larche, 363 U.S. 420, 440, 442, 80 S.Ct. 1502, 4 L.Ed.2d 1307 (1960).... It is true, of course, that some governmental benefits may be administratively terminated without affording the recipient a pre-termination evidentiary hearing." See cases cited in note 10, p. 263. That court has long recognized that the requirements of due process may vary according to the nature of the interest to be protected and the likelihood of harm to the individual. In Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 315, 70 S.Ct. 652, 657, 94 L.Ed. 865, the court, quoting from another case, said: "`The criterion is not the possibility of conceivable injury but the just and reasonable character of the requirements, having reference to the subject with which the statute deals.'" See, also, 16A C.J.S. Constitutional Law § 628b, p. 856. The due process of law provisions do not prevent an administrative agency in every case from issuing an order affecting the private rights of an individual without formal notice and hearing before such order. The due process requirements may under some circumstances be satisfied if full hearing in the courts is available after the administrative order with judicial power to stay irreparable injury pending court hearing. Parker v. Board of Barber Examiners (La.App.), 84 So.2d 80.
"Apart from statute, the necessity of notice and hearing in an administrative proceeding depends on the character of the proceeding and the circumstances of the case; insofar as generalization is possible, it may be stated as a general rule that notice and hearing are required where an administrative body acts in a quasi-judicial manner but not where its actions are executive, administrative, or legislative." 73 C.J.S. Public Administrative Bodies and Procedure § 130, p. 452.
Under the Nebraska scheme the Director acts ministerially. The likelihood of error is small. The compelling public interest in removing from the highways those drivers whose records demonstrate unsafe driving habits outweighs the need for notice and hearing prior to the order to protect the individual against mistake. In this connection the matter must be viewed not as an isolated case but in the collective aspect, that is, the removal of many such drivers from the highways.
Cases such as Francisco v. Board of Dental Examiners (Tex.Civ.App.), 149 S. W.2d 619, where summary revocation of a dental license followed upon a conviction of a felony involving moral turpitude, are distinguishable upon at least two grounds. First, in the cited case there was the question of whether the felony involved moral turpitude and this requires a separate determination or judgment apart from the conviction itself, and second, the conviction in that case would not have any necessary and immediate relationship to the competence of the individual to practice dentistry hence no direct immediate relationship to the public health. On the other hand, in our case the Legislature has determined, and we believe reasonably so, that a habit of repeated traffic violations has a definite relationship to the fitness of the driver to operate a motor vehicle and hence to the compelling public interest in safety on the highways.
If a ministerial error has occurred or if there is a fraudulent abstract a notice of revocation is void and this may be determined on the appeal. There is in fact no final "taking" until the court review has occurred or the motorist has acquiesced by failing to take an appeal. The following we think is pertinent. Forkosch, Constitutional Law (2d Ed.), § 191, p. 208, *225 says: "The concept of procedural due process, as we have seen, gives to every person the constitutional right to notice and hearing before his life, liberty or property is finally taken. To this point we have assumed that the agency, in its proceedings, is `taking' because its findings of fact are binding upon the judiciary when reviewed. Regardless of this finality, and even if it is or is not present, a person is entitled only to one fair hearing (adequate notice is assumed) at some point before a final taking. This fair hearing may or may not be in an agency proceeding, as there may be a court or judicial one instead or in addition. Obviously this latter proceeding accords with procedural due process; if the former, then the question is whether procedural due process was given therein. We are not here concerned with substantive rights * * *, so that if all of the required procedural rights are obtained either in the agency, or in the courts on review, or in a combination of both, before a final taking occurs, then no procedural violation has occurred."
The Court of Appeals of Kentucky, in Commonwealth, Dept. of Public Safety v. Thomas (Ky.App.), 467 S.W.2d 335, may have come to a different conclusion than have we as to the scope of Bell v. Burson, supra, for it has applied the principles of that case to void that State's "point" statute because of lack of provision for prerevocation hearing. There are, however, some significant differences between our and the Kentucky statute. There the administrative agency was entrusted with discretion both as to whether the license should be suspended upon conviction and also as to the period of suspension. The details of the statutory scheme are not set forth. We think, however, that the element of discretion is sufficient to clearly distinguish the case. If discretion is to be exercised, it must be based upon some factual basis if it is not to be purely arbitrary and this would of course require notice and hearing.
Affirmed.


855 F.2d 859
Schultzv.Swanhorst
NO. 87-5157
United States Court of Appeals,Eighth Circuit.
JUN 24, 1988

1
Appeal From:  D.S.D.

2
AFFIRMED.


541 U.S. 954
POINDEXTERv.UNITED STATES.
No. 03-8929.
Supreme Court of United States.
March 22, 2004.

1
C. A. 4th Cir. Certiorari denied. Reported below: 75 Fed. Appx. 188.


432 F.2d 298
70-2 USTC  P 9625
WESTERN NATIONAL LIFE INSURANCE COMPANY OF TEXAS, Petitioner-Appellee,v.COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
No. 28569.
United States Court of Appeals, Fifth Circuit.
Sept. 30, 1970.

Thomas L. Stapleton, Atty., Johnnie M. Walters, Asst. Atty. Gen., Lee A. Jackson, Atty., Tax Div., U.S. Dept. of Justice, K. Martin Worthy, Chief Counsel, Eugene F. Colella, Atty., Internal Revenue Service, Washington, D.C., for appellant.
Francis A. Goodhue, Jr., New York City, Arthur K. Mason, Washington, D.C., J. Waddy Bullion, Buford P. Berry, Dallas, Tex., for taxpayer; William J. Glading, Newark, N.J., Alan R. Vogeler, Cincinnati, Ohio, Joseph Korff, New York City, of counsel.
O. Jan Tyler and Robert K. Sands, James L. Walsh, Gen. Counsel, Dallas, Tex., William B. Harman, Jr., Kenneth L. Kimble, William T. Gibb, Washington, D.C., G. Mason Connell, Jr., Richmond, Va., amici curiae.
Before TUTTLE, THORNBERRY and INGRAHAM, Circuit Judges.
TUTTLE, Circuit Judge:

1
In this appeal from the Tax Court of the United States the Commissioner of Internal Revenue challenges the correctness of the Tax Court's determination of the method to be used in the computation of life insurance company taxable income under the Life Insurance Company Income Tax Act of 1959, Sections 801-820 of the Internal Revenue Code of 1954, as amended.  The Tax Court held that the company could accrue 'defered and uncollected' annual premiums for the purpose of complying with state statute requirements that an amount equal to the policyholder's share of the policy of such premiums must be added to reserves on the assumption that they had been paid, without being required to accrue such 'deferred and uncollected' annual premiums for inclusion in the company's assets except in an amount that would balance off the amount added to reserves.

2
The commissioner's position, which was successfully urged before the courts of appeals of the Seventh and Fourth Circuits in Franklin Life Insurance Co. v. United States, 7th Cir., 399 F.2d 757 and Jefferson Standard Life Ins. Co. v. United States, 4th Cir., 408 F.2d 842 is that 'once accrued for any purpose, accrued for all purposes.'

3
The facts are not in issue.  It is clear that a gross annual premium on an insurance contract is the agreed consideration for coverage for a period of a year from the policy anniversary date.  It is also universally understood that of that amount a certain part must be set aside as a reserve for the protection of the policyholder.  For the purpose of this litigation all parties seem satisfied with the definition of this amount as the 'net valuation premium.'  Also, the parties all agree that the remainder of the premium, that is, the difference between gross and net valuation premiums may be referred to as the 'loading.'  Uniform with all insurance companies is a condition that exists at the end of each taxable year that there are policies outstanding as to which a partial premium has been paid but remaining premiums are to be paid at quarterly or monthly intervals throughout the balance of the policy year.  There is also at all times at the end of the taxable year a certain amount in premiums that are due which are not paid because of the grace period provided in the policies.  These two classes of premiums are known as 'deferred and uncollected premiums.'  The parties agree that under normal accounting procedures these deferred and uncollected premiums are not truly accruable as income in the usual accounting sense, since the companies have no legal claim to have them paid.  Undoubtedly, many are never paid, but equally true is the fact that many are ultimately collected.

4
Because the policy is outstanding from the date of its issue, the life insurance industry either because of requirements of state regulating agencies or otherwise, universally considers these deferred and uncollected premiums as accrued at the end of the year for the purpose of dividing them into what might be called the 'policyholder's share' and the 'loading,' and then covering the policyholder's share into reserves.  It is also generally true, apparently, (as occurred in this case) that in reporting gross income for the purpose of determining 'gain and loss from operations' under Section 809(c)(1) insurance companies do actually report under the item of 'gross amount of premiums and other considerations * * * on insurance and annuity contracts' the total amount of deferred and uncollected premiums.

5
For many years the National Association of Insurance Commissioners, (hereinafter N.A.I.C.), has furnished annual statement forms to be used for reporting to the state insurance commissioners, and these annual statements are filed as exhibits to the income tax returns of the insurance companies.  It is not disputed that under the N.A.I.C. forms only that part of the deferred and unpaid premiums representing the policyholder's share is shown as an asset.  In other words, there is a corresponding entry in the asset column to offset the liability to reserves resulting from the state commissioners' requirement that the policyholder's share be accrued and added to reserves even though not legally collectable.

6
The Act with which we are concerned establishes a statutory framework which provides a measurement of life insurance company total income on an annual basis for use and application of the normal corporation tax to the result.  It utilizes a series of separate computations in the determination of the final tax.1

7
It is not necessary, for an understanding of the issues here, for us to detail the computations that are to be made to ascertain the net result to which the rate of tax is applied.  Suffice it to say, that the larger the reserve, which the numerator of a fraction is, the less the quotient which is to be taxed.  So, too, the smaller the 'assets,' being the denominator of the fraction, the smaller the quotient which is to be taxed.  Thus, the effect, possibly fortuitous, of the method used by this taxpayer as well as those in the cases cited above and by all other companies following the N.A.I.C. form of reporting, is that the inclusion of a part of the gross deferred and uncollected premiums representing the policyholders' share in the reserves as an accrued item and the omission of all or a part of such premiums in the asset column works to the tax advantage of the taxpayer.

8
This company claimed initially that although it was required to, and did, accrue a large percentage of the gross premiums on deferred and uncollected premiums in the reserve account, it was not required to add any part of this amount to assets.  The commissioner issued a deficiency letter, and the insurance company litigated the matter before the Tax Court.  That Court, in an initial opinion, decided that Western National Life Insurance Company correctly excluded any part of the deferred and uncollected premiums from the asset side of the ledger.  Upon petition for rehearing and upon the filing of a brief by the American Life Convention and the Life Insurance Association of America as amicus curiae, the court adopted the views of amici and held that the asset figure should include an offsetting entry of an amount equivalent to the figure set aside by the company to reserves, representing the policyholders' share of the deferred and uncollected premiums.  The Tax Court noted the contrary decision of the Court of Appeals for the Seventh Circuit in Franklin, supra, and the District Court in North Carolina in Jefferson Standard Life Insurance Co. v. United States, 272 F.Supp. 97 (M.D.N.C.1967) (subsequently affirmed supra).  However, the Tax Court was not persuaded, and held with the position put forward by the American Life Convention and Life Insurance Association of America.

9
While, of course, we are not bound by the decisions of the Courts of Appeals of the two circuits which have heretofore passed upon precisely this same question, we think it appropriate to say that it would take extremely cogent reasoning to cause us to take a different view on a matter of statutory construction.

10
We believe that much weight should be placed on the reasoning of the court in the Franklin case which, as we view it, says, in effect, that the statute requires that all computations entering into the determination of the taxes imposed shall be made under an accrual method of accounting, as it does;2 that this company does accrue deferred and uncollected premiums, although ordinary bookkeeping or accounting practices would not require this treatment, because of the fact that they are not legally collectable; these premiums are accrued in order for the company to comply with the state regulation that it transfer to the reserves that percentage of the amount representing the policyholders' share, and the total amount is also accrued by the company in reporting its gain from operations, which is a part of the formula by which the ultimate amount of income to be taxed is arrived at; thus, the accrual method adopted by the insurance company must be applied uniformly, even though in its computations under phase one of the statute it obtains the benefit in the numerator of the fraction of only a percentage (albeit a large one) of the total.  There would be no percentage to be transferred to reserves if the entire deferred and uncollected premiums were not accrued.  We agree with the other two courts that once the accrual method is used it must be applied uniformly, even though the result would be that the asset figure resulting from applying the accrual basis to the gross premiums would not balance with the policyholders' share of the 'net valuation premiums.'

11
We also agree with the decisions in these two cases to the effect that the Congress did not adopt the N.A.I.C. form of statement for its accounting method as to determining the tax base for insurance companies.  As will appear from the statute itself, the N.A.I.C. annual statement was referred to as being the proper standard 'except as provided in the preceding sentence,' the preceding sentence providing that all computations should be under an accrual method of accounting.  In point of fact, the N.A.I.C. method is a hybrid method and not strictly an accrual method.

12
To paraphrase what is so well stated by the Court of Appeals for the Fourth Circuit: An accrual method of accounting would not require the inclusion of any part of these deferred and uncollected premiums.  However, when the taxpayer does accrue them, we are of the view that they msut be accrued in full, even though advantage of only a part of them can be used by the taxpayer in the formula that is used for determining the base of taxation.  See 408 F.2d 842, 856.

13
From the briefs filed with this court and from our general knowledge, it is evident that very few phases of corporate or personal income taxation has been attended with as much difficulty as the devising of a fair basis for taxing insurance companies.  It is not doubted that the industry and treasury officials as well as the joint committee on taxation of the House and Senate and the two additional appropriate committees of the two congressional bodies have worked closely together in attempting to achieve a final result that is fair and workable.  This result is disclosed in the amendments of 1959.  We, therefore, do not believe much is to be gained by reading the legislative history prior to that time.  As stated by the court in Jefferson Standard Life Ins. Co., supra, 'the life insurance income tax act of 1959 was a comprehensive revision of the scheme of imposing income taxes on life insurance companies, other than mutual life insurance companies.'  408 F.2d 842 at 844.

14
We fully appreciate the argument made by the insurance company here, as well as by the amici to the effect that the failure to specify 'loading' as a deductible item in the compuation of 'gain from operations' is of no significance, because, so it is argued, the initial requirement of reporting gross premiums was not thought to include deferred and uncollected premiums in the item of gross premiums.  It is clear that if this theory were correct, then there need be no specific provisions for deducting the loading increment among the list of allowable deductions.  However, we approach this particular problem from the standpoint of a history which includes the income tax returns filed in this particular case, which shows that insurance companies have included the gross amounts of deferred and uncollected premiums as 'gross premiums' on its tax returns.  Thus, even though this inclusion may have resulted in an adverse result to the taxpayer, under this part of the tax formulas, the company treated the gross amounts of the deferred and uncollected premiums as accrued, even though they now contend that this was not required by Section 809(c)(1) of the Internal Revenue Code.3

15
It must be clear, therefore, that the Court of Appeals in the Franklin case made a logical connection between this fact and the determination of whether the gross amount was to be included in assets rather than merely the amount of premiums on deferred and uncollected items less loading.  We fully concur with the following statement in the Jefferson Standard case, as a further comment on the contention strongly made by the briefs before us, that Congress, in effect, turned over to the N.A.I.C. the power to adopt a method of computation of the tax base even though it might not fully fit into the accrual method of accounting.  'The careful and detailed attention given by Congress throughout Sections 801 through 820 to definition of the particular items utilized as factors in the tax formula and in specifying and enumerating the permissible deductions and exclusions negates the existence of any intent on the part of Congress to relegate the substantive matter of offsetting or excluding loading on deferred and uncollected premiums, with its impact on the resulting tax, to the N.A.I.C.'

16
The Tax Court should have required the inclusion in the assets columns of the taxpayer of the gross amount of deferred and uncollected premiums, rather than limiting such increment of assets to an amount equal to the policyholders' share therein.

17
The Tax Court decision is reversed and the case is remanded to that court for further proceedings not inconsistent with this opinion.

1
 For a short description of the Acts, see United States v. Atlas Life Ins. Co., 381 U.S. 233, 85 S.Ct. 1379, 14 L.Ed.2d 358

2
 Section 818(a), Internal Revenue Code of 1954:
All computations entering into the determination of the taxes imposed by this part shall be made-- (1) under an accrual method of accounting, or (2) to the extent permitted under regulations prescribed by the Secretary or his delegate, under a combination of an accrual method of accounting with any other method permitted by this chapter (other than the cash receipts and disbursements method).
Except as provided in the preceding sentence, all such computations shall be made in a manner consistent with the manner required for purposes of the annual statement provided by the National Association of Insurance Commissioners.

3
 Section 809(c) provides for inclusion in the computation of gain or loss from operations of the 'gross amount' of premiums and other consideration * * * on insurance and annuity contracts


65 Cal.App.3d 656 (1977)
135 Cal. Rptr. 473
COUNTY OF LOS ANGELES, Plaintiff and Respondent,
v.
EILEEN S. KRANZ, as Executor, etc., et al., Defendants and Appellants.
Docket No. 48449.
Court of Appeals of California, Second District, Division Two.
January 4, 1977.
*658 COUNSEL
Alexander, Inman, Kravetz & Tanzer, Leon J. Alexander and Gene R. Prasse for Defendants and Appellants.
John H. Larson, County Counsel, Terry C. Smith, S. Robert Ambrose, Max E. Truex and Marie Stephens, Deputy County Counsel, for Plaintiff and Respondent.
OPINION
FLEMING, Acting P.J.
This is a proceeding in eminent domain brought by the County of Los Angeles to acquire for street improvements a one-third-acre parcel of unimproved Redondo Beach land owned by Eileen Kranz and Thomas Kranz, executor of the estate of Frank Kranz. Landowners appeal the order after judgment denying their motion to include their litigation expenses, attorney's and appraiser's fees, in the award of costs.
(1) Landowners' litigation expenses are not compensable as a matter of constitutional right in eminent domain proceedings. (Community Redevelopment Agency v. Abrams (1975) 15 Cal.3d 813, 827-838 [126 Cal. Rptr. 473, 453 P.2d 905].) The award of these expenses as costs is governed by statute. The statute applicable at the time of trial was former Code of Civil Procedure section 1249.3, which provided in pertinent part:
"At least 30 days prior to the date of trial, plaintiff shall file with the court and serve a copy thereof on defendant its final offer to the property sought to be condemned and defendant shall in like manner, file and serve a copy thereof on plaintiff his final demand for the property sought to be condemned....
"If the court, on motion of the defendant made within 30 days after entry of judgment, finds that the offer of the condemnor was unreasonable and that the demand of condemnee was reasonable, all viewed in the light of the determination as to the value of the subject property, the costs allowed ... shall include all expenses reasonably and necessarily incurred in preparing for and in conducting the condemnation trial including, and not limited to, reasonable attorney's fees, appraisal fees, *659 surveyor's fees, and the fees for other experts, where such fees are reasonably and necessarily incurred to protect defendant's interest prior to trial, during trial and in any subsequent judicial proceedings in the condemnation action.
"In determining the amount of attorneys fees and expenses to be awarded under this section, the court shall consider written, revised or superseded offers and demands served and filed prior to or during the trial."[1]
Before trial, county's final offer was $63,000; landowners demanded $72,500. At trial, county's expert appraised the property at $57,200; landowners' expert valued it at $96,750. The jury found the fair market value of the property to be $79,077.55.
(2a) It is conceded that landowners' final pretrial demand was reasonable. The issue is whether county's final pretrial offer was unreasonable. (3) By statute, reasonableness of the offer must be viewed in light of the adjudicated value of the property. Moreover, reasonableness depends on the proportional difference between offer and demand, the absolute monetary amounts, and the good faith, care, and accuracy in the method of determination of offer and demand. The measure of reasonableness is in the first instance a factual matter for the trial court. (City of Los Angeles v. Cannon (1976) 57 Cal. App.3d 559, 562 [127 Cal. Rptr. 709].) As in any finding by the trial court, however, if the uncontradicted evidence permits only one conclusion, the issue is legal, not factual. (Rullman v. State Farm Mut. Automobile Ins. Co. (1970) 8 Cal. App.3d 606, 609 [87 Cal. Rptr. 551].)
(2b) In our view, the uncontradicted evidence compels the finding that county's final pretrial bid was unreasonable as a matter of law. First, and most obviously, county's offer was significantly disproportionate to the adjudicated value of the property, less than 80 percent of the jury verdict.
Second, county's offer was significantly lower in absolute terms ($16,000) than the jury verdict.
*660 Third, county's offer ignored landowners' expert's appraisal of $96,750. While experts often differ, the substantial difference between appraisals should have cast some doubt on the accuracy of county's appraisal of $57,200. County argues that landowners' expert improperly relied on uptrending sales of noncomparable properties in formulating his appraisal. Those sales must have had some relevance, however, because the trial court permitted evidence of uptrending sales to go before the jury. In any event, those sales alone would not account for the major discrepancy in appraisals. County should have realized that a jury would give some weight to the opinion of each expert, and fix the fair market value of the property somewhere between the two.[2] Landowners came down more than half way on their demand: county stubbornly stuck to its own appraisal plus a small amount which would barely cover landowners' added costs of preparing the cause for trial.
(4) Code of Civil Procedure section 1249.3 was intended to promote settlement of valuation disputes in eminent domain proceedings and guarantee full recompense to the landowners in case of unnecessary litigation. It should have applied in these circumstances.
The order is reversed and the cause remanded for further proceedings in accordance with this opinion.
Compton, J., and Beach, J., concurred.
A petition for a rehearing was denied February 1, 1977, and respondent's petition for a hearing by the Supreme Court was denied March 3, 1977.
NOTES
[1]  Section 1249.3 has been replaced by a new section 1250.410, effective 1 July 1976. The new section substantially reenacts the old, with a clarification of the standard of reasonableness. To award litigation expenses, the court must find: "that the offer of the plaintiff was unreasonable and that the demand of the defendant was reasonable viewed in the light of the evidence admitted and the compensation awarded in the proceeding...."
[2]  The jury's verdict was almost exactly half-way between the two experts' appraisals.