A Florida appeals court panel on Wednesday overturned a verdict requiring Morgan Stanley to pay $1.58 billion plus interest to Ronald Perelman for misleading him about the health of Sunbeam Corp., a company the bank helped sell to the financier.

The 2-1 decision follows a 2005 trial in which Palm Beach County Circuit Judge Elizabeth Maass, irked at Morgan Stanley for withholding and destroying e-mails and other potential evidence, instructed a jury to assume the firm was guilty of defrauding Perleman and Coleman.

The Appeals Court panel skirted that issue and ruled that Coleman (Parent) Holdings Inc., Perelman's company, failed to prove the level of damages it suffered due to Morgan Stanley's action. Specifically, it said Coleman failed to prove the ``fraud-free'' value of Sunbeam's stock on the date of the transaction. The panel told a lower court to enter a judgment in favor of the bank and said Coleman isn't entitled to a retrial.

``Because there was no proof presented at trial on the correct measure of damages, the trial court should have granted Morgan Stanley's motion for directed verdict,'' Judge Carole Y. Taylor wrote in her opinion. ``We therefore reverse the final judgment for compensatory damages and remand for entry of a judgment for Morgan Stanley.''

And because the court reversed the finding against Morgan Stanley, it reversed the punitive damages as well. Judge George A. Shahood concurred with the opinion. Judge Gary M. Farmer dissented, saying he would have upheld the compensatory damage award and ordered a new trial to determine the merit of punitive damages.

``This was very good news,'' Morgan Stanley Chief Financial Officer David Sidwell said in a call with analysts, though he noted that Perelman can appeal the verdict. ``There are additional steps the other party can take. Our first read and that of our law team is that this is clearly a victory.''

Morgan Stanley has reserved $360 million for the Perelman issue, Sidwell said. The bank's shares were up 4.1 percent early Wednesday afternoon at $79.23 on the New York Stock Exchange, after the bank reported a 70 percent jump in first-quarter earnings.

In a statement, Perelman said he was disappointed by the ruling but believes he ultimately will prevail in a rehearing before the full appeals court or, beyond that, the Florida Supreme Court

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