Albert A. Devries, and A. Devries and Sons, Incorporated, a Corporation, Appellants, v. E. H. Starr, Appellee, 393 F.2d 9 (10th Cir. 1968)

"As there was no significant dispute over the facts proven, the conclusion as to the sufficiency of the evidence was for the reviewing court. We deal, in this review, with the method of the proof of damages, not the measure. Narrowed even more, the issue is whether the evidence offered justifies an award, whether the quantum of proof produced forms an adequate basis for a reasoned judgment.

"Future rental value cannot be susceptible of precise proof. As it depends, so far as the amount of damages for breach of a lease is concerned, upon future profits, it partakes of the nature of loss of earning capacity or of credit. To require proof of rental value approaching mathematical certitude would bar a recovery for an actual injury suffered. All that can be done is to place before the court such facts and circumstances as are available to enable an estimate to be made based upon judgment and not guesswork. Every anticipatory breach of an obligation, and every appraisal of damage involving the present value of property involves a prediction as to what will occur in the future. Present market value of property is but the resultant of the prediction of many minds as to the usability of property and probable financial returns from that use, projected into the future as far as reasonable, intelligent men can foresee the future.

"The proof of future profits by the evidence of past profits in an established business gives a reasonable basis for a conclusion. It is true that this business changed from trolley to bus within two years of the end of the base period and that management changed from lessee to lessor but we think the fact of transportation in the same communities for more than a quarter of a century sufficed to give the operation the classification of an established business. Here different methods of operation or normal changes in the executive staffs do not seem sufficient to interfere with the probative value of past experience. Franchises and property of street railways and bus lines are difficult of appraisal. Nothing is more indicative of their value for lease or sale of the fee than past earnings. If we were to adopt the view that the interest conveyed is a defeasible fee, its defeasance dependent upon a condition such as nonpayment of annual instalments of the purchase price, the same difficulties exist. The unknown subtrahend would be the present value, instead of the rental value. Evidence of value would be made up of the items of proof. One of the most important of these, in the case of property such as here involved, would be past earnings.

"This Court has sustained recoveries for future profits over four years based solely upon evidence of the profits of an established business for the past four years. We there approved an instruction which told the jury, `Damages are not rendered uncertain because they cannot be calculated with absolute exactness. It is sufficient if a reasonable basis of computation is afforded, although the result be only approximate.'

"The ways compensatory damages may be proven are many. The injured party is not to be barred from a fair recovery by impossible requirements. The wrong-doer should not be mulcted, neither should he be permitted to escape under cover of a demand for nonexistent certainty. Damages for breach of the lease were in contemplation of the parties when the contract was made. The lease contained a covenant of reentry without prejudice to right of action for arrears of rent or breach of covenants. The provision in the Bankruptcy Act gives a new right of recovery in bankruptcy only. This right of recovery is an unsecured claim of the character of a claim for a deficiency above the value of inadequate collateral.

"Certainty in the fact of damage is essential. Certainty as to the amount goes no further than to require a basis for a reasoned conclusion. The certainty of the evidence as to damages for rejection of a lease depends upon the same tests as in other situations where damages are difficult of proof. This Court, recently, in an infringement case was required to appraise the value of opinion evidence as to the part of profits attributable to the use of a pirated play, an obviously elusive fact. No expert thought any greater percentage than ten should be attributed to the play. The lower court allowed twenty so that the award might by no possibility be too small. We approved because `what is required is not mathematical exactness but only a reasonable approximation. That, after all, is a matter of judgment * * *.'

"Satisfactory evidence was presented for the three years of actual operation of the properties covered by this lease. We think that prior earnings of the same property over fourteen years was a fair base to use to project the estimate of the earnings for the eight years of future operation. The failure to produce further evidence, either through experts or transportation surveys, was not fatal to respondent's case, even though such evidence is admissible. We see no reason to disagree with the conclusion of the circuit court of appeals that under the evidence presented the damages for eight years might be predicted with a `fair degree of certainty.'"

It is true that in that case there was a dissent explicitly on the ground of the inadequacy of proof of damages by Mr. Justice Douglas (concurred in by Mr. Justice Black) from the majority ruling reflected in Mr. Justice Reed's opinion. But it may well be considered that the dissent, instead of discrediting the prevailing opinion, served rather to emphasize the actuality of mature reflection and consideration out of which the majority ruling emerged.

In Sheldon v. Metro-Goldwyn Pictures Corporation, (2 Cir.) 106 F.2d 45, 51, aff'd 309 U.S. 390, 406-408, 60 S. Ct. 681, 84 L. Ed. 825, the Court of Appeals, Second Circuit, through Judge Learned Hand, in a copyright infringement case, said:

"We are aware that out of all this no real standard emerges, and that it would be absurd to treat the estimates of the experts as being more than expressions of very decided opinions that the play should count for very little. But we are resolved to avoid the one certainly unjust course of giving the plaintiffs everything, because the defendants cannot with certainty compute their own share. In cases where plaintiffs fail to prove their damages exactly, we often make the best estimate we can, even though it is really no more than a guess (Pieczonka v. Pullman Co., 2 Cir., 102 F.2d 432, 434), and under the guise of resolving all doubts against the defendants we will not deny the one fact that stands undoubted. Procedural duties are devised in aid of truth; and their unsparing use may defeat their whole purpose, as here it would. However, though we do not press the burden of proof so far, the defendants must be content to accept much of the embarrassment resulting from mingling the plaintiffs' property with their own. We will not accept the experts' testimony at its face value; we must make an award which by no possibility shall be too small. It is not our best guess that must prevail, but a figure which will favor the plaintiffs in every reasonable chance of error. With this in mind we fix their share of the net profits at one fifth."

And in National Labor Relations Board v. Kartarik, Inc. (8 Cir.), 227 F.2d 190, 192, 193, the court, speaking through Judge (later, Chief Judge) Johnsen, said:

"On respondent's second contention, as set out above, that the determinations of back-pay made by the Board were clearly erroneous as having been speculatively arrived at in their amounts, we think that, at the least, such determinations on the part of the Board may not judicially be required to rest upon any greater degree of certainty as to amount than that applicable to contract or statutory breaches generally. Cf. F. W. Woolworth Co. v. N.L.R.B., 2 Cir., 121 F.2d 658, 663.

"That degree of certainty may appropriately be recalled. `There is a clear distinction between the measure of proof necessary to establish the fact that (a party) sustained some damage and the measure of proof necessary to enable (a tribunal) to fix the amount.' Story Parchment Paper Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562, 51 S. Ct. 248, 250, 75 L. Ed. 544. `Certainty in the fact of damage is essential. Certainty as to the amount goes no further than to require a basis for a reasoned conclusion.' Palmer v. Connecticut Ry. & Lighting Co., 311 U.S. 544, 561, 61 S. Ct. 379, 385, 85 L. Ed. 336. These principles are, of course intended to permit a solution of the problem of amount to be made upon any range of facts, circumstances or reasonable inferences, which afford a rational basis for a conclusion."

This court in several reported opinions has disclosed its concurrence in the decisional considerations reflected in the foregoing quoted language. Thus, in Mountain States Telephone and Telegraph Company v. Hinchcliffe (10 Cir.), 204 F.2d 381, 382, 383 (a suit by a customer for the failure of a telephone corporation to furnish him with proper service), the court, by Chief Judge Phillips, said:

"The trial court also submitted to the jury the issue of loss of profits, if any, resulting from the failure to furnish proper and adequate telephone facilities. Whether there was any competent evidence to take that issue to the jury is the more difficult question presented on this record. It should be noted, however, that the trial court in submitting that issue carefully instructed the jury that its verdict must be based upon evidence and not upon speculation or conjecture.

"In Hoffer Oil Corp. v. Carpenter, 10 Cir., 34 F.2d 589, 592, we said:

`The general rule is that, where the cause and existence of damages has been established with requisite certainty, recovery will not be denied because such damages are difficult of ascertainment. * * *

`In Straus v. Victor Talking M(ach). Co., supra, page 802 of 297 F., the court said: "The constant tendency of the courts is to find some way in which damages can be awarded where a wrong has been done. Difficulty of ascertainment is no longer confused with right of recovery." * * *

`A reasonable basis for computation, and the best evidence which is obtainable under the circumstances of the case and which will enable the jury to arrive at an approximate estimate of the loss, is sufficient.'

"While the damages may not be determined by mere speculation or guess, it is enough if the evidence shows the extent of the damages as a matter of just and reasonable inference, although the result be only approximate.

"However, the plaintiff must establish his damage by the most accurate basis possible under the circumstances. He must produce the best evidence reasonably obtainable."

In an earlier opinion, this court in Shannon v. Shaffer Oil and Refining Company (10 Cir.), 51 F.2d 878, 882, 78 A.L.R. 851, in the way of support of a ruling affirming a judgment denying damages largely through want of adequate proof of the elements and amount thereof, thus summarized the pertinent judicial teaching upon the point:

"Obviously a plaintiff may not come into court and say no more than `the defendant stole some wheat' or that `a fire destroyed some of my goods,' and ask for substantial damages. The rule is that, if an injured plaintiff has produced the best evidence available, and if it is sufficient to afford a reasonable basis for estimating his loss, he is not to be denied a substantial recovery because the exact amount of the damage is incapable of ascertainment. In Eastman [Kodak] Co. v. Southern Photo Co., 273 U.S 359, at page 379, 47 S. Ct. 400, 405, 71 L. Ed. 684, the court held: `Damages are not rendered uncertain because they cannot be calculated with absolute exactness. It is sufficient if a reasonable basis of computation is afforded, although the result be only approximate. This, we think, was a correct statement of the applicable rules of law. Furthermore, a defendant whose wrongful conduct has rendered difficult the ascertainment of the precise damages suffered by the plaintiff, is not entitled to complain that they cannot be measured with the same exactness and precision as would otherwise be possible.'

In Anvil Min. Co. v. Humble, 153 U.S. 540, 14 S. Ct. 876, 38 L.Ed, 814, the Supreme Court held that mathematical certainty as to damage was not necessary, if the evidence `furnished a basis upon which a reasonable estimate' of the elements entering into the damage might be made. In the Hoffer Case, supra, we held that `a reasonable basis for computation, and the best evidence which is obtainable under the circumstances of the case and which will enable the jury to arrive at an approximate estimate of the loss, is sufficient.'"

In Wells Truckways v. Burch (10 Cir.), 247 F.2d 194, 196, 197, the court, after a comprehensive factual review, and with instant pertinence, said:

"There was, therefore, substantial evidence from which the jury could find loss of profits. Before recovery may be had for loss of future profits, it must be established by substantial evidence that such loss will occur. But when that is once established, it is not necessary that the exact amount of such loss be ascertained. It is then necessary only that the evidence be sufficient to enable the jury to reasonably approximate the amount of such loss."

In United States v. Griffith, Gornall and Carman, Inc. (10 Cir.), 210 F.2d 11, 13, a Federal Tort Claims Act suit by a contractor for damages caused by the flow of rain water from a government air base upon a concrete water pipeline under construction by the contractor, this court remanded to the trial court a judgment for the plaintiff with direction to eliminate from the trial court's judgment so much thereof as constituted an award of $15,000.00 for "injury and impairment of business, loss of earnings, destruction of credit and reduction of net worth" because of failure of proof of any such damage in the particular case. There was clearly a failure of such proof, coupled with evidence possibly reflective of the loss of gross receipts or "gross profits," so called, and a failure, despite the intimation of its availability, to show "net losses." Nevertheless, the opinion offers the following discussion reflective of the applicable decisional standard:

"Prospective profits are necessarily somewhat uncertain and problematical, but in cases where damages are definitely attributable to the wrong of the defendant and are only uncertain as to amount, they will not be denied even though they are difficult of ascertainment. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 51 S. Ct. 248, 75 L. Ed. 544; Kobe, Inc. v. Dempsey Pump Co., 10 Cir., 198 F.2d 416, 426, certiorari denied 344 U.S. 837, 73 S. Ct. 46, [97 L. Ed. 651]; Indian Territory Illuminating Oil Co. v. Townley, 10 Cir., 81 F.2d 159; Hoffer Oil Corp. v. Carpenter, 10 Cir., 34 F.2d 589, certiorari denied 280 U.S. 608, 50 S. Ct. 158, 74 L. Ed. 651. The loss of future profits from a regularly established business may in proper cases be established by showing that the profits after the wrong are less than past profits. 25 C.J.S., Damages, § 90; Palmer v. Connecticut Ry. & Lighting Co., 311 U.S. 544, 561, 61 S. Ct. 379, 85 L. Ed. 336; Eastman Kodak Co. of New York v. Southern Photo Materials Co., 273 U.S. 359, 47 S. Ct. 400, 71 L. Ed. 684; Kobe, Inc. v. Dempsey Pump Co., supra. This is often the only available evidence. The fact of damage, however, must be proved to a certainty. Mathematical exactness as to the amount is not required but the evidence must form a basis for a reasonable approximation. The court must have before it such facts and circumstances to enable it to make an estimate of damage based upon judgment, not guesswork."

And in the recent case of Garcia v. Mountain States Telephone and Telegraph Company (10 Cir.), 315 F.2d 166, 167, 168, 169, a suit by a dentist to recover against a telephone company damages for the negligent omission of the plaintiff's name from the latter's telephone directory's classified section, this court, for want of supportive evidence of damages, and on the ground that a motion for a directed verdict against the plaintiff should have been granted, affirmed a judgment of dismissal based on a jury's verdict for defendant. There, too, the plaintiff, in the way of proof, had relied — and it would seem, deliberately — upon proof of diminution of gross professional receipts rather than of net loss. The following instructive language is quoted from the opinion:

"In cases like this, the injured party may `recover damages for inconvenience, annoyance, discomfort and business interference without proving specifically the amount of pecuniary loss resulting therefrom.' Mountain States Telephone & Telegraph Co. v. Hinchcliffe, 10 Cir., 204 F.2d 381, 382. Once the injured party proves the fact of his damages with reasonable certainty, `recovery will not be denied because the damages are difficult of ascertainment.' Frank Bond and Son, Inc. v. Reserve Minerals Corp., 10 Cir., [65 N.M. 257,] 335 P.2d 858, citing Mountain States Telephone & Telegraph Co. v. Hinchcliffe, supra, and quoting from Stern v. Dunlap, 10 Cir., 228 F.2d 939, 943, where we said, `It is enough if the evidence adduced is sufficient to enable the court or jury, as the case may be, to make a fair and reasonable approximation (of the damages).' And see also United States v. Griffith, Gornall & Carman, Inc., 10 Cir., 210 F.2d 11; Palmer v. Connecticut Ry. & Lighting Co., 311 U.S. 544, 61 S. Ct. 379, 85 L. Ed. 336; Gould v. Mountain States Telephone and Telegraph Co., 6 Utah 2d 187, 309 P.2d 802; Corbin on Contracts, Vol. 5, Sec. 1020. But, the claimant most assuredly must establish his loss `by the most accurate basis possible under the circumstances. He must produce the best evidence reasonably obtained.' Mountain States Telephone and Telegraph Co. v. Hinchcliffe, supra; Restatement of Contracts, Sec. 331(1). Loss of profits, where reasonably ascertainable, have been the usual measure of compensatory damages in cases like these. Mountain States Telephone and Telegraph Co. v. Hinchcliffe, supra; Muskegon Agency v. General Telephone Co., 350 Mich. 41, 85 N.W.2d 170; Gould v. Mountain States Telephone and Telegraph Co., 6 Utah 2d 187, 309 P.2d 802. `To say that one is entitled to recover his net profit is another way of saying that he is entitled to recover what he actually lost, as a result of the other party's default. In other words, he is entitled to be made whole as a result thereof, to be placed financially where he would have been but for such breach. * * * Compensatory damages will be given for the net amount of loss or gain prevented by one's breach.' Resolute Ins. Co. v. Percy Jones, Inc., 10 Cir., 198 F.2d 309. See generally Corbin on Contracts, Vol. 5, Sec. 1022."

But the plaintiff in the Garcia case, as has already been observed, manifestly sought by his evidence to predicate his recovery on the diminution of his gross receipts, without, in any wise, relating that diminution to his probable, or even possible, loss of net earnings, which was what really mattered.

More exhaustive reflection of the judicial teaching in respect of the presentation of proof of damages in litigation comparable to the instant case appears presently to be unnecessary. Consideration has, by us, been accorded to such deliverances upon a broad pattern; and those cases immediately hereinbefore cited, although not exhaustive, appear to be, as well, reflective of generally prevailing opinion, as instructive concerning the pertinent, and ultimately controlling thinking of this court, and of the Supreme Court of the United States.

While, as has already been observed, supra, the appellant had been engaged generally in business as an importer for several years prior to 1960, the evidence indicates that his dealing in cork board and other cork products was initiated during the year 1960. He then began the purchasing of cork board from the appellee, and, of other cork products from another source not involved in this litigation. Early thereafter, however, the appellant began to purchase other cork products, as well as cork board, from the appellee, who thus became the prime source of the appellants' stock in trade.

By way of evidence in the trial, the appellant disclosed, (a) in the number of units, the quantity of cork board and cork products which he purchased from the appellee, (b) the total price in dollars which he paid therefor to the appellee, and (c) the net profit, in terms of dollars, which he realized therefrom, during each of the years, 1960, 1961 and 1962. For 1963, he similarly disclosed (a) the number of units, both of cork board and of other cork products by him purchased from the appellee, and the price in dollars by him paid therefor, and the amount in dollars of the net profit which, during 1963, he realized therefrom; and (b) the amount in dollars which he paid during that year for cork products by him acquired during that year from suppliers other than the appellee, and also the amount in dollars of the net profit which he realized from the products so acquired from other suppliers. The appellant also disclosed the amount, in terms of dollars, of net profits by him actually realized in 1964 from cork products by him theretofore acquired from the appellee, but disposed of during 1964.

From the authorities already cited, supra, it appears to be recognized that proof of a plaintiff's actual experience in the way of volume of business, and especially in the way of net profits, during a reasonable interval immediately preceding the impact of an actionable wrong of the sort here involved, is competent and instructive evidence, and is entitled to consideration, upon the subject of damages consequent upon such wrong. It provides a basis whereon, whether partially or exclusively, the trier of the facts may estimate and find such damages, for it points to the value of the enterprise against which a wrong is alleged.

Evidence was also received of the amounts, in terms of money, of purchases of cork products made from the appellee by certain of the former customers of the appellant, named in the confidential list of customers, supra, (after the appellee had solicited and obtained such list of customers), through the device of price lists materially undercutting the appellant's prices for like cork products. Naturally, that evidence came largely from representatives of such former customers of the appellant. Then, the appellant presented testimony by himself as to what his percentage of profit would have been on sales to such customers in like respective volumes. Evidence of that nature is obviously instructive in the present context. For those customers, prior to their solicitation by the appellee through his price lists, were regular customers of the appellant, who, in consequence of such solicitation, were induced to withdraw their patronage from the appellant, to his potential and actual economic injury, as a result of the impairment of his business. His abandonment by such enticed customers was inevitably reflected in damages to him. In passing, it may be recognized that some of the factors entering into the appellant's computation of such loss of profits as to accounts of the nature mentioned in this paragraph may well be of arguable validity. But obviously, that consideration goes to the evaluation and probative significance of the computation, not to the entitlement to consideration, of such loss of profits, as was reasonably established.

This court considers that, in the setting of the present litigation, the evidence thus adverted to, as presented by the appellant, within the meaning of the cited decisions of this court, supra, was and is of such character as to be "the best evidence which is obtainable under the circumstances of the case and will enable" the trier of the facts "to arrive at an approximate estimate of the loss," and, especially, was and is adequate to enable the trial court to determine and arrive at a conclusion respecting the damages sustained by the appellant and to enter judgment therefor.

Instead, the trial court "conclude(d) as a matter of law, that the plaintiff has failed to prove any damages, and by reason thereof his complaint should be dismissed," (emphasis added), and announced the entry of judgment accordingly. So doing, it rejected as quite uninstructive the appellant's testimony as to his sales and profits experience prior to the appellee's tortious approach to the appellant's confidentially disclosed customers.

And, as to the appellant's testimony touching the extent of profits he would have made from sales, in volume approximable to those few identified sales to his known established customers post-intrusively effected by the appellee, the trial court treated it as if it were designed directly to support an award to the appellant in the amount of the profit he would have made out of such sales, as such, upon the assumption that he would have effected them but for the misconduct of the appellee. The latter evidence deserved consideration as supportive of the persistence, within the pertinent trade area, of the market for cork products which the appellant had developed, and, before the appellee's invasion, had enjoyed, and the volume and potential profits thereof, as a factor in the admeasurement of damages consequent upon the unjustifiable piracy by the appellee of the appellant's customers, and, therefore, of his entire business. Whether the appellee would have made those sales, and if so in what volumes and amounts, was not the prime thrust of that evidence. It was, rather, the existence and persistence, and potential availability to the appellant, of the trade itself, and its significance in the ultimate solution of the question as to the amount of damage to the appellant resulting from the appellee's indefensible intrusion into the appellant's customer relations in their entirety, and not limited to the few customers identified in that particular evidence.

In passing, it is observed that throughout the trial, conducted, as has already been observed, under pressure manifestly arising out of the inadequacy of time for its presentation, the trial court held the appellant within rigid boundaries in the making of his proofs. Moreover, the trial judge did not hesitate explicitly to put aside and disregard, as patently incredible, several items of the appellant's testimony relevant to net profits, and therefore to damages, that were not the subject of controverting testimony. We readily recognize the right of a trial judge, in a case tried without a jury, to reject as untrue testimony though it be not directly disputed by contrary evidence. But that is a judicial prerogative which should be exercised only sparingly and with the utmost circumspection. Readiness to resort to it may well reflect an attitude that enters into the trial generally of a specific item of litigation wherein it is discernible. It is not here even intimated that such an influence was actually present in the trial of this case. It is, nevertheless, unfortunate that some of the thus rejected evidentiary statements are relevant to the issue of damages that was categorically and dispositively decided adversely to the appellant.

After mature consideration, it is concluded that the judgment herein of the trial court dismissing the complaint and this action on the ground of the failure of the appellant to prove his damages should be reversed, and that this action should be remanded to the trial court with instructions to determine and assess the appellant-plaintiff's damages, and to make and enter judgment therefor in favor of the appellant and against the appellee. Beyond such action, this court is persuaded that it should not presently proceed. It is convinced, especially, that it should not restrict the trial court in respect either of the amount of its eventual judgment, or in the manner of its arrival at such amount.

Order and judgment accordingly.