Forest's Mens Shop v. Schmidt

• Citation: 536 So.2d 334,14 Fla. L. Weekly 22
• Decision Date: 21 December 1988
• Docket Number: No. 87-0326,87-0326
• Parties: 14 Fla. L. Weekly 22 FOREST'S MENS SHOP and Ladies Den of Stuart, Appellants/Cross Appellees, v. Richard L. SCHMIDT and Charles E. Schmidt, Jr., as trustees d/b/a Monterey Shopping Plaza, Appellees/Cross Appellants.
• Court: Court of Appeal of Florida (US)

Page 334

536 So.2d 334

14 Fla. L. Weekly 22

FOREST'S MENS SHOP and Ladies Den of Stuart, Appellants/Cross Appellees, v. Richard L. SCHMIDT and Charles E. Schmidt, Jr., as trustees d/b/a Monterey Shopping Plaza, Appellees/Cross Appellants.

No. 87-0326.

District Court of Appeal of Florida, Fourth District.

Dec. 21, 1988.

Steven L. Perry of Crary, Buchanan, Bowdish & Bovie, Stuart, for appellants/cross appellees.

Glenn N. Smith and Brian S. McHugh of Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A., Fort Lauderdale, for appellees/cross appellants.

WEBSTER, PETER D., Associate Judge.

Appellant (plaintiff below) appeals, and appellees (defendants below) cross appeal, from a final judgment, entered after a nonjury trial, awarding appellant $18,000.00 in lost profits. The parties agree that there is no evidentiary support for the award made by the trial court. However, that is the extent of their agreement. Appellant argues that it established lost profits, reduced to present value, of $486,837.00, and that the judgment should have been for that amount. On the other hand, appellees argue that no competent evidence was offered to establish lost profits in any amount, and that, therefore, the judgment should have awarded nominal damages only. A summary of the evidence follows.

Perry J. Smith is the sole stockholder in, and president of, appellant Forest's Mens Shop and Ladies Den of Stuart (hereafter "Forest's"), a retail men's and ladies' wear store. Forest's opened a store in Stuart Florida, in 1981. In 1982, the store moved into the Monterey Shopping Plaza (hereafter "Monterey") which is owned by appellees, as trustees.

Initially, Forest's leased space at Monterey designated units 46 and 47, which included some 2,000 square feet. Forest's installed a second floor, which increased its sales space to approximately 3,300 square feet.

While Smith had managed the store since 1974, he did not become the sole owner until 1984. Shortly after Smith became the sole owner of the store, the space designated unit 48, consisting of some 800 square feet, became available. Unit 48 was separated from the space leased by Forest's by a hallway (designated unit 47A) which connected a parking area with other stores. The hallway consisted of some 400 square feet.

Smith immediately approached Monterey with a proposal that Forest's be permitted to lease both unit 48 and unit 47A (the hallway). Smith planned to physically incorporate unit 47A into the newly-expanded store, while continuing to allow customer and tenant movement through that space. He intended to use the additional space to expand the store's inventory of existing merchandise and to add new lines, as well.

Monterey accepted Smith's proposal and, on February 26, 1985, Forest's and Monterey executed separate leases for units 47A and 48. Each was for a 92-month term. The lease for unit 47A required Forest's to pay rent on only one-half of the total square footage in recognition of the fact that, although the space would be physically incorporated into the expanded store, customers and tenants would continue to be free to use it as a passageway.

Forest's commenced construction necessary to incorporate the new space, incurring out-of-pocket costs of approximately $13,000.00 to $15,000.00. It also purchased approximately $60,000.00 to $70,000.00 worth of additional merchandise in anticipation of the expansion.

In May 1985, approximately three months after the leases had been signed and less than two months after the commencement of the lease term, Monterey told Forest's that it would not be possible to honor the lease for unit 47A because other tenants had objected. Monterey also told Forest's that if, in light of this development, Forest's no longer wished to lease unit 48, Monterey would let Forest's out of that lease. Monterey offered to reimburse Forest's for out-of-pocket costs incurred in physically setting up the new store. Two months later, Forest's responded that, if it could not lease unit 47A, it did not wish to lease unit 48.

Attempts to settle the dispute were unsuccessful, and Forest's filed suit, seeking damages. Prior to completion of the trial, Forest's explicitly waived any claim for out-of-pocket damages, electing instead to proceed exclusively on the theory that it was entitled to recover lost future profits.

At trial Forest's failed to offer any of its financial records in support of its claim for lost profits. Instead, Perry Smith testified, in a conclusory fashion, that based on past experience he estimated that the gross profit which would have been realized from the use of the additional space would have been approximately $80,000.00 per year. Multiplying this figure by the remaining lease term, Smith testified, again in a conclusory fashion, that total lost profits were approximately $640,000.00. Kevin Kenney, Forest's certified public accountant, testified, also in conclusory terms, that, in his opinion, the business is a profitable one. Finally, Dr. Merle Dimbath, an economist retained by Forest's, testified that he had developed an analysis of Forest's "economic loss" and that, based upon that analysis, he concluded that Forest's had lost $650,282.78 in profits which it would have realized over the term of the leases. He testified that, reduced to its present value, the amount of lost profits was $486,837.00.

Forest's financial statements for the periods ending September 30, 1984 and September 30, 1985, were offered in evidence by Monterey. The financial statement for the period ending September 30, 1984, reflects gross sales of $484,253,70; a net loss of $18,930.99 ($11,794.99 if depreciation is disregarded); a negative stockholder's equity of $26,673.04; and a decrease in working capital from $214,955.26 to $150,734.66. The financial statement for the period ending September 30, 1985, reflects gross sales of $546,240.01; a net loss of $30,797.13 ($20,254.13 if depreciation is disregarded); a negative stockholder's equity of $57,955.17; and a decrease in working capital to $60,092.22. Neither financial statement reflects compensation to Smith disproportionate to his duties. (On the contrary, the financial statement for the period ending September 30, 1984, reflects compensation to Smith of only $7,064.38.)

Monterey also presented the testimony of Alan Fiske, a certified public accountant, and Gordan Douglas, an economist. Fiske testified that, based upon Forest's financial records, Forest's had had a history of losses, rather than profits. While its sales had increased, they had been accompanied by losses which had increased at an even greater rate. In Fiske's opinion, Forest's losses established that it was not a viable business and that, therefore, there was no factual basis upon which lost...