Pena v. Ludwig

• Decision Date: 19 January 1989
• Docket Number: No. 10-87-179-CV,10-87-179-CV
• Citation: 766 S.W.2d 298
• Parties: Al PENA, Individually and D/B/A Alco Industries, Appellant, v. Debbie LUDWIG, Appellee. Waco
• Court: Texas Court of Appeals

Page 298

766 S.W.2d 298

Al PENA, Individually and D/B/A Alco Industries, Appellant, v. Debbie LUDWIG, Appellee.

No. 10-87-179-CV.

Court of Appeals of Texas,

Waco.

Jan. 19, 1989.

Rehearing Denied Feb. 16, 1989.

Charles M. McDonald, Tina M. Koemel and Dick Kettler, McDonald, Harmon & Malone, Waco, for appellant.

Greg M. Dykeman, Strong, Pipkin, Nelson & Bissell, Beaumont, for appellee.

OPINION

THOMAS, Chief Justice.

This appeal involves the Texas Deceptive Trade Practices Act (DTPA). See Tex.Bus. & Com.Code Ann. §§ 17.41-.63 (Vernon 1987 and Vernon Supp.1989). Debbie Ludwig, appellee, sued Alfred Pena, appellant, after he undertook to remodel a building which Ludwig intended to use as a hairstyling shop. She alleged Pena misrepresented the quality of his carpentry, plumbing and electrical services and breached express and implied warranties. The jury answered all liability issues in Ludwig's favor and awarded her $3,000 cost of repairs, $5,000 lost profits, $500 exemplary damages, and $7,000 attorney's fees. The court entered a $31,500 judgment for Ludwig by trebling actual damages to $24,000 and then adding the trebled sum to the award of attorney's fees and exemplary damages.

Questions on appeal relate to the court's trebling of actual damages, the evidentiary support for recovery of cost of repairs and lost profits, the charge, and an alleged comment on the weight of the evidence. The judgment will be reformed to delete $17,000 from Ludwig's recovery, but will be otherwise affirmed.

Only the "trier of fact" has the discretionary authority under the DTPA to treble actual damages in excess of $1,000. Id. at § 17.50(b)(1) (Vernon 1987); Martin v. McKee Realtors, Inc., 663 S.W.2d 446, 448 (Tex.1984). If the jury awards actual damages, then the court must award "two times that portion of the actual damages that does not exceed $1,000." Id.

Ludwig concedes the court could not treble actual damages because it was not the fact-finder. The jury awarded actual damages, which required the court to award an additional $2,000 by doubling the first $1,000 of actual damages. See id. Therefore, Pena's first point attacking the court's authority to treble actual damages is sustained.

Pena questions in his second and third points whether the evidence was legally and factually sufficient to support the award of $5,000 lost profits. He contends Ludwig could not recover lost profits because her business was new and unestablished and because she failed to provide objective evidence from which the jury could calculate lost profits with reasonable certainty. He also argues she failed to prove a causal connection between lost profits and his wrongful conduct.

Lost profits may be recovered if they are the natural and probable consequences of wrongful conduct and their amount is shown by competent evidence with reasonable certainty. Southwest Battery Corporation v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098-99 (1938). Proof to a mathematical exactness is not required because measuring lost profits is an inherently speculative undertaking. White v. Southwestern Bell Tel. Co., Inc., 651 S.W.2d 260, 262 (Tex.1983); Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340, 348 (1955). Even the rules by which lost profits are measured cannot be exactly stated. Pace Corporation, 284 S.W.2d at 348. Thus, a defendant cannot escape liability merely because the plaintiff cannot state or prove a perfect measure of lost profits. Id.

Lost profits are usually proved by comparing the business done by the plaintiff's established concern during a not-too-remote comparable base period with the business done by plaintiff's concern during the comparable period for which recovery is sought. Southwest Battery Corporation, 115 S.W.2d at 1099. Lost profits may also be recovered for the normal increase in business which might reasonably be expected to have occurred, in light of past developments and existing conditions, over the business actually done in the base period. Id.

Lost profits of a new or unestablished business generally cannot be proved to a reasonable certainty due to the absence of a prior base period for comparison. See id. However, lost profits may be recovered for a new enterprise, if factual data is otherwise available to furnish a sound basis for computing probable losses. Universal Commodities, Inc. v. Weed, 449 S.W.2d 106, 113 (Tex.Civ.App.-Dallas 1969, writ ref'd n.r.e.); see Pace Corporation, 284 S.W.2d 340. Whether the evidence is sufficient to support a finding of lost profits must be determined from the facts of each case. Automark of Texas v. Discount Trophies, 681 S.W.2d 828, 829 (Tex.App.-Dallas 1984, no writ).

Ludwig, at age thirty-seven, was an experienced hairstylist and instructor, having worked in at least ten hairstyling shops and owned four shops over fifteen years. She kept the books, made the day-to-day business decisions involved in managing her shops, and was primarily responsible for designing, decorating and promoting the successful opening of at least three of her own shops. Dwight Belicek, the owner of Armstrong-McCall Wholesale Beauty Supply, described her as an "expert," "very, very smart," and "very, very business minded." She had a reputation as a shop owner, according to Belicek, for knowing "the insides and outs of profits and books" and for being a "very sharp business person when it comes to advertising and setting up ... [a new shop]."

Ludwig and her husband bought and remodeled a building in the Midway Center to start their first hairstyling shop, but growth in business forced them in May 1985 to move the shop to a larger building in the Hewitt Plaza. The relocated shop, which they renamed Lone Star Barber & Hairstyling, was still in operation at the time of the trial. Ludwig and her husband then divorced under an agreement which apparently gave him the Lone Star shop, allowed her to start new shops, but prohibited her from directly soliciting Lone Star customers.

Ludwig decided in late May 1986 to open a new shop in the Hewitt Plaza, just "around the corner" from her ex-husband's Lone Star shop, and picked June 30 as the target date for the opening. She leased space for the shop on June 2, entered into an oral contract with Pena in the first week of June to do the carpentry, electrical and plumbing work necessary to ready the premises for occupancy, bought furniture and fixtures, and arranged a $3,000 bank loan. Pena agreed to finish the remodeling within one week from the date he started. Despite repeated pleas from Ludwig and after numerous excuses for delay on his part, Pena finally abandoned his uncompleted work on July 16, five weeks after he started. Ludwig immediately employed Collier Electric, A-1 Plumbing, and carpenter John Boykin to repair the electrical, plumbing and carpentry work which Pena had improperly done and to finish remodeling the premises. She finally opened on July 28 under the name "Haircrafters" with three hairstylists.

Haircrafters was still in business, but had not yet earned a profit, when the suit against Pena was tried eleven months later. Ludwig attributed Haircrafters' lack of profit to her inability to advertise the opening and operation of the new shop. She claimed Pena's shoddy work and delay forced her to use the proceeds from the $3,000 loan, which she had intended to use for direct mail advertising, to repair and complete the abandoned work and to pay her living expenses. The bank refused to loan her another $3,000 for advertising, and Haircrafters could not generate funds for direct mail advertising between its opening and the trial because it was barely paying its rent and utilities.

Ludwig contended that advertising, particularly direct mail zone advertising, is vital to the opening of any new hairstyling shop. Dwight Belicek ranked television advertising higher than direct mail, but agreed that opening a new shop without advertising its existence would be "financial suicide." Ludwig claimed that Haircrafters would have been as profitable as Lone Star's initial operation, if she could have obtained the funds to advertise. Belicek described Haircrafters as a "very nice shop" and knew of no reason why it would not be successful if people knew of its existence. He believed that two shops located near each other, both equally as nice and operated the same way, would have similar profits.

Ludwig used the $35,000 profit, which she said Lone Star earned over a six-month period in 1985, as the basis for estimating Haircrafters' lost profits during the eleven-month period between its opening and the date of the trial. She first doubled Lone Star's six-month profit to obtain an annual profit of $70,000, then multiplied the $70,000 annual profit by 11/12ths ($70,000 X 11/12ths = $64,167) to calculate Lone Star's profit for a base period comparable to the eleven-month period for which she was seeking recovery of lost profits by Haircrafters. Next, she divided Lone Star's eleven-month profit by six ($64,167 / 6 = $10,694) to determine the average amount of profit produced by each of Lone Star's six hairstylists during the eleven-month base period. Finally, she multiplied $10,694 by 3 ($10,694 X 3 = $32,083) to calculate the total profit that three hairstylists working at Haircrafters should have produced from its opening to the date of the trial. These figures exclude Ludwig's inconsequential miscalculations in her testimony. Then, to allow for "unforseen situations ... and to take in all possibilities," Ludwig arbitrarily reduced her estimate of Haircrafters' lost profits from $32,083 to $15,000.

Ludwig had opened another Haircrafters shop in October 1986 on the Texas State Technical Institute campus, which was still operating when the suit was tried in June 1987. The campus shop had been opened and operated, according to Ludwig, with sufficient advertising. She testified that in 1987 each full-time hairstylist at the campus shop would produce an...