Westric Battery Co. v. Standard Elec. Co., Inc.
| Decision Date | 22 August 1975 |
| Docket Number | No. 74-1326,74-1326 |
| Citation | 522 F.2d 986 |
| Parties | WESTRIC BATTERY COMPANY, a Colorado Corporation, Plaintiff-Appellee, v. STANDARD ELECTRIC CO., INC., a Texas Corporation, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Kenneth C. Groves, Denver, Colo., for plaintiff-appellee.
Reed L. Winbourn, of Zarlengo, Mott & Zarlengo, Denver, Colo. (Clemens, Weiss, Spencer & Welmaker, by Theo Weiss, San Antonio, Tex., on the brief), for defendant-appellant.
Before SETH, HOLLOWAY and DOYLE, Circuit Judges.
Standard Electric, defendant in the trial court, seeks reversal of a judgment in favor of Westric Battery, which judgment is based on a jury verdict. Various items of damages were claimed and recovered on account of defective battery separators furnished by Standard Electric.
This is not our first encounter with the case. Our prior review occurred following a trial dating back to May 1972. On that occasion the jury had also found for the plaintiff and had awarded damages in the amount of $472,067.28. We affirmed that part of the judgment which imposed liability for breach of warranty. There was a remand for retrial of the damage issue alone. See Westric Battery Co. v. Standard Electric Co., 482 F.2d 1307 (10th Cir. 1973). Westric had sought recovery for loss of future profits and for impairment of capital all in addition to out of pocket loss, past profits and cost of the defective separators. Our opinion recognized generally Westric's entitlement to out of pocket losses and net profits, but reversed because the jury had been allowed to speculate on future profits and to award damages for indirect consequences of defendant's acts. It was felt that there had been remoteness of damages, duplication in the award and excessiveness.
At the most recent trial Westric was allowed to amend its complaint so as to demand damage to its good will. The several items and the amounts awarded were:
Damages for direct costs and expenses $112,705.71
Damages for loss of profits 64,804.00
Damages for cost of separators 18,953.00
Damages for good will 375,000.00
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TOTAL $571,462.71
The main contention now to be dealt with is the $375,000.00 item for alleged loss of good will. Appellants, not unsurprisingly, say that this is plainly excessive and lacking in genuine support in the record.
Appellant's secondary contentions are the alleged allowance of out of pocket losses until March 31, 1972 and the exclusion of certain of the testimony and exhibits.
In taking up the good will problem, we note our recognition in the prior opinion that good will has some potential in a case like the present one. As was said by the Supreme Court of Colorado: "Good will has long been accepted, and so treated, as an attribute of a business, trade or profession." Lerner v. Stone, 126 Colo. 589, 252 P.2d 533, 536 (1952). The Colorado court has not ruled in a context like the present one, but there is no dearth of authoritative support for damages arising out of injury to good will in breach of warranty occasioned by defective products. 1
Although intangible (and not easy to prove), 2 good will is nonetheless real. It is that which attaches to a business on account of name, location, reputation for competency and the imponderables which cause buyers to return.
Evidence by Westric to establish its loss consisted of testimony of Mr. Trombetta, vice president of another battery company. He testified to having considered purchase of Westric in 1968. Pursuant to this, he sent an employee to appraise it. Based on this appraisal, Trombetta concluded that Westric's good will had a value of from $250,000 to $500,000.
A second approach came from an expert, a Mr. Milliken, who calculated the value of Westric's good will in terms of the profits which it would have been expected to earn in addition to regular earnings had it not suffered injury as a result of appellee's faulty battery separators. These approaches have some support in the cases. See Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690 (5th Cir. 1975); Standard Oil Co. v. Moore, 251 F.2d 188, 219 (9th Cir. 1957), Cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958).
Although the law permits evidence of the kind we have outlined, this does not solve our problem. Thus, the trial court in its supplemental pretrial order permitted plaintiff to offer proof of damage to good will for all aspects of its business not limited to the golf cart portion. This, however, assumed that other damages to good will were related to the defective golf cart separators.
At the first trial Westric claimed and proved only that the separators for golf cart batteries were defective. At the second trial this was expanded. Mr. Hill, the owner of Westric, testified that the Standard separators were also used in the commercial batteries and the top lines of their automotive batteries. These were the same type as the ones used in the golf cart batteries. Further evidence disclosed the existence of a high rate of complaints as to defects in the automotive batteries; the Westric reputation deteriorated in this area also. The witness who testified to loss of good will in the automotive battery area did not testify that he knew anything about the golf cart battery failures. According to him, the loss of automotive battery good will all took place after 1968. By this time, according to Mr. Milliken's testimony, all of Westric's good will had dissipated.
In view of this time factor, we see no evidence whatever that Westric suffered good will loss in the automotive and commercial aspect of the battery business occasioned by failure of golf cart batteries. It necessarily follows that the jury's award of damages for loss of good will to the entire business is not well founded. We also have some doubts as to Mr. Trombetta's opinion in that it is based upon a hearsay report from an employee. There is a saving grace, and that is that Trombetta relied to a great extent on the location of the business; also on the fact that Mr. Hill personally had an excellent reputation for integrity and service which inured to the benefit of the business. Trombetta also was shown to have relied on the identity of the customers of Westric, some of whom were large wholesale distributors. Notwithstanding, though, that Trombetta's evidence becomes salient, we are unable to reconcile, assuming that Trombetta gave $500,000 value to good will, the fact that at least half of it was attributed to batteries other than for golf carts. The jury, as we have noted, awarded $375,000 total.
In view of the lack of connection of the auto battery good will to the main head of damage, the golf cart injury, we see no escape from the elimination of every semblance of automotive battery injury. We have pondered how to do this and have concluded that of the $375,000, if full value is given to the golf cart good will injury, an allowance of $250,000 would have some justification. Based on this, we have concluded that $125,000 must be eliminated and stricken from the good will award and that the judgment is to be amended accordingly.
Appellant complains that the award of $64,804 to cover loss of profits to the date of trial was invalid and excessive.
Our previous holding (in this case) was that the loss of net profits is recoverable if adequately proven. This proceeded from Lee v. Durango Music, 144 Colo. 270, 355 P.2d 1083 (1960) and Lockwood Grader Corp. v. Bockhaus, 129 Colo. 339, 270 P.2d 193 (1954), which cases stand for the rule that such losses resulting from the interruption of an established and a going business are recoverable. But this court ruled in the present context that profits are recoverable only to the extent that such profits result from conduct which hinders ability to produce. The upshot enunciated was that recovery for future profits beyond the trial date had to be considered remote since Westric's inability to produce (which was in law compensable) was temporary.
On retrial Westric sought damages for loss of good will and once again it sought $64,804 for loss of profits up to the time of the first trial. Mr. Maynard, Westric's expert, gave a value of $32,402 for loss of profits during 1969-70, and according to Mr. Hill, Westric's president, the company's ability to produce batteries was severely limited due to its preoccupation with repairing and replacing defective batteries to its customers. The expert witness, Mr. Milliken, testified to the same effect. As a result of this testimony, the amount claimed could be considered attributable to the impairment of Westric's ability to produce.
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