ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
MYRL O. WILKINSON STEPHEN L. TRUEBLOOD
ANTHONY R. JOST JAMES B. ORGAN
Wilkinson, Goeller, Modesitt, Trueblood Law Firm
Wilkinson and Drummy Terre Haute, Indiana
Terre Haute, Indiana
TURBINES, INC., ) ) Appellant- Plaintiff, ) ) vs. ) No. 84A05-9603-CV-114 ) REX EUGENE THOMPSON, ) ) Appellee-Defendant. )
Appellant-Plaintiff Turbines, Inc. (hereafter referred to as "Company") sued Rex
Thompson for breach of a covenant not to compete. After a bench trial the trial court
awarded damages in Company's favor. Company now appeals contending the damage award
is inadequate. We affirm.
Company repairs, rebuilds, and sells turbine engines for crop-duster airplanes. Thompson, a highly skilled engine builder, was employed by Company for approximately nine years. Because of a decline in business Company terminated Thompson's employment in March 1994. Upon termination Company paid Thompson $12,000.00 in compensation. In return Thompson signed a written agreement prohibiting him, for a period of one year, from entering a business in competition with Company or soliciting business from Company's existing or former customers. The agreement did not contain a liquidated damages clause. After leaving Company Thompson began his own engine repair business. He also began soliciting Company's former customers. As a result Company filed suit. After a bench trial the trial court determined that Thompson had breached the non-competition agreement and entered judgment in Company's favor for $19,623.32. At Thompson's request the trial court entered specific findings and conclusions in support of its judgment. This appeal ensued in due course. Additional facts are set forth below where relevant.
Company contends the damage award is insufficient as a matter of law. Pointing to evidence of record that shows Thompson received gross profits in excess of one hundred thousand dollars during the period covered by the non-competition agreement, Company argues a proper award of damages should reflect that amount.
Upon review of a judgment supported by special findings and conclusions this court
applies a two-tiered standard: first, we determine whether the evidence supports the findings;
second we determine whether the findings support the judgment. The trial court's findings
and conclusions will be set aside only if they are clearly erroneous. W & W Equipment Co.,
Inc. v. Mink, 568 N.E.2d 564 (Ind. Ct. App. 1991) trans. denied. Findings of fact are clearly
erroneous if the record lacks any facts or reasonable inferences to support them. DeHaan v.
DeHaan, 572 N.E.2d 1315 (Ind. Ct. App. 1991), trans. denied. In determining whether the
special findings and judgment are clearly erroneous, we will not reweigh the evidence or
judge witness credibility. Id. Rather, we must accept the ultimate facts as stated by the trial
court if there is evidence to sustain them. Citizens State Bank v. Peoples Bank, 475 N.E.2d
324 (Ind. Ct. App. 1985). Also, where, as here, a party has the burden of proof at trial and
an adverse judgment is entered, if the party prosecutes an appeal, he does so from a negative
judgment. When appealing a negative judgment the party must show that the evidence points
unerringly to a conclusion different from that reached by the trial court. Aetna Cas. & Sur.
Co. v. Crafton, 551 N.E.2d 893 (Ind. Ct. App. 1990).
The record shows that Thompson solicited business from four of Company's customers, namely: Crowley-Ridge Aviation, Air Force Turbine Services, Ohio Turbine Center, Inc., and Turbine Power, Inc. As to each customer the trial court determined the amount of lost profits, if any, Company suffered as a result of Thompson's conduct. Except for Crowley Ridge Aviation, Company challenges the trial court's determination. We address each company in turn.
question is whether those fees or receipts would have gone to Company if Thompson had not
solicited the business. The record shows the disputed funds were paid to Thompson for
certain welding work he performed for Ohio Turbine. Robert Ruhe, an official of Ohio
Turbine, testified that he had been a customer of Company in the 1970's, but the relationship
ended after a disagreement that led to litigation. He continued as follows:
Q. Bob are you testifying that if Rex Thompson had not done this welding for you that you definitely would have given that work to Jim MillsSee footnote 1 as opposed to anybody else?
A. At that time I would say that Jim and I were still quite adversarial and that
he wouldn't have gotten any of it.
R. at 683. The forgoing testimony supports the trial court's finding that Ohio Turbine Center
would not have placed the welding business with Company. Consequently, profits
Thompson received from Ohio Turbine Center would not have gone to Company in any
event. Because the trial court's findings are supported by the evidence they are not clearly
erroneous, and therefore will not be set aside. W & W Equipment Co., supra.
"[could]not be sure whether the decline in revenues was merely cyclical or was the product
of Thompson's competition." R. at 207-08. Concluding that only a percentage of the decline
was attributable to Thompson's competition, the trial court calculated Company's revenue
loss at $7,150.26.
Company contends the trial court erred in measuring damages based on its loss in revenue as opposed to Thompson's gross receipts. Also, Company challenges the trial court's method of calculation. Absent an enforceable liquidated damages clause, lost profits are a proper measure of damages in actions involving covenants not to compete. Hahn v. Drees, Perugini & Co., 581 N.E.2d 457 (Ind. Ct. App. 1991); see also 25 C.J.S. Damages § 79(d). ("The measure of damages for breach of a contract . . . restraining competition is the loss of profits sustained by the injured party."). Here, Company acknowledges that lost profits are an appropriate measure of damages. It suggests however that lost profits can be measured only by the amount of gross receipts Thompson received from Turbine Power. We disagree. First in awarding lost profits, net profits, and not gross profits, are generally the proper measure of recovery. Ashland Pipeline Co. v. Indiana Bell Tel. Co., Inc., 505 N.E.2d 483 (Ind. Ct. App. 1987) reh'g denied. Thus to the extent that gross receipts in this case are the equivalent of gross profits they are an inappropriate measure of recovery. Second, Thompson's gross receipts, while reflecting a gain to Thompson, does not necessarily reflect damage to Company. Rather, as with Ohio Turbine, the question here is whether the revenues Thompson received from Turbine Power would have gone to Company but for Thompson's interference. Company contends that its lost profits ranged from $134,376.29
to $255,333.89. These figures apparently represent the gross receipts Thompson received
from Turbine Power, Inc. Company points to no evidence of record suggesting that it has
ever conducted the volume of business for Turbine Power necessary to generate the forgoing
revenue. Nor does Company point to any evidence of record suggesting that it would have
conducted that volume of business for Turbine Power but for Thompson soliciting the
business. In essence Company failed to demonstrate that its lost profits were in any way
related to the gross receipts Thompson received from Turbine Power, Inc. To the contrary,
Company introduced into evidence Plaintiff's Exhibit 25 showing the revenue it received
from Turbine Power, Inc., from 1993 to 1995. R. at 920. The amounts and their decline
were reflected in the trial court's finding. Again, because the trial court's findings are
supported by the evidence they are not clearly erroneous, and therefore will not be set aside.
W & W Equipment Co., supra.
Company's argument challenging the trial court's method of calculation also fails. The trial court first found that the evidence was unclear whether Company's decline in revenue from Turbine Power was due to the cyclical nature of the business or from Thompson's competition. Next, the trial court found that three fourths of Company's decline in revenue from 1993 to 1994 and one fourth of Company's decline in revenue from 1994 to 1995See footnote 2 were the result of Thompson's competition and calculated an award accordingly. A damage award does not require any specific degree of certainty, so long as the amount
awarded is supported by the evidence and is not based on speculation or conjecture. National
Advertising Co. v. Wilson Auto Parts, Inc., 569 N.E.2d 997 (Ind. Ct. App. 1991). Even
where the amount is uncertain, lost profits as an element of damages still may be awarded
if the evidence is sufficient for the fact-finder to make a fair and reasonable determination.
Farm Bureau Mut. Ins. Co. v. Dercach, 450 N.E.2d 537 (Ind. Ct. App. 1983) reh'g denied.
In this case the record is clear that the amount of Company's lost profits due to Thompson's
competition was uncertain at best.See footnote
The record shows that Company's business was cyclical,
and revenues Company received from different customers including Turbine Power varied
significantly from year to year. Although the record supports the conclusion that Company
suffered some amount of lost profits, Company failed to carry its burden of demonstrating
the loss attributable to Thompson's competition versus the loss attributable to the cyclical
nature of its business. By attributing a fractional portion of lost profits to Thompson's
competition, the trial court acted well within the evidence. We find no error on this issue.
Finally Company complains that in addition to lost profits it was also entitled to the loss of value to its business as an element of damage. The trial court entered no findings in that regard and Company asserts error. As we have already indicated lost profits are a proper measure of damages in actions involving covenants not to compete. Hahn, supra. To support its argument that it is entitled to loss in business value in addition to lost profits Company cites Lawrence v. Cain, 144 Ind. App. 210, 245 N.E.2d 663 (1969). However Lawrence
stands for no such proposition. In that case plaintiff sought injunctive relief and damages for
breach of a covenant not to compete. The trial court entered damages against the breaching
party and on appeal we reversed holding that the non-breaching party failed to prove
damages. In so doing we noted:
In our opinion it was also incumbent upon appellant to show that the good will of the business had been impaired or destroyed, or that there had been a loss in the value of the property, or a loss of profits by reason of appellees' breach of the contract.
Id. at 668 (emphasis added) quoting Gewartowski v. Tomal et al., 125 Ind. App. 481, 123
N.E.2d 580 (1955). Clearly the various measures of damage in Lawrence are set forth in the
alternative. Contrary to Company's argument it was not entitled to loss in value as well as
lost profits. The trial court did not err in failing to enter findings on this issue.
BARTEAU, J., and KIRSCH, J., concur.
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