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Champs Convenience Stores Inc. v. United Chemical Co.8/14/1991
nses when computing the lost profits. We note that the rent payments were clearly denominated as "rent" on the expenses portion of the income statement, which was introduced as evidence at trial, and these payments were deducted as expenses when computing lost profits. Defendant is correct that the income statement did not include a specific category denominated as "note payments" under the expense column. However, Michael Smith, the certified public accountant who prepared the income statement at issue here and who testified at trial as an expert for plaintiff, gave a complete explanation during his testimony as to why the note payments were not deducted as an expense. During cross-examination, the following exchange took place between Smith and defendant's counsel:
Q. Why do you say that the portion of the note payments that's attributable to the principal, why is that not a proper expense?
A Because it's reducing the note itself, and that note has been allocated between some of the items that you mentioned[:] good will, the purchase of inventory, the purchase of equipment. And so the good will is being amortized over a sixty- month period, the depreciation is being amortized -- the equipment is being depreciated over a seven-year straight-line method, which in effect you wind up getting a deduction for those note repayments because you've got a corresponding liability at the time that the business was acquired.
Smith had already testified that he used generally accepted accounting procedures when he performed the tasks required for preparing the reports presented at trial, which would include the income statement. Smith further testified that both amortization expenses which were for the amortization of good will and depreciation expenses for the equipment cost acquired when the business was purchased were deducted as expenses from the gross profits along with the other expenses in arriving at the net income figure which was used to compute lost profits. Thus, we conclude, as Smith testified at trial, that the amortization and depreciation expenses which were deducted as expenses in arriving at lost profits reflect the component parts of the note payments, and therefore there was no double recovery as asserted by defendant.
In addition to claiming that plaintiff is receiving a double recovery by being allowed to collect for the rent and note payments made while the building was being repaired, defendant contends that note payments and rent payments are indirect costs of doing business, or overhead, and that overhead can be an element of damages in a contract case but not in a tort case. Defendant claims to have found no North Carolina cases allowing overhead as an item of damage in a tort case.
In a tort action the general rule in North Carolina is that a plaintiff is "entitled to recover an amount sufficient to compensate . . . for all pecuniary losses sustained . . . which are the natural and probable result of the wrongful act and which . . . are shown with reasonable certainty by the evidence." Huff v. Thornton, 287 N.C. 1, 8, 213 S.E.2d 198, 204 (1975) (plaintiffs allowed to recover for damage to their home as well as for loss of use of their home while it was under repair from the damage sustained when defendants' trucks struck the residence). The focus of recovery of damages in a tort action is whether the consequences were the natural and probable result of the wrong which is different from the focus in contract actions which is whether the consequences were within the legal contemplation of the parties. Steffan v. Meiselman, 223 N.C. 154, 25 S.E.2d 626 (1943). Th
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