Lead Opinion
OPINION
This case presents two questions: 1) whether the trial court abused its discretion in denying the motion of defendant Holt Atherton Industries, Inc. to set aside default judgment and for new trial; and 2) whether there is any evidence to support recovery of lost profits. We hold that the trial court did not abuse its discretion in denying the motion for new trial and that the evidence is legally insufficient to support recovery of lost profits. Therefore, we affirm in part and reverse in part the judgment of the court of appeals.
In January 1987, Roy and Kitty Heine took their bulldozer to Holt Machinery Company for repairs under an alleged oral warranty. Holt Machinery did not recognize the oral warranty. The bulldozer remained in the possession of Holt Machinery but it was not being repaired because Holt Machinery did not recognize the warranty and the Heines did not agree to pay for repairs. In August of 1987, Holt Machinery merged into Holt Atherton Industries, Inc. Holt Atherton then merged into B.D. Holt Company. In September of 1987, the Heines agreed to pay for the repairs to their bulldozer. In March 1988, the Heines brought this action against B.D. Holt, B.D. Holt Co., and Holt Co. of Texas alleging violations of the Deceptive Trade Practices Act (Tex.Bus. & Com.Code §§ 17.41-17.63), breach of express and implied warranties, breach of contract, negligence, and tortious interference with business relations. In July 1988, the Heines’ Second Amended Original Petition added Holt Atherton as a defendant and was properly served on Holt Atherton’s registered agent, Stevenson Atherton. In August 1988, the trial court rendered default judgment against Holt Atherton due to its failure to appear and answer. The Heines severed their cause of action against Holt Atherton to obtain a final judgment. Subsequently, the trial court stayed the actions against the other defendants pending the outcome of this appeal. Holt Atherton moved to set aside the default judgment and for new trial. The trial court denied Holt Atherton’s motion, and the court of appeals affirmed.
I.
A trial court’s discretion in determining whether to grant a new trial after the court renders a default judgment must be referenced to the guiding rule set out in Craddock v. Sunshine Bus Lines,
A default judgment should be set aside and a new trial ordered in any case in which [1] the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; provided [2] the motion for a new trial sets up a meritorious defense and [3] is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff.
Craddock,
When applying the Craddock test, the trial court looks to the knowledge and acts of the defendant as contained in the record before the court. Strackbein v. Prewitt,
The evidence introduced by Holt Atherton in support of its motion for new trial was uncontroverted by the Heines. Therefore, the trial court could accept this evidence as true and apply the Craddock requirements. The only evidence Holt Ath-erton presented to the trial court to negate intentional disregard or conscious indifference was the affidavit of Stevenson Ather-ton, which states:
The failure of the corporation to file an answer herein was due to accident and mistake due to the complete lack of any knowledge as to the facts or circumstances involved in this cause. Holt Ath-erton Industries, Inc. has never done any business with Roy or Kitte [sic] Heine, nor repaired any type of equipment nor provided any type of service of any kind to either Roy or Kitte [sic] Heine. The corporation known as Holt Atherton Industries, Inc. has not been actively involved in the operation of a business that repairs heavy equipment of any type during the time period set forth in the Heme’s [sic] lawsuit.
Holt Atherton argues that its motion and affidavit established that it failed to answer due to an accident or mistake. Ather-ton’s statement that no answer was filed “due to accident and mistake” is merely a conclusory allegation. There is no explanation of the nature of the mistake. The factual allegations only serve to set up a meritorious defense. There are no factual allegations supporting the first part of the Craddock test. The essence of Holt Ather-ton’s evidence is that it did not file an answer because Stevenson Atherton did not think Holt Atherton could possibly be held liable.
The trial court did not abuse its discretion in denying the motion because it could have concluded, based on the evidence before it, that Holt Atherton’s failure to answer was intentional or due to conscious indifference. There was no support given to the allegation of mistake or accident. Because we hold that the first element of the Craddock test was not satisfied, we do not reach the other two elements.
II.
Once a default judgment is taken on an unliquidated claim, all allegations of fact set forth in the petition are deemed admitted, except the amount of damages. Morgan v. Compugraphic Corp.,
Holt Atherton argues that there is no evidence supporting the trial court’s award of damages for lost profits. “In a nonjury trial, where no findings of fact or conclusions of law are filed or requested, it will be implied that the trial court made all the necessary findings to support its judgment.” Burnett v. Motyka,
Recovery for lost profits does not require that the loss be susceptible of exact calculation. White v. Southwestern Bell Tel. Co.,
The Heines’ testimony was the only evidence presented concerning their lost profits and can be divided into two segments. First, Mr. Heine was examined by his counsel. Then, the trial judge questioned both Heines.
When Mr. Heine was examined by his counsel, only one question was asked which touched on lost profits. The relevant question and answer are:
Q. Now as a result of the defendant keeping the dozer for eight months, did you lose out on $200,200 in lost income during that time period?
A. Yes, sir, I did.
Even if this testimony were otherwise sufficient, lost income is not the correct measure of damages. See supra note 1. Further, this testimony is legally insufficient because it does not provide any indication of how the Heines determined what their lost profits were. See, e.g., Village Square, Ltd. v. Barton,
After the Heines’ counsel completed his questions, the trial judge asked additional questions to determine what the Heines’ lost profits were and how the Heines concluded that their lost income was $200,200. The judge started out by questioning Mr. Heine. Mr. Heine could not provide answers to the judge’s questions but suggested that Mrs. Heine could be more helpful because she kept the books for the Heines. Mrs. Heine testified that she could not say what their lost profits were without look
There are two problems with this analysis. First, the Heines never offered any evidence showing that there was enough work to keep two bulldozers working full-time over the relevant thirteen month period. This is particularly significant here because the Heines testified that there had not been enough work in the preceding years to keep both bulldozers working full-time.
In response to further questions by the trial judge, Mr. Heine testified that the Heines lost several contracts because they did not have their bulldozer available. Mr. Heine was not able to specify which contracts they lost, how many they lost, how much profit they would have had from the contracts, or who would have awarded them contracts. The Heines could have supported their lost profits with testimony that they had lost out on specific contracts because they did not have their bulldozer available. See Pace Corp. v. Jackson,
The testimony elicited by the trial judge provides pieces of several different methods of calculating lost profits. However, the Heines were not able to provide evidence supporting one complete calculation. Recovery of lost profits must be predicated on one complete calculation. See, e.g., Fleming Mfg. Co. v. Capitol Brick, Inc.,
III.
We affirm the court of appeals’ holding that the trial court did not abuse its discretion in denying Holt Atherton’s motion for new trial and reverse the court of appeals’ holding that the evidence supporting an award of lost profits was legally sufficient. As a general matter, when we sustain a no evidence point of error after a trial on the merits, we render judgment on that point. Tex.R.App.P. 81(c); Mobil Oil Corp. v. Frederick,
After a default judgment is granted, the trial court must hear evidence of unliquidated damages. Tex.R.Civ.P. 243. However, as a practical matter, in an uncontested hearing, evidence of unliquidated damages is often not fully developed. This is particularly true when the trial judge expresses a willingness to enter judgment on the evidence that has been presented. Therefore, when an appellate court sustains a no evidence point after an uncontested hearing on unliquidated damages following a no-answer default judgment, the appropriate disposition is a remand for a new trial on the issue of unliquidated damages.
We remand the cause to the trial court for a new trial on the issue of lost profits.
Concurring and dissenting opinion by Justice DOGGETT joined by Justice MAUZY.
Notes
. The trial court’s judgment includes the §120,-000 as "Loss of Income Due to Absence of Dozer.” Holt Atherton notes that the correct measure of damages is lost net profit, not gross profits. See Turner v. PVInti Corp.,
. We disapprove Automark of Texas,
. Although Mr. Heine was not on the witness stand when he made this statement, it was transcribed by the court reporter and appears in the statement of facts.
. Mr. Heine testified ‘"85 was light; ’86 was disastrous.”
Concurrence Opinion
In overturning a judgment for this family business, the majority imposes new obstacles to any commercial enterprise that has wrongfully suffered a loss of profits.
While covered by a Holt Atherton repair warranty, a part broke on one of the two D-8 Caterpillar bulldozers owned and operated by Roy and Kitty Heine. Instead of providing prompt repairs, Holt Atherton allegedly left them without the use of the bulldozer for about a year. Before granting the Heines a default judgment, the trial court appropriately heard evidence on their unliquidated damages including lost profits. See Morgan v. Compugraphic Corp.,
Roy calculated lost income to be $200,-200, based on the days the machine was incapacitated and also on “several” lost land clearing contracts, one of which, the O’Connor contract, was open-ended as to the amount of work. He further testified that by charging $80 per hour for bulldozer work, he realized an “immediate profit” of about $30 to $40 per hour. Additionally, he described a job for other of his equipment, which was lost due to customer impatience with the extended delays resulting from breakdown of the bulldozer. His total figure included an adjustment “for the time that there might not have been anything.” Referencing the probable familiarity of experienced business people with approximate costs and profit margins, the trial court inquired as to profits shown on their recent income tax returns. The Heines
On appeal, Holt Atherton urges that this testimony was “too speculative” and constituted no evidence to support a finding of damages for lost profits. In reviewing a no evidence point, we have recently written that consideration must be limited to: only the evidence and inferences tending to support the jury’s finding, viewed most favorably in support of the finding, and disregardpng] all contrary evidence and inferences.
Havner v. E-Z Mart Stores, Inc.,
To support a default judgment in Capitol Brick, Inc. v. Fleming Mfg. Co.,
Sprott [its president] testified that ... Capitol Brick’s mold press which would have produced this particular ten inch brick was idle for 11V2 weeks; that during normal conditions the press would have produced some 1,750,000 bricks; and that these bricks would have sold for $120 per thousand, or some $207,000. Sprott also indicated a 25% net profit figure which translates into lost profits of $51,750. This was the only evidence concerning Capitol Brick’s unliquidated damage claim.
Fleming Mfg. Co. v. Capitol Brick, Inc.,
To negate the award of lost profits, the majority must take something and call it nothing — it must treat the Heines’ sworn testimony, given in response to a series of questions from the trial judge, as devoid of any legal value. This contrived disposition results from the impossibility of a remand to the court of appeals for a factual insufficiency review that Holt Atherton has failed to request.
Denial of relief in this case has ramifications that extend to all commercial litiga
It then announces new requirements that a party must chose a particular method for measuring lost profits, at 85, and that “[rjecovery of lost profits must be predicated on one complete calculation.” Id. at 85. We have previously declined to construct such inflexible rules that could unfairly bar recovery:
It is impossible to announce with exact certainty any rule measuring the profits the loss for which recovery may be had_ A party who breaks his con-
tract cannot escape liability because it is impossible to state or prove a perfect measure of damages.
Southwest Battery Corp.,
The majority’s professed lack of “any basis for determining whether the damages were established with reasonable certainty or were based on pure speculation,” at 84, discounts the Heines’ response to the trial court’s inquiry about how they “calculate[d]” their damages. They referenced hourly charges, lost contracts, cost factors, and down-time adjustments. Estimations, when “given in terms of calculations, [constitute] more than conjecture, speculation or guesswork” and must be evaluated by the finder of fact. Reliance Universal Inc. v. Sparks Industrial Services,
Though criticized by the majority for failing to explain “that they had lost out on specific contracts,” at 85, the Heines were not necessarily required to identify specific, measurable, lost contracts because they were an existing business with a history of profitability.
There is undoubtedly some legal evidence to support the Heines’ lost profits damages. Since there is no factual insufficiency point of error requiring further review by the court of appeals, its judgment should be affirmed.
. In burdening small businesses like the one involved here, the majority continues an unfortunate trend of insensitivity to the realities of independent business. See Caller-Times Publishing Co. v. Triad Communications, Inc.,
. Similarly, in Texas Gas Explor. v. Broughton Offshore,
. Compare Capitol Brick,
. Nor were they required to prove their previous profits "remainfed] stable or [grew] to support an award for lost profits in subsequent years.” Martin v. Lou Poliquin Enterprises, Inc.,
