201 Conn. 305 | Conn. | 1986
The plaintiff, West Haven Sound Development Corporation, brought this action against the defendant, city of West Haven, to recover damages for an alleged breach of contract. A jury found for the
The parties to this appeal have been involved in litigation for more than eleven years. The facts leading up to the alleged breach have been clearly and adequately set forth in the cases of West Haven v. Impact, 174 Conn. 160, 384 A.2d 353 (1978), and New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 459 A.2d 999 (1983). We will, therefore, limit ourselves to a brief discussion of the facts relevant to the defendant’s claims on appeal.
The jury could reasonably have found that the plaintiff, then doing business under the name of Phyllis’, the defendant, and the West Haven Redevelopment Agency entered into a contract early in 1973. Under the terms of the contract, the defendant conveyed to the plaintiff a parcel of land by a deed containing the condition that the land be used in accordance with the defendant’s urban renewal plan (the plan) for the Savin Rock area of West Haven. The plan, which was also incorporated by reference into the contract, provided that a substantial portion of the land in the Savin Rock area would be developed for commercial, recreational and apartment use. The parties to the contract expressly agreed that there could be no modification of the plan affecting the rights of the redevelopers without their consent. The plaintiff constructed a restaurant facility on its parcel, at a cost of approximately $1,700,000. The restaurant opened for business in December, 1973.
On October 17,1974, a referendum initiated by a civic organization called Impact was passed by the voters of West Haven. The referendum required the city to reverse its course and turn the remaining undeveloped Savin Rock property into a public park. The West
Between the passage of the referendum and our decision in Impact, redevelopment in the Savin Rock area was at a standstill. In May, 1977, the plaintiffs business closed. The plaintiff then filed this action, alleging that its business had failed because the defendant had breached its contract with the plaintiff by modifying the original redevelopment plan. At trial, the jury found for the plaintiff and awarded damages of $3,100,000. The defendant subsequently moved to set aside the verdict, and for judgment notwithstanding the verdict. The motions were denied.
On appeal, the defendant claims that the trial court erred: (1) in failing to find that the city of West Haven was not the proper defendant; (2) in failing to find that the defendant was excused from fulfilling its contrac
I
Liability
The defendant’s first contention is that the trial court should have found as a matter of law that the city of West Haven was not liable for any failure to implement the plan. The defendant’s contention is premised on the notion that the redevelopment agency, created through a state enabling statute; see General Statutes § 8-126;
The defendant’s argument fails for several reasons. First, the city of West Haven was a separate party to the contract itself, and thus even if the redevelopment agency were to be considered a state agency, the town could still be held liable for breach of contract as a principal obligor. In addition, the fact that the West Haven
The jury heard evidence that the West Haven redevelopment agency was created by the city of West Haven and that its members were appointed by city officials. The jury had before it the contract for the sale of the land to the plaintiff. The parties to the contract were “the West Haven Redevelopment Agency, an agency of the City of West Haven, Connecticut . . . the City of West Haven . . . and The Phyllis’s Incorporated.” (Emphasis added.) The deed of conveyance specifically refers to the West Haven redevelopment agency as “an agency of the City of West Haven, Connecticut, not being a distinct and separate corporate entity.” Extensive evidence was also presented regarding the respective duties of the agency and the city in proposing, approving, implementing and modifying a plan of redevelopment.
Ordinarily, the question of agency is one of fact to be determined by the trier of fact. Cohen v. Meola, 184 Conn. 218, 220, 439 A.2d 966 (1981); Botticello v. Stefanovicz, 177 Conn. 22, 26, 411 A.2d 16 (1979); Cleaveland v. Gabriel, 149 Conn. 388, 394-95, 180 A.2d 749 (1962). In this case, however, the trial court effectively removed that issue from the jury’s consideration by directing the jury to find that the West Haven redevelopment agency was an agent of the city of West
The trial court’s charge was correct. “Factual allegations contained in pleadings upon which the cause is tried are considered judicial admissions and hence irrefutable as long as they remain in the case.” Dreier v. Upjohn Co., 196 Conn. 242, 248, 492 A.2d 164 (1985); Griffin v. Nationwide Moving & Storage Co., 187 Conn. 405, 406 n.l, 446 A.2d 799 (1982); Rodearmel v. Rodearmel, 173 Conn. 273, 275, 377 A.2d 260 (1977); Lutkus v. Kelly, 170 Conn. 252, 257, 365 A.2d 816 (1976); Jones Destruction, Inc. v. Upjohn, 161 Conn. 191, 199, 286 A.2d 308 (1971); see Tait & LaPlante, Connecticut Evidence (1976) § 6.7 (a). The defendant admitted agency in its answer, and at no time during the trial of this case did it seek to have its admission “ ‘withdrawn, explained or modified.’ ” Dreier v. Upjohn Co., supra, 249 n.2. Moreover, the defendant
The defendant’s second contention is that the court erred in failing to find as a matter of law that performance of the contract had been rendered impossible by the passage of the referendum and by the subsequent trial court decision that the referendum did not effect a modification of the plan. The concepts of impossibility or impracticability of performance have been recognized in various decisions of this court; see Grenier v. Compratt Construction Co., 189 Conn. 144, 454 A.2d 1289 (1983); Hess v. Dumouchel Paper Co., 154 Conn. 343, 225 A.2d 797 (1966); in the Restatement (Second) of Contracts, §§ 261 through 272, and in various legal treatises. See 6 Corbin, Contracts §§ 1320 through 1372; 18 Williston, Contracts (3d Ed. Jaeger) §§ 1931 through 1979. Section 261 of the Restatement (Second) of Contracts provides: “Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.” A “governmental regulation or order” which makes performance of a duty impracticable “is an event the non-occurrence of which was a basic assumption on which the contract was made.” 2 Restatement (Second), supra, § 264.
The defendant’s position is that it should be excused from performing its contractual obligations because the passage of the referendum and the trial court ruling were “governmental orders” which rendered its performance impossible. The defendant recognizes that for a party successfully to utilize the “impracticability by act of law” defense, that party must not be at fault in
Under § 1 of the charter of the city of West Haven, “the inhabitants dwelling in the territorial limits of the Town of West Haven . . . shall be a body politic and corporate under the name of the City of West Haven.” The municipality as an entity represents the interests of its inhabitants. Keating v. Patterson, 132 Conn. 210, 213 n.l, 43 A.2d 659 (1945). The West Haven charter also delineates the powers of the mayor and the city councilpersons who act on behalf of the citizens of West Haven. In signing the contract at issue in this appeal, the mayor, acting in his official capacity, bound the city to sell the parcel of land to the plaintiff and to observe all of the contractual obligations involving the Savin Rock redevelopment plan. When such obligations were unfulfilled, it was the city that was sued.
The charter also gives the people of West Haven the right to propose ordinances to the city council and if an ordinance is not passed by the council, the people may approve the ordinance by a majority of votes. The referendum at issue in this case was proposed by a group of West Haven citizens belonging to an organization called “Impact” and was approved by the majority of West Haven voters. The parties agree that upon its passage, the Impact referendum automatically became a city ordinance, and that the city council could not have refused to enact it. An ordinance is a legisla
The Maine Supreme Court faced a similar issue in Elsemore v. Hancock, 137 Me. 243, 18 A.2d 692 (1941). There, the plaintiff had contracted with the defendant town to teach in its public high school. When the inhabitants of the town voted to close the school, the court held that the doctrine of impossibility did not relieve the town of liability for breach of the teaching contract. The court explained, “[ajssuming authority to be vested in the voters of a town to discontinue a free high school at will, where no contract rights are involved, we do not believe it should be permitted, as one of the parties to a valid contract, to avoid its contractual obligations by such roundabout action.” Id., 250. Like the town in Elsemore, the city of West Haven should not be allowed to utilize the impossibility defense when it was itself responsible for the referendum, the action that created the impossibility. “To hold otherwise would be to overlook reality and the facts in the case.” West Haven v. Impact, supra, 165.
II
Damages
As previously stated, the jury returned a general verdict in favor of the plaintiff in the amount of $3,100,000.
We first address the defendant’s claim that there was insufficient evidence that the breach of contract caused the failure of the plaintiff’s restaurant business. Causation was a question of fact for the jury to determine. We must presume that the jury by its general verdict found the issue of causation in favor of the plaintiff. Sanderson v. Steve Snyder Enterprises, Inc., 196 Conn. 134, 142 n.5, 491 A.2d 389 (1985); Matthews v. F.M.C. Corporation, 190 Conn. 700, 706, 462 A.2d 376 (1983). The plaintiff in this case presented evidence that by 1974 there were at least seven developers in the Savin Rock area of West Haven. The jury could reasonably have concluded that these individuals would have proceeded with redevelopment, but for the defendant’s breach of contract. The jury could further have determined that the surrounding development would have revitalized the entire area, resulting in increased patronage of the plaintiff’s restaurant. We believe that the evidence was sufficient to support the jury’s determination that the breach of contract caused the plaintiff to suffer damages in this case.
The defendant also claims that the trial court erred in allowing Jordan, a certified public accountant, to testify to the value that the plaintiff’s restaurant would have had had the defendant not breached its contract to permit redevelopment of the Savin Rock area. On
The defendant contends that Jordan should not have been allowed to value the plaintiffs restaurant on the basis of econometric predictions of future revenues and costs because actual data was available which showed that the restaurant had operated at a loss in 1974 and 1975. The defendant argues that Jordan’s projections as to the restaurant’s profitability were faulty being contradicted by the actual profit record in 1974 and 1975. It is undisputed that the plaintiff’s restaurant lost $76,831.53 in 1974 and $70,151.79 in 1975. The defendant thus concludes that Jordan should not have been allowed to testify to his opinion as to the restaurant’s value, because that opinion was based on his allegedly faulty profit projections.
The trial court did not err in allowing Jordan to testify to the restaurant’s value based on the economic situation as it reasonably appeared before the breach of contract. The plaintiff opened its restaurant in December, 1973. The parties have stipulated that the breach occurred, if at all, on October 17,1974, the date of the referendum precluding further development of the Savin Rock area. The restaurant eventually closed its doors in May, 1977. Jordan testified as to what he believed the business would have earned, and what it would have been worth, had the breach not occurred.
The defendant also argues that Jordan should not have been permitted to give his opinion as to the restaurant’s value because that opinion was based on the existence of future profits which, the defendant contends, were speculative and uncertain to occur. The plaintiff had operated its business in the Savin Rock area since 1945, beginning with a hot dog stand. As its business improved, the plaintiff built an addition to its establishment, and later moved into a larger facility. In 1961, the plaintiff built a new, larger restaurant, where the enterprise continued to grow and prosper. The plaintiff in 1970 unsuccessfully resisted the condemnation of its establishment pursuant to the defendant’s plan of redevelopment. Thus, when the plaintiff built its new restaurant in 1973, it was not without a sustained history of profitable operation in the Savin Rock area.
The plaintiff does not appear to have sought to recover damages for “lost profits” as such from the defendant’s breach of contract. Rather, the plaintiff theorized that it had been forced to go out of business by the defendant’s breach, and thus, that it was entitled
“The general rule in breach of contract cases is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as that which he would have been in had the contract been performed.” Beckman v. Jalich Homes, Inc., 190 Conn. 299, 309, 460 A.2d 488 (1983); Lar-Rob Bus Corporation v. Fairfield, 170 Conn. 397, 404-405, 365 A.2d 1086 (1976); Bachman v. Fortuna, 145 Conn. 191, 194, 141 A.2d 477 (1958). It has traditionally been held that a party may recover “general” contract damages for any loss that “may fairly and reasonably be considered [as] arising naturally, i.e., according to the usual course of things, from such breach of contract itself.” Hadley v. Baxendale, 9 Ex. 341, 354, 156 Eng.
The plaintiff had operated a profitable restaurant for many years in the Savin Rock area of West Haven. The defendant appears to argue that the prospects of its continued success were speculative and uncertain merely because the plaintiff had recently relocated its business in a different, larger, and more expensive physical structure. This court has never held that a prior profit experience is essential to the recovery of prospective profits for breach of contract. Gordon s. Indusco Management Corporation, 164 Conn. 262, 274, 320 A.2d 811 (1973). Reasonable certainty of proof is all that is required, and “mere uncertainty as to the amount of lost profits may be dispelled by the same degree of proof as is required in other civil actions, that is, the amount may be determined approximately upon reasonable inferences and estimates.” Burr v. Lichtenheim, 190 Conn. 351, 360, 460 A.2d 1290 (1983); Bronson & Townsend Co. s. Battistoni, 167 Conn. 321,
In the present case, Jordan based his profit projections, and hence, his opinion as to the restaurant’s value, on standard valuation procedures recognized in the accounting profession. Not only was Jordan a certified public accountant, but he also had been a university professor where he taught both graduate and undergraduate courses in finance and accounting. Moreover, Jordan had co-authored a college textbook on securities analysis and business valuation, the third edition of which had specifically dealt with valuation in the restaurant industry. In Stern & Co. v. International Harvester Co., supra, 46-48, we found reversible error in the refusal of the trial court to allow the plaintiffs expert accountant witness to testify to the value of the plaintiffs business allegedly lost as a consequence of the breach of contract. See also Doeltz v. Longshore, Inc., 126 Conn. 597, 601, 13 A.2d 505 (1940) (“since the only available evidence as to the value of the goodwill of a business is necessarily the opinion of a qualified witness, evidence of that character is accepted in such cases”). While Jordan’s opinion as to the value of the plaintiff’s restaurant before the breach was necessarily based on assumptions concerning the level of supportive development by other businesses in the Savin Rock area, Jordan qualified his opinion accordingly, and the jury was correctly instructed that it must reject the expert’s opinion if it failed to find the assumed facts to be proven. We find that Jordan’s opinion as to the going concern value of the plaintiffs restaurant business before the breach was based on reasonable estimates of lost profits.
We next consider the defendant’s related claims that the evidence was insufficient to support the amount of the damage award and that the damages awarded were
As previously discussed, Jordan, the plaintiff’s expert witness, testified that the going concern value of the plaintiff’s restaurant before the breach was $1,900,000. It does not appear, however, that Jordan was ever asked for his opinion of the going concern value of the plaintiff’s business after the breach. As such, the jury had no evidence from which it might have determined the diminution in value of the plaintiff’s business caused by the breach. In this case, the plaintiff’s loss consisted of the difference between the value of the business had the contract been performed and the actual value of the business as a result of the breach. Johnson v. Healy, 176 Conn. 97, 104-107, 405 A.2d 54 (1978); Gordon v. Indusco Management Corporation, supra, 273. The plaintiff appears to have theorized that since it had been forced to go out of business, its business was worth nothing as a going concern as a result of the breach. Therefore, according to the plaintiff, it was entitled to receive as compensation the full value that its business would have had had the breach not occurred. We disagree.
While the plaintiff’s theory might have validity in certain circumstances, we find it inapplicable to the facts of this case in light of the factors considered by Jordan
It is clear to us that many of the factors considered by Jordan in projecting the plaintiff’s future profit stream, and hence, the value of the “business itself” before the breach, were such as could not have been lost by the plaintiff in consequence of the breach. For example, assuming that the plaintiff was forced into bankruptcy by the breach, it would nonetheless retain the value of its name, its reputation, its experience in the restaurant business, its recipes, its right to franchise, etc. These quantities, very much the same as goodwill, were valuable assets which underlay, in part, Jordan’s opinion as to the value of the business as a going concern. It simply cannot be said that these assets were suddenly rendered valueless merely because the plaintiff was forced to close its doors. On the contrary, these elements of value remained with the plaintiff to be used or not as it chose, e.g., by reopening its business at a new location. Cf. Laurel, Inc. v. Commissioner of
Before concluding our discussion of this category of the plaintiff’s damages, it is important to make two final points. The first concerns Jordan’s projection
Secondly, the trial court, over the defendant’s objection, allowed the plaintiff to ask Jordan for his opinion as to the value that the plaintiff’s restaurant would have had as of the date of trial, July 5, 1984, had it remained in business. Jordan responded that the business would have been worth $2,700,000. The plaintiff in its brief to this court glibly asserts that there is “no indication” that the jury considered this figure in its deliberations. We agree. We would also note, however, there is “no indication” of this or anything else that the jury might have considered in arriving at its $3,100,000 damage award. This unfortunate circumstance comes about, in part, because neither the plaintiff nor the defendant sought to have the jury instructed as to how they were to compute damages in the event that they found a breach of contract. The value that the plaintiff’s business might have had in 1984 was irrelevant to the issue of damages in this case. Jordan’s opinion as to the value of the restaurant in 1974 was based on his projections of future profits, not future value. The defendant’s objection to Jordan’s testimony as to the restaurant’s estimated value in 1984 should have been sustained.
We next consider the second category of damages claimed by the plaintiff, i.e., those consisting of its alleged loss of capital investment in land, its building and its fixtures. As previously noted, the plaintiff values its lost investment in capital assets at $911,036.39. The plaintiff claims that it undertook this level of capital investment in reliance on the contract, and that as a consequence of the breach its investment was lost.
The plaintiff was entitled to recover the full value of what it had lost as a consequence of the breach of contract. As we have previously discussed, the plaintiff described an element of this loss as the value of its business as a going concern. Accordingly, the plaintiff produced Jordan, who valued the plaintiff’s business as a going concern at $1,900,000, essentially by projecting a stream of future profits, and then by capitalizing those profits, at an appropriate rate of capitalization, to their net present value. As Jordan clearly indicated in his testimony, the value figure which he derived was intended to represent the amount of money that a buyer
Furthermore, it appears that the plaintiff seeks to recover the diminution in value of its business as measured by two alternative approaches to valuation. While there are several different methods by which to determine the value of a closely-held corporation, these methods, and their variants, are of two general types: (1) capitalization of earnings, or the net present value of a future income stream; and (2) net asset value, or the present sale price of the business assets less its liabilities. Ronald v. 4-C’s Electronic Packaging, Inc., 168 Cal. App. 3d 290, 299, 214 Cal. Rptr. 225 (1985); In re Marriage of Hewitson, 142 Cal. App. 3d 874, 881-82, 191 Cal. Rptr. 392 (1983); 2 O’Neal, Close Corporations (1958) § 7.24; Lawinger, “Appraising Closely-Held Stock—Valuation Methods and Concepts,” 110 Trusts and Estates 816, 817-19 (1971); 2 Proof of Facts 2d,
By claiming damages for the loss of its capital investment, the plaintiff utilizes nothing other than a variant of the net asset approach to the valuation of its business. Clearly, the plaintiff may not recover as damages the sum of the results obtained under alternative approaches to valuation. Since the plaintiff would not be entitled to recover both its loss of capital investment and the capitalized value of its projected lost earnings, the jury’s verdict of $3,100,000 finds no support in the evidence, and is therefore excessive.
We would add that should the plaintiff on remand elect to recover its loss in capital investment, rather than the capitalized value of its projected lost earnings, it will be incumbent upon the plaintiff to value its investment correctly. The plaintiff presently values the loss of its investment at $911,036.39, a figure it derives by aggregating the acquisition costs of its capital assets, subtracting the amount encumbered by mortgage, and then adding back in the amount of the deficiency judgment. The plaintiff’s proffered procedure does not produce the correct measure of contract damages. While
We now turn to the third and final category of damages claimed by the plaintiff. These damages include short-term bank loans, loans from corporate officers and individuals, accounts payable to suppliers, and related costs incurred by the plaintiff in an attempt to meet operating expenses and thus to remain in business after the breach. As noted, the plaintiff values the amount of this loss in the approximate amount of $200,000.
Thus, a jury question was presented as to whether the expenses incurred by the plaintiff in an attempt to salvage its business after the breach were reasonable. We have no way of knowing to what extent the jury included these expenses in its award. On remand, the jury should be instructed that the plaintiff may recover only those expenses reasonably incurred in its efforts to mitigate damages occasioned by the breach of contract.
Before leaving this case a final caveat is in order. We have throughout this opinion set forth only standards by which the losses claimed by the plaintiff may be identified and valued. We emphasize that all of these losses are not necessarily compensable in an action for breach of contract. A significant limitation on the recovery of damages for breach of contract is stated in 3 Restatement (Second) of Contracts, § 351 (1). That section provides that “[djamages are not recoverable for loss that
There is error and the case is remanded for further proceedings not inconsistent with this opinion.
In this opinion the other justices concurred.
General Statutes § 8-136 provides: “A redevelopment plan may be modified at any time by the redevelopment agency, provided, if modified after the lease or sale of real property in the redevelopment project area, the modification must be consented to by the redeveloper or redevelopers of such real property or his successor or their successors in interest affected by the proposed modification. Where the proposed modification will substantially change the redevelopment plan as previously approved by the legislative body, the modification must similarly be approved by the legislative body.”
General Statutes § 8-126 provides in part: “The legislative body of any municipality may designate as a redevelopment agency the housing authority of the municipality or the state commissioner of housing or other appropriate state agency, or may create a new redevelopment agency to consist of electors resident therein. The members of any redevelopment agency so created shall be appointed by the chief executive of a city or borough or by the board of selectmen of a town with the approval of the legislative body.”
For example, upon cross-examination of the plaintiffs expert, Professor Janice Griffith, the following colloquy took place:
*311 “Q. Professor Griffith, you indicated I believe that the Redevelopment Agency is the one that performs the functions of redevelopment on behalf of a city?
“A. Yes.
“Q. Are you aware of who is a defendant in this case?
“A. The City of West Haven.
“Q. Are you aware that the New Haven, or the West Haven Redevelopment is not a defendant?
“A. I believe I am aware of that, yes.
“Q. And-
“A. I have not looked directly at the caption, but in terms of my impression of the entire case, yes, it is against the City of West Haven.
“Q. And the Redevelopment Agency is the one who is obligated to perform the various functions with regard to redevelopment.
“A. Not all of the functions. The statute does provide for the City to approve the plan and to take other action. But the Redevelopment Agency is the agency which undertakes the specific redevelopment function.
* ** *
“Q. Did I understand your testimony to be that the City Council by statute has a vote in this redevelopment procedure also?
“A. The specific statute, but my recollection is that the legislative body of the City of West Haven must approve the redevelopment plan and if there is any substantial modification to the plan they must also approve it.
“Q. And must they not also approve any deeds or any land disposition agreements?
“Mr. Sherwood: If you know.
“A. I would know. I would have to look at the statute, but my recollection is, yes, they would have to.”
The plaintiff itself Has not grouped or presented its damages in any organized fashion, and we stress that our categorization of damages is for convenience of analysis only. The same is true with respect to the dollar amounts assigned by us to these categories. While taken from actual figures proffered by the plaintiff in its brief, the values we have assigned to individual categories are, at best, approximations based on the limited information before us. On remand, the plaintiff is free to value and prove its damages, and under whatever theory, as it wishes. In short, the plaintiff on remand is not collaterally estopped by the dollar amounts or theories of recovery discussed in this opinion.
It is important to recognize that the plaintiff, by capitalizing its projected earnings, effectively converted those earnings into property with a present value, according to the plaintiff, of $1,900,000. This valuable property must be conceptualized as consisting of its component elements, and we think those elements may imperfectly be described as capital and goodwill. This court does not attempt to apportion the relative contributions to earnings between the plaintiffs capital and its goodwill; see 1 Bonbright, Valuation of Property (1937) pp. 242-43; comment, “Valuation of Shares In a Closely Held Corporation,” 47 Miss. L.J. 715, 729 (1976); Vass, “Factors That Are Presently Being Emphasized in Valuing a Closely-Held Corporation,” 38 J. Tax. 356, 357 (1973); although we note that this—the combined value of its capital and goodwill—is what the plaintiff sought to value, and hence to recover as damages, when it chose to value its loss by capitalizing its projected earnings to a net present value of $1,900,000.
Thus, viewing the plaintiffs capital and goodwill as property, it is clear that the plaintiff placed a value on this property only by valuing, under the capitalization of earnings method, the profit stream that this property would likely have produced. To the extent that any of this property remained, in whatever combination or proportion, after the breach, we assume that it retained at least some of its capacity to generate income, and therefore, that it must have had some value, even after the breach. As we have previously stated, we consider it highly unlikely that the plaintiff lost all of its goodwill in consequence of the breach, i.e., the value of its name, etc., and therefore, the plaintiff may be thought to have retained at least some of the income producing potential of its goodwill after the
In summary, we think that where a plaintiff in a contract action seeks to recover damages for the alleged loss of its business, and where the plaintiff elects to value its business by a method which relies on the capitalization of projected earnings (the capitalization of earnings method and its many variants), the plaintiff must place two values into evidence. The first is the value of the business based on the capitalized value of the profits the business would have earned if not for the breach. The second is the value of the business based on the capitalized value of the profits the business would reasonably be capable of producing after the breach. With regard to this latter value, we would note that a business is not necessarily incapable of producing profits merely because it has been forced temporarily to close its doors. The decision to close, like the decision not to reopen, may be based on a number of different factors, personal to the controlling shareholders or directors, not directly related to the economic environment created by the breach of contract. Therefore, we believe that substantive principles of contract recovery as well as the doctrine of avoidable consequences; see Farnsworth, Contracts (1982) § 12.12; require that the after-breach value of the business be determined by capitalizing the profits that the business is reasonably capable of producing, without regard to whether the business has actually reopened its doors. The difference between these two values will reflect the proper measure of recovery.