”Net Profit” Legal Definition

In Gerwin v. Southeastern Cal. Assn. of Seventh Day Adventists (1971) 14 Cal.App.3d 209, the appellate court defined net profit as follows:

"When loss of anticipated profits is an element of damages, it means net and not gross profits. . . . 'To allow plaintiff to recover a judgment based in part on his gross profits would result in his unjust enrichment. If he is entitled to recover at all, because of his loss of profits, such recovery must be confined to his net profits. Net profits are the gains made from sales "after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed.'" (Gerwin, supra, 14 Cal.App.3d at pp. 222-223.)

In Seaboard Music Co. v. Germano (1972) 24 Cal.App.3d 618, the plaintiff leased juke boxes. the defendants wrongfully breached the lease. (Id. at p. 621.)

According to the company's president, the plaintiff's share of the profits averaged $ 55.10 per week, and the operating/servicing expenses were $ 4.10 per week. (Id. at pp. 621-622.)

Given 122 weeks remaining on the lease, the trial court awarded $ 51 per week for the 122 weeks remaining on the lease, 3 or $ 6,222, for damages. (Ibid.)

On appeal, the defendants argued that "it may be inferred overhead was reduced" and thus, the loss of net profits was actually less than the award. (Id. at p. 622.)

Pointing out that there was no evidence in the record that overhead was reduced, our colleagues in Division One of this District admonished: "If plaintiff's computation of net profit from the lease was inaccurate, or improperly arrived at, it was appellants' duty to attack it in the trial court. We are at a loss to understand how either the trial court or this court could subtract an inference from $ 51 a week." (Ibid.)