Sunnyland Farms Inc. v. Cent. N.M. Electric Coop. Inc.

Decision Date17 May 2011
Docket NumberNo. 28,807.,28,807.
Citation2011 -NMCA- 049,149 N.M. 746,255 P.3d 324
CourtCourt of Appeals of New Mexico


Freedman Boyd Hollander Goldberg Ives & Duncan, P.A., Joseph Goldberg, Michael Goldberg, Walter K. Martinez Law Office, Kenneth Martinez, Kevin Martinez, Albuquerque, NM, for Appellee.Cuddy & McCarthy, LLP, Gregory V. Pelton, Albuquerque, NM, Montgomery & Andrews, P.A., Stephen S. Hamilton, Jaime R. Kennedy, Santa Fe, NM, for Appellant.Virtue Najjar & Brown, PC, Lucy E. Bettis, Santa Fe, NM, for Amicus Curiae N.M. Rural Electric Coop. Ass'n.Michael B. Browde, Albuquerque, NM, for Amicus Curiae N.M. Trial Lawyers Ass'n.


SUTIN, Judge.

{1} Defendant Central New Mexico Electric Cooperative, Inc. appeals a judgment awarding substantial consequential and punitive damages to Plaintiff Sunnyland Farms, Inc. Plaintiff purchased a commercial greenhouse operation intending to hydroponically grow tomatoes. Its facilities were destroyed by fire before it was able to plant its first crop. Plaintiff sued Defendant on various theories including claims for breach of contract and negligence in failing to provide the required advance notice before disconnecting electric power to Plaintiff's facilities, and claiming that, as a result of the disconnect, Plaintiff could not access water necessary to quench the fire.

{2} District court determined that Plaintiff suffered approximately $21 million in consequential damages. The court compared fault on the negligence claim and determined that Plaintiff was 80% at fault and Defendant was 20% at fault. The court did not consider Plaintiff's fault on the breach of contract claim and awarded Plaintiff the full amount of damages, and permitted Plaintiff to elect its remedy after the time for appeal had expired. On appeal, Defendant attacks the allowance of consequential damages in contract, the award of punitive damages, and the amount of the consequential damages attributable to future lost profits. Plaintiff cross-appeals on issues involving prejudgment and post-judgment interest and a set-off. We hold that the district court erred in awarding consequential damages in contract and in awarding punitive damages. On the issue of the amount of the lost profits awarded on Plaintiff's negligence claim, we hold that Plaintiff's evidence lacked a reasonably certain basis as to future production levels on which the court based its award and therefore did not support the amount of the award. On the cross-appeal issues, we hold that the court did not err, and we affirm on those issues.

BACKGROUNDThe Start of the Relationship

{3} Defendant is an electric cooperative that was owned and operated by its members who purchase and distribute electricity to themselves for their own benefit. Defendant and its members are bound by Defendant's bylaws, rules, rate classifications, and rate schedules, including tariffs filed by Defendant with the New Mexico Public Regulatory Commission (PRC) (formerly the Public Utility Commission).

{4} One tariff, or “original rule,” states that if payment by a member using electricity is not paid within fifteen days from the date of a delinquent disconnect notice from Defendant, the member “will be subject to disconnect.” A PRC regulation to which Defendant was subject states that a cooperative can disconnect electricity for failure of a member “to fulfill his contractual obligations for services,” but that it “shall not constitute sufficient cause for discontinuing service to an existing [or] ... prospective customer ... for failure to pay the bill of another customer as guarantor thereof.”

{5} In June 2003 Plaintiff purchased a tomato farm from Agstar of New Mexico, Inc. (Agstar), agreed to pay Agstar's debts, and told Defendant that Plaintiff would assume liability for Agstar's delinquent obligations to Defendant. Electricity to the facilities had been turned off by Defendant for Agstar's nonpayment. On July 10, 2003, Plaintiff opened four accounts in Plaintiff's name and paid Defendant a deposit of $10,750. Plaintiff also paid all amounts owed to Defendant by Agstar as of July 10, Agstar's four accounts with Defendant were closed, Agstar was no longer using electricity, and Agstar's existing deposit was added to Sunnyland's deposit. Plaintiff received Defendant's final bills for Agstar's electricity accounts which were mailed by Defendant on July 17, 2003. These bills stated that they would become delinquent on August 5, 2003.

The Disconnect Notices and Ultimate Disconnect of Plaintiff's Electricity

{6} A saga followed of Defendant's mixture of mistaken, ambiguous, and inappropriate billings and disconnect notices and procedures, which were the bases for the district court's determinations of Defendant's contract and tort liability in this case. That unfortunate saga was followed by Plaintiff's negligent actions and failures to act, which were the bases for the court's determinations of Plaintiff's comparative fault.

{7} Defendant's first billing to Plaintiff on August 9, 2003, to September 8, 2003, when Defendant disconnected electricity to one of Plaintiff's accounts, was replete with mistaken, confusing, and improper billings, and with improper electricity cut-off procedures and orders and disconnect notices that we need not detail. Plaintiff was not aware that Defendant had sent an employee to Plaintiff's operation on September 8, 2003, to disconnect the electricity. Once Plaintiff became aware on September 8 that its electricity had been disconnected to the tomato-growing facility, an employee of Plaintiff called Defendant to determine why the electricity had been disconnected and was told that all four of Agstar's accounts were four months past due, although Agstar's past due accounts had been paid up as of July 10, 2003. Plaintiff's employee was also told that, as a requirement of reconnect, Plaintiff had to pay all amounts owed including Plaintiff's most recent bills, that is, bills that were mailed out just two days before the date of the disconnect, and that Plaintiff also had to pay a reconnect fee for all four accounts.

{8} Plaintiff sent payment to Defendant via overnight mail on September 8, 2003, after conversing with Defendant as to why the electricity had been disconnected. The district court found that Plaintiff did not pay the amounts billed until 11:13 a.m. on September 9, 2003, which was when Defendant received Plaintiff's payment for the August 9, 2003, bills. In that regard, the district court also found that Plaintiff “failed to take any reasonable efforts to make payment to [Defendant] on September 8, 2003.” The district court further found that Defendant admitted that it disconnected the electricity for non-payment of Agstar's bills that were, in Defendant's view, guaranteed by Plaintiff, and that Defendant did not disconnect the electricity to Plaintiff's operation for any amounts owed by Plaintiff for its electrical use.

The Unfortunate Aftermath

{9} Sometime between 9:30 and 9:45 on the morning of September 9, 2003, Plaintiff's employees were welding a trailer hitch inside the packing facility. The welding was being conducted near combustible materials which eventually started the fire. One of Defendant's employees was near the facility and drove over to see what was happening. The disconnect had caused one source of water to be unavailable to fight the fire. Although he had tools and the ability to reconnect the electricity, he did not do so. At about 11:07 a.m., Defendant was asked to turn the power back on. Shortly thereafter, additional employees of Defendant arrived at the scene. They questioned the request to turn the power back on because of safety concerns for the firefighters and said they would do so if someone agreed to accept liability for any injuries that might occur (a circumstance we discuss in more detail in our discussion of punitive damages later in the opinion). At approximately 11:15 a.m., firefighting efforts were suspended because of concerns about hazardous materials exploding. After materials exploded at approximately 11:25 a.m., firefighting efforts resumed at about 11:45 a.m. The fire ultimately consumed almost all of the facilities except for the greenhouse which was rendered useless without the operations building.

The District Court's Findings of Fact, Conclusions of Law, and Judgment

{10} The district court entered 248 findings of fact and entered 13 conclusions of law and a judgment. The findings detailed Defendant's billing notices and activities. The findings also set out with specificity the manner in which Plaintiff's employees and Plaintiff negligently acted and failed to act. The court specifically found that [Plaintiff's] employees negligently caused the fire” and that their negligence was the “sole proximate cause of the fire.” The court also found that Plaintiff was negligent per se in several respects, including the violations of various regulations by failing to train its employees in firefighting techniques, failing to have an emergency plan addressing what to do in case of a fire, failing to have a functioning and closable fire door between the packing house and a support building, and failing to comply with regulations concerning the use of a well pump. Further, the court found Plaintiff to be negligent by failing to properly maintain a dry hydrant that could have been used by the nearby town's fire department and that would have been the best source of water to fight the fire, and also by failing to have more than one source of power which ran through a support building to energize an exterior well pump. In addition, Plaintiff's backup generator to provide electricity was not operating at the time of the fire. The court also entered numerous findings related to damages. Finally, in regard to Defendant's liability, ...

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