## Facts

- Sunnyland Farms, Inc. operated a hydroponic tomato facility whose water pumps depended on electricity supplied by Central New Mexico Electric Cooperative, Inc. (CNMEC).
- CNMEC disconnected Sunnyland’s electrical service for nonpayment without providing its customary fifteen-day disconnection notice.
- The next day, a fire caused by Sunnyland employees’ negligence ignited and destroyed the facility.
- Because the facility lacked electrical power, water pumps could not provide water to fight the fire, and Sunnyland alleged the loss would have been avoided or reduced if service had not been disconnected.
- Sunnyland sued CNMEC for breach of contract and negligence, seeking, among other damages, substantial lost profits.
- After a bench trial, the district court found CNMEC liable in contract and tort, awarded more than $21 million (including lost profits), reduced tort damages by 80% for Sunnyland’s comparative fault, and awarded $100,000 in punitive damages.
- The Court of Appeals reversed the contract judgment, rejected lost profits as too speculative, vacated punitive damages, and approved an offset based on CNMEC’s purchase of a subrogation lien; it otherwise affirmed rulings on interest.

## Issues

1. What foreseeability standard governs consequential damages for breach of contract, and whether Sunnyland could recover extraordinary consequential damages (including future lost profits) on its contract claim.
2. Whether the evidence supported lost-profit damages in negligence with reasonable certainty or was impermissibly speculative.
3. Whether CNMEC’s conduct supported punitive damages.
4. Whether a liable defendant may reduce its liability by purchasing a subrogation lien and asserting an offset against the plaintiff’s recovery.
5. Whether the trial court properly denied prejudgment interest on the negligence award.

## Decision

- The Supreme Court affirmed reversal of the contract judgment, holding Sunnyland failed to establish recoverable consequential damages under the applicable foreseeability standard.
- The Court reversed the Court of Appeals on tort lost profits and reinstated the district court’s negligence damages (including lost profits), subject to the existing 80% comparative-fault reduction.
- The Court affirmed vacatur of punitive damages for lack of substantial evidence of willful, wanton, or reckless conduct.
- The Court reversed approval of the offset, holding CNMEC was not entitled to reduce its liability through purchase of a subrogation lien.
- The Court affirmed the rulings on pre- and post-judgment interest, including denial of prejudgment interest as within the trial court’s discretion.

## Legal Principles

- Consequential contract damages are limited to losses that arise naturally from the breach or were within the parties’ contemplation at contracting based on communicated special circumstances.
- A utility’s breach does not make it a de facto insurer of a customer’s extraordinary prospective profits absent proof that such exposure was reasonably contemplated or naturally foreseeable from the breach.
- In tort, lost-profit damages are recoverable when proven with reasonable certainty; mathematical precision is not required, and an appellate court may not reweigh trial-level factfinding supported by substantial evidence.
- Punitive damages require proof of a culpable mental state beyond negligence, such as willfulness, recklessness, or conscious disregard of others’ rights.
- Public policy bars a tortfeasor from purchasing a subrogation interest and using it to offset its own liability, because it would permit the wrongdoer to benefit from its wrongdoing.
- Prejudgment interest in tort is discretionary and may be denied where liability and damages are genuinely disputed and the case involves substantial complexity.

## Conclusion

The court limited contractual consequential damages to foreseeable losses within the parties’ contemplation, upheld substantial tort lost-profit damages as supported by substantial evidence, rejected punitive damages for lack of aggravated misconduct, disallowed offsets based on a defendant’s purchase of a subrogation lien, and affirmed denial of prejudgment interest as a discretionary call in a complex, disputed case.


Sunnyland Farms, Inc. v. Cent. N.M. Elec. Coop., Inc., 301 P.3d 387 (N.M. 2013)