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Sunnyland Farms, Inc. v. Central New Mexico Electrical Cooperative, Inc. | 301 P.3d 387 (2013)

What kind of damages are available for a breach of contract? How about in tort? And when may punitive damages be awarded? The New Mexico Supreme Court considered these questions in Sunnyland Farms versus Central New Mexico Electrical Cooperative. We’ll call them Sunnyland and the co-op.

The co-op supplied electric power to Sunnyland but had shut off service for nonpayment. The next day, while the power was still out, Sunnyland employees engaged in arc welding accidentally started a fire in Sunnyland’s packhouse and operations building. Sunnyland employees initially tried to put the fire out with water hoses, but without electricity to power the water pumps, there was no running water. Firefighters arrived, but without Sunnyland’s pumps, could do little. The firefighters contacted the co-op seeking to restore power, but the co-op employees, fearful of causing injury or exacerbating damages if they restored power during a fire, refused. The fire destroyed the buildings and left Sunnyland unable to plant or harvest the season’s tomato crop.

The co-op ordinarily gave customers fifteen days’ notice before suspending service but didn’t give Sunnyland that notice.

Sunnyland sued the co-op for breach of contract and tort. The largest damages claim was for the lost profits from crops that couldn’t be planted. Both parties presented expert witnesses who testified regarding the value of the crop that Sunnyland could’ve planted and harvested.

The trial court determined that Sunnyland suffered consequential damages of twenty-one million dollars. The court then reduced the tort award by 80 percent as a result of Sunnyland’s comparative fault in both starting the fire by engaging in welding while without water pressure, and then by trying to put out the fire with inoperative water service instead of with fire extinguishers. But the court awarded full damages in contract, twenty-one point four million dollars. Finally, the trial court awarded Sunnyland one hundred thousand dollars in punitive damages based on the co-op’s failure to restore power when firefighters requested it. Thus, the trial court found for Sunnyland on both contract and tort claims.

The court of appeals reversed the contract consequential damages award and vacated the punitive damages award. Sunnyland appealed to the New Mexico Supreme Court.

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