Summary of a Recent
Judicial Development in
Commercial Transactions

Failure to Prove Foreseeability and Certainty of Breach
of Livestock Contract Damages

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Penner Cattle, Inc. v. Cox, 287 S.W.3d 370, 2009 WL 1413309 (Tex. App. 2009), the Court of Appeals of Texas in Eastland held that a party failed to prove that the consequential damages he sought for breach of a livestock grazing contract were reasonably foreseeable. He also failed to prove the amount of damages that he claimed with reasonable certainty.

Background

Plaintiff Penner Cattle, Inc. (Penner) entered into a contract with defendant Bill Cox to purchase and raise cattle. Id. at *1. Under the contract, Cox was responsible for purchasing and raising the cattle, and Penner was responsible for the purchase price and cost of feed, medicine, and transportation, plus 35 cents per pound for weight gained. Id. Cox purchased 323 head of cattle during the summer of 2003 and transported them to defendant Tom Nix's ranch, and Penner reimbursed Cox for his costs. Id. The cattle were sold in October 2003, except for 98 head which Nix kept to secure payment for his expenses, and Cox billed Penner $23,353 for feed, transportation, and medicine costs. Id. Penner estimated that it owed only $19,337, and withheld payment until the remaining 98 head of cattle were released, but Nix subsequently sold the cattle, and Cox informed Penner that it now owed $29,705 due to grazing costs incurred after October 2003. Id. Penner filed a breach of contract claim against Cox and Nix, and the defendants counterclaimed for breach of contract as well. Id. The trial court ruled for the defendants on the issue of liability and awarded Cox $252,712, including $175,000 in consequential damages, and Penner appealed. Id.

Arguments

Penner argued that the consequential damages awarded to Cox were excessive and unsupported by the evidence. Id.

Analysis and Holdings

The damages awarded to Cox included consequential damages in the form of lost profits of $175,000, based on the assumption that Penner had timely paid for the medicine, feed, and transportation and that Cox had then invested that money in the cattle business. Id. Cox claimed that he could have made between $6,000 and $7,000 profit about every 60 days by purchasing and reselling a load of cutting bulls; over four years that amounted to 25 lost opportunities for Cox, which totaled $175,000. Id. Examining this calculation, the appellate court found that there was insufficient evidence that such damages were reasonably foreseeable. Id. at *2. The court explained that "to recover consequential lost profits, a claimant must show the parties contemplated at the time they made the contract that such damages would be a probable result of the breach" (i.e., consequential damages must be reasonably foreseeable). Id. The court reasoned that prejudgment interest compensates a party for the inability to invest money wrongfully withheld, and noted that Cox had received 7.75 percent prejudgment interest on his damages already, and thus concluded that Cox had not established that the parties contemplated any foreseeable damages beyond basic breach of contract damages. Id. The court further found that Cox had failed to prove the $175,000 amount with reasonable certainty; the calculation was based solely on his own opinion, with no objective evidence to substantiate his claim. Id. Therefore, the court reversed and remanded for a new trial on the issue of liability as well as damages, because Cox's consequential damage claim was unliquidated. Id. at *3.

The case was decided on May 21, 2009.