approving the Hadley measure of damages for breach of contractSummary of this case from Solidfx, LLC v. Jeppesen Sanderson, Inc.
June 17, 2002 Rehearing Denied August 5, 2002
Certiorari to the Colorado Court of Appeals, Court of Appeals Case No. 99CA1214.
JUDGMENT AFFIRMED AND CASE REMANDED
No. 00SC960, Vanderbeek v. Vernon Corp . : Economic Torts — Consequential Damages — Proximate Cause — Reasonably Ascertainable.
The supreme court affirms the court of appeals' judgment. In doing so, however, it clarifies that the proper test for assessing consequential damages arising from economic torts is whether such damages are the natural and probable result of the injury sustained by virtue of the tortious act. As in other torts, these damages must be proximately caused by the tortious act and be reasonably ascertainable. Here, the supreme court holds that (1) an increase in the price Respondent paid to acquire 95,000 shares of Osicom Technologies, Inc. ("Osicom"), and (2) Respondent's inability to purchase an additional 105,000 shares of Osicom stock were the natural and probable result of Petitioners' wrongful attachment. In addition, the supreme court holds that the Petitioners' wrongful attachment of Respondent's funds was the proximate cause of such damage. Finally, the supreme court holds that the increased cost of acquiring 95,000 shares of Osicom stock is reasonably ascertainable and therefore recoverable. However, the lost profits on 105,000 shares of Osicom stock not purchased because of the wrongful attachment is not reasonably ascertainable and thus not recoverable.
Wehrle Law Firm, P.C., Richard T. Wehrle, Denver, Colorado, Attorney for Petitioners.
Martin Mehaffy, LLC, Joel C. Maguire, Boulder, Colorado, Attorney for Respondent.
We granted certiorari to consider the appropriate test for recovery of consequential damages in actions alleging tortious economic interference. Relying on our decision in Colorado Kenworth Corp. v. Whitworth, 144 Colo. 541, 357 P.2d 626 (1960), the court of appeals concluded that consequential damages for wrongful attachment were recoverable only if at the time the tort was committed, both parties contemplated such damages as the probable result thereof, and these damages were not uncertain, unnatural, remote as to cause, speculative, or conjectural. Because the court of appeals concluded that the consequences of Petitioners' wrongful attachment were within the "reasonable contemplation" of the parties at the time the tort was committed, it awarded Respondent the "use value" of the unlawfully detained funds. It denied Respondent the "lost profits value" of these funds though, because this value was not reasonably ascertainable.
The precise issue on which we granted certiorari was framed as:
Whether the court of appeals erred by applying a standard for assessment of economic tort damages that is in conflict with the decision of the Colorado Supreme Court in Colorado Kenworth Corp. v. Whitworth, 144 Colo. 541, 357 P.2d 626 (1960).
We affirm the court of appeals' judgment. In doing so, however, we clarify that the proper test for assessing consequential damages arising from economic torts is whether such damages are the natural and probable result of the injury sustained by virtue of the tortious act. As in other torts, these damages must be proximately caused by the tortious act and be reasonably ascertainable. Here, we hold that (1) an increase in the price Respondent paid to acquire 95,000 shares of Osicom Technologies, Inc. ("Osicom"), and (2) Respondent's inability to purchase an additional 105,000 shares of Osicom stock were the natural and probable result of Petitioners' wrongful attachment. In addition, we hold that the Petitioners' wrongful attachment of Respondent's funds was the proximate cause of such damage. Finally, we hold that the increased cost of acquiring 95,000 shares of Osicom stock is reasonably ascertainable and therefore recoverable. However, the lost profits on 105,000 shares of Osicom stock not purchased because of the wrongful attachment is not reasonably ascertainable and thus not recoverable. We therefore affirm the court of appeals' judgment.
I. FACTS AND PROCEDURAL HISTORY
Petitioners, Robert R. Vanderbeek, William C. Bacon, and Dorothy Severson, in their capacity as co-trustees on behalf of the James W. Vanderbeek Generation-Skipping Transfer Trust, brought an action in Boulder County District Court against Respondent, Vernon Corporation, and others arising out of a partnership agreement among the parties. In conjunction therewith and pursuant to C.R.C.P. 102, Petitioners moved ex parte for issuance of a pre-judgment writ of attachment against approximately $1,000,000 they expected to be paid into the account of Respondent at Firststate Bank. In reliance on Petitioners' representations, the trial court granted the motion, and on December 23, 1997, a Writ of Attachment was served on Firststate Bank. Firststate then froze $1,023,370 in Respondent's account.
In response, Respondent traversed the writ of garnishment issued in aid of attachment. At the traverse hearing, the trial court concluded that a forum selection clause in a partnership agreement between the parties deprived it of subject-matter jurisdiction over the action. Accordingly, on January 13, 1998, it dismissed the action and dissolved the writ.
Subsequently, Respondent filed a motion seeking damages it claimed were caused by the wrongful attachment of its funds. According to the stipulation of facts submitted to the trial court by the parties, Respondent intended to use $450,000 of the funds frozen by the writ of garnishment to purchase 200,000 shares of Osicom. Petitioners had no actual knowledge of this intent. On December 24, 1997, the day after the writ was issued, shares of Osicom were trading at $2 3/16 per share. Thus, on this date, Respondent could have acquired 200,000 shares of Osicom for approximately $436,000 plus commission. Respondent was unable to purchase Osicom until the funds were released however. By this time, the stock had appreciated considerably such that Respondent was only able to obtain 95,000 shares for a cost of $449,828.15.
Respondent claimed damages in the amount of $331,015.65. This figure represented the additional $242,728.15 it had to pay for the 95,000 shares of Osicom it did purchase plus $88,287.50 in lost profits on the 105,000 shares of Osicom it was unable to purchase. The trial court refused to award either component. It reasoned that Osicom's dramatic rise in value between December 23, 1997 and January 13, 1998 was unforeseeable and thus damages attributable thereto were merely speculative or conjectural. Instead, it held that the appropriate measure of damages was the interest on the principal amount of the funds during the time they were frozen.
The court of appeals reversed in part. It acknowledged that "[o]rdinarily, the measure of damages for tortious detention of money is the legal rate of interest for the period of such detention." Vanderbeek, 25 P.3d at 1245 (citing Boyle v. Poor, 62 Colo. 337, 163 P. 967 (1916)). However, it correctly held that consequential damages might also be recovered. Id. (citing Colo. Kenworth Corp. v. Whitworth, 144 Colo. 541, 357 P.2d 626 (1960)). It therefore turned its attention to the test for determining when consequential damages are available.
The court of appeals recognized that "[d]amages resulting from wrongful attachment are governed by tort principles" and that "[g]enerally in an action for tort, an injured party is entitled to recover damages for the natural and probable consequences of the tort."Vanderbeek, 25 P.3d at 1244. However, the court of appeals read Colorado Kenworth Corp. as requiring it to apply the more limited standard for recovery of consequential damages derived from Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854). Id. at 1244-45. It therefore held that consequential damages for wrongful attachment are recoverable "`if under the circumstances, it can be fairly said that both parties have these consequences in contemplation at the time of the wrong complained of, as the probable result thereof, and if these unusual consequences are neither uncertain, unnatural, nor remote as to cause, nor speculative and conjectural in effect." Id. at 1245 (quoting Colo. Kenworth Corp. 144 Colo. at 549, 357 P.2d at 631-32). Applying this test, the court of appeals held that "it was within the reasonable contemplation of the parties that the money attached was to be used for investment purposes of some kind." Id. at 1246. It therefore awarded as consequential damages the additional cost Respondent paid for the 95,000 shares of Osicom. Id. It denied the profits lost on the 105,000 shares of Osicom Respondent never purchased, however, because these damages were not reasonably ascertainable. Id. at 1246-47.
We affirm the court of appeals' judgment, but for a different reason.
Because we disagree with the court of appeals that Colorado Kenworth Corp. resolves the issue before us, we begin with an analysis of that case.
A. Colorado Kenworth Corp .
The parties in Colorado Kenworth Corp. entered into a sales agreement for the purchase of a "truck-tractor." 144 Colo. at 542, 357 P.2d at 628. The purchaser, Whitworth, made an initial payment and agreed to pay the balance in seventeen successive monthly payments. Id. He gave a note for this balance secured by a chattel mortgage on the truck-tractor. Id. Whitworth purchased the truck-tractor for the purpose of hauling freight, and Kenworth, the seller, knew this. Id. at 549, 357 P.2d at 631. Due to a dispute between the parties, Kenworth repossessed the truck. Id. at 544-45, 357 P.2d at 629. Whitworth claimed that this repossession was wrongful and brought suit. Id. at 545, 357 P.2d at 629. The parties stipulated at a pretrial conference that the action was founded on a theory of conversion. Id. As part of his damages, Whitworth claimed consequential damages resulting from his inability to perform a freight-hauling contract with a third party. Id.
On appeal this court articulated the relevant issue before it in this way: "Are consequential damages recoverable in a conversion action, or is the plaintiff restricted to a recovery of the value of the article taken with interest on such value." Id. at 549, 357 P.2d at 631. Thus, the issue on appeal as framed by the court was not the standard by which the recovery of consequential damages are to be determined but simply whether they are recoverable at all in a conversion action.
The court founded its analysis of this issue on an initial premise: that Kenworth knew Whitworth purchased the truck-tractor for the purpose of hauling freight. Id. It then cited both of the competing standards for recovery of consequential damages in a tort action involving purely economic interference. Id. First, the court acknowledged that conversion is a tort and thus "Kenworth should be answerable to such damages as will completely indemnify Whitworth for the natural and probable consequences of its conversion." Id. Under this standard, whether consequential damages are recoverable depends only on a determination that these damages were proximately caused by the wrongful act and that they are reasonably ascertainable. Then, the court cited the rule derived from Hadley v. Baxendale for recovery of special damages in a contract action: "Damages flowing from a conversion which are not ordinary, usual, or commonly to be expected are recoverable `if, under the circumstances, it can fairly be said that both parties have these consequences in contemplation at the time of the wrong complained of, as the probable result thereof, and if these unusual consequences are neither uncertain, unnatural, nor remote as to cause, nor speculative and conjectural in effect.'" 144 Colo. at 549, 357 P.2d at 631-32 (quoting Cannon v. Oregon Moline Plow Co., 197 P. 39, 41 (Wash. 1921)).
In the context of economic torts, consequential damages and special damages are synonymous. Either term "refers to damages consequent upon but distinct from harm to the plaintiff's entitlement." 1 Dan B. Dobbs,Dobbs Law of Remedies § 3.3(4), at 302 (2d ed. 1993). To the extent that Colorado Kenworth Corp. can be read as distinguishing between special and consequential damages we reject such a construction.
Under either a tort or a contract standard, the foreseeability of the consequences is a factor. However, the test derived from Hadley imposes a more restrictive foreseeability limitation. To be recoverable under the Hadley test, consequential damages must be so likely that "it can fairly be said" both parties contemplated these damages as the probable result of the wrong at the time the tort occurred. Under the tort standard, damages need only be reasonably foreseeable.
Importantly, because Kenworth knew Whitworth purchased the truck-tractor for the purpose of hauling freight, the consequential damages Whitworth claimed satisfied even the more restrictive Hadley standard of foreseeability. Thus, it was not necessary for the court to decide between the two tests, and it never did. After reciting both tests, it simply concluded that lost profits resulting from a conversion of property are recoverable. 144 Colo. at 549, 357 P.2d at 632. Accordingly, we do not read Colorado Kenworth Corp. as deciding whether a tort or a contract measure of damage should govern the recovery of consequential damages in an economic tort action. We therefore address this issue now.
Of the two cases cited by Colorado Kenworth Corp. in support of the proposition that lost profits are recoverable in a conversion action, one applies the Hadley standard and one applies the traditional tort standard for recovery of consequential damages. In all, Colorado Kenworth Corp. cites six cases in its discussion of this issue. Two apply the tort standard, two apply the Hadley standard, and two permit the recovery of consequential damages in a conversion action without any discussion of the appropriate standard.
B. The Appropriate Measure of Damage for Economic Torts
Central to our determination of the appropriate measure of damage is a determination of the nature of the duty breached in economic torts. Where the duty breached stems from a contract, redress must be under the contract, and the rule derived from Hadley is the appropriate standard by which to assess the consequential damages of the breach. However, where a duty arises independently of any contractual obligations between the parties, a tort action will lie, and consequential damages should be assessed under traditional tort standards.
We have recently had occasion to fully examine the boundary between contract and tort law in upholding the validity of the economic loss rule. See Town of Alma v. Azco Constr., Inc., 10 P.3d 1256 (Colo. 2000). In Town of Alma, we explained that "[t]he essential difference between a tort obligation and a contract obligation is the source of the duties of the parties." 10 P.3d at 1262. Tort law is designed to protect all citizens from the risk of harm to their persons or their property. Id. Accordingly, tort duties are generally imposed by law "without regard to any agreement or contract." Id. Contract obligations, in contrast, arise from promises between the parties. Id.
The rationale behind Hadley v. Baxendale's contract measure of damages demonstrates why it is an inappropriate standard for assessing consequential damages when the duty breached arises independently of any agreement between the parties. The Hadley rule is designed to further a fundamental principle of contract law: parties must be able to confidently allocate risks and costs during their bargaining without fear that unanticipated liability may arise in the future, effectively negating the parties' efforts to build these cost considerations into the contract. Under Hadley, a party to a contract is only responsible for those damages that he should reasonably have contemplated as the probable result of a breach at the time the contract was entered into. Because the party is aware, or should be aware, that these damages are a potential consequence of breach, he presumably will take into account the risk that these contingencies will occur while negotiating the contract. Thus, by limiting contractual liability to those damages foreseen by the parties at the time the contract was formed, Hadley ensures that the bargain struck reflects a mutually agreeable allocation of the risks and costs of breach. In other words, Hadley guarantees the fairness of a bilateral agreement by protecting the parties from unanticipated liability arising in the future.
But a tortious act is a unilateral invasion of a right taken "without regard to any agreement or contract." Town of Alma, 10 P.3d at 1262. The victim of a tort has no opportunity to negotiate with the tortfeasor — no opportunity to allocate the risk that a particular consequence will occur or evaluate the cost if it should. Therefore, whether he reasonably contemplated a particular consequence as the probable result of the tort at the time it occurred is irrelevant.Cf. 22 Am. Jur. 2d, Damages § 454 (2001) ("The distinction between damages in tort and damages for breach of contract is not a mere matter of form, since a party to a contract is given the legal option to perform or pay damages, and in order to allow the party to evaluate his options in a meaningful way, one who breaks a contract is liable only for those damages which one could reasonably anticipate.").
Accordingly, the rule derived from Hadley is inapplicable in tort actions where the duty breached arises independently from any agreement between the parties. See Restatement (Second) of Torts § 917 cmt. d (1979) (stating that while the limitation in actions for breach of contract [that the harm must be such as the contract breaker should reasonably foresee at the time of making the contract to be within the risk of occurrence as a result of his breach] does not ordinarily apply to the extent of liability in tort, it may apply in cases in which the basis of the tort is the failure of the defendant to perform the obligations of a consensual relation with the other).
Economic interference through wrongful attachment is a tort that recognizes the existence of a duty independent of any contractual obligations. Therefore, although the conduct necessary to commit this tort involves purely economic interference, any damages resulting from wrongful attachment are nevertheless governed by tort principles.Stensvad v. Towe, 759 P.2d 138, 144 (Mont. 1988) (permitting the plaintiff in a wrongful attachment action to recover $5,000 for loss of income under tort principles). Accordingly, we hold that the appropriate measure of the damages a victim of wrongful attachment may recover is such damage as is "the natural and probable result of the injury sustained by virtue of the tortious act." Thompson v. Tartler, 166 Colo. 247, 255, 443 P.2d 365, 369 (1968); see also McNeill v. Allen, 35 Colo. App. 317, 325, 534 P.2d 813, 818-19 (1975) (rejecting Hadley standard and awarding plaintiffs damages for loss of a favorable interest rate on a home they intended to purchase in a fraud action because the victim of a tort "may recover such damages as are the natural and probable result of the injury sustained by virtue of a tortious act"). As is the case in other tort actions, the recovery of these damages is limited by the requirements that such damages be proximately caused by the tortious act, and that they be reasonably ascertainable.
C.R.C.P. 102 does not modify the damages recoverable in an action for wrongful attachment. See Cromley v. Hardman Bros., 122 Colo. 489, 498, 223 P.2d 1045, 1049 (1950) (holding that the Colorado Rules of Civil Procedure do not "attempt to affect the substantive rights of litigants"). Respondent argues, and we agree, that under C.R.C.P. 102, damages for wrongful attachment are governed by tort principles. We disagree, however, with Respondent's understanding of those principles. Respondent argues that because wrongful attachment is a tort, Petitioners are liable for any damages resulting therefrom, regardless of how remote or unforeseeable these damages may be. Under this rule, even speculative or conjectural damages would presumably be recoverable. We cannot justify a rule that would impose liability for remote and unforeseeable injuries connected to the tortious act only through a disjointed and extended chain of causation. The unlimited liability imposed by such a broad rule is inconsistent with the policy that a tortfeasor should be held responsible and the victim compensated, but only for the kinds of harms within the risk created by his conduct. In accordance with this goal, proximate cause excludes from the appropriate scope of responsibility harms resulting from the tortfeasor's conduct that are so clearly outside the risk created by his conduct that it would be unjust or at least impractical to impose liability therefor. See generally Law of Torts, supra, Ch. 10. Thus, as Respondent concedes at one point in its brief to this court, C.R.C.P. 102 "contains an inherent element of foreseeability." See C.R.C.P. 102(n)(2) ("A plaintiff who fails to prevail at the hearing provided for by this section is liable to the defendant for any damages sustained as a result of the issuance of process, costs, and reasonable attorney's fees.").
C. The Tortious Act Must Proximately Cause The Consequential Damages
In torts involving interference with contract and economic opportunity "[m]ost courts award damages under tort principles . . . with damages limits based upon proximate cause rather than contemplation of the parties." Dan B. Dobbs, The Law of Torts, § 455, at 1297 (2000) [herinafter Law of Torts]; see also Dean v. James McHugh Constr. Co., 392 N.Y.S.2d 946, 948 (N.Y.App.Div. 197 7) (holding that there is "no reason why a party who is wrongfully deprived of the use of his funds may not recover damages representing more than the legal interest rate, provided that he can prove that such damages were actually sustained as a proximate result of the deprivation"). "Under this view, the plaintiff can recover all proximately caused damages, including consequential damages, even if those damages were greater than the damages the plaintiff could recover against [a] contract breacher." Law of Torts,supra, § 455, at 1297. The proximate cause standard requires only that the damages be "reasonably foreseeable." Ekberg v. Greene, 196 Colo. 494, 496-97, 588 P.2d 375, 376-77 (1978); see also Walcott v. Total Petroleum, Inc., 964 P.2d 609, 611 (Colo.App. 1998) ("[F]oreseeability is the touchstone of proximate cause."); cf. C.J.I.-Civ.3d 9:30 ("The negligence, if any, of the defendant . . . is not a cause of any . . . damage . . . to the plaintiff . . . unless injury to a person in the plaintiff's situation was a reasonably foreseeable consequence of that negligence."). "The exact or precise injury need not have been foreseeable, but it is sufficient if a reasonably careful person, under the same or similar circumstances, would have anticipated that injury to a person in the plaintiff's situation might result from the defendant's conduct." C.J.I.-Civ.3d 9:30. Thus, although broader than Hadley, proximate cause serves as a very real limit on liability. Melvin Aron Eisenberg, The Principle of Hadley v. Baxendale, 80 Calif. L. Rev. 563, 567 (1992) ("[T]he choice between a regime based on Hadley v. Baxendale and a regime based on proximate cause is not a choice between liability for foreseeable losses and liability for all losses caused in fact. Rather it is a choice between competing standards of foreseeability . . . ."). In sum, because damages resulting from wrongful attachment are governed by tort principles, proximate cause is the appropriate standard by which to assess their extent.
Damages Must Be Reasonably Ascertainable
Whether Hadley or proximate cause serves to limit liability for consequential damages, a plaintiff must prove the damages he has suffered with reasonable certainty. Dobbs, supra, § 6.6(2), at 137. "When the issue of causation is resolved, the question is whether the evidence of loss . . . contains sufficient certainty and proximity upon which to base an award of special or consequential damages." Cope v. Vermeer Sales Serv. Co. of Colo., 650 P.2d 1307, 1309 (Colo.App. 1982). "The purpose of the reasonable certainty rule is to avoid making compensatory damages awards for lost profits which are fabricated or based on mere conjecture or speculation." Nora v. Safeco Ins. Co., 577 P.2d 347, 350 (Idaho 1978) (internal quotations omitted). The rule only applies to situations where the fact of damages is uncertain, not where the amount is uncertain. Peterson v. Colo. Potato Flake Mfg. Co., 164 Colo. 304, 310, 435 P.2d 237, 239 (1967).
Hornblower v. Lazere, 222 N.W.2d 799 (Minn. 1974), provides a relevant application of this rule. In that case, the defendant alleged in his counterclaim that by mispaying him $8,000, the plaintiff had caused him to forbear selling stock that he otherwise would have sold.Hornblower, 222 N.W.2d at 803. This stock declined in value between the time that the mispayment was made and the time the plaintiff demanded that defendant return the $8,000. Id.
Citing the rule that speculative, remote or conjectural damages are not recoverable, the Minnesota Supreme Court held that an award of damages could not be sustained on this basis. Id. It noted that "[a]lthough defendant alleged that the negligent payment caused him to forbear selling stock which later declined in value, he was unable at trial to state specifically what stock he would have sold, and on what date he would have sold it, had he been informed of the correct state of his account." Id. Accordingly, the court reasoned that "since it would have been impossible for the jury to have determined with any accuracy what stocks defendant would have sold and on what date, . . . we hold that the evidence, viewed in the light most favorable to the verdict, is too speculative to afford a reasonable basis for that portion of the verdict granting damages to defendant for plaintiff's negligent mispayment of the $8,000." Id.
With these principles in mind, we turn to the merits of the case at hand.
The parties are former partners who had an established business relationship. Not only did Petitioners know the approximate amount of money Respondent was transferring into the state, they knew precisely when this transfer would take place, and at what bank. Furthermore, the parties stipulated that Respondent intended to use the funds frozen by the writ of garnishment to purchase 200,000 shares of Osicom. Given these undisputed facts, we hold that the damages sought by Petitioner are the natural and probable result of the injuries they sustained by virtue of the tortious act. In addition, although Petitioners had no actual knowledge that Respondent intended to purchase Osicom, it was reasonably foreseeable that the money attached was to be used for investment purposes of some kind. Likewise, it was reasonably foreseeable that attachment of the funds would prevent, or at least delay, such an investment and cause damage thereby. Accordingly, we hold as a matter of law that Petitioners' wrongful attachment of Respondent's funds proximately caused: (1) an increase in the price Respondent paid to acquire 95,000 shares of Osicom stock; and (2) Respondent's inability to purchase an additional 105,000 shares of Osicom stock. See Pioneer Constr. Co. v. Richardson, 176 Colo. 254, 259, 490 P.2d 71, 74 (1971) (holding that the question of proximate cause is for the court in the absence of conflicting testimony); see also Lyons v. Nasby, 770 P.2d 1250, 1256 (Colo. 1989) (holding that "where reasonable minds can draw but one inference from the evidence," the question of proximate cause becomes one of law); Samuelson v. Douthirt, 187 Colo. 155, 160, 529 P.2d 631, 634 (1974) (holding that the question of "proximate cause [is] for the court where the evidence, and the inferences to be drawn therefrom, are such that reasonable men, giving fair consideration thereto, must reach the same conclusion").
We now turn our attention to whether the damages claimed by the Respondent are reasonably ascertainable. First, we consider Respondent's claim that it had to pay a higher price to acquire 95,000 shares of Osicom stock as a result of Petitioner's wrongful attachment. It is undisputed that, at the time of attachment, Respondent intended to buy 200,000 shares of Osicom stock and had earmarked a certain sum of money for this purpose. Because these funds were frozen, however, it was unable to purchase Osicom stock until approximately one month later when the writ of garnishment was released. Since the price of Osicom stock increased dramatically while the funds were frozen, Respondent was able to purchase only 95,000 shares of Osicom with the money it had set aside to purchase 200,000 shares. These facts are reasonably ascertainable from the parties' stipulation.
According to that stipulation: On December 24, 1997, the day after the writ was issued, Respondent could have acquired 95,000 shares of Osicom stock for $207,100. Respondent ultimately paid $449,828.15 for 95,000 shares of Osicom in January of 1998 after the writ was released. Hence, because of Petitioners' wrongful attachment of its funds, Respondent Vernon Corporation had to pay an additional $242,728.15 in order to obtain 95,000 shares of Osicom stock. Therefore, not only is the additional amount paid for the 95,000 shares reasonably ascertainable, it is "a concrete figure that [can] be calculated given the time frame and the differences in the price of the stock."Vanderbeek, 25 P.3d at 1246.
We approve of the court of appeals' assessment of this element of the consequential damages claimed by Respondent:
[D]espite the trial court's conclusion that "money [can] be put to innumerable uses," an identifiable portion of the wrongfully attached money here had been set aside for a particular purpose. Accordingly, defendant is entitled to . . . the additional amount paid for the 95,000 shares . . . of the wrongfully attached $450,000 that he had intended to spend, and indeed, did spend on Osicom stock.
Vanderbeek, 25 P.3d at 1246. Because the increase in the price Respondent paid to acquire 95,000 shares of Osicom stock is a reasonably ascertainable consequential damage of Petitioners' wrongful attachment, it is recoverable. Accordingly, we affirm the court of appeals' judgment awarding Respondent the increase in the price it paid to acquire 95,000 shares of Osicom stock.
In contrast, whether, and to what extent, Respondent lost profits on the 105,000 shares he never purchased is speculative and conjectural. Generally, damages based on lost profits are disfavored when the venture from which the projected profit is derived is speculative or conjectural. Lee v. Durango Music, 144 Colo. 270, 278, 355 P.2d 1083, 1087 (1960) (holding that a claim for future profits may not be sustained by evidence which is speculative, remote, imaginary, or impossible of ascertainment); Milheim v. Baxter, 46 Colo. 155, 103 P. 376 (1909); see also Restatement (Second) of Torts § 912 cmt. f (1979) (requiring that an injured party have a "substantial and measurable chance of a profit without chance of loss" to satisfy the requirement of "certainty"). As the trial court pointed out, "stock trading is a gambler's business, the very nature of which is speculative and conjectural."
Profits from a stock investment are not realized until the stock is sold at a higher price than that at which it was bought. These 105,000 shares of Osicom stock were neither bought nor sold. Thus, unlike the increased cost Respondent actually paid to acquire the 95,000 shares of Osicom, determining the profits Respondent could have realized had he purchased the 105,000 shares of Osicom the day after the earmarked funds were frozen is entirely dependent on an arbitrarily chosen "sell" date.
On December 24, 1997 — the day after Respondent's earmarked funds were frozen — Osicom stock was trading at $2 3/16 per share. Subsequent to this date, the value of Osicom's stock has varied tremendously. Adjusted to reflect a reverse split of the stock on a one for three basis that Osicom completed on July 24, 1998, it has ranged from $1 7/8 to $19 1/2 according to the parties' stipulation. Respondent chose to calculate profits lost on the 105,000 shares they were unable to purchase as a result of Petitioners' wrongful attachment based on the value of Osicom stock on November 30, 1998 — the day before the trial court hearing on this issue. On this date, Osicom stock closed at $9 1/16 per share. Accordingly, Respondent claimed the difference in value between Osicom's stock on this date and its value the day after the earmarked funds were frozen, or $88,287.50, as the profits it had lost. If Respondent had instead chosen the date on which Osicom stock was trading at $19 1/2 per share, its "lost profits" would have been much more. In contrast, if lost profits had been measured from the date that Osicom was trading at 1 7/8, Respondent would not have been damaged at all. This uncertainty precludes an award of damage for lost profits. Cf. Hornblower 222 N.W.2d at 803 (holding that although plaintiff caused defendant to forbear selling stock which later declined in value, damages therefor were too speculative to be recovered because defendant was unable at trial to state specifically what stock he would have sold, and on what date he would have sold it). We therefore affirm the court of appeals' judgment denying Respondent lost profits on the 105,000 shares of Osicom stock it was unable to purchase because of Petitioners wrongful attachment.
Respondent's calculation of the profits it claims to have lost takes into account the 3 to 1 reverse stock split that occurred on July 24, 1998.
We hold that consequential damages are recoverable in torts of economic interference, such as the wrongful attachment here. As in any other tort action, the appropriate measure of the damage a victim of an economic tort may recover is that amount which is the natural and probable result of the injury sustained by virtue of the tortious act. In order to be recoverable, such damages must be proximately caused by the tortious act and must be reasonably ascertainable.
Given the undisputed facts in this case, we hold that the damages sought by Petitioner are the natural and probable result of the injury they sustained by virtue of the tortious act. In addition, we hold that Petitioners' wrongful attachment of Respondent's funds was the proximate cause of: (1) an increase in the price Respondent paid to acquire 95,000 shares of Osicom stock; and (2) Respondent's inability to purchase an additional 105,000 shares of Osicom stock. The increased cost of acquiring 95,000 shares of Osicom stock due to the wrongful attachment is reasonably ascertainable and therefore recoverable. However, the lost profits on 105,000 shares of Osicom stock not purchased because of the wrongful attachment is not reasonably ascertainable and therefore not recoverable. We therefore affirm the court of appeals judgment. We remand the case to the court of appeals to return it to the trial court to recalculate the Respondent's damages consistent with this opinion.
Justice Bender dissents.