Opinion ID: 2054217
Heading Depth: 2
Heading Rank: 2

Heading: Anticipatory Breach of Lease at Common Law; Measure of Damages

Text: At common law, when a lessee abandoned the premises and refused to pay any more rentsometimes called an anticipatory breach of the lease or a breach by anticipatory repudiationthe lessor had available two basic courses of action: refuse to accept the surrender, let the property lie idle, and sue for the rent as it came due; or accept surrender of the premises, thereby terminating the lease, and immediately sue for damages. Sagamore Corp. v. Willcutt, 120 Conn. 315, 180 A. 464, 465 (1935). [15] Under the latter approach, the lessor was entitled, as of the date of breach, to the most accurate possible calculation of damages attributable to a period wholly in the future, i.e., the balance of the lease term. An old federal district court decision aptly summarized the common law approach to calculating damages under the second alternative: It is well settled that the proper measure of damages presently recoverable by a lessor under a lease for years, from the lessee therein, on an abandonment constituting a breach thereof by the lessee, is the present value of the difference between [1] the fair rental value, at the time of such breach, of the leased premises for the balance of the unexpired term and [2] the total agreed rent for such unexpired term. Leo v. Pearce Stores Co., 57 F.2d 340, 341 (E.D.Mich.1932) (emphasis added); see Garcia v. Llerena, 599 A.2d 1138, 1143 (D.C. 1991). Because damages are payable as of the date of judgment in a lump sum, rather than as they accrue over the balance of the lease term, the Leo court recognized that the total of such future damages must be reduced or discounted to the present value of receiving that sum over time. Leo, 57 F.2d at 341. This means that both the balance of the agreed rent yet unpaid on the date of breach and the fair rental value of the lease on the date of breachwhich are to be compared in order to ascertain changesrepresent sums calculated for a future period but discounted to present value. See Vibrant Video, Inc. v. Dixie Pointe Assocs., 567 So.2d 1003, 1004 (Fla.Dist.Ct.App.1990); Taylor Publishing Co. v. Systems Mktg., Inc., 686 S.W.2d 213, 217 (Tex.Ct.App.1984). Because Smith filed its counterclaim for nonpayment of rent before expiration of the lease, Smith invoked the measure of damages summarized above from Leo, which is specified in § 12.4 of the lease. See supra note 12. More specifically, Smith relied on the particular measure of damages in § 12.9 reflecting the difference between [1] the present value of the rent reserved under this lease on the date of breach, discounted at ten percent (10%) per annum, and [2] the fair market value of the Lease on the date of breach. Supra note 12. [16] Put somewhat more simply, this means that Smith was entitled to the difference between the total amount CUIC promised to pay under the lease for the balance of the rental period after the breach (discounted at 10% per year), and the total amount Smith could reasonably expect to receive for that entire period upon reletting the premises after the breach (discounted to reflect present market value). If, for example, CUIC had defaulted on payment of a sum which, when properly discounted, totaled $10,000 for the balance of the term, and Smith could reasonably be expected to relet the premises from the date of the breach for no more than $8,000, representing present ( i.e., discounted) fair market value of the lease for that same period, Smith's discounted damages would be $2,000. If, however, Smith could reasonably be expected to relet for a sum which, when discounted to the date of breach, would total $10,000 or more, not a lesser amount such as the $8,000, there would be no damages.