Opinion ID: 1453336
Heading Depth: 3
Heading Rank: 1

Heading: Compensatory Damages for the Sublease Period

Text: Economy vehemently argues that, even if the trial court properly ruled that it had unreasonably withheld consent to the sublease, there was no basis for the court's award of damages to Garcia of $180,000, which represented the monthly sublease rent of $7,500 for the twenty-four months from April 1985 through March 1987. Economy particularly attacks the court's imposition of a judgment decreeing that Economy was jointly and severally liable with American for this $180,000 (plus, as will be discussed below, $91,125 of prejudgment interest). Its argument, however, on this point is rather scant; its sum and substance is: The Court's Conclusions of Law Nos. 4 and 9 [holding Economy jointly and severally liable for Garcia's compensatory damages] transform the admitted liability of American Toyota on its promissory notes into a joint and several liability of Economy Rentals along with American Toyota. Strange alchemy! Analytically, the court may have incorrectly measured the damages sustained by Garcia from Economy's breach of the lease. In the absence of other elements of damage, the tenant is entitled to recover from the landlord the reasonable rental value of the leased premises, less the rent payable to the landlord. See Barfield v. Damon, 56 N.M. 515, 523, 245 P.2d 1032, 1037 (1952); Restatement (Second) of Property § 10.2(1) (1976). Here, the reasonable rental value of the premises was not the $7,500 per month payable by American under the sublease (plus the $3,000 per month that American agreed to pay directly to Economy), because the sublease covered both the Economy property and the Rogers property. Thus, the trial court arguably should have determined the reasonable rental value of the Economy property alone and used that as the measure of the rental value of which Garcia was deprived by Economy's wrongful termination of the lease. [9] However, the trial court found that Garcia suffered an additional element of damage besides the loss of the property's rental value  namely, American's nonpayment of sublease rental to Garcia. The court found that Economy's termination of the Garcia lease and its later direct lease with American were proximate causes of American's refusal to vacate the property when its sublease expired on June 30, 1986, and proximate causes of American's withholding the sublease rent. The court also found that Economy and American acted in concert with one another. These findings invoke the additional rule as to measure of damages in Barfield v. Damon that special damages which are within the contemplation of the parties and resulting directly and proximately from the breach, are recoverable if they can be established with reasonable certainty. 56 N.M. at 523, 245 P.2d at 1037. The rule as stated in the Restatement is that, when the leased property is used for business purposes, damages include loss of anticipated business profits proven to a reasonable degree of certainty, which resulted from the landlord's default, and which the landlord at the time the lease was made could reasonably have foreseen would be caused by the default[.] Restatement (Second) of Property § 10.2(5). Although there was no explicit finding that, when the lease was executed in 1977, the parties contemplated that a breach by Economy would result in American's withholding its sublease (then an oral sublease) payments to Garcia, such a finding would have been well within the evidence; Economy knew from the outset that American occupied the property as Garcia's subtenant, and it was easily foreseeable that a termination by Economy of Garcia's right to possession could result in American's ceasing to pay rent to its sublessor Garcia. The trial court's finding that Economy's breach proximately caused American's nonpayment of sublease rent was supported by substantial evidence. Among other things, Rivera testified that American withheld the rent because of Economy's termination of the lease, and a statement to the same effect appeared in the escrow agreement between American and the bank. Had Economy not declared the lease terminated, American would have had no excuse for failing to honor the promissory notes and comply with the Grant of Leaseholds obligating it to pay Garcia $7,500 per month. Economy was therefore liable for this item of special damage or loss of profits.