(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (NMSA 1978) or otherwise determined pursuant to agreement of the parties (Sections 55-1-302 and 55-2A-503 NMSA 1978), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under Subsection (2) of Section 55-2A-527 NMSA 1978, or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in Subsection (1) or Paragraph (a) of Subsection (3) of Section 55-2A-523 NMSA 1978, or, if agreed, for other default of the lessee: (i) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor; (ii) the present value as of the date determined under clause (i) of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term; and (iii) any incidental damages allowed under Section 55-2A-530 NMSA 1978, less expenses saved in consequence of the lessee's default.

(2) If the measure of damages provided in Subsection (1) of this section is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under Section 55-2A-530 NMSA 1978, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.

History: 1978 Comp., § 55-2A-528, enacted by Laws 1992, ch. 114, § 83; 2005, ch. 144, § 44.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Uniform Statutory Source. — Section 2-708 [55-2-708 NMSA 1978].

Changes. — Substantially revised.

1. Subsection (1), a substantially revised version of Section 2-708(1) [55-2-708(1) NMSA 1978], states the basic rule governing the measure of lessor's damages for a default described in Section 2A-523(1) or (3)(a) [55-2A-52355-2A-523 NMSA 1978], and, if agreed, for a contractual default. This measure will apply if the lessor elects to retain the goods (whether undelivered, returned by the lessee, or repossessed by the lessor after acceptance and default by the lessee) or if the lessor's disposition does not qualify under Section 2A-527(2) [55-2A-527(2) NMSA 1978]. Section 2A-527(3) [55-2A-527(3) NMSA 1978]. Note that under some of these conditions, the lessor may recover damages from the lessee pursuant to the rule set forth in Section 2A-529 [55-2A-529 NMSA 1978]. There is no sanction for disposition that does not qualify under Section 2A-527(2) [55-2A-527(2) NMSA 1978]. Application of the rule set forth in this section is subject to agreement to the contrary. Sections 2A-504, 2A-103(4) and 1-302 [55-2A-504, 55-2A-10355-1-302 NMSA 1978, respectively].

2. If the lessee has never taken possession of the goods, the measure of damage is the accrued and unpaid rent as of the date of default together with the present value, as of the date of default, of the original rent for the remaining term of the lease less the present value as of the same date of market rent, and incidental damages, less expenses saved in consequence of the default. Note that the reference in Section 2A-528(1)(i) and (ii) [55-2A-528 NMSA 1978] is to the date of default not to the date of an event of default. An event of default under a lease agreement becomes a default under a lease agreement only after the expiration of any relevant period of grace and compliance with any notice requirements under this Article and the lease agreement. American Bar Foundation, Commentaries on Indentures, § 5-1, at 216-217 (1971). Section 2A-501(1) [55-2A-501 NMSA 1978]. This conclusion is also a function of whether, as a matter of fact or law, the event of default has been waived, suspended or cured. Sections 2A-103(4) and 1-103 [55-2A-103 and 55-1-103 NMSA 1978, respectively]. If the lessee has taken possession of the goods, the measure of damages is the accrued and unpaid rent as of the earlier of the time the lessor repossesses the goods or the time the lessee tenders the goods to the lessor plus the difference between the present value, as of the same time, of the rent under the lease for the remaining lease term and the present value, as of the same time, of the market rent.

3. Market rent will be computed pursuant to Section 2A-507 [55-2A-507 NMSA 1978].

4. Subsection (2), a somewhat revised version of the provisions of Subsection 2-708(2) [55-2-708 NMSA 1978], states a measure of damages which applies if the measure of damages in subsection (1) is inadequate to put the lessor in as good a position as performance would have. The measure of damage is the lessor's profit, including overhead, together with incidental damages, with allowance for costs reasonably incurred and credit for payments or proceeds of disposition. In determining the amount of due credit with respect to proceeds of disposition a proper value should be attributed to the lessor's residual interest in the goods. Sections 2A-103(1)(q) and 2A-507(4) [55-2A-103 and 55-2A-507 NMSA 1978, respectively].

5. In calculating profit, a court should include any expected appreciation of the goods, e.g. the foal of a leased brood mare. Because this subsection is intended to give the lessor the benefit of the bargain, a court should consider any reasonable benefit or profit expected by the lessor from the performance of the lease agreement. See Honeywell, Inc. v. Lithonia Lighting, Inc., 317 F. Supp. 406, 413 (N.D.Ga.1970); Locks v. Wade, 36 N.J.Super. 128, 131, 114 A.2d 875, 877 (Super.Ct.App.Div.1955). Further, in calculating profit the concept of present value must be given effect. Taylor v. Commercial credit Equip. Corp., 170 Ga.App. 322, 316 S.E.2d 788 (Ct.App.1984). See generally Section 2A-103(1)(u).

Cross References. — Sections 1-302, 2-708, 2A-103(1)(u), 2A-402, 2A-504, 2A-507, 2A-527(2) and 2A-529 [55-1-302, 55-2-708, 55-2A-103(1)(u), 55-2A-402, 55-2A-504, 55-2A-507, 55-2A-527(2) and 55-2A-529 NMSA1978, respectively].

"Agreement". Section 1-201(b)(3) [55-1-201(b)(3) NMSA 1978].

"Goods". Section 2A-103(1)(h) [55-2A-103(1)(h) NMSA 1978].

"Lease". Section 2A-103(1)(j) [55-2A-103(1)(j) NMSA 1978].

"Lease agreement". Section 2A-103(1)(k) [55-2A-103(1)(k) NMSA 1978].

"Lessee". Section 2A-103(1)(n) [55-2A-103(1)(n) NMSA 1978].

"Lessor". Section 2A-103(1)(p) [55-2A-103(1)(p) NMSA 1978].

"Party". Section 1-201(b)(26) [55-1-201(b)(26) NMSA 1978].

"Present value". Section 1-201(b)(28) [55-1-201(b)(28) NMSA 1978].

"Sale". Section 2-106(1) [55-2-106(1) NMSA 1978].

The 2005 amendment, effective January 1, 2006, deleted the statutory reference in Subsection (1) to Section 55-2A-504 NMSA 1978 and changed the statutory reference in Subsection (1) from Section 55-1-102(3) NMSA 1978 to Section 55-1-302 NMSA 1978.