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Economy Rentals Inc. v. Garcia9/24/1991
MONTGOMERY, Justice.
The principal issue on this appeal is whether Economy Rentals, Inc., a lessor of real property in Albuquerque, New Mexico, breached its lease by unreasonably withholding consent to its lessee's request for approval of a sublease and then terminating the lease when the lessee failed to cure an alleged default. Resolution of this issue requires us to articulate standards for a determination of what constitutes "reasonable" grounds for withholding consent to a lessee's proposed assignment or sublease. We hold that the trial court properly determined that the lessor's refusal to consent was unreasonable.
This resolution does not, however, dispose of this appeal. Several issues relating to the relief afforded the lessee by the trial court for the lessor's breach, and for the sublessee's concomitant breach of its obligations under the sublease, are raised by the appellants, including issues relating to the compensatory damages awarded the lessee against both the lessor and the sublessee and whether those parties could properly be held "jointly and severally" liable for those damages. In the course of our opinion, we also discuss issues relating to prejudgment interest, punitive damages, and determination of attorney's fees, along with certain other issues of which we dispose summarily. We affirm in part, reverse in part, and remand for further proceedings.
I. Facts and Issues
Effective April 1, 1977, Julian Garcia, an automobile dealer in Albuquerque, leased from Economy Rentals, Inc. ("Economy"), certain premises at 725 Wyoming Boulevard, N.E. (the "Economy property"), for a ten-year period at an escalating rent, leaching $3,000 per month from April 1982 through March 1987. Although effective in April 1977, the lease was not actually signed by Economy and Garcia until June 14, 1979. Contemporaneously with executing
the lease, the parties also executed an "amendment" to the document, under which the lessee could not assign or sublet the premises without the written consent of the lessor, "which consent shall not be unreasonably withheld."
When the lease became effective and for some time before, the Economy property was occupied by American Toyota, Inc. ("American"). American had been formed in 1976 to enable Garcia to acquire a second automobile franchise from Toyota Motors; at that time Garcia already owned and operated another Toyota dealership in Albuquerque. Initially, Garcia owned 90% of the stock in American; the remaining 10% was owned by his cousin, Beatriz Rivera, who was named president and general manager. Pursuant to Toyota Motors' requirement, Rivera also held an option to acquire sufficient additional stock to become the majority stockholder.
Garcia had first acquired a lease on the Economy property in 1976 by assignment (with Economy's consent) from the previous tenant and had placed American in possession under an oral sublease at that time. Thus, when Economy and Garcia executed the new ten-year lease in 1979, American had been occupying the Economy property for at least two years, with Economy's full knowledge and consent. The parties confirmed this arrangement in writing when the lease and the amendment were executed, with Economy consenting to the subleasing of the premises to American on the understanding that Garcia was not relieved of his obligations under the lease.
In 1983 a dispute arose between Rivera and Garcia over Rivera's option to acquire control of American. The dispute apparently was protracted and bitter. It was finally resolved in May 1984 by execution of a series of documents under which Rivera, through America
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