2020 New Mexico Statutes
Chapter 56 - Commercial Instruments and Transactions
Article 8 - Money, Interest and Usury
Section 56-8-3 - Interest rate; no written contract.

The rate of interest, in the absence of a written contract fixing a different rate, shall be not more than fifteen percent annually in the following cases:

A. on money due by contract;

B. on money received to the use of another and retained without the owner's consent expressed or implied; and

C. on money due upon the settlement of matured accounts from the day the balance is ascertained.

History: 1978 Comp., § 56-8-3, enacted by Laws 1983, ch. 254, § 1.

Repeals and reenactments. — Laws 1983, Chapter 254, § 1 repealed and reenacted 56-8-3 NMSA 1978. For prior history, see Laws 1851-1852, p. 254; C.L. 1865, ch. 79, § 4; C.L. 1884, § 1734; C.L. 1897, § 2550; Code 1915, § 3525; C.S. 1929, § 89-103; 1941 Comp., § 53-603; 1953 Comp., § 50-6-3; Laws 1980, ch. 68, § 1.

Cross references. — For interest rate on open accounts in commercial houses, see 56-8-5 NMSA 1978.

For exemption from limits of interest rate on National Housing Act loans, see 58-8-2 NMSA 1978.

Compiler's notes. — Annotations to decisions under prior versions of Section 56-8-3 NMSA 1978 and their predecessors (which contained various legal rates of interest) appear in the annotations to decisions under this section.

I. GENERAL CONSIDERATION.

Application to prejudgment interest. — This section, by its own terms, applies only in those actions on a contract where the contract is silent as to prejudgment interest. D.J. Simmons, Inc. v. Broaddus, 116 Fed. Appx. 964.

Applicability. — This statute applies to all judgments and decrees. The references to contracts in the statute simply clarifies that a contract could always set a different rate of interest, which a judgment was to follow. Folz v. State, 1993-NMCA-066, 115 N.M. 639, 857 P.2d 39, cert. denied, 115 N.M. 602, 856 P.2d 250.

This section does not use the term "damages". Instead it refers to "money due by contract". Aspen Landscaping, Inc. v. Longford Homes of N.M., Inc., 2004-NMCA-063, 135 N.M. 607, 92 P.3d 53, cert. denied, 2004-NMCERT-005, 135 N.M. 565, 92 P.3d 10.

Section inapplicable when neither contract nor judgment involved. — This section is inapplicable where the trial court, sitting in equity, is not awarding money due on a contract and there is no money due "on a judgment." El Paso Natural Gas Co. v. W. Bldg. Assocs., 675 F.2d 1135 (10th Cir. 1982).

1980 amendment inapplicable to complaint filed prior thereto. — The increase in the interest rate from 6 percent to 10 percent enacted in 1980 does not apply to a complaint filed prior to 1980. Strickland v. Roosevelt County Rural Elec. Coop., 1982-NMCA-184, 99 N.M. 335, 657 P.2d 1184, cert. denied, 99 N.M. 358, 658 P.2d 433 (1983), and cert. denied, 463 U.S. 1209, 103 S. Ct. 3540, 77 L. Ed. 2d 1390 (1983).

Inapplicable when written contract fixes different rate. — Where a written contract fixing a different rate existed between the parties, there is no applicability of this section. Skarda v. Davis, 1973-NMSC-011, 84 N.M. 544, 505 P.2d 1220.

Inapplicable when written contract provides "no interest". — Where express provision of contract stipulated that part of obligation payable in annual installments was to bear no interest, there is no place for the operation of any implied contract to pay interest, regardless of how the statutory term "due" used in this section might be interpreted. City of Clovis v. Sw. Pub. Serv. Co., 1945-NMSC-030, 49 N.M. 270, 161 P.2d 878.

Inapplicable when contract performed out-of-state. — Where drainage district bonds and coupons issued by Roswell drainage district of New Mexico are made payable to bearer at bank in Illinois, interest rate after maturity of coupons is governed by law of state where contract was to be performed and not by this section. Roswell Drainage Dist. v. Parker, 53 F.2d 793 (10th Cir. 1931).

Applicable when contract uses mathematical formula. — When the amount owed is ascertainable by a mathematical calculation from a standard fixed in the contract or from established market prices, this section is applicable. Grynberg v. Roberts, 1985-NMSC-040, 102 N.M. 560, 698 P.2d 430.

An injured party is entitled to prejudgment interest as a matter of right when the amount due under the contract can be ascertained with reasonable certainty by a mathematical standard fixed in the contract or by established market prices. The trial court has discretion to award prejudgment interest, if justice requires, when the contract amount is not ascertainable by the above means. Kueffer v. Kueffer, 1990-NMSC-045, 110 N.M. 10, 791 P.2d 461.

Prejudgment interest is permissible as a matter of right when the amount due under the contract can be ascertained with reasonable certainty by a mathematical standard fixed in the contract or by established market prices. Furthermore, so long as the amount of money obligation is ascertainable, interest is recoverable even where the creditor has not actually realized any loss as a result of nonpayment. Martinez v. Albuquerque Collection Servs., Inc., 867 F. Supp. 1495 (D.N.M. 1994).

Applicability in divorce cases. — Award of prejudgment interest in a divorce case is a question within the sound discretion of the trial court, as it is in other cases. Jurado v. Jurado, 1995-NMCA-014, 119 N.M. 522, 892 P.2d 969.

Fact that defendant offered to pay contested amount before trial is not persuasive that it was inequitable for the trial court to award plaintiff prejudgment interest on the amount. Aspen Landscaping, Inc. v. Longford Homes of N.M., Inc., 2004-NMCA-063, 135 N.M. 607, 92 P.3d 53, cert. denied, 2004-NMCERT-005, 135 N.M. 565, 92 P.3d 10.

Subsection A requires that contract be breached before an award of prejudgment interest can be considered. State Farm Mut. Auto. Ins. Co. v. Barker, 2004-NMCA-105, 136 N.M. 211, 96 P.3d 336.

Purpose of prejudgment interest. — This section allows prejudgment interest in cases proving money due by contract; the obligation to pay prejudgment interest arises by operation of law and constitutes an obligation to pay damages to compensate a claimant for the lost opportunity to use money owed the claimant and retained by the obligor between the time the claimant's claim accrues and the time of judgement (the loss of use and earning power of the claimant's fund). State ex rel. Bob Davis Masonry, Inc. v. Safeco Ins. Co. of Am., 1994-NMSC-106, 118 N.M. 558, 883 P.2d 144.

Certainty of damages does not provide the basis for an award of prejudgment interest under this section. State Farm Mut. Auto. Ins. Co. v. Barker, 2004-NMCA-105, 136 N.M. 211, 96 P.3d 336.

Prejudgment interest as damages. — The fact that Subsection A fixes a statutory maximum rate of 15 percent for interest "on money due by contract" does not preclude use of that rate in computing prejudgment interest as damages; the same rate is fixed in Subsection B for interest "on money received to the use of another and retained without the owner's consent expressed or implied". Interest as damages is computed at the statutory rate, and finding an implied contract to pay interest is not necessary in order to apply Subsection B. Economy Rentals, Inc. v. Garcia, 1991-NMSC-092, 112 N.M. 748, 819 P.2d 1306.

Construction with Section 56-8-4 NMSA 1978. — Prejudgment interest assessed from the date the claim accrued was consistent with an award under this section, not 56-8-4B NMSA 1978; as a result, the appeals court should not review the award as a matter of discretion, but as an award as of right pursuant to this section. Gilmore v. Duderstadt, 1998-NMCA-086, 125 N.M. 330, 961 P.2d 175.

Prejudgment interest not considered insurance "claim". — Prejudgment interest is not included within the definition of "covered claims" in 59A-43-4C NMSA 1978 so as to be limited or excluded by the Property and Casualty Insurance Guaranty Law liability cap of $100,000 per occurrence on individual "covered claims." Also, no specific authority within the Guaranty Law is necessary to award prejudgment interest. The trial court has that authority under either this section or 56-8-4B NMSA 1978. Aztec Well Servicing Co. v. Prop. & Cas. Ins. Guar. Ass'n, 1993-NMSC-023, 115 N.M. 475, 853 P.2d 726.

Prejudgment interest rate to be applied is the one in effect when the dispute becomes a pending case. Taylor v. Allegretto, 1994-NMSC-081, 118 N.M. 85, 879 P.2d 86.

Countervailing equities regarding prejudgment interest. — When prejudgment interest is awarded either as a matter of right or in the trial court's discretion, the court will examine any countervailing equities to determine whether the award was properly made. State ex rel. Bob Davis Masonry, Inc. v. Safeco Ins. Co. of Am., 1994-NMSC-106, 118 N.M. 558, 883 P.2d 144.

Debtor may elect to pay more than legal interest. — Although the legal rate of interest is 6%, that does not prevent a debtor from paying more if he elects, and a debtor who knows that an account stated contains items of interest on average monthly balances agrees to pay interest on the monthly balances. Brown & Manzanares Co. v. Gise, 1907-NMSC-030, 14 N.M. 282, 91 P. 716.

A mere difference of opinion as to the amount owed will not relieve the breaching party for liability for prejudgment interest. Kueffer v. Kueffer, 1990-NMSC-045, 110 N.M. 10, 791 P.2d 461.

Interest on judgment against political subdivision. — Because of the separate policies furthered by the two sections, it cannot be said that the language of 56-8-4D NMSA 1978 exempts a city from prejudgment interest under this section, which is silent as to the assessment of interest against political subdivisions. City of Carlsbad v. Grace, 1998-NMCA-144, 126 N.M. 95, 966 P.2d 1178.

Legal interest rate if contract silent. — This section empowers private lenders to charge interest on money debts at the legal rate if the contract is silent on the issue. Martinez v. Albuquerque Collection Servs., Inc., 867 F. Supp. 1495 (D.N.M. 1994).

Source of award not determinative. — In determining interest, whether an award is made by arbitrators or by a court is not the determining factor. State Farm Mut. Auto. Ins. Co. v. Barker, 2004-NMCA-105, 136 N.M. 211, 96 P.3d 336.

II. MONEY DUE BY CONTRACT.

A. IN GENERAL.

Since check takes on characteristics of demand note, section covering interest on money due on contract applies. Coseboom v. Marshall Trust, 1960-NMSC-113, 67 N.M. 405, 356 P.2d 117.

Check on which payment has been stopped comes within classification of "money due by contract." Coseboom v. Marshall Trust, 1960-NMSC-113, 67 N.M. 405, 356 P.2d 117.

Money due on settlement from insurance policy is "due by contract" and is therefore subject to interest at the statutory rate. O'Meara v. Commercial Ins. Co., 1962-NMSC-160, 71 N.M. 145, 376 P.2d 486.

Money due on settlement from insurance policy. — Trial court's application of Subsection A and award of prejudgment interest for money due by contract was proper based on a judgment allowing the stacking of insurance coverage because the insured had a reasonable expectation of coverage under the policy. Ponder v. State Farm Mut. Ins. Co., 2000-NMSC-033, 129 N.M. 698, 12 P.3d 960.

Oral contract. — Where plaintiff was the assignee of an account receivable due under an oral contract to care for and feed cattle; and defendant testified that the parties to the oral contract orally agreed to waive interest charges, it was within the discretion of the trial court to disbelieve evidence of the alleged oral waiver and award fifteen percent interest on the amount due. Production Credit Ass'n of Sw. N.M. v. Alamo Ranch Co., 989 F.2d 413 (10th Cir. 1993).

B. DATE OF ACCRUAL.

Interest accrues upon maturity of indebtedness. — In a situation where no additional demand is required to mature the indebtedness, reason and logic support the accrual of interest from the date of refusal of payment. Coseboom v. Marshall Trust, 1960-NMSC-113, 67 N.M. 405, 356 P.2d 117.

On demand notes interest is recoverable from time of demand. Coseboom v. Marshall Trust, 1960-NMSC-113, 67 N.M. 405, 356 P.2d 117.

Interest on bill of exchange dates from judgment. — Principal's liability on a bill of exchange drawn against it by an agent and paid by the plaintiff bank does not include interest on the principal amount before the date judgment was entered. Roswell State Bank v. Lawrence Walker Cotton Co., 1952-NMSC-020, 56 N.M. 107, 240 P.2d 1143.

Contract does not expressly forbid accrual of interest. — Where the parties entered into a long-term contract for the sale of natural gas, plaintiff recovered judgment against defendant for overcharges together with prejudgment interest; the contract provided that if plaintiff paid an overcharge, then within 30 days after final determination, defendant would refund the amount of the overcharge; and there was no indication that the parties intended to delay the due date for payment of overcharges until final judicial determination, no prohibition of prejudgment interest on overcharges could be implied from the contract and the award of prejudgment interest was within the discretion of the trial court. City of Farmington v. Amoco Gas Co., 777 F.2d 554 (10th Cir. 1985).

Oral contract. — Where the parties entered into an oral contract to care for and feed cattle, prejudgment interest should be awarded on the amount due for cattle feed from the date the last of the cattle were sold, which was the date when the amount due under the oral contract could be ascertained with reasonable certainty. Production Credit Ass'n of Sw. N.M. v. Alamo Ranch Co., 989 F.2d 413 (10th Cir. 1993).

III. MONEY RETAINED WITHOUT CONSENT.

Cotenant liable for interest on rents and profits withheld from cotenant. — Where a cotenant entered under a deed which purported to convey the whole estate, and claimed the land adversely, he is liable for interest on his cotenant's share of the rents and profits received, although his cotenant failed to demand them, as there was no consent to their retention. Armijo v. Neher, 1903-NMSC-005, 11 N.M. 645, 72 P. 12.

Express contract stipulating no interest. — Subsection B does not create a liability for interest if the retention of a payable obligation is proper. When an express provision of a contract stipulates that a payable obligation is to bear no interest, there can be no implied contract to pay interest under the statute. Murdock v. Pure-Lively Energy 1981-A, Ltd., 1989-NMSC-048, 108 N.M. 575, 775 P.2d 1292.

Prejudgment interest may be awarded in connection with judgment based on quantum meruit. — When a person is found to be liable in quantum meruit, the factfinder has made, in essence, a determination that the person has retained the money due (i.e., the value of the services or materials) and has deprived the claimant of the opportunity to use the money. The trial court may compensate the claimant for the lost opportunity by awarding prejudgment interest. Taylor v. Allegretto, 1994-NMSC-081, 118 N.M. 85, 879 P.2d 86.

Beneficiary mistakenly paid money owes prejudgment interest. — When a p.o.d. (paid on death) beneficiary of a joint account was mistakenly paid the money in the account upon the death of one of the two joint tenants and was, thus, unjustly enriched at the bank's expense, the bank was entitled as a matter of right (absent countervailing equities) to an award of prejudgment interest at a rate of not more than 15%. Sunwest Bank v. Colucci, 1994-NMSC-027, 117 N.M. 373, 872 P.2d 346.

Award of prejudgment interest is a question of law. — The award of prejudgment interest is a question of law solely within the sound discretion of the court and where defendant wrongfully deducted the amount due on a delinquent promissory note from a non-renewal certificate of deposit with a fixed term of six months and a fixed rate of six percent, the court did not err in awarding prejudgment interest in the statutory amount on the ground that because there was no contract in force, 56-8-3 NMSA 1978 applied. Navajo Tribe v. Bank of N.M., 700 F.2d 1285 (10th Cir., 1983).

IV. MONEY DUE ON MATURED ACCOUNTS.

Interest collectable after maturity of general obligation bond. — Because of 73-21-18 and 73-21-19 NMSA 1978 allowing a governing body to levy and collect taxes for payment of general obligations at any time they should become necessary, as opposed to special obligation bonds which can draw only upon specific funds as designated by statute and city ordinance, interest may be collected after the date of maturity of a general obligation bond in accordance with the general rule that interest coupons or notes executed by the maker of a note or bond to evidence installments of interest do bear interest after maturity, although there is no provision for interest. Dexter v. Lakeshore City Sanitation Dist., 1971-NMSC-057, 82 N.M. 556, 484 P.2d 1266.

Section inapplicable to special revenue bonds. — This section is inapplicable when a specific rule applies to the state or its subdivisions, particularly in the case of special revenue bonds. The statutory method of repaying such bonds is exclusive. Thus, bondholders do not receive interest upon interest after maturity of passing bonds. Munro v. City of Albuquerque, 1939-NMSC-043, 43 N.M. 334, 93 P.2d 993.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 45 Am. Jur. 2d Interest and Usury §§ 10 to 12, 26, 41, 63 to 75, 87, 88.

Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932, 40 A.L.R.4th 147, 41 A.L.R.4th 694.

Recovery of interest in action on real estate broker's statutory bond, 17 A.L.R.2d 1035.

Personal liability of executor or administrator for interests on legacies or distributive shares where payment is delayed, 18 A.L.R.2d 1384.

Recovery of interest on claim against a governmental unit in absence of provision in contract or express statutory provision, 24 A.L.R.2d 928.

Rights as between vendor and vendee under land contract in respect of interest, 25 A.L.R.2d 951.

Claim in bankruptcy as bearing interest after filing of petition where there is a surplus, 27 A.L.R.2d 586.

Rights by one entitled to contribution to recover interest, 27 A.L.R.2d 1268.

Right to interest on unpaid alimony, 33 A.L.R.2d 1455.

Time from which interest is recoverable on demand note or like demand instrument containing no provision as to interest, 45 A.L.R.2d 1202.

Cotenant accountable for rents and profits or use and occupation as chargeable with interest and as entitled to interest on expenditures by him, 51 A.L.R.2d 388.

Rights in profits earned by partnership or joint adventure after death or dissolution, 55 A.L.R.2d 1391.

Taking or charging interest in advance as usury, 57 A.L.R.2d 630.

Interest upon arrearages or unpaid accumulations of annuities, 66 A.L.R.2d 857.

Auctioneer's liability for interest on deposit money, 80 A.L.R.2d 1237.

Right to interest on refund or credit in absence of specific controlling statute, 88 A.L.R.2d 823.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

47 C.J.S. Interest and Usury; Consumer Credit §§ 32, 34; 91 C.J.S. Usury §§ 5 to 10, 56, 61, 118, 135, 141, 144, 153.