Court Opinion

ID: 6905825
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:00:11.571084+00
Date Added: 2024-06-11T16:06:19.413276
License: Public Domain

Me. Justice Bean
delivered the opinion of the court.
The demurrer to the complaint is a general one. In its support the defendant relies upon two points: (1) That the sum of $2,500 sought to be recovered in this action was liquidated damages and not a penalty; (2) that there was no privity of contract between the defendant and I. Gevurtz & Sons, the bankrupt named in the complaint. There is a paucity of expression as to the facts which might have some influence in determining whether the contract in question provides for liquidated damages or a penalty in the event of a breach of any covenant on the part of the lessee. The question is presented with much care and apparently after great research by the learned counsel for both parties; therefore, we are disinclined to pass the subject of our own volition. It is averred that defendant, M. C. Banfield, successor of the lessor, terminated the lease about April 25, 1913. It also appears that about that time I. Gevurtz & Sons, the party that made the deposit claimed, and was inter.ested as lessee in the demised premises, was adjudged a bankrupt by order of the United States Court and plaintiffs were appointed as trustees- of its estate. It may perhaps fairly be inferred by construing the language of the complaint most strongly against the pleader that the lessor’s grantee, to whom we will refer hereafter as the lessee, had the right under the stipu*56lation quoted to terminate the lease and that he exercised that option. Briefly stated, the case comes to us with no showing of any actual damage to the landlord caused by any act of the lessee. No rent appears to be in arrears. Under these conditions and considering the stipulations of the lease we will proceed.
1. When the lessor terminated the lease as alleged in the pleading the liability of the lessee to pay rent accruing thereafter was extinguished: 24 Cyc. 1162; Meagher v. Eilers Music House, 77 Or. 70 (150 Pac. 266); Carson v. Arvantes, 10 Colo. App. 382 (50 Pac. 1080).
2. When the relations of landlord and tenant are ■at an end and the lessee has surrendered the premises and the landlord accepted the same and thus put an end to the lease, so far as the rights of the parties to it are concerned all covenants therein in favor of either party are at once terminated where no cause of action has accrued or matured during the life of the lease: 2 Underhill on Landlord and Tenant, pp. 1238, 1239; sec. 730; Silva v. Bair, 141 Cal. 599 (75 Pac. 162); Deane v. Caldwell, 127 Mass. 242, 248.
3. In the absence of express covenants to the contrary a landlord, after accepting a surrender of the premises, has no cause of action for damages against his former tenant by reason of diminished rent paid thereafter: Meagher v. Eilers Music House, 77 Or. 70 (150 Pac. 266); Carson v. Arvantes, 10 Colo. App. 382 (50 Pac. 1080).
4. The trustees of I. G-evurtz & Sons, who are successors to its interest, were entitled on a surrender or rescission of the lease to be repaid by the lessor the money deposited by the lessee as security for the payment of rent or for the performance of the cove*57nants of the lease, if the lessee was not then in default; or, if it was in default, to the deposit less the amount of rent due and in arrears, and compensation for preceding breaches of the contract: 1 Underhill on Landlord and Tenant, p. 594, § 378; Meagher v. Eilers Music House, 77 Or. 70 (150 Pac. 266); Ladd & Bush v. Smith, 6 Or. 316; Cunningham v. Stockon, 81 Kan. 780 (106 Pac. 1057, 19 Ann. Cas. 212); Chaude v. Shepard, 122 N. Y. 397 (25 N. E. 358); Yuen Suey v. Fleshman, 65 Or. 606 (133 Pac. 803, Ann. Cas. 1915A, 1072).
5-7. This brings us to the question: Was the $2,500 deposited as security for the performance of the covenants or was it under the stipulation of the demise liquidated damages? As a general rule the intention of the contracting parties is an important, if not a conclusive, element in determining whether a sum stipulated to be paid in cáse of the breach of a contract is to be regarded as liquidated damages or a penalty. Modern authorities attach greater importance to the meaning and intention of the parties than to the language of the clause designating the sum as a penalty or as liquidated damages: Salem v. Anson, 40 Or. 339 (67 Pac. 190, 91 Am. St. Rep. 485, 56 L. R. A. 169); Wilhelm v. Eaves, 21 Or. 194 (27 Pac. 1053, 14 L. R. A. 297). The tendency and preference of the law is to regard the stipulation or covenant as of the nature of a penalty rather than as liquidated damages, for the reason that then it may be apportioned to the actual loss sustained and compensation for such loss is the full measure of right and justice. Where the circumstances and the nature of the stipulation are such that the actual damages are not ascertainable with any degree of certainty the *58rule stated does not apply. If there is an agreement for a fixed, unvarying sum, without regard to the date of the breach, when in the very nature of things the date of the breach would be all-important in determining the element of actual damages, the stipulation must be held to be one for a penalty: 8 R. C. L., § 114, p. 564; note, Ann. Cas. 1912C, p. 1025. In Section 115 of 8 R. C. L., p. 567, the author states:
“In other words, the damages stipulated for must be such as to amount to compensation only, and if the principle of compensation has been lost sight of the sum named will be treated as a penalty.”
8, 9. Especially is this rule if the damages are neither doubtful, speculative, or difficult of proof. It has been held that the party claiming the amount stipulated for as damages must show by evidence dehors the contract that the amount so claimed approximates his actual damages: Id., § 117; note, Ann. Cas. 1912C, p. 1025. In the present case it is clear from the agreement that the $2,500 deposited was the property of the lessee and he was to be paid “interest therefor during such time as the lessee shall not be in default for breach of condition or covenant.” It must follow that such amount would belong to the tenant until it was in some way forfeited to the landlord. The facts disclosed by the complaint do not indicate any such forfeiture. The lease specifies one certain sum designated in a portion thereof as liquidated damages. • It contains covenants for the performance on the part of the lessee of various acts, some of more and some of less importance. The damages accruing from a breach of some of the stipulations, such as the failure to pay for the repair of a water-pipe or the use of water for a month, would be of easy ascertainment. According to the literal terms of the instrument *59$2,500 is “fixed and agreed upon as the full measure of demands * * in the event that said lessee, * * shall violate any of the terms, covenants or conditions” of the lease. Possibly some of the stipulations belong to that class which justifies such an arrangement as to damages. Prom a reading of all the instrument it cannot he believed that a forfeiture of the whole sum was intended or contemplated by the contracting parties for a trivial or technical breach of the agreement, but rather that the money was deposited as security for the performance of the terms of the lease and that they stipulated for a penalty. Under the facts and circumstances disclosed in the case, although some of the language employed strongly evinces a contrary intent, the amount deposited and stipulated for should he regarded as a penalty and not as liquidated damages: Wilhelm v. Eaves, 21 Or. 194 (127 Pac. 1053, 14 L. R. A. 297); Yuen Suey v. Fleshman, 65 Or. 606 (133 Pac. 803, Ann. Cas. 1915A, 1072); Hull v. Angus, 60 Or. 95 (118 Pac. 284); Carter v. Strom, 41 Minn. 522 (43 N. W. 394); 2 Pom. Eq. Juris., § 443; 1 Sutherland on Damages, § 294; 3 Parsons on Contracts (9 ed.), p. 176; 19 Cent. Law Journal, 282-285.
10,11. It is stated in the brief that the learned trial judge based his conclusion upon the second point of the demurrer. Prom a consideration of this phase of the case it appears from the complaint that Philip Gevurtz executed the lease in his own name as “and for” the agent of I. Gevurtz & Sons. The rhetoric of the pleading is not perfect. The faulty use of the word “for” does not leave the allegation meaningless or doubtful. It might subject the pleading to a motion to make more definite and certain, but the same cannot he ignored or held vulnerable to a demurrer es*60pecially when considered with the averment that I. Gevurtz & Sons paid the money as the deposit, thus showing that the contract was executed in the transaction of the business of the corporation. The weight of authority is to the effect that parol evidence is admissible to charge a principal on a simple contract not negotiable, where the name of the agent appears as the principal, and to show that the contract was executed with intent to bind the principal or for - his benefit: 31 Cyc. 1659; Barbre v. Goodale, 28 Or. 465 (38 Pac. 67, 43 Pac. 378); Anderson v. Portland Flouring Mills Co., 37 Or. 483 (60 Pac. 839, 82 Am. St. Rep. 771, 50 L. R. A. 235); Riddle State Bank v. Link, 78 Or. 498 (153 Pac. 1192); Smith v. Campbell, post, p. 420 (166 Pac. 546), filed June 26, 1917, In the absence of any denial of the facts asserted or other appropriate defense the plaintiffs should recover. It is contended on behalf of defendant that he is not liable to anyone upon the assertion of the plaintiffs that Housman the original lessor accounted to defendant Banfield for the deposit when the property was conveyed to him. But the allegation of the complaint goes further than this and sets forth that the defendant to whom the leased premises were sold subject to the lease, “assumed all the lessor’s obligations thereunder, including the obligation of the said George A. Housman, the original lessor, with reference to the repayment of the deposit in said lease provided for.” The word “assumed” in matters of law is “to take upon one’s self.” “ ‘Assume’ means to undertake, engage or promise”: 1 Words and Phrases, 586, 587.
12. The complaint, therefore, shows that defendant agreed to perform the conditions of the lease as to the deposit. The demurrer to the complaint should have been overruled; Strode v. Smith, 66 Or. 163 (131 Pac. *611032). It follows that the judgment of the Circuit Court must be reversed aud it is so ordered.
Beversed.
Mr. Chief Justice McBride, Mr. Justice Moore aud Mr. Justice McCamant concur.