Court Opinion

ID: 9552767
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:16:19.619886+00
Date Added: 2024-06-11T15:28:53.605478
License: Public Domain

BAKES, Chief Justice,
concurring in part and dissenting in part:
I concur in Parts I through IV and Part VI of the majority opinion. I also agree with the majority’s conclusion in Part V of its opinion that there was sufficient evidence before the trial court to support its conclusion that the sale was not made in a commercially reasonable manner. I disagree, however, that the trial court erred by not discounting the total rents in computing the damage award. The majority construes the holding in the case of Industrial Leasing Corp. v. Thomason, 96 Idaho 574, 532 P.2d 916 (1974), too broadly where it states that the rule of law formulated in Thomason “recognizes that money is capable of earning income and therefore rents which are accelerated must be accordingly discounted.” The lease agreement in the Thomason case did not contain an acceleration clause. Instead, it “provided no measure of damages in the event of default, other than that the lessor might exercise an option provided for in the lease to take possession of the property and either sell or re-lease it to another.” Industrial Leasing Corp. v. Thomason, supra at 576, 532 P.2d at *747918. Thomason, therefore, did not involve discounting of rents that became due upon default through an acceleration clause in the lease, and the holding in Thomason regarding the discounting of rents was not intended to extend to leases that include acceleration clauses.
The lease agreement in this action, however, provided in paragraph 20 that in the event of default the respondent had the right to exercise any one of several remedies, including:
“(iii) Lessor may immediately recover from Lessee, with respect to any and all items of Equipment, and with or without repossessing Equipment, the accelerated and total sum of all rent and other amounts due and to become due; provided, however, that upon repossession or surrender of Equipment, Lessor may sell or otherwise dispose of Equipment, with or without notice and on public or private bid, and apply the net proceeds thereof, after deducting all expenses, including attorneys’ fees, incurred in connection therewith, as required by law or in equity.” (Emphasis added.)
Thus, under paragraph 20(iii) in the lease agreement between the respondent lessors and the appellant lessees, the respondent was expressly entitled to accelerate all rents under the lease agreement upon default by the appellant. The distinction between the Thomason case and the case at hand is that in Thomason the plaintiff lessor sued for damages incurred as a result of the lessee’s repudiation of the lease. In this case, respondent exercised one of the options provided for in the lease agreement by suing for the amount previously agreed upon by the parties to be due in the event of appellant’s breach, determined by “the accelerated and total sum of all rent and other amounts due and to come due.”
Other than in a contract of sale, an acceleration clause in a contract such as the lease here is in actuality a liquidated damages provision that establishes damages in the event of a breach. See generally, 22 Am.Jur.2d Damages § 228 (1965). This Court has previously held that a liquidated damages clause contained in a contract freely entered into by parties to the contract should be enforced if an accurate determination of damages is difficult or impossible to make and the liquidated damages bear a reasonable relationship to the actual damages suffered. See, e.g., Young Electric Sign Co. v. Capps, 94 Idaho 518, 492 P.2d 52 (1971); Melton v. Amar, 83 Idaho 99, 358 P.2d 855 (1961); Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020 (1954). Thus, an accelerated damages clause contained in a rental agreement should be enforced as liquidated damages in the absence of an allegation and proof that it constitutes an unenforceable penalty. “Provisions in a contract providing for liquidated damages in the event of default are prima facie valid,” In re Grodnik’s, Inc., 128 F.Supp. 941, 942 (D.Minn.1955), and the burden of proving facts to show that damages provided for by the contract do not bear a reasonable relation to the actual damages suffered or that they are exorbitant and unconscionable rests upon the party seeking to invalidate the provision. Accord, Howard v. Bar Bell Land & Cattle Co., 81 Idaho 189, 340 P.2d 103 (1959).
The appellant did not raise the issue of discounting the accelerated damages at trial. Nor did appellant introduce any evidence showing that the liquidated damages provision was unreasonable in light of the actual damages suffered, or that actual damages were not difficult to determine when the agreement was executed. The acceleration clause in the contract entered into in this case made all rents due upon the default of the appellant, and there is no legal ground for requiring the rents to be discounted in the absence of such a showing. By requiring the district court to discount the rental payments on remand, the majority is in effect holding that all acceleration clauses in rental agreements are unreasonable per se, an unwise and unjustified conclusion.
The trial court did not err in failing to discount the accelerated and unpaid rental payments and enforcing the accelerated damages provision according to the agree*748ment of the parties. Accord, Computer Property Corp. v. Columbia Distributing Corp., 493 F.2d 953 (4th Cir.1974) (court held accelerated rentals could be recovered as liquidated damages upon default of lessee under lease of computer equipment); Frank Nero Auto Lease, Inc. v. Townsend, 64 Ohio St.2d 65, 411 N.E.2d 507 (1979): see In re Grodnik’s, Inc., supra; Falco Corp. v. Hood, 7 N.C.App. 717, 173 S.E.2d 578 (1970); White v. Wilbanks, 144 S.W.2d 941 (Tex. Civ.App.1940): cf. Idaho State University v. Mitchell, 97 Idaho 724, 552 P.2d 776 (1976) (parties are bound by damage provisions included in contract, and liability is restricted to terms of contract); Young Electric Sign Co. v. Capps, supra (an agreed to liquidated damages provision will be enforced if damages set forth bear reasonable relation to the anticipated damage).
I would affirm the trial court in its entirety.