Court Opinion

ID: 5252210
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:16:58.986467+00
Date Added: 2024-06-11T08:27:57.730584
License: Public Domain

Smith, J. (concurring):
In paragraph 8 of the lease the tenant covenants to remain liable, after he shall have been dispossessed of the property by summary proceedings, for any deficiency that should result upon reletting the premises to the end of the stipulated term of the lease. This covenant is now inserted in many leases and its significance is well understood. If the $7,500 deposited shall be held under paragraph 19 of the lease to be liquidated damages for all breaches of covenants of the lease, this construction in my judgment practically nullifies this covenant to remain liable for deficiency of rent. It may be argued that this covenant to remain liable for a deficiency of rent was necessary in order to establish such damages for breach of the covenants of the lease as would support this $7,500 as liquidated damages. If this sum be liquidated damages as to one party it is as to the other, and I find no warrant for. ignoring the specific covenant by the tenant found in paragraph 8 to remain hable for the deficiency, and using that covenant as a mere makeshift to give force to another provision in the contract, providing that this $7,500 should be liquidated damages rather than a penalty. If the landlord had retained the ownership of the property, I think he might have held the tenant hable for that deficiency until the end of the stipulated term, even though in excess of the sum of $7,500. If this be true, to hold this $7,500 as stipulated damages would allow a recovery not only of the deficiency in rent, but of this $7,500 in addition. This clearly was not within the intention of the parties, and, because of that covenant to pay the deficiency in rent which, if fulfilled, would furnish complete indemnity to the landlord for the broken covenants of the lease, I think this $7,500 should not be held to be stipulated damages in this case.
I agree with the conclusion reached by Mr. Justice Page, however, upon the ground that damages are proven from the defendants’ breach in excess of $7,500. The rent provided for, without the additional rent, amounted to $5,500 a year. This lease was afterwards and on January 28, 1915, modified reducing the rental to $4,000 for three years, $4,500 for one year thereafter and $5,500 for the balance of the term. The proof is to the effect that by the change of *15circumstances the property can no longer be used as a moving picture theatre and that the rental value of the property is only $2,500 per year. The termination of the lease provided for is September 30, 1935. The ejectment in summary proceedings was in March, 1917. The deficiency for which the tenant would be hable under the lease would amount upon this basis to upwards of $60,000 for the balance of the term under the lease as modified. If the property had not been sold this action would be prematurely brought, but with a sale of the property without the assignment of the rights under the lease, the relations of the parties have terminated, and it is, I think, a necessary inference that with a prospective deficiency under the terms of the lease of over $60,000, the decrease in rental value must, of necessity, have entered into the price for which the property was sold, so as to have caused damage by reason of the breach of the covenants of the lease largely in excess of the $7,500, the amount of the deposit. The defendants were not allowed to show the value of the property they received in exchange for this property when they transferred it to Stern by a full covenant deed; but a breach of a covenant in a lease to pay $5,500 a year rent for eighteen years where the evidence shows that the property has so.depreciated that the rental value is now only $2,500 a year, establishes prima facie damage far in excess of $7,500, the amount here in question, and the burden would be upon the tenant to show that by some fortuitous event the property had sold for a sufficient sum to yield an income equivalent to the amount covenanted to be paid as rent. The defendants have, therefore, established their damage in this case without proof of the amount received for the property.
For these reasons I concur in the reversal, and in the dismissal of the complaint.
Laughlin, J., concurred.
Judgment reversed, with costs, and complaint dismissed upon the merits, with costs.