2625 Bldg. Corp. v. Deutsch

• Citation: 179 Ind.App. 425,385 N.E.2d 1189
• Decision Date: 21 February 1979
• Docket Number: No. 2-277A41,2-277A41
• Parties: 2625 BUILDING CORPORATION d/b/a the Marott Hotel, Appellant (Defendant Below), v. Richard E. DEUTSCH, Appellee (Plaintiff Below).
• Court: Indiana Appellate Court

Page 1189

385 N.E.2d 1189

179 Ind.App. 425

2625 BUILDING CORPORATION d/b/a the Marott Hotel, Appellant (Defendant Below), v. Richard E. DEUTSCH, Appellee (Plaintiff Below).

No. 2-277A41.

Court of Appeals of Indiana, Fourth District.

Feb. 21, 1979.

Robert A. Claycombe and Heather M. Wiske of Kothe, Shotwell, Claycombe, Hendrickson & Kortepeter, Indianapolis, for appellant.

H. Andrew Sonneborn of Bamberger & Feibleman, Indianapolis, for appellee.

MILLER, Judge.

This is an appeal by Defendant, 2625 Building Corporation, d/b/a The Marott Hotel (Marott), from a judgment for the Plaintiff (Deutsch) granting recovery of his advance payment for hotel rooms which were reserved for the 1973 Indianapolis "500" Mile Race weekend but were not used.

A summary of the facts shows that on December 7, 1972, Deutsch, a resident of Connecticut, made reservations by telephone for six rooms at the Marott for the 1973 "500" Mile Race weekend (May 27, 28, 29). Marott requested advance payment for the rooms. Deutsch complied with Marott's demand and paid by check in the amount of $1,008.00 in full for the reserved rooms. At the end of March, or the beginning of April, 1973, Deutsch, by telephone, cancelled the reservations and requested the return of his advance payment. Marott refused his demand. Deutsch did not use the rooms and later brought action against Marott to recover the $1,008.00 advance payment alleging the above facts and, in addition, that Marott had relet the rooms and was not harmed by the cancellation.

At trial before the court, after Deutsch presented his evidence and rested, Marott moved for dismissal on the ground that Deutsch had failed to present evidence in support of his allegation that Marott had relet the rooms and was not harmed, and, therefore, had failed to establish a Prima facie case. The judge took the motion under advisement, reserving his ruling until the conclusion of all the evidence. Marott presented no evidence and rested. The judge then took the entire matter under advisement and, about 30 days later, entered the following judgment in favor of Deutsch and against Marott:

"This cause having been taken under advisement at the close of the Plaintiff's evidence; the Defendant having made a motion for involuntary dismissal, which the Court took under advisement; and the Defendant then resting its case without the presentation of evidence; and the Court now being duly advised finds as follows:

"The Court deems the Plaintiff's complaint amended to conform to the evidence. The contract between the parties was an oral special contract which was cancelled by the Plaintiff before the date to be performed by the Defendant. Therefore, it is in the nature of an executory contract which was never performed. The Plaintiff is, therefore, entitled to the recovery of his deposit less any actual damages suffered by the Defendant. (The Defendant having failed to show any actual damages, the Plaintiff is entitled to recover the entire deposit.) To allow the Defendant to retain the entire amount would constitute a penalty which the law abhors and would unjustly enrich the Defendant. (195 Ind. 503 (144 N.E. 881)) The Plaintiff has failed to prove the date of the original demand for return of the deposit and therefore interest will be allowed from the filing of this lawsuit, which also constitutes a demand.

"IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the Plaintiff recover from the Defendant the sum of One Thousand and Eight Dollars ($1,008.00). with interest at eight per-cent (8%) from January 3, 1974.

"IT IS FURTHER ORDERED that the Defendant's motion for involuntary dismissal be and is hereby overruled.

"Costs of this action are assessed against the Defendant."

On appeal Marott argues that the decision of the trial court was not sustained by sufficient evidence, that the decision of the trial court was contrary to law in that the court found the contract between the parties to be an executory contract and to contain a provision for a penalty upon cancellation, and that the trial court abused its discretion in deeming Deutsch's complaint amended to conform to the evidence without a request from Deutsch and without any indication of the court's intention to do so before he entered judgment.

We affirm.

Initially we examine Marott's contention that the court erred in finding the room reservation to be an oral special contract which was executory in nature and which contained a provision for a penalty upon cancellation. In absence, Marott argues that the contract was fully executed at the time Deutsch tendered his advance payment for the reservations and thereafter it was obligated to hold the rooms open and available for Deutsch on the dates reserved. Hence, Marott argues it was not required to refund Deutsch's advance payment when the reservations were cancelled.

An executory contract is defined in 17 Am.Jur.2d, Contracts, § 6, p. 341, as follows:

"An executory contract is one in which a party binds himself to do or not to do a particular thing, whereas an executed contract is one in which the object of the agreement is performed and everything that was to be done is done. The distinction would seem to relate to the legal effect of a contract at two different stages. An executory contract, it is said, conveys a chose in action, while an executed contract conveys a chose in possession." (emphasis added)

Contrary to Marott's contention, the contract was not fully executed at the time the reservations were cancelled. Under the facts of this case the contract was executory in nature, part of which had been executed when Deutsch cancelled his reservations. That is to say, the portion of the contract pertaining to Deutsch's tender of payment in full and Marott's acceptance of said payment was an executed portion of the contract and the obligation of Marott to provide its facilities for Deutsch's use remained executory until Deutsch's cancellation. Marott's further contention that it was obligated to keep the rooms available for Deutsch after he cancelled his reservations is also without merit. Deutsch's repudiation of the contract was an anticipatory breach thereof which relieved Marott from its future obligations and enabled it, if it desired, to sue at that time for damages caused by such breach. 6 I.L.E. Contracts § 232; See also, Squillante, Anticipatory Repudiation and Retraction, 7 Valparaiso L.J. 373 (1973).

We next examine Marott's claim that the evidence did not support the trial court's conclusion that full payment for the rooms constituted a penalty. The general nature of an agreement for hotel reservations was recently defined in Freeman v. Kiamesha Concord, Inc. (1974), 76 Misc.2d 915, 351 N.Y.S.2d 541, as follows:

"The solicitation of a reservation, the making of a reservation by the transmittal of a deposit and the acceptance of the deposit constituted a binding contract in accordance with traditional contract principles of offer and acceptance."

In Freeman, supra, the guest paid the hotel a $20.00 deposit in advance for a three day reservation, used the hotel's facilities for two days but refused to use them on the third day because of his dissatisfaction with the entertainment. The hotel insisted upon full payment for the three days in accordance with the reservation. The guest paid under protest and sued to recover for the amount paid for the unused portion of the reserved period. The Civil Court of the City of New York denied recovery stating:

"A hotel . . . services thousands of guests at a single time. The maintenance of its facilities entails a continuing large overhead expenditure. It must have some means to legitimately ensure itself the income which its guests have contracted to pay for the use of its facilities. The minimum period reservation contract is such a device. The rooms are contracted for in advance and are held available while other potential guests are turned away. A guest who terminates his contractual obligations prior to the expiration of the contract period will usually deprive the hotel of anticipated income, if the guest cannot be held financially accountable upon his contract. At that point, replacement income is virtually impossible. . . . No great imagination is required to comprehend the economic catastrophe which would ensue if all such guests were to cancel at the last minute or to check out prior to the end of their contract period without continuing contractual liability."

The Marott cites this decision in support of its proposition that it had a right to refuse to refund $1,008.00 to Deutsch when he cancelled his reservations. However, we find the facts in the case at hand to be clearly distinguishable. In Freeman the guest had checked into the hotel pursuant to the contract whereas in this case Deutsch had not. Moreover, Freeman involved a "last minute" check-out prior to the end of the contract period, whereas Deutsch gave the Marott approximately two months advance notice of his cancellation.

We do not disagree with the reasoning in Freeman as applied to the facts therein and such reasoning is certainly applicable in "last minute" cancellation cases, especially at resort type hotels. Thus, we recognize there may be instances when a guest's cancellation of reservations would not justify a refund of an advance payment. As noted previously, the making and acceptance of the reservation in this case constituted a binding contract. Upon Deutsch's breach Marott was entitled to Actual damages in accordance with traditional contract principles. French v. Cunningham (1898), 149 Ind. 632, 49 N.E. 797; Jeffries v. Lesh (1924), 195 Ind. 503, 144 N.E. 881. However, we agree with the trial court that to allow Marott to retain damages representing payment for use of all the rooms, regardless of the fact that damages could be ascertained, would be to enforce a penalty or forfeiture. Czeck v. Van Helsland (1968), 143 Ind.App. 460, 241 N.E.2d 272. To hold...