280 U.S. 224 (1930), 48, Kothe v. R. C. Taylor Trust

• Docket Nº: No. 48
• Citation: 280 U.S. 224, 50 S.Ct. 142, 74 L.Ed. 382
• Party Name: Kothe v. R. C. Taylor Trust
• Case Date: January 06, 1930
• Court: United States Supreme Court

Page 224

280 U.S. 224 (1930)

50 S.Ct. 142, 74 L.Ed. 382

Kothe

v.

R. C. Taylor Trust

No. 48

United States Supreme Court

Jan. 6, 1930

Argued December 4, 1929

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE FIRST CIRCUIT

Syllabus

1. A stipulation in a contract to pay a fixed sum as liquidated damages in case the contract be broken will not be enforced if the amount fixed is plainly without reasonable relation to any probable damages from a breach. P. 226.

2. In a lease for two years, the lessee agreed that the mere filing of a petition in bankruptcy against him should be deemed a breach, and that thereupon, ipso facto, the lease should terminate and the lessor become entitled to reenter and also to recover damages equal to the full amount of the rent reserved for the remainder of the term. The lessee became bankrupt, and the lessor claimed $5,000, equal to 15 months' rent. Held, that the claim should not be enforced against the trustee in bankruptcy, as, on the case submitted, the provision in the lease must be regarded as one for a penalty apparently designed to insure to the lessor preferential treatment in the event of the lessee's bankruptcy. P. 226.

3. Agreements tending to defeat the purpose of the Bankruptcy Act to bring about an equitable distribution of the bankrupt's estate among creditors holding just demands based upon adequate consideration must be regarded with disfavor. P. 227.

30 F.2d 77 reversed

Certiorari, 279 U.S. 830, to review a judgment of the circuit court of appeals reversing the district court and upholding a claim against Kothe, as trustee in bankruptcy.

MCREYNOLDS, J., lead opinion

MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

April 20, 1927, respondent, the R. C. Taylor Trust, leased to one Turkel certain real estate, reserving rent at the rate of $4,000 per annum. The meager record before

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us does not affirmatively show the length of the term, but we accept the statement by counsel for both sides that it was two years. The lease contained the following provision:

The filing of any petition in bankruptcy . . . by or against the lessee shall be deemed to constitute a breach of this lease, and thereupon, ipso facto and without entry or other action by the lessor, this lease shall become and be terminated, and, notwithstanding any other provisions of this lease, the lessor shall forthwith upon such termination be entitled to recover damages for such breach in an amount equal to the amount of the rent reserved in this lease for the residue of the term thereof.

[50 S.Ct. 143] Turkel having been adjudged bankrupt, the lessor filed proof of debt for $5,000, demanded as

damages for breach of lease, . . . that being the same as the amount of rent reserved in the lease from February 15, 1928 to May 15, 1929, the end of the term.

The referee disallowed the claim

for the reason...