Alvord v. Banfield

• Citation: 166 P. 549,85 Or. 49
• Parties: ALVORD ET AL. v. BANFIELD.
• Decision Date: 03 July 1917
• Court: Supreme Court of Oregon

166 P. 549

85 Or. 49

ALVORD ET AL. v. BANFIELD.

Supreme Court of Oregon

July 3, 1917

Department 2.

Appeal from Circuit Court, Multnomah County; W. N. Gatens, Judge.

Action by W. C. Alvord and others, trustees in bankruptcy of the estate of I. Gevurtz & Sons. against M. C. Banfield. From a judgment dismissing the action, plaintiffs appeal. Reversed.

This is an action by the trustees in bankruptcy of the estate of I Gevurtz & Sons, a corporation, to recover $2,500 deposited by the bankrupt as a forfeit in case of a breach of the conditions of a certain lease. The trial court sustained defendant's demurrer to the complaint and dismissed the action. Plaintiffs appeal.

After the formal allegations of the complaint as to the corporate character of I. Gevurtz & Sons, and the official status of plaintiffs, the complaint sets forth, in substance, the following facts: On March 6, 1911, Philip Gevurtz, acting as the agent of I. Gevurtz & Sons, entered into a lease with one George A. Housman of a certain three-story and basement apartment house known as No. 730 Hoyt street, in the city of Portland, Or., then in the course of construction, for a term of five years at a rental of $500 a month, aggregating $30,000. The lessee covenanted to pay promptly all charges and expenses for operating the premises leased, including charges for water, gas, fuel, heat, electric light, power and telephone service used therein, and at his own expense to keep the interior and exterior of said premises, except as to the roof and foundation, in proper repair during the term of the lease. It was stipulated that all general repairs and alterations should be made by the lessee without any cost or expense to the lessor. A copy of the lease is made a part of the complaint. It is alleged that I. Gevurtz & Sons deposited with G. A. Housman the sum of $2,500 at the time of taking possession of the premises, as provided for in such lease that Housman sold and transferred to defendant M. C. Banfield all his right, title, and interest in the leased premises subject to the demise and accounted to him for the deposit and Banfield assumed all the obligations of the original lessor under the terms of the lease. The agreement provided that for any failure of the lessee to fulfill any of the covenants of the lease the lessor might at his option terminate the lease and take possession of the premises. That part of the language of the instrument bearing upon the deposit is as follows:

"It is further agreed by and between the lessor and the lessee herein that the sum of $2,500 is hereby fixed and agreed upon as the full measure of demands for all claims or demands of said lessor against the said lessee in the event that said lessee, his heirs or assigns, shall violate any of the terms covenants, or conditions of this lease on his part to be observed and performed, or in the event the lessor herein may exercise any option given him under the terms of this lease whereby this lease shall be violated and forfeiture of the lease declared thereunder, which said sum of $2,500 said lessee hereby agrees to pay to said lessor upon taking possession of the above-described premises to be applied by said lessor at any time during the term of this lease as liquidated, fixed, and agreed damages upon termination of the lease by option of lessor as herein provided, or for failure of the said lessee or those having his interest in the premises so to perform and observe the said terms, covenants, and conditions or either of them. And the measure of damages against the said lessee or those having his interest in the premises shall be limited to the said sum of $2,500, and he shall not be liable to the said lessor in any other sum for any breach of the conditions, covenants, or terms of this lease or upon a forfeiture of the said lease. Said lessor shall hold said $2,500 during the term of this lease and shall pay to the lessee 6 per cent. per annum interest therefor during time as the lessee shall not be in default for breach of condition or covenant; said interest to be paid annually. And if lessee shall not be in default it shall be applied in payment of the last five months' rent, in which event the interest thereon shall cease five months before the end of said term. * * *

"It is further understood and agreed by and between the lessor and the lessee herein that in case the interest of the lessee or those having his interest in the premises shall be attached or attempted to be attached, sold under execution or attempted to be sold under execution, or a lien or interest acquired by a third party to the155 interest of the lessee herein or those having his interest in the premises, including the possession or attempted possession of any person as a receiver of any court or by any other order of any court, or as a trustee in bankruptcy, then during the term in any of the above-mentioned events at the option of the lessor herein or those having his estate in the premises, this lease may be terminated and declared null and void and all rights of the said lessee or those having his interest in the premises and those claiming under him or them, as well as the right of any receiver, attaching creditor, execution purchaser, or trustee in bankruptcy to occupy the premises shall immediately terminate, and they or either of them regarded as trespassers by the lessor or those having his interest in the premises."

The agreement also contained this stipulation:

"It is further understood and agreed that the lessor shall furnish gas ranges, window shades, electric fixtures, and refrigerators at his own proper cost and expense before possession is delivered as provided hereinbefore. But such gas ranges, window shades, electric fixtures, and refrigerators shall remain the property of the lessor and shall be maintained or replaced during the term of this lease by the lessee at his own cost and expense."

It is alleged that about April 25, 1913, M. C. Banfield terminated the lease, at which time no part of the $2,500 and the accumulated interest thereon had been or since has been applied on account of the last or of any rental whatever due under the terms of the lease, and that by reason thereof the plaintiffs herein are entitled to receive a return of the above sum with interest thereon at the rate of 6 per cent. per annum from March 6, 1911, to date. The plaintiffs assert a demand and nonpayment.

Chriss A. Bell, of Portland, for appellants. L. R. Webster, of Portland (Emmons & Webster, of Portland, on the brief), for respondent.

BEAN, J. (after stating the facts as above).

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 interested 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 stipulation 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...