Chicago Inv. Co. of Mississippi v. Hardtner

Citation167 Miss. 375,148 So. 214
Decision Date15 May 1933
Docket Number30569
CourtUnited States State Supreme Court of Mississippi
PartiesCHICAGO INV. CO. OF MISSISSIPPI v. HARDTNER

Division A

Suggestion Of Error Overruled November 6, 1933.

APPEAL from chancery court of Harrison county HON. D. M. RUSSELL Chancellor.

Suit by the Chicago Investment Company of Mississippi against Rudolph H. Hardtner. From a decree sustaining a demurrer to the bill of complaint, and dismissing the original bill, the complainant appeals. Reversed, and cause remanded in accordance with opinion.

Reversed and remanded.

W. L. Guice, of Biloxi, for appellant.

A court of equity had jurisdiction of this suit if for no other purpose than to secure a cancellation of the lease of record and to cause an accounting between the parties.

Section 24, Griffith's Miss. Chancery Practice; Allen v. Leflore County, 31 So. 815; Keystone Lbr. Yard v. Yazoo R. R. Co., 50 So. 445.

The court's construction of the lease was wholly contrary to the terms of the lease and as courts do not favor penalties, the action of the trial court was erroneous.

If the money or property deposited by the tenant with the landlord constitutes security for the performance of the covenants of the tenant, such as the covenant to pay rent, and the tenant's breach of covenant results in the landlord's electing to terminate the lease, the deposit is not forfeited; but the amount to be returned is subject to reduction by reason of the right of the landlord to retain or deduct rent due, or such other damages as have arisen prior to the termination of the relation, because of the tenant's breach of covenant.

36 C. J., page 300, sec. 1083; 36 C. J., section 1084; 36 C. J., section 1087; Sutton v. Goodman, 80 N.E. 608; Caesar v. Rubinson et al., 67 N.E. 58; Curtis v. Van Bergh, 161 N.Y. 47, 55 N.E. 398; Ward v. Hudson River Bldg. Co., 125 N.Y. 230, 26 N.E. 256.

The only breach of the lease which the defendants assert as a ground for retaining the deposit is the omission of the tenants to pay the forty-five dollars of the monthly rent. In all other respects the covenants of the lease were kept and performed.

It is not claimed in this case that the landlord sustained any other damages beyond the loss of the rent, and that was allowed at the trial and deducted from the deposit. In the absence of anything in the record to the contrary, the presumption is that the landlord resumed the possession of the demised premises, or relet them for the same or for a larger rental; and, if so, it is difficult to see why he should be entitled to have the leased premises and the deposit at the same time.

A provision in a lease in regard to liquidated damages, such as the one in question, that is not mutually binding on both parties, should not be enforced against one of them unless the facts and circumstances are such as to make it entirely clear that such was the purpose of the stipulation.

Chaude v. Shepard, 122 N.Y. 397, 25 N.E. 358; Scott v. Montells, 109 N.Y. 1, 15 N.E. 729; Michaels v. Fishel. 62 N.E. 428; Virginia Amusement Co. v. Mid City Trust Co., 220 Ill. 147.

The law looks with disfavor upon forfeitures and will uphold them only when there is no other way of arriving at justice.

We call to the court's further attention the following cases which uphold the theories of law advanced by us and decided in the cases we have set out in this brief as supporting our contention.

Banner Case, 149 F. 936; Evans v. McClure, 108 Ark. 531; Dunn v. Natenberg, 208 Ill. 300; Shanklin v. Kamin, 197 Ill.App. 630; Scott v. Montells, 109 N.Y. 1, 15 N.E. 729; Wolff v. Dembosky, 95 N.Y.S. 559; Brill v. Schlosser, 81 N.Y.S. 678; Hochman v. Boltt, 152 N.Y.S. 1031; Schwartz v. Ribaudo, 110 N.Y.S. 352; Niles v. Iraquois, 109 N.Y.S. 712; Michael v. Fishel, 62 N.E. 425; Hume v. Riggs, 12 App. (D. C.) 355; Sutton v. Goodman, 194 Mass. 389; Continental Nat. Bank. v. Bell, 25 N.E. 1070; Crausman v. George C. Graham Construction Co., 159 N.Y.S. 709; Northern Brewery Co. v. Princess Hotel, 78 Ore. 453, 153 P. 37; Yuen Suey v. Fleshman, 65 Ore. 606, 133 P. 803; Adams v. Dunn, 64 Penn. Supp. 303; Steel v. Thompson, 59 Cal. 191; Wilson v. Agnew, 25 Colo. 109.

Gardner & Backstrom, of Gulfport, for appellee.

The Supreme Court of New York in Longbardi v. Yuliano, 33 Misc. 472, 67 N.Y.S. 902, a case in which the facts are very similar to the facts in the case at bar, held that the sum of two hundred dollars deposited to secure the payment of the rent provided to be paid under the terms of the contract and on a breach thereof was to be stipulated damages, was not a penalty as being forfeited by failure to pay an installment of rent less than the sum of two hundred dollars since the deposit was to be retained by the lessor, not for the failure to pay one installment simply but all other subsequently accruing installments, and was to be liquidated damages for the breach of the covenant to pay rent.

In determining whether or not a contract provides for liquidated damages or a penalty, the court will consider the following: the nature of the contract, the terms and provisions of the entire instrument, the subject matter of the contract, the ease or difficulty in measuring the damages flowing from a breach of the contract, the reasonableness of the sum stipulated for, the consequences naturally flowing from a breach of the contract, and the particular circumstances surrounding the transaction under consideration.

Keeble v. Keeble, 85 Ala. 552, 5 So. 149; Burrill v. Doggett, 77 Me. 545, 1 A. 667; Mathews v. Sharpe, 99 Penn. St. 560; Keck v. Brieber, 148 Penn. St. 645, 24 A. 470, 33 Am. St. Rep. 846; Stilwell v. Lumber Company, 73 Ark. 432, 84 S.W. 483, 108 Am. St. 47, and note.

Necessarily, the profitableness or unprofitableness of the contract was a matter of speculation. With this situation confronting the contracting parties, no inference can be drawn from the contract more reasonable than that the lessee intended and the lessor agreed that if the contract proved to be a burdensome and unprofitable one, the lessee could terminate that contract by paying the sum of ten thousand dollars as liquidated damages. The terms of the contract itself bear out this interpretation.

The terms and provisions of the instrument preclude any other construction save and except that the deposit was intended by the parties as liquidated damages.

If the damage from a breach of the contract cannot be readily ascertained, it is competent for the parties to fix a reasonable sum to be paid to the injured party by the party making the default.

Hennessey v. Metzger, 152 Ill. 505, 43 Am. St. Rep. 267; Taylor v. Times Newspaper Co., 83 Minn. 523, 86 N.W. 760, 85 Am. St. Rep. 473; Monmouth Park Association v. Wallis Iron Works, 58 N. J. L. 133, 26 A. 140, 39 Am. St. Rep. 626, 19 L. R. A. 456; Sun Printing Association v. Moore, 183 U.S. 642, 22 S. C. T. 240, 46 L.Ed. 366.

If the contract provides for liquidated damages, the amount stipulated may be recovered in case of a breach of the contract, without proof of the actual damage.

Stanley v. Montgomery, 102 Ind. --, 26 N.E. 213; Sanford v. First National Bank, 94 Ia. 680, 63 N.W. 459; American Cooper Works v. Galland-Burks Brewing Co. , 30 Wash. 178, 70 P. 236; Chicago Railway Co. v. McEwen (Ind. App.), 71 N.E. 926; Morris v. Ashburn (Tex. Civ. App.), 21 S.W. 993; Jackson v. Hunt, 76 Vt. 284, 56 A. 1010; Welsh v. McDonald, 85 Va. 500, 8 S.E. 711.

The real test is whether or not construing the contract as a whole, the parties intended to liquidate the damage.

Hennessey v. Metzger, 152 Ill. 505, 38 N.E. 1058, 43 Am. St. Rep. 267; Krukel v. Wherry, 189 Penn. St. 198, 42 A. 112, 69 Am. St. Rep. 802; Railroad Co. v. Cabinet Co., 104 Tenn. 568, 58 S.W. 303, 50 L. R. A. 729; Tade v. Gross, 127 N.Y. 480, 28 N.E. 469, 13 L. R. A. 652, 24 Am. St. Rep. 478; Foley v. McKeegan, 4 Ia. 1, 66 Am. Dec. 107; Jones v. Mississippi Farms Co., 116 Miss. 295, 76 So. 880; Central trust Company v. Wolff, 255 Mich. 8, 237 N.W. 29, 78 A. L. R. 843; 1 Underhill, Landlord and Tenant, Section 369; 36 C. J., p. 301; Stott Realty Company v. Amusement Company, 195 Mich. 684, 162 N.W. 283; Malone v. Levine, 240 Mich. 222, 215 N.W. 356, 358; Barrett v. Monro (Wash.), 124 P. 369, 40 L. R. A. (N. S.) 763.

Argued orally by W. L. Guice, for appellant, and Oscar Backstrom, for appellee.

OPINION

McGowen, J.

From a decree of the lower court sustaining a demurrer to the bill of complainant exhibited by the appellant, Chicago Investment Company of Mississippi, against the appellee, Rudolph H. Hardtner, and dismissing the original bill, appeal is prosecuted here.

The essential facts set out in the bill are about as follows: The appellant, Chicago Investment Company of Mississippi, a corporation chartered under the laws of this state, and appellee, Hardtner, entered into a lease contract by which Hardtner leased to the Chicago Investment Company certain lands and improvements in Gulfport, Mississippi, for a term of ninety-nine years. Appellant paid the stipulated rental promptly for five years until October, 1930, when it defaulted in the payment of its rent, which was one thousand five hundred dollars due in advance every three months. Upon this default, under the terms of the lease, the appellee declared a forfeiture or termination of the lease and took over the leased premises into his possession from the Chicago Investment Company of Mississippi. The bill further stated that the investment company was indebted to Hardtner for certain taxes and a balance due on rent, but that Hardtner had in his possession a ten thousand dollar deposit which had been placed with him for two distinct purposes, to-wit, to guarantee the prompt payment by the Chicago Investment Company...

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