Comm'r of Ins. v. Massachusetts Acc. Co.

• Decision Date: 30 January 1942
• Citation: 310 Mass. 769,39 N.E.2d 759
• Parties: COMMISSIONER OF INSURANCE v. MASSACHUSETTS ACC. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

310 Mass. 769

39 N.E.2d 759

COMMISSIONER OF INSURANCE

v.MASSACHUSETTS ACC. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Jan. 30, 1942.

Appeal from Supreme Judicial Court.

Proceeding in the matter of the receivership of the Massachusetts Accident Company on the claim of the Boston Insurance Company. From an adverse decree, claimant appeals.

Affirmed.

Before FIELD, C. J., and QUA, DOLAN, and RONAN, JJ.

D. M. Hill and D. M. Hill, Jr., both of Boston, for claimant.

A. B. Casson and T. W. Lawless, both of Boston, for receiver.

RONAN, Justice.

The Boston Insurance Company on April 17, 1930, leased certain premises to the Massachusetts Accident Company for a term ending January 31, 1941. The Commissioner of Insurance has been duly appointed receiver of the lessee, and vacated the demised premises on May 12, 1940. The lessor filed a claim with the receiver and seeks to establish a claim for the unpaid rent for the residue of the term. The single justice allowed the claim in the sum of $667.45, being the rent at the rate designated by the lease for the month of May less what has been paid by the receiver for the first twelve days of that month. The lessor appealed.

The lease provided for the acceleration of the rent upon the happening of certain contingencies including the appointment of a receiver for the lessee, and, upon the reentry of the lessor, the lease was to terminate. The issues presented for decision are whether the provision for the acceleration of the rent calls for a penalty or liquidated damages, and if for a penalty, then for what amount the claim should be established.

An examination of the lease discloses that the lessee not only assumed the obligation to pay rent but also to pay a portion of the cost of the improvements which the lessor had made upon the demised premises, and for electricity furnished by the lessor or to reimburse it for payments it might make for the electricity, if it was furnished by a public service company. The lessee was bound to keep the premises in repair; to indemnify the lessor for all loss and damage arising from the lessee's neglect or use of the premises, and for any injuries sustained by persons thereon that were not due to the negligence of the lessor. The lessee could not make any holes in the walls or floors or attach any awnings or signs without the written approval of the lessor. It is unnecessary to recite the other covenants which the lessee was required to perform and observe. The lease was made upon condition that all such covenants would be kept by the lessee, and upon its failure to do so or if a receiver should be appointed all the rent for the balance of the term should immediately become due and payable. Breach of some of these covenants would be of minor importance and the loss that might result therefrom could be readily and accurately ascertained. The loss might be greatly disproportionate to the amount required to be paid for rent for the residue of the term. It could hardly be thought that this provision for the acceleration of the rent was considered by the parties as compensation for damages due to a breach of these various covenants. The parties did not describe this lump-sum payment of rent as liquidated damages, although if they had that would not be conclusive. Fisk v. Gray, 11 Allen 132;Wallis v. Carpenter, 13 Allen 19;Kaplan v. Gray, 215 Mass. 269, 102 N.E. 421. But it appears that certain payments of instalments of rent to be made subsequently to a reentry by the lessor are referred to as ‘liquidated damages,’ which indicates that the parties knew how to provide for such damages when they intended to do so. Makletzova v. Diaghileff, 227 Mass. 100, 116 N.E. 231;United States v. Bethlehem Steel Co., 205 U.S. 105, 27 S.Ct. 450, 51 L.Ed. 731. We think that the clause providing for the acceleration of rent in this lease, which must be construed as of the time of its execution and not as of the time of the breach, comes within the general rule that, where a lease contains many covenants of varying importance, and where a breach of some of them would result in a loss which could be accurately determined and would be inconsiderable in comparison with the amount required by the lease to be paid although the damage resulting from a breach of some of the other covenants would be substantial and difficult exactly to ascertain, the sum designated to be paid upon a breach of any of these covenants is a penalty and not liquidated damages. Higginson v. Weld, 14 Gray 165;Fisk v. Gray, 11 Allen 132;Wallis v. Carpenter, 13 Allen 19;Makletzova v. Diaghileff, 227 Mass. 100, 116 N.E. 231;De Cordova v. Weeks, 246 Mass. 100, 140 N.E. 269;Kothe v. R. C. Taylor Trust, 280 U.S. 224, 50 S.Ct. 142, 74 L.Ed. 382;In re Barnett, 2 Cir., 12 F.2d 73;In re Frey, D.C., 26 F.2d 472;Webster v. Garrette, 10 Cal.App.2d 610, 52 P.2d 550;Virginia Amusement Co. v. Mid-City Trust & Savings Bank, 220 Ill.App. 147;Noble v. Sturm, 210 Mich. 462, 178 N.W. 99;Jennings v. First National Bank of Kansas City, 225 Mo.App. 232, 30 S.W.2d 1049;Caesar v. Rubinson, 174 N.Y. 492, 67 N.E. 58;Seidlitz v. Auerbach, 230 N.Y. 167, 129 N.E. 461;Lenco, Inc., v. Hirschfeld, 247 N.Y. 44, 159 N.E. 718; 884West End Ave. Corp. v. Pearlman, 201 App.Div. 12, 193 N.Y.S. 670;Id., 234 N.Y. 589, 138 N.E. 458;Electrical Products Corp. v. Ziegler Drug Stores, 141 Or. 117, 10 P.2d 910,15 P.2d 1078;Gentry v. Recreation, Inc., 192 S.C. 429, 7 S.E.2d 63, 128 A.L.R. 743; Am.Law Inst.Restatement: Contracts, § 339. Willison, Contracts (Rev.Ed.) § 776.

While the lessor could not enforce the provision for an acceleration of the rent, it was entitled to prove its claim either for rent or for damages to the extent that it had an existing demand on or before June 1, 1940, which was the last date, in accordance with the order of the court, that a claim could be filed, even if the demand might not have been liquidated or presently payable. But it could not prove a claim that had not accrued at the time of the filing of the proof and which might or might not thereafter accrue. French v. Morse, 2 Gray 111;Morgan v. Wordell, 178 Mass. 350, 59 N.E. 1037,55 L.R.A. 33;Goding v. Roscenthal, 180 Mass. 43, 61 N.E. 222;Dunbar v. Dunbar, 180 Mass. 170, 62 N.E. 248,94 Am.St.Rep. 623;Cotting v. Hooper, Lewis & Co., Inc., 220 Mass. 273, 107 N.E. 931;Shaw v. United Shoe Machinery Co., 220 Mass. 486, 108 N.E. 68;Ellis v. Burnham, 263 Mass. 57, 160 N.E. 437;In re L. P. Hollander Co., Inc., petitioner, 301 Mass. 278, 16 N.E.2d 35.

The receiver had paid the rental at the rate fixed by the lease up to May 12, 1940, when he vacated the premises, but as the lease provided for the payment of rent in advance all that the receiver owed on the last-mentioned date was the rent for the month of May, less what he had paid for the occupancy during the first twelve days of that...