Hyman v. Cohen

• Decision Date: 25 May 1954
• Citation: 73 So.2d 393
• Parties: HYMAN et al. v. COHEN.
• Court: Florida Supreme Court

Page 393

73 So.2d 393

HYMAN et al. v. COHEN.

Supreme Court of Florida, En Banc.

May 25, 1954.

Rehearing Denied July 27, 1954.

Ward & Ward, Miami, and John E. Porte, Miami Beach, for appellants.

Sibley & Davis, Miami Beach, for appellee.

ROBERTS, Chief Justice.

The litigation resulting in the final decree with which we are here concerned had its inception in a controversy between the parties to a lease of certain hotel property in Miami Beach, as to their respective rights thereunder and particularly as to the disposition to be made of a deposit in the amount of $25,000 made by the lessee with the lessors at the beginning of the lease term. The lessee, who is the appellee here, was the moving party in the litigation, his suit being filed after he had vacated the premises upon threat of eviction by the lessors for non-payment of rent. By his suit, the lessee invoked the aid of the equity court for a declaration of his rights under the lease and, specifically, to have the lease declared to be 'cancelled, null and void' and to obtain the return of his $25,000 deposit. From a decree in favor of the lessee, the lessors have appealed.

The lease in question was for a five-year term and called for an annual rental of $25,000. The $25,000 deposit was denominated in the lease as a 'cash bond' guaranteeing the performance of all the covenants of the lease, including the covenant to pay rent, but there was no provision for forfeiture of the deposit upon the mere breach of a covenant by the lessee. The lease provided for the forfeiture of the deposit in the following terms: 'If the lease is cancelled for default of the lessee, then no part of the funds shall be returned to the lessee by the lessors, nor shall the lessors be required to account to the lessee for any part of the said fund.' Provision was made for the return of the deposit to the lessee during the last year of the rental period, although not as rent.

The lessee went into possession of the lease premises in July of 1948, although the lease was dated October 1, 1948, and operated the hotel until October of 1950. He did not, however, pay the rental installments of $5,000 each due on February 1, 1950, and October 1, 1950. On October 10, 1950, the lessors advised the lessee, in writing, that the lessee was in default in these payments and stated further that 'You are hereby required to make payment of said rent, or to surrender the premises to the undersigned within three days from the date whereupon this notice is given, in accordance with Section 83.20(2), of Compiled General Laws of Florida.'

On October 13, 1950, the lessee wrote the lessors that their 'demand of surrender * * * is accepted, and in compliance with said demand, we tender back * * * possession of said premises as surrender thereof, and hand you herewith the keys to said premises.' The lessee in this letter also referred to a previous letter which he had written to the lessors under date of October 5, 1950, charging the lessors with failure to make the repairs required of them by the lease. He demanded that the lessors account to him for the cash bond of $25,000 held by them.

The lessee thereupon moved out of the hotel and, on October 23, 1950, filed this suit. His complaint alleged the facts above recounted and stated that there was a dispute between him and the lessors as to whether, in these circumstances, there had been a mutual cancellation of the lease by the parties. It was his contention that the lease had been so cancelled. It was also alleged that the right of the lessors to retain the $25,000 deposit had been terminated by the mutual act of the parties and that the lessors were holding this fund as trustees for the lessee. The bill prayed for a declaration of the rights of the parties and, specifically, that the court declare that the lease 'is at an end and is terminated and all rights and obligations of the parties thereunder have come to an end; that the court cancel, void and annul said lease by reason of the defendants' breach of the said lease [as to the alleged breach of the lessors' covenant to repair] and by reason of the surrender made and accepted in pursuance thereof; and that the defendants be required to account to the plaintiff for the cash bond and require them further to forthwith pay the same sum to the plaintiffs.'

Their motion to dismiss having been denied, the lessors filed their answer in which they alleged, in substance, that the lease was still in effect and that the lessee 'is still liable for the payment of damages for any difference between the amount of rent which they had agreed to pay and the amount which the lessors may ultimately receive for the balance of the term together with the $10,000 now in default, plus interest, attorneys fees and costs.' It was also alleged that the lease market in Miami was fluctuating and had been for many years, and that it was impossible to tell at that point just what damages the lessors would ultimately suffer 'by reason of the tenant, the plaintiff, wrongfully breaking the terms and conditions of said lease.' They asked the court to treat the $25,000 deposit as liquidated damages and that the plaintiff be decreed to be estopped, because of his own wrongdoing, to claim any portion of the fund or, in the alternative, that the lessors be allowed to retain the deposit 'as rental to be applied upon the default of the lease in the last year of the term.' They also prayed that the court 'determine that the plaintiff is still indebted to these defendants in the sum of $10,000 plus attorneys fees and accrued interest and costs.'

The cause went to trial before a Special Master on the issues thus made by the pleadings.

The Master made a full report, with extensive findings of fact. We will, however, set forth only those which we deem pertinent to the issues before this court.

On the question of whether the lease had been terminated, the Master found that the actions of the parties 'served to cancel the lease and to terminate tenant's liability to landlords for any rent falling due after October 13, 1950.'

As to the $25,000 deposit, he found that 'the $25,000 deposit is only a security deposit, and cannot be appropriated by landlords as and for agreed or liquidated damages.' He found that there was due and owing to the lessors $10,000 for past-due rent accrued at the time of the termination of the lease, and recommended that the lessors be allowed to deduct this amount, plus interest, and also any taxable court costs, from the security deposit, and that a money judgment be entered for the lessee for the balance of such deposit. He also recommended that the final decree recite that the lease was cancelled as of October 13, 1953, and that the parties thereto are released from any further liability thereon.

The Chancellor over-ruled the exceptions to the Master's Report, except as to an allowance of an attorney's fee to the lessors, and entered his final decree ratifying and confirming the Report in all other respects. As noted above, the lessors have appealed from such decree.

The lessors here contend, first, that equity had no jurisdiction of the cause, there being an adequate remedy at law. This contention cannot be sustained. We think the allegations of the bill were sufficient to state a cause of action under the Declaratory Judgments Act, F.S.A. § 87.01 et seq., within the rule stated in Ready v. Safeway Rock, Co., 157 Fla. 27, 24 So.2d 808. Moreover, it would appear that the complaint stated a cause of action in equity, independently of the Declaratory Judgments Act, in that a bill for cancellation of a lease is a recognized subject for equitable relief.

It is also contended on behalf of the lessors that the lower court erred in holding that the lease had been 'cancelled'--it being the contention of the lessors here, as it was in their answer, that the lease is still in effect and that their operation of the hotel subsequent to re-entry was 'for the account of the lessee.'

As in the case of Stenor, Inc. v. Lester, Fla., 58 So.2d 673, 676, the lessors here, upon default in the payment of rent by the lessee, 'had the right to elect to treat the lease as terminated and resume possession of the premises, thereafter using the same exclusively as [their] own for [their] own purposes; or [they] might have retaken possession of the premises for the account of the lessee, holding the lessee in general damages for the difference between the rental stipulated to be paid and what in good faith appellant might have been able to recover from a reletting; or [they] might have stood by and done nothing and sued the lessee as each installment of rent matured, or for the whole when it became due.' And we think that the evidence in the instant case, as in the Stenor v. Lester case, showed that the lessors elected to pursue the first of these alternatives.

As heretofore noted, on receipt of the notice to 'pay up or get out,' the lessee 'got out.' Thereafter, the lessors took over the operation of the hotel, rented it to a corporation which they formed for that purpose, and at no time advised the lessee that they were doing so 'for the account of the lessee.' The question of whether the lessors' re-entry and subsequent use of the premises was for their own account or for the account of the lessee was a question of fact, which was resolved by the Special Master against the contention of the lessors, and we think the evidence was clearly susceptible of the inference that they resumed possession 'for their own account.'

But this is not to say that the lessors thereby 'cancelled' the lease in the sense of a 'rescission' thereof.

It is unquestionably true, as contended by the lessee, that the effect of the 'rescission' of a contract is to extinguish it for all purposes, not only to preclude the recovery of the contract price but also to prevent the recovery of damages for breach of the contract. Upon a rescission, 'the...