Stenor, Inc. v. Lester

• Decision Date: 11 December 1951
• Citation: 58 So.2d 673
• Parties: STENOR, Inc. v. LESTER et al.
• Court: Florida Supreme Court

Page 673

58 So.2d 673

STENOR, Inc. v. LESTER et al.

Supreme Court of Florida, Division A.

Dec. 11, 1951.

Rehearing Denied April 15, 1952.

Keen, O'Kelly & Spitz, Tallahassee, and Janes H. Ruby, Miami Beach, for appellant.

Sibley & Davis, Miami Beach, for appellee.

HOBSON, Justice.

Appellant, defendant below, leased a hotel, with equipment to appellee on April 11, 1946, at a total rental of $57,000, payable at the rate of $11,200 per year.

Under the lease appellee was required to deposit with appellant $11,200 as '* * * security for the performance by the lessee of all the terms conditions, covenants and agreements * * *.' It was provided that on default by the lessee the entire sum at the option of the lessor should be retained as 'liquidated and agreed upon damages' for breach or as a pro tanto amount for the lessee's actual damages. Interest was to be paid by the lessor on the amount held and it was provided that it should not be applied to rent. Provision was also made for the return of portions thereof at specified dates if no default had occurred up to that time.

The lease also provided that in case of damage to the property by fire, wind, etc. which does not render it wholly unfit for use, such damage should be repaired by the lessor and a proportionate part of rent credited to the lessee upon any unavailable portion of the premises for the length of time such part could not be used, and if the lessor should fail to expend sums required for executing any of the covenants, the lessee might pay same after ten days notice in writing to the lessor and deduct the amount from rent. It was further agreed that whenever the lessor should be required under the terms of the lease to expend any sums for the protection of the premises and effectuating any of his covenants, if the lessor should fail to make payments therefor the lessee might pay same, after ten days notice in writing to the lessor, and deduct the amount paid from the rent due.

On September 17, 1947, a hurricane damaged the property. Appellee, on April 22, 1949, filed a bill in equity for an injunction and an accounting, alleging that the lessor had not repaired such damage after notice and that appellee had expended a large sum on repairs; that appellee expended $400 in placing fire doors on the hotel as required by city ordinance; that appellee had to expend $664.30 on the installation of a water heater in order to furnish a sufficient supply of hot water to the hotel; that appellee had, on demand of appellant, paid $300 to appellant for linens which actually were supposed to be furnished by appellant as part of the inventory and that appellant refused to return such sum on demand; and appellee asserted a right of set-off against rent for the total amount due.

On April 15, 1949, appellant brought eviction proceedings in the Civil Court of Record, seeking at the same time to retain the $11,200 deposit.

The bill filed by appellee sought to enjoin the eviction action. A temporary injunction was granted. Appellant answered alleging that the $11,200 deposit rightfully belonged to him and denied other allegations of appellee's complaint. Appellant also filed a cross bill praying for dissolution of the temporary injunction, dismissal of the bill, that appellee be removed from the premises and appellant placed in possession, and for a judgment for damages for wrongful detention. After the filing of appellee's answer to the cross bill, appellant requested the appointment of a receiver. A receiver was appointed.

The master disallowed appellee's claims on grounds of nonassertion and inadequate notice, and found appellee to be in default; that the $11,200 was solely a security measure and that appellee was entitled to a return of the deposit less rent due and an amount for liability insurance.

The Chancellor found that appellee was due the $11,200 with interest; $1,488.44 for expenditure for storm damage repair, $400 for installation of fire doors, with interest, less $7,200 rent due, with interest and an amount for insurance premium.

Both the appellant and appellee assert one question (essentially) on appeal--that is, whether the provision for the retention of the $11,200 security deposit is one for liquidated damages or for a penalty?

The courts have used in their determination of this question a number of general principles and have not bound themselves by any one rule. The principles are sufficiently broad to permit great latitude in their application.

The question of determination is one of law for the courts. Greenblatt v. McCall, 1914, 67 Fla. 165, 64 So. 748; Smith v. Newell, 1896, 34 Fla. 147, 20 So. 249. It has been stated innumerable times that the intent of the parties at the time the contract was made is the controlling factor or guide. Mayor of Brunswick v. Aetna Indemnity Co., 1908, 4 Ga.App. 722, 62 S.E. 475; J. B. Colt & Co. v. Armstrong Light Co., 17 Ala.App. 378, 85 So. 570. But from the opinions it is evident that intent is determined by the objective principles discussed herein.

The denomination of a sum as 'liquidated damages' is not conclusive as to its character. Greenblatt v. McCall, supra.

The fundamental rule recognized almost universally is that when the actual damages contemplated by the parties upon breach are susceptible of ascertainment by some known rule or pecuniary standard and the stipulated sum is disproportionate thereto, it will be regarded as a penalty. Pembroke v. Caudill, 1948, 160 Fla. 948, 37 So.2d 538, 6 A.L.R.2d 1395. The prime factor is whether the sum named is just compensation for the damage resulting from breach. Though it is proper for parties to provide in advance for a sum to be paid or retained as liquidated damages, equity will not permit one seeking its aid to retain...