Stewart v. Basey

Citation150 Tex. 666,245 S.W.2d 484
Decision Date16 January 1952
Docket NumberNo. A-3346,A-3346
PartiesSTEWART et ux. v. BASEY.
CourtSupreme Court of Texas

E. M. DeGuerin, Austin, for petitioners.

Smith & Furr, Austin, for respondents.

HICKMAN, Chief Justice.

The controlling question in this case is whether the language quoted below stipulating the damages recoverable for the breach of a lease contract is a provision for liquidated damages or for a penalty. The trial court construed it as a provision for a penalty and, finding that the lessor suffered no damages by lessee's breach except $38.50 caused by the destruction of a partition door in one of the leased buildings, rendered judgment for that amount only. The Court of Civil Appeals upheld the trial court in its refusal to award liquidated damages, but reversed that portion of the judgment awarding only $38.50 as damages and remanded the case to the trial court for the sole purpose of determining the amount of actual damages sustained by the lessor. Tex.Civ.App., 241 S.W.2d 353.

By a contract in writing petitioners, E. C. Stewart and wife, leased to respondent, James Marvin Basey, three store buildings on South Congress Avenue in the city of Austin. The lease stated that it was for a term of five years, beginning on January 1, 1949, and ending at midnight on December 31, 1954. The dates cover a period of six years, but for the purposes of this opinion it is immaterial whether the term was five years or six years. The lease provided for a monthly rental of $325.00, payable each month in advance. Respondent went into possession under the lease and paid the monthly rentals through November, 1949, during which month he vacated the buildings. On the following December 5th the keys were returned to petitioners upon their request, since which time they have executed leases to other tenants. The provision of the contract which we are called upon to construe reads as follows: 'The failure to pay any monthly installment of rental when such installment is due shall terminate this lease at the option of Lessors. The failure of Lessee to make said payment or payments or the breach of this contract otherwise by him shall render him liable to Lessors, as agreed liquidated damages, the sum of One Hundred Fifty (150) Dollars per month for each and every month of the unexpired term of this lease which shall become due and payable when the option to terminate this lease is exercised or at the time of the breach of this contract otherwise by Lessee if any, and the payment thereof be secured by lien on the property of Lessee in said Store Buildings at said time.'

Another provision of the contract is: 'That the violation of any term of this lease by either party hereto shall terminate the same at the option of the other.'

It will be observed that liability for the payment of $150.00 per month as liquidated damages is not limited to the breach of any one particular covenant of the contract. The covenant to pay the rent when due is but one of the covenants the breach of which would give rise to a claim by the lessors for $150.00 per month for each and every month of the unexpired term of the lease.

Volumes have been written on the question of when a stipulated damage provision of a contract should be enforced as liquidated damages and when enforcement should be denied because it is a penalty provision. One line of cases, of which Eakin v. Scott, 70 Tex. 442, 7 S.W. 777, is typical, states that the intention of the parties governs and another line states that their intention is immaterial, but when the results are examined there appears but little disparity between them. All agree that to be enforceable as liquidated damages the damages must be uncertain and the stipulation must be reasonable. There is a statement in the opinion in Eakin v. Scott, supra, which, standing alone, would lead to the conclusion that the damages in that case were certain in amount. But when the entire opinion is read, it becomes obvious that the damages were very uncertain in the contemplation of the parties when the contract was executed; and that is the true test of uncertainty. The true theory is well expressed in Williston on Contracts, Revised Edition, Sec. 779, p. 2192, in this language: 'But as has been seen, the chief, almost the only, means of determining whether the parties in good faith endeavored to assess the damages is afforded by the amount of damages stipulated for, and the nature of the breach upon which the stipulation was agreed to become operative. This is but saying in other words that the reasonableness or unreasonableness of the stipulation is decisive.'

The cases which hold that the intention of the parties controls impute to the parties an intention to provide for a penalty when it would be unreasonable and unjust to do otherwise, even though their language clearly expresses the contrary intention. They indulge in a presumption in order to arrive at the justice of the case. The cases which disregard the intention of the parties treat the question as one of the legality of the stipulation. The reasoning in Langever v. R. G. Smith & Co., Tex.Com.App., 278 S.W. 178, 179, is typical of that employed in cases which announce that the intention of the parties controls. The statement in the opinion that 'the real intention of the parties when ascertained will control' is followed by the statement that such intention 'is not necessarily ascretained by the words employed'. Regardless of which line of cases is followed, the courts will not be bound by the language of the parties.

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    ...Stamp Ad, Inc. v. Barton Raben, Inc., 915 S.W.2d 932, 936 (Tex. App. Houston [1st Dist.] 1996, no writ) (citing Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952)). Courts determine the proper measure of damages from the facts of the case. Vance v. My Apartment Steak House of San Antonio, In......
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    ...23 Mich.L.Rev. 211, 221-22 (1925). Finally, we have recognized that contract penalties are disfavored in Texas. Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952) (landlord should not receive more or less than actual damages upon tenant's breach). A landlord should not be allowed to......
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    ...See, e.g., Amigo Broadcasting, LP v. Spanish Broadcasting Sys., Inc., 521 F.3d 472, 482–83 (5th Cir.2008) (citing Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952) ); Jones v. DRG Fin. Corp., 722 S.W.2d 402, 405–406 (Tex.1987) (considering whether sufficient evidence existed to sup......
  • Zachry Constr. Corp. v. Port of Hous. Auth. of Harris Cnty.
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    ...independently that delay damages are recoverable. Instead of supporting the dissent, Sharyland contradicts it.70 Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952).71 “Consequential damages are those damages that result naturally, but not necessarily, from the defendant's wrongful a......
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