Strode v. Smith

• Citation: 131 P. 1032,66 Or. 163
• Parties: STRODE et al. v. SMITH et al.
• Decision Date: 29 April 1913
• Court: Supreme Court of Oregon

131 P. 1032

66 Or. 163

STRODE et al. v. SMITH et al.

Supreme Court of Oregon

April 29, 1913

Appeal from Circuit Court, Multnomah County; Henry E. McGinn, Judge.

Action by Kate Strode and others against Frank E. Smith and another. From a judgment for plaintiffs, defendants appeal. Affirmed.

The defendants appeal from a judgment in favor of plaintiffs for $6,000, damages for the breach of a bond.

The complaint, for the first cause of action, shows the following facts: On the 28th day of May, 1910, the plaintiffs executed a lease to defendant Frank E. Smith of a certain lot in the city of Portland, Or., for the term of 35 years. The lease contained 25 separate stipulations set forth at length in the complaint. The general provisions were: That the lessee should pay a monthly rental of $1,500 in advance, beginning on the 1st day of October, 1910, also all taxes, charges, and assessments imposed on the property, including water rents and the general taxes for the year 1910, which were to be paid on or prior to the 15th day of March, 1911; that the lessee should erect a building upon the premises, of the kind specified in the lease, to be of the value of $100,000; that the erection of such building should be commenced in good faith within one year from the execution of the lease; and that the lessee should keep the same insured for two-thirds of its value. The twelfth stipulation read as follows 'That the said lessee covenants and agrees that within sixty (60) days from the execution of this lease he will execute and deliver to the lessors a bond with a good, safe and reliable surety company as surety for the sum of six thousand ($6,000) dollars, to insure the lessee carrying out this lease, which bond shall be made to the lessors and in form and conditioned as they may desire, and which must be satisfactory to them, and continue in force as to such surety for not less than one year. *** The lessee further covenants and agrees that not later than sixty-five (65) days before the commencement of the removal of the building which now stands upon the said leased real property, he, the said lessee, will execute and deliver to the lessors a bond with a good, safe and reliable surety company as surety for the sum of fifty thousand ($50,000.00) dollars, covering at least one year and conditioned that said lessee will construct and pay for a building on said leased premises as hereinbefore provided, which bond shall be made to the lessors and in form and conditioned as they may desire and to be satisfactory to them. In the event that the liability of such surety on such last named bond should not continue until the full completion of said building as herein provided, then said lessee shall renew said bond for like time, in the same form and with same or like surety satisfactory to the lessors." Pursuant to the terms of the lease, duplicates thereof were placed with the bank in escrow, to be delivered when Frank E. Smith should execute to the plaintiffs the bond with surety, as provided for.

On August 13, 1910, according to the agreement, defendant Frank E. Smith executed and delivered to plaintiffs the following bond:

"Pacific Surety Company of California.

"Whereas on May 28th, 1910, a written lease was executed by Kate Strode and Rose Bridges and Anna Herrall and V.K. Strode and J.B. Bridges, Jr., as lessors, and Frank E. Smith, as lessee, in and by which said lessors leased to said lessee lot five (5) in block nineteen (19) of the city of Portland, in the county of Multnomah, and state of Oregon for the term of thirty-five (35) years from and after October 1, 1910, at the rental and on the terms and conditions therein stated, a copy of which lease is hereto attached and hereby made a part hereof; and

"Whereas it was and is provided in and by said lease that said lessee will, within 60 days from the date of its execution execute and deliver to said lessors a bond with a good and safe and reliable surety company as surety for the sum of six thousand ($6,000) dollars, to insure said lessee carrying out said lease, and that said bond shall be in form and conditioned as said lessors may desire and must be satisfactory to them; and

"Whereas, it is further provided in and by said lease that said lessee shall, at his own sole cost and expense, erect and place upon said leased property a building of the kind and in the time and manner stipulated therein, and that the erection of said building shall be commenced within one year from the date of the execution of said lease; and

"Whereas, it is further provided in and by said lease that said lessee shall, not later than sixty-five (65) days before the commencement of the removal of the building now standing upon said leased property, which will necessarily be not less than sixty-five (65) days before the commencement of the erection of said new building to be erected and placed by said lessee upon said leased property, execute and deliver to said lessors a bond, with a good and safe and reliable surety company as surety for the sum of fifty thousand ($50,000) dollars, in form and conditioned as provided for in said lease and particularly conditioned that said lessee will construct and pay for said new building on said leased property as in said lease provided; and

"Whereas, it is further provided in said lease that said lessee shall, in addition to other payments therein provided for, pay the general taxes on said leased property for the year 1910 and pay the same prior to March 15th, 1911; and ***

"Whereas, conditions in the city of Portland at the time of and ever since the execution of said lease were and still are most favorable for the owners of real property in the same general neighborhood and of the same general character as said leased property securing and making advantageous and profitable leases of their real property, and by reason of said execution of said lease and the giving of this bond said lessors have and do tie up said leased property in such manner and for such time as to lose many favorable opportunities of making advantageous and profitable leases thereof to other parties than said lessee, and said lessors were induced and persuaded to so execute said lease and so place the same in escrow because and by reason of said provision therein for the execution and delivery to them by said lessee of said fifty thousand ($50,000) dollar bond to secure the erection of said new building on said leased property and said provision therein for the payment by said lessee of said 1910 taxes on said leased property; and

"Whereas, because of the facts recited in the last preceding paragraph hereof and the fact that it might be claimed by said lessee that it could not be determined until at or near the expiration of said thirty-five year term of said lease to what extent said lessors would be damaged by the failure of said lessee to execute and deliver said fifty thousand ($50,000) dollar bond and erect said new building as provided in said lease, and for many other reasons, the damages which would be sustained by said lessors if said lessee should fail to execute and deliver said fifty thousand ($50,000) dollar bond as provided for in said lease would be uncertain and incapable of reasonable estimation or definite calculation, and the damages which would be sustained by said lessors if said lessees should fail to pay said 1910 taxes as provided in said lease would likewise be uncertain and incapable of reasonable estimation or definite calculation; and

"Whereas, it has been and is hereby agreed by and between said lessors and said lessee and the surety hereinafter named that said lessors would be damaged to the extent of not less than four thousand ($4,000) dollars if said lessee should fail to so execute and deliver said fifty thousand ($50,000) dollar bond, and said lessors and said lessee and said surety have agreed and do hereby agree upon four thousand ($4,000) dollars as and for fixed and stipulated and liquidated damages to said lessors arising from a failure of said lessee to so execute and deliver said fifty thousand ($50,000) dollar bond; and

"Whereas, said lessors and said lessee and said surety have agreed and do hereby agree that said lessors will be further damaged to the extent of not less than the amount of said taxes if said lessee fails to pay said 1910 taxes as provided in said lease and have agreed and do hereby agree upon the amount of said taxes as and for fixed and stipulated and liquidated damages to said lessors arising from a failure of said lessee to so pay said 1910 taxes as provided in said lease:

"Now, therefore, we, Frank E. Smith, said lessee, as principal, and the Pacific Surety Company, a corporation, organized and existing under and by virtue of the laws of the state of California, and authorized and empowered under the laws of the state of Oregon, to become surety on bonds, undertakings, etc., as surety, do hereby jointly and severally covenant and agree with said lessors as follows:

"First. That if said lessee fails to pay said 1910 taxes of said leased property as provided in said lease, we, and each of us, will, on demand, pay to said lessors the amount of said taxes as and for fixed and stipulated and liquidated damages sustained by said lessors by reason of said lessee's failure; but in no event shall said surety be required to pay said lessors more than two thousand ($2,000) dollars under and by reason of this paragraph of this bond.

"Second. That if said lessee fails to procure the execution and delivery to said lessors of said fifty thousand ($50,000) dollar bond as provided in said lease, we, and each of us will, on demand, pay to said lessors the sum of four thousand ($4,000) dollars as fixed and stipulated and...