146 N.Y.S. 939 | N.Y. App. Div. | 1914
Lead Opinion
The action was to recover a deposit of $2,000 made by the plaintiffs upon a lease, less the amount due when they were dispossessed. The lease was for a tenement house on Orchard street for a term of four years commencing on February 1,1911, at a yearly rental of $12,000, payable in monthly installments of $1,000 each, to be paid $500 on the fifth and $500 on the tenth of each month in advance. The lease provided that ‘ ‘ in case any rent shall be due and unpaid, or if default shall be made in any of the covenants herein contained, then it shall be lawful for the party of the first part to re-enter the said premises, or in her option, to commence summary proceedings, to recover possession * * * and in the event of such re-entry, or the commencement of such summary proceedings, this lease shall be at an end.”
The parties of the second part covenanted to make all inside and outside repairs and to keep the same in good condition except the outside structural repairs as brick walls and sidewalks, and in the event of their failure to make said repairs the landlord had the right to make the same and to add the costs thereof to the monthly rent due for the month subsequent to said repairs. They covenanted to comply with all orders of the fire underwriters and to comply with the orders and requirements of the tenement house and other bureaus of the
“ And the parties further agree that in the event that the said parties of the second part shall be dispossessed, on summary proceedings brought to recover possession of said premises and to remove them therefrom, that the said party of the first part shall, nevertheless, have the right to retain the said sum of Two thousand ($2,000.00) Dollars, as liquidated damages, and not as a penalty.” The lease further provided for the payment by the party of the first part of interest at the rate of three per cent on said $2,000 to be deducted annually from the rent to be paid; “ the said party of the first part, upon the termination of this lease, at the end of the term aforesaid, shall return the said deposit of Two thousand ($2,000.00) Dollars to the parties of the second part, heirs or assigns.”
The plaintiffs went into and remained in possession for a year. On the 13th of February, 1912, summary dispossess proceedings were instituted against them solely for the nonpayment of $325, part of the rent for the month of February, and they were removed. Plaintiffs brought this action to recover the amount of the deposit and it was tried before the court and a jury. The defendant raised the issue that the plaintiffs had broken their covenant to make repairs, that when possession was retaken the premises were badly out of repair, and that he had spent $1,600 for repairs. The plaintiffs controverted this, testifying that the premises were in much better condition when they left than when they took possession, and submitted bills showing they had expended $1,200 in repairs. The jury resolved this question of fact in favor of the plaintiffs, and returned a verdict for them for $1,781.37, which was the amount of the deposit, $2,000, less the rent due, $325, and interest on the balance of $1,675, viz., $109.37. Thereafter
By the verdict of the jury the breach of the covenant to repair is out of the case. There remains, therefore, only the breach of the covenant to pay rent. That is $325, a portion due for one month.
Upon this breach are the plaintiffs to be held to have forfeited the amount of their deposit ? An examination of the lease discloses that the tenants obligated themselves to but one general covenant, to wit, the payment of the rent reserved. It is true they were obliged to make all inside and outside repairs; to comply with all orders of the board of fire underwriters; all city ordinances and requirements affecting the property, to pay excess Croton watér charges and to pay plate glass insurance. But the possible damages flowing from the breach of any of these requirements were not only easily ascertainable but the lease lays down an exclusive method of ascertainment. It specifically provides that the damages after ascertainment shall be added to the rent of the ensuing month and become payable by the- tenants as increased rent.
The verdict establishes no breach except to pay rent.
In Chaude v. Shepard (122 N. Y. 397) the court said: “It may be observed that the primary purpose of the deposit was security for the performance by the plaintiff of his covenants in that instrument. Those covenants were to pay the rent and the charges assessed for Croton water, and to make repairs during the term. The only default at the time of his removal, by means of the summary proceedings taken by the defendant, was in the non-payment of one month’s rent. * * * The damages resulting from the termination of the tenancy by reason of the plaintiff’s failure to perform the covenants, were neither indefinite nor uncertain in character. His relation of tenant could be terminated before the end of the term only by the act or consent of the defendant; and when he accomplished it and took possession of the premises, the damages with which the plaintiff was chargeable were those only, which resulted from breach of the covenants prior to entry of the defendant, upon the termination by the latter of such tenancy. * * *
In Caesar v. Rubinson (71 App. Div. 180) the lease provided for a deposit of $1,000 “ as security for the faithful performance of this agreement on their part, and in case of any breach thereof by said tenants said amount shall be paid and retained by said landlords as liquidated damages for such breach, but in case the actual damages suffered by said landlords through such breach shall be greater than said sum of one thousand ($1,000) dollars, then said sum shall be applied on account of such damage and said tenants be still liable for the balance thereof.” This court, although divided, held, in a forcible opinion by Mr. Justice Hatch, that the provision was for liquidated damages and the landlord was entitled to retain the deposit. But in 174 New York, 492, the Court of Appeals unanimously reversed, saying: “The circumstance that the deposit is described in the lease as liquidated damages for a breach of the agreement is not at all conclusive. * * * Whether it is that or a penalty depends upon the nature of the transaction and the intention of the parties. ->:■ ->:■ * A provision in a contract such as that now under consideration will be treated as liquidated damages only in those cases where from the nature of the transaction the actual damages consequent upon a breach of the contract are incapable of accurate measurement, or where the sum specified in the instrument is not out of all proportion to any damages which could possibly arise from a breach. * * * The only breach of the lease which the defendants assert as a ground for retaining the deposit is the omission of the tenants to pay the forty-five dollars of the monthly rent. * * * There is no inherent difficulty in measuring the legal damages which the landlord sustained in a case where the tenant omits to pay the rent, and is for that reason dispossessed.
Feyer v. Reiss (154 App. Div. 272) is distinguishable in these important particulars. First. The lease in that case was clear and definite as to the character of the deposit. “ It being expressly understood and agreed that if the lessees surrender the said premises or are dispossessed therefrom prior to the expiration of this lease in 1914, then and in that event the said eight hundred ($800) dollars, together with any subsequent installments which shall be paid by the lessees as hereinbefore provided, shall belong to the lessor as liquidated and stipulated damages, and the parties hereto agree to stipulate such deposit as liquidated damages because they cannot ascertain the exact amount of damage which the lessor would sustain in the event of any breach or violation hereunder.” Secondly. The jury rendered a verdict against the plaintiff, thus resolving the facts adversely to the tenants, and the judgment of dismissal was upon that verdict and not against it as in the case at bar;
It seems to me that in the case at bar the authorities and the verdict of the jury settle the controversy in favor of the respondent. To use the language of the Court of Appeals in the Caesar Case (supra): “ I am unable to distinguish, this case in principle from those in which this court has passed upon provisions of a similar character in leases or agreements between landlord and tenant (Chaude v. Shepard, supra; Scott v. Montells, 109 N. Y. 1.) In these cases it was held that the deposit was intended as security for the performance of the covenants of the lease and not as liquidated damages.”
The determination of the Appellate Term should be affirmed, with costs to the respondent.
McLaughlin and Laughlin, JJ., concurred; Ingraham, P.. J., and Scott, J., dissented.
Dissenting Opinion
Sarah Eoth executed and delivered to the plaintiffs a lease of certain property known as Nos. 85-87 Orchard street, in the city of New York, for a term of four years, commencing on the 1st day of February, 1911, at the yearly rental of $12,000, payable in equal monthly installments of $1,000 each in advance. The lease provided that if any rent should be due and unpaid, or if default should be made in any of the covenants contained in the lease, then it should be lawful for the landlord to re-enter on the premises and commence summary proceedings to recover possession thereof, and that in the event of such re-entry or the commencement of such summary proceedings, the lease should be at an end. The tenants further covenanted that they would make all inside and outside repairs in and about said premises, and keep the same in good condition during the continuance of the lease, except the outside structural repairs, which were to be made by the landlord. The tenants further covenanted that, in the event of their failure to make such repairs, the landlord would have the
The defendant set up as a defense and counterclaim that on resuming possession of the premises he found that the tenants had failed to comply with the covenant to make repairs; that the landlord did make such repairs at a cost of $1,600. Upon the trial the court submitted the question to the jury as to whether the property, at the time the landlord took possession, was in good condition, and if the jury found that the premises were not in good condition, less reasonable wear and tear, as they should have been, then the value of the repairs should be deducted from the balance of the deposit of security that was made at the time the lease was entered into; and the court directed the jury to deduct from the $2,000 the amount of the repairs that the landlord was required to make. The jury returned a verdict in favor of the plaintiffs for $1,'T84.3'T. The court, before submitting the case to the jury, having reserved the question whether or not it would direct a verdict for the defendant under the lease, set aside the verdict and dismissed the complaint, and from the judgment entered thereon the plain
The direct question presented is, whether under the provisions of the lease to which attention has been called the defendant was entitled to retain the $2,000 as liquidated damages upon the failure of the tenants to comply with the terms and conditions of the lease, as a result of which the landlord instituted summary proceedings and regained possession of the property and the lease was terminated in consequence thereof. By the lease the tenants assumed various obligations as to repairs, compliance with the ordinances of the municipal departments and the payment of additional Croton water rates, in addition to the obligation to pay the rent. The amount of the deposit was the amount that would be payable for two months’ rent of the premises, and it might well be that if, in consequence of a violation of the tenants’ obligation to pay the rent reserved, it would be necessary to dispossess the tenants, the loss to the tenants by the termination of the lease at the middle of the month, or at a time when a new lessee of the premises could not be obtained, would largely exceed the amount of the deposit and in addition the incidental loss to the landlord by reason of the failure of the tenants to make repairs or observe the other obligations that they had assumed under the lease. Certainly the parties had a right to provide by their express agreement that a reasonable sum should be assumed to pay the damages which the landlord would sustain in. consequence of a termination of the lease because of a refusal of the tenants to comply with their obligations to avoid the difficulty of proving that amount of damage which they had sustained. The difficulty in determining whether or not premises of this kind were maintained in good condition and repair by a tenant during the term of the lease is exemplified in this case. The defendant proved without contradiction that when he took possession of the premises he was compelled to make repairs costing over $1,600, but because of the difficulty of proving that these repairs were made necessary by a failure of the tenants to keep the premises in good condition
I, therefore, think that the determination of the Appellate Term should be reversed and the judgment entered in the City Court affirmed, with costs to the appellant in all courts.
Scott, J., concurred.
Determination affirmed, with costs.