138 N.Y.S. 185 | N.Y. App. Term. | 1912
The complaint alleges the lease of premises in a building, the deposit of $2,000 under a clause of the lease which not only provides that this deposit shall be security for the faithful performance of all the covenants of the lease and shall be retained as liquidated damages in case of a breach, but also that, in case the landlord shall bring summary proceedings, he shall nevertheless have the right to retain the said sum of $2,000' as liquidated damages. The complaint alleges further that, in February, the plaintiffs paid the landlord $625 on account, leaving $325 due, for the February rent, and that the plaintiffs were dispossessed in summary proceedings for the non-payment of this sum. It further alleges that the terms of the contract under which the sum deposited was to be retained as liquidated damages amounted to a forfeiture and penalty.
The defendant demurred to this cause of action, and the demurrer was sustained. The sole question which we have to consider is, whether, on the face of the contract, it conclusively appears that the sum deposited is in fact liquidated damages and not a penalty. It is, of course, well established that parties have a right to agree that, in case of a breach of covenant, a certain sum shall be fixed in advance as the damages for that breach. If they have actually agreed that the sum to be paid on a breach represents an estimate of the damages sustained, the party in default must pay these damages even though the agreement uses words such as “ forfeit ” or-“ penalty.” On the other hand, though the parties, in their agreement, have used words such as “ liquidated damages,” the courts will regard the clause for the' payment of a fixed sum upon the happening of a breach as a penalty or forfeiture, if it appears that the parties did, in fact, regard the sum fixed as a penalty and not as an estimate of probable damages fixed in advance. In determining whether or not a sum agreed upon is, in fact, a penalty or liquidated damages, the courts must consider “ the actual intention of the parties, so far as it can reasom ably and fairly be ascertained from the language of the contract, and from the nature of the surrounding circumstances of the case.” Little v. Banks, 85 N. Y. 258.
“ While it .was within their power to agree that the lessee should continue to pay rent after the premises had been taken away from him owing to his default, still a covenant to pay, with no right to enjoy, should be clear and unambiguous as to the event which calls it into action.” Michaels v. Fishel, 169 N. Y. 381, 390.
Applying this rule, the courts have repeatedly held valid provisions for liquidated damages upon an eviction by summary proceedings, where it was shown that the parties contemplated that the amount fixed was a reasonable estimate of the damages which might accrue if it became necessary to terminate the lease for the tenant’s failure to comply with its terms. An excellent example of the application of this rule is to be found in the case of Peabody v. Richard Realty Co., 69 Misc. Rep. 582. In that case the lessee gave the lessor a surety company bond conditioned for the payment of the sum of $10,000 as liquidated damages in case' the lessor should dispossess the lessee. The fact that the surety company gave a bond expressly conditioned for payment upon a dispossession of the tenant, shows clearly and unambiguously that the parties contemplated a distinct liability to accrue upon and survive the' termination of summary proceedings. When it was further shown that this sum to be paid was in reasonable proportion to the probable damages caused by the termination of the lease, the court was bound to enforce the provision for liquidated damages, or to disregard the clear intent of the parties. In the case of Lesser v. Stein, 39 Misc. Rep. 349, the parties had also clearly and unambiguously provided that “ the sum deposited shall be retained by the lessor as liquidated damages for said lessee’s breach and her necessity to re-enter or resume possession of said premises, whether by due process of law or upon voluntary surrender thereof,” and in that case also the court gave effect to the provision for liquidated damages. In the cases of Longobardi v. Yuliano,
Applying the rules of law established by these decisions to the case before us, I believe that we must hold that the provision as to liquidated damages for the non-payment of rent cannot be regarded as showing any intent by the parties that the amount fixed is actually to be regarded as liquidated damages, and the sole question to be considered by us is, whether the provision for the retention of the deposit^ in the event that the tenant is dispossessed, may be regarded as liquidated damages. -
While the language used in the leases in some of the cases cited is somewhat similar to that used in the clause of the lease under consideration, the intention of the parties must be determined from the language of the whole lease and all the surrounding circumstances, so that no construction of an isolated clause in a lease in another case can be conclusive of the intention of the parties in this case. In the lease before us, the parties did not agree that the tenant should continue to be liable for any rent or other payment after summary proceedings, but, on the contrary, provided that, upon the commencement of summary proceedings, the lease should be at an end; nor did they unequivocally provide that the sum deposited should be liquidated damages for the termination of the lease. On the contrary, the terms of the clause read in connection with the other terms of the lease point rather to the view that the deposit should be retained only as damages for the previous breach of the covenant to pay rent, in spite of the termination of the lease, and not because of the termination of the lease.
It follows that the demurrer to the first cause of action should be overruled, and that the order appealed from should be reversed with respect to the demurrer interposed to the first cause of action, with ten dollars costs and disbursements to appellant, and that plaintiffs’ motion for judgment on the pleadings should be granted with respect to the
Page, J., concurs; Hotchkiss, J., concurs in result.
Ordered accordingly.