131 P. 1032 | Or. | 1913
delivered the opinion of the court.
The sole question for our determination is the ruling upon the demurrers. It is contended on behalf of defendants that the provisions in the bond, which are denominated liquidated damages, are as a matter of fact penalties. It will be noticed that tbe complaint shows a provision in tbe bond that if tbe lessee should fail to pay tbe 1910 taxes on tbe leased property on or prior to the 15th day of March, 1911, tbe obligors would on demand pay tbe lessors tbe amount of such taxes as and for fixed and stipulated and liquidated damages sustained by tbe lessors by reason of such failure. But that in no event should tbe surety be required to pay more than tbe sum of $2,000 by reason of that stipulation in tbe bond. As a first cause of action tbe complaint shows that defendant Smith failed to pay tbe taxes on or before tbe specified time, or at any time, and that by reason of such failure plaintiffs were compelled to, and did, after that date pay tbe same, wbicb amounted to $3,220.80. Tbe bond does not provide that defendants will pay $2,000 for tbe failure to pay taxes in any event, but only in case tbe taxes shall equal or exceed that amount. In other words, tbe bond stipulates tbe exact amount of the taxes as damages, limiting tbe amount, however, to $2,000. In Krausse v. Greenfield, 61 Or. 502, at page 512 (123 Pac. 392, at page 396), Mr. Justice Moore, speaking for this court, said: “In tbe case at bar, though tbe damages were liquidated, tbe compensation agreed upon was just and reasonable. * * Tbe amount awarded is less than tbe damages sustained, and, this being so, tbe stipulation in tbe contract cannot be construed as a
The second cause of action is for the recovery of $4,000 for the failure of defendant Smith to furnish the $50,000 bond, securing the erection of the building. It is claimed that the complaint is demurrable as to this cause of action, because the $4,000 denominated in the bond as liquidated damages is a penalty. The complaint discloses that the execution of the $50,000 bond was the preliminary step to be taken by the lessee for the construction of an eight-story steel frame building to cover an entire city lot in the center of the business district of the City of Portland. The building was to be valued at $100,000 for insurance purposes, and was to be a modem class A building, with the exposed walls on Third and Alder streets faced with pressed brick. Plaintiffs were to receive $1,500 rental per month for the term of 35 years, or $630,000. The building was to be the property of plaintiffs as part consideration of the lease. In addition to this, the defendants were to pay the taxes, insurance, and city assessments. Failure to give the building bond was in effect a failure to erect the building, for without the bond defendant Smith had no right
1. Unless the court can declare as a matter of law from an inspection of the contract that the damages are so excessive as to. be a penalty, the demurrer should he overruled and the question determined after the answer is filed: Blunt v. Egeland, 104 Minn. 351 (116 N. W. 653); De Graff, Vrieling & Co. v. Wickham, 89 Iowa, 720 (52 N. W. 503, 57 N. W. 420); Hoxsey v. Patterson, 59 Ill. 522; Wilcox v. Walker (Tex. Civ. App.), 43 S. W. 579; 19 Am. & Eng. Ency. of Law (2 ed.), 423. It is usually a difficult question to determine whether stipulations of this kind are in the. nature of liquidated damages or penalties. Courts usually go no further in laying down fixed rules for determining in all cases whether the stipulation is liquidated damages or a penalty than is necessary for a decision of the particular case under consideration.
2, 3. The question must, therefore, he determined in each case upon the facts and circumstances of the given cause. The intention of the parties to the contract, however, must control, if that can be ascertained. In the construction of contracts, the end to be attained is to ascertain the intention of the parties; and the bond in question is no exception to the rule: Stratton v. Fike, 166 Ala. 203 (51 South. 874); Curtis v. Van Bergh, 161 N. Y. 47, 52 (55 N. E. 398).
4. This court and others have announced certain rules which in some cases afford a general guide in construing such stipulations in contracts. In Krausse v. Greenfield, 61 Or., at page 512 (123 Pac. 395), Mr.
5. The bond under.consideration in this case recites as a reason for stipulating as to amount of damages that at the time of the execution of the lease, and from then until the execution of the bond, the conditions in the City of Portland were favorable for the owners of real property to secure profitable leases; that by executing the lease to defendant Smith plaintiffs tied up their property in such a manner and for such a time as to lose many favorable opportunities of making advantageous leases thereof to other parties; that plaintiffs were induced to execute the lease by reason
It is strongly urged by counsel for defendants that if a minor condition in the bond had been broken, and the plaintiffs had been damaged in the sum of $10, or had paid the taxes one day after the time due, according to the language thereof, the plaintiffs would
6. It is also contended that the bond is indefinite as to the provision relating to the execution of the $50,000 bond not later than 65 days before the commencement of the removal of the old building now standing upon the leased property, which would necessarily be not less than 65 days before the commencement of the erection of the new building. But it will be noticed that the bond plainly provides for the commencement of the new building within one year from the date of the lease.
7. The complaint charges that, after the expiration of the year, the defendant Smith had wholly failed to execute such bond. It was agreed in the lease to execute the building bond with surety, conditioned that the lessee would construct and pay for a building on the leased premises as specified, “which bond shall be made to the lessors and in form and conditioned as they may desire and which must be satisfactory to them.” It is contended on behalf of defendants that this is too indefinite for enforcement. It therefore appears that the substance of the condition of the bond is specified in the contract. The plaintiffs, under these terms, would have the right to demand a bond so framed that the conditions would embrace those specified in the lease, and one so plain as to form that there woijld be no likelihood of nonenforcement on account of form. They would have been bound to be
In the case of Olympia Bottling Works v. Olympia Brewing Co., 56 Or. 87, at page 93 (107 Pac. 969, at page 971), the court said: “"While in the case at bar, taking the contract as a whole, it is manifest that the right to continue the agency for the additional five year period constituted a very important part of the consideration for the first five years’ service, and the contract having been fully executed, and the consi deration thereby fully paid for the first period, more latitude should be allowed in determining whether the provision in the contract, whereby the party paying such consideration was to receive the benefit thereof, than in a case where the option or contract is merely executory, or partly executory”: See, also, Livesley v. Johnston, 45 Or. 30, 46, 47 (76 Pac. 13, 946, 106 Am. St. Rep. 647, 65 L. R. A. 783); Hawkins v. Graham, 149 Mass. 284 (21 N. E. 312, 14 Am. St. Rep. 422). In 9 Cyc., p. 624, the rule is laid down as follows: “In the cases above referred to the promisor must act
The demurrers, therefore, were properly overruled. The judgment of the lower court will he affirmed.
Affirmed.