151 P. 667 | Cal. Ct. App. | 1915
Plaintiff brought this action to recover the sum of $1407.50 for rentals unpaid by the defendant, A. J. Johnston Company, upon a lease of a certain store in the city of Sacramento. McClatchy and Bontz are joined as defendants as sureties upon a bond executed by the three defendants as a consideration for the letting of said premises to the A. J. Johnston Company. They demurred to the complaint upon the general ground that it did not state facts sufficient to constitute a cause of action against them. The superior court made its order sustaining the demurrer without leave to amend the complaint, and from the judgment entered upon this order the plaintiff has appealed.
The instrument executed by defendants is therein denominated a bond. The obligatory part of it is as follows: "That A. J. Johnston Company, a corporation, as principal, and C. K. McClatchy and L. E. Bontz, as sureties, are held and *145 firmly bound unto Weinreich Estate Company, a corporation, in the sum of two thousand ($2,000.00) dollars, gold coin of the United States of America, to be paid to said Weinreich Estate Company, a corporation, its successors and assigns; for which payment well and truly to be made we bind ourselves and our heirs, executors and administrators, jointly and severally, firmly by these presents."
The condition of the obligation is in substance recited to be: The execution of the lease of the store, for the term of five years commencing February 1, 1910, at a monthly rental, payable in advance, of two hundred dollars per month for the first three years, two hundred and twenty-five dollars and two hundred and fifty dollars per month for the fourth and fifth years, respectively. The concluding language of the bond is:
"Whereas, said lease contains certain other covenants and agreements on the part of said A. J. Johnston Company, a corporation, to be performed.
"Now, therefore, if said A. J. Johnston Company, a corporation, shall well and truly pay unto Weinreich Estate Company, a corporation, said rental at the times and in the amounts as in said lease provided and as hereinabove set forth and shall well and truly perform each and all of the other covenants and agreements in said lease contained, to be performed by said A. J. Johnston Company, a corporation, then the above obligation shall be null and void, otherwise to remain in full force and virtue."
The position of appellant is that the sum of two thousand dollars mentioned is to be construed as a penalty to cover the actual damages sustained upon the breach of the condition of the bond by a failure to perform any covenant in the lease.
Respondents concede that such is the nature of the liability of sureties upon bonds to secure the faithful performance of trusts, public contracts, duties of officials and such contracts like builders' as are authorized by express provision of law. They claim, however, that as this is a mere private contract and there being no statute fixing the liability upon the bond, and as they have promised to pay the flat sum of two thousand dollars if the rent is unpaid or other covenant of the lease unperformed, the agreement is void and imposes no liability upon them because of the provisions of sections
It is sometimes said that the cardinal rule in the interpretation of a contract is to ascertain the intention of the parties. For the purpose of ascertaining such intention there are certain established rules laid down, among which are: "When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to other provisions of this title." (Civ. Code, sec.
"A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, sec.
That legal terms are to be given their legal meaning unless obviously used in a different sense (17 Am. Eng. Ency. of Law, 2d ed., p. 13), and the settled law of the land at the time a contract is made becomes a part of it and must be read into it. (6 R. C. L., 243.) Another familiar rule is that mentioned by Mr. Justice Henshaw, in Mebius Drescher Co. v.Mills,
Having in view these rules of interpretation, what was the intention of respondents and the nature of the obligation that they undertook to assume in executing the bond, as ascertained from the complaint in this action, the allegations of which the demurrer admits to be true?
Before the time of Henry VII, the sureties, upon a bond in form like the one here involved, would be required to pay the entire sum of two thousand dollars upon the breach of the covenant to pay rent. We learn from Sir William Blackstone's Commentaries, volume 11, chapter 20, page 30, that formerly if any condition was unperformed, the whole *147 penalty was recoverable at law, but that the courts of equity interposed and would not permit a man to take more than in conscience he ought, viz., his principal, interest and expenses in case the forfeiture accrued by nonpayment of money borrowed; the damages sustained, upon nonperformance of covenants and the like. Notwithstanding the rule in equity the courts of law continued to pronounce judgment for the full amount of the penalty and, in Bonefour v. Rybot, 3 Burr, 1370, Sir Thomas More was moved to say: "It was extraordinary that after it was settled in equity that the forfeiture might be saved by the performing the intent, and this was the nature of a bond, the courts of law did not follow equity, but still continued to doinjustice as of course, and put the parties to the delay and expense of setting it right elsewhere as of course."
Finally the equitable intent of the bond was established by statutes (8 and 9 Wm. III, ch. 41, sec. 8) which required the plaintiff to assign breaches of the bond, and the jury to assess the damages for such breaches as were proved at the trial.
Thus in England, where the parties originally, in the common-law form of bond did covenant to pay the whole stipulated penalty, upon the breach of any condition, the language used in this form of bond acquired a "legal meaning" at variance with its literal import, as a result of the decisions of the courts of equity and the statutes enacted.
That these bonds, couched in peculiar language to express an intent to pay actual damages only, have received the same equitable interpretation in this country is shown by a resort to the cases in which they have been the subject of litigation involving mere private contracts, and not depending upon any statute authorizing or requiring them.
In Spencer v. Perry,
In Turck v. Marshall Silver Min. Co.,
In Henry v. Davis,
Other cases of like nature, in which the same interpretation has been given to such bonds, are: O'Keefe v. Dyer,
In the light of the pleading before the court, to say that the sureties intended to pay the entire sum of two thousand dollars upon the default in payment of a single monthly rental of two hundred dollars is to give the bond an unreasonable construction and to violate all of the rules of interpretation mentioned. It is contrary to the meaning given to the language used in creating the obligations under such bonds, as the language is understood in the ordinary and popular sense in this state where instruments in like form have been and are now in general and extensive use to secure the performance of mere private contracts of the nature here involved, as well as official duties and various trusts.
Respondents have cited no authority and we know of none that militates against the views here expressed. Many are referred to by them in support of the rule "that a plaintiff seeking to recover a sum as stipulated damages, must also show by pleading and proof that it is a case where the parties are allowed under the code to stipulate the damages." The rule is unquestioned. They are mistaken as to the effect of Glock v. Howard WilsonColony Co.,
Los Angeles O. G. Assoc. v. Pacific Surety Co.,
Respondents concede that, under the old equity rule, plaintiff is entitled to recover, were it not for the enactment of the two sections of the Civil Code mentioned. These sections announced no new principles of law in this state. Indeed, more than ten years prior to their enactment, in Streeter v. Rush,
Respondents place principal reliance upon Jack v. Sinsheimer,
We think that it appears from the complaint that respondents obligated themselves to pay the actual damages suffered and not the entire sum of two thousand dollars, upon the breach of any covenant in the lease.
The judgment is reversed.
Chipman, P. J., and Burnett, J., concurred.
A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on September 23, 1915. *152