Moumal v. Parkhurst

JOHNS, J. — 1. For the purposes of this opinion all of the material allegations of the complaint are deemed to be true and the question presented is whether, under the terms and provisions of the lease, the $10,000 was a deposit or an actual payment, and whether the money is to be treated as a penalty or as liquidated damages. There is no provision in the lease for a reletting of the premises by the landlord on account of the tenant for nonpayment of rent or the breach of any covenant. It is alleged that the defendants evicted plaintiff from the premises and thereby terminated the lease and plaintiff’s tenancy; that defendants have been in possession ever since and have collected the rents. When used in a pleading, the word “evicted” has a legal meaning. In an early English case the party evicted was said to be “expelled, amoved 'and put out.” Bouvier defines eviction as “deprivation of the possession of lands or tenements” and says: “It may be fairly stated that any actual entry and dispossession, adversely and lawfully made under paramount title, will be an eviction.” In McAdam on Landlord and Tenant (4 ed.), Volume 2, page 1375, it is said: [252] ‘ ‘ The term ‘ eviction, ’ in its primary sense, means a dispossession by legal proceeding or judicial sentence; the recovery of lands and tenements from another’s possession by due course of law. The word is now used to denote any act of the landlord by which his tenant is deprived of the enjoyment of the whole or of a part of the demised premises. * * “An ‘eviction’ has been defined as ‘any act of permanent character done by the landlord or by his procurement with the intention and effect of depriving the tenant of- the enjoyment of the premises demised, or part thereof.’ ” The demurrer admits that the defendants evicted plaintiff and that they are now in possession and collecting the rents, and in the absence of a provision in the lease for a reletting of the premises by the landlord for and on account of the tenant, it must be assumed that the landlord did not make his re-entry for the purpose of reletting the property and marshaling the rents for and on account of the tenant, and that such re-entry did terminate the lease. Assuming that the lease was terminated, it is the defendants’ contention that the $10,000 was an actual payment by plaintiff to defendants at the time the lease was executed and that through a failure of the plaintiff to pay rental as provided for in the lease they are now entitled to keep and retain the money as a penalty under the terms and provisions of the lease. In Cranston v. West Coast Life Ins. Co., 63 Or. 427, 437 (128 Pac. 427), it is said that as usually construed “payment” means “a transfer of money from one person who is the payer to another who "is the payee in satisfaction of a debt.” To constitute payment, therefore money or some other valuable thing must be delivered by the debtor to the creditor for the purpose of extinguishing the debt and the debtor must receive it for the same purpose. Payment is defined to be “the act of paying or that which [253] is paid to discharge the obligation or duty; satisfaction of a claim or recompense; the fulfillment'of a promise or the performance of an agreement; the discharge in money of a sum due.” The lease provides that: “The said lessees do further by these presents hereby deposit and turn over to the lessor the sum of Ten Thousand Dollars ($10,000), the receipt ef which is hereby acknowledged, which said Ten Thousand Dollars ($10,000) is to be held by said lessor and applied in payment of the rent for the final months under this lease, and taxes for the year 1922; and in case this lease is for any reason forfeited or declared null and void on account of any fault of the said lessees for the nonpayment of rent or otherwise, then said Ten Thousand Dollars ($10,000) shall be and become the property of said lessor. During the life of this lease, however, the said lessor shall pay to the said lessees interest on said deposit, until the said sum is taken over by the said lessor in payment of rent or by forfeiture, annually, at the rate of six per cent (6%) per annum. ’ ’ The lease is for a period of ten years, the interest alone would be $600 per annum and upon the theory that the $10,000 was an actual payment to the defendants at the time of the execution of the lease the defendants would then be paying plaintiff $600 per annum as interest for the use of their own money. As we understand it, a deposit is made when one person gives to another with his consent the possession of personal property to keep for the use and benefit of the first or a third party. 2, 3. Under the record we construe the lease to mean that the $10,000 was a deposit with the lessors; that the title to the money remained in the lessees, subject to the terms and conditions of the lease, and that [254] it was not an actual payment to the lessors at the time of the execution of the lease. The question is then presented as to whether the $10,000 is a penalty or liquidated damages. The case of Cunningham v. Stockton, 81 Kan. 780 (106 Pac. 1057, 19 Ann. Cas. 212), is almost identical with the case at bar and it was there held: “That the deposit could not, under the circumstances, be regarded as liquidated damages, and that when the landlord elected to dispossess the tenant he terminated the lease and ended the obligation of the tenant under it for the remainder of the term and was not entitled to retain the deposit, except so much of it as was necessary to pay the rentals which had accrued when possession was taken.” In Caesar v. Rubinson, 174 N. Y. 492 (67 N. E. 58), it was held that: “The landlord, having asserted his right to re-enter for failure of the tenant to pay a monthly rent of $45, # * thereby waived the claim to the deposit except so far as it was necessary to- apply it in payment of rent then due or accrued.” The New York case is cited and approved by this court in a well-considered opinion by Mr. Justice Bamsey in the case of Yuen Suey v. Fleshman, 65 Or. 606-613 (133 Pac. 803), in which the facts were very similar to those in the present case. It was there held that: “The $5,000, deposited by the respondent, should be regarded as a penalty to secure the performance of the conditions of the lease on the part of the lessee, and not as liquidated damages.” In that case the appellant elected to terminate the lease for nonpayment of rent and ejected the respondent by an action at law. It was said that: [255] “This effectually terminated the tenancy, and exonerated the lessee from all liability for rent not due at the time of such ouster.” The same rule is laid down in the case of Northern Brewery Co. v. Princess Hotel, 78 Or. 453 (153 Pac. 37), and the rule is sustained by the weight of authority. We hold that under the terms and provisions of the lease the $10,000 was a deposit and was not an actual payment; that it should be treated as a penalty and not as liquidated damages; that the complaint states a cause of action and that the demurrer should have been overruled. The judgment of the lower court is reversed and the cause remanded with the right of the defendants further to plead. Reversed and Remanded. Bean, Burnett and Harris, JJ., concur.