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Stuco Corp. v. Gates — District Court of Appeal of Florida, Second District (Sept. 19, 1962)

Factual and Procedural Background

The Stuco Corporation (plaintiff/appellant) leased the Gates Riviera Motel from Morris and Anna Gates (defendants/appellees) for a ten-year term beginning December 15, 1957. Pursuant to the lease the lessee deposited $60,000 with the lessors as a security deposit. The plaintiff failed to pay a rent installment due May 15, 1958 (the opinion uses $45,000.00 in one place and the final decree recites $45,500.00), which the court treated as a breach that prematurely terminated the lease. The defendants instituted eviction proceedings that resulted in a final judgment of eviction by default.

After the eviction, Stuco sued in the Circuit Court for Dade County, seeking a declaratory judgment that the security deposit should be treated as a penalty and returned in whole or in part. A motion to dismiss for improper venue in that suit was denied below but the denial was reversed on appeal (Fla.App. 1959, 112 So.2d 36). The plaintiff then filed the present, substantially identical suit in Broward County.

On June 30, 1960, Judge Lamar Warren entered an interim pretrial/interlocutory order ruling that the deposit was not for liquidated damages; the record does not disclose the motion or notice prompting that order. The case was later transferred (the record does not show the formal reassignment) to Judge George W. Tedder, Jr. An amended answer by the defendants listed special damages, including waste. On final hearing Judge Tedder dismissed the complaint with prejudice and entered a final decree for the defendants. The decree (in material part) found the plaintiff breached the lease, found no inequitable conduct by the defendants, quoted the lease clause addressing the deposit and a $90,000 minimum-damage provision for forfeiture within the first nine years, and expressly found (based on testimony of Anna Gates corroborated by Sylvia Joseph) that the parties intended to liquidate their damages.

Legal Issues Presented

  1. Whether it was error to admit extrinsic (parol) evidence regarding the parties' intention concerning the deposit clause.
  2. Whether the security deposit constituted liquidated damages rather than a penalty.
  3. Whether the trial court erred in modifying or disregarding a prior interlocutory order (entered by another judge) that had held the deposit was not for liquidated damages.
  4. Whether the trial court erred by refusing to grant summary judgment in favor of the plaintiff.

Arguments of the Parties

Appellant's (Stuco Corporation) Arguments

  • It was erroneous to admit extrinsic testimony about the circumstances of lease execution because that testimony violated the parol evidence rule.
  • The trial court erred in finding that the $60,000 deposit was intended as liquidated damages rather than a penalty.
  • The chancellor improperly overruled or failed to adhere to an earlier order (by another judge) which had determined the deposit was not liquidated damages; the earlier order should have controlled or supported summary disposition for the plaintiff.
  • The court improperly refused to enter summary judgment for the plaintiff.

Appellees' (Defendants) Position

  • The defendants asserted, among other things, that the appellant had not presented an adequate record on appeal to permit consideration of the assigned errors.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Hyman v. Cohen, 73 So.2d 393 (Fla. 1954) Establishes that a security deposit forfeitable on premature termination of a lease is presumptively liquidated damages (not a penalty); inquiry centers on parties' intent at time of contract; damages on premature lease termination are often not readily ascertainable. The decree under attack was expressly bottomed on Hyman. The court applied Hyman to hold the deposit presumptively liquidated damages and used Hyman's guidance on uncertain damages in lease markets to support that presumption here.
Vaughn v. Smith, 96 So.2d 143 (Fla. 1957) Pretrial orders control subsequent course of action but may be modified at trial to prevent manifest injustice (Rule 1.16, Rules of Civil Procedure). The court cited Vaughn to justify modifying a prior interlocutory pretrial order after a full hearing and to hold that such earlier orders are not immutable.
Bergovoy v. Atlantic Electric, Inc., 140 So.2d 885 (Fla.App. 1962) Recognizes that procedural rules do not foreclose a trial court, with continuing jurisdiction, from reviewing and revising its earlier orders. Cited to support the proposition that the trial court properly reviewed and altered its earlier pretrial rulings when reached by subsequent full hearing.
Lewis v. Belknap, 96 So.2d 212 (Fla. 1957) Reaffirms Hyman's doctrine and applies the presumption of liquidated damages to executory contracts for sale of realty; presumption can be dispelled by evidence of contrary intent. Cited to show that the presumption can be dispelled but that, under facts here, the presumption stood; the opinion relied on Lewis as reinforcing Hyman's principles.
Young v. Cobbs, 83 So.2d 417 (Fla. 1955) Authority related to the circumstances under which deposit provisions constitute liquidated damages. Listed with other Florida cases as supporting authorities for the presumption that a deposit may be liquidated damages.
6701 Realty v. Deauville Enterprises, 84 So.2d 325 (Fla. 1955) Authority on landlord-tenant forfeiture/deposit issues and liquidated damages analysis. Cited as additional supporting authority consistent with Hyman and Lewis.
Goldfarb v. Robertson, 82 So.2d 504 (Fla. 1955) Another Florida precedent concerning deposit/forfeiture and liquidated damages principles. Cited in support of the legal framework recognizing presumption of liquidated damages.
Widmeyer v. Olds, 144 So.2d 825 (Fla.App. 1962) Appellate rule that the court will not consider assigned error when the record is deficient or relevant testimony is not in the transcript. Cited in the rehearing discussion to deny the petition for rehearing because the appellant failed to supply a complete record of prior proceedings.
Joyner v. Andrews, 137 So.2d 870 (Fla.App. 1962) Same appellate limitation regarding deficient records. Relied on to support denial of rehearing due to deficiencies in the record on appeal.
Brown v. Householder, 134 So.2d 801 (Fla.App. 1961) Same principle: appellate courts will not resolve assigned error where the transcript is incomplete. Cited in rehearing section to justify refusal to consider additional factual claims absent an adequate record.
Gross v. Gross, 131 So.2d 487 (Fla.App. 1961) Same record-deficiency rule cited in the rehearing context. Cited as additional authority supporting the court's denial of rehearing based on the incomplete record.
Fla.App. 1959, 112 So.2d 36 Appellate disposition reversing denial of motion to dismiss for improper venue in the plaintiff's prior Dade County action. Referenced in the procedural history to explain why the plaintiff refiled the suit in Broward County.

Court's Reasoning and Analysis

The court addressed the plaintiff's points in sequence and explained its legal and factual analysis as follows:

  1. On admission of extrinsic evidence (Point 1):

    The court held that the testimony admitted did not attempt to vary or contradict the written lease and thus did not offend the parol evidence rule. Because the lease language was equivocal regarding whether the deposit constituted liquidated damages or a penalty, the court permitted a broad inquiry into circumstances surrounding execution to determine the parties' intent. Consequently the court found no error in receiving testimony from two witnesses on that issue.

  2. On refusal to grant summary judgment (Point 4):

    The court treated Point 4 as disposed of incidentally when discussing the admissibility of evidence and the later full hearing — i.e., summary disposition was inappropriate in light of the evidentiary inquiry the court allowed and the mixed question of law and fact ultimately resolved at final hearing.

  3. On modification of an earlier pretrial/interlocutory order (Point 3):

    The court explained that pretrial orders control subsequent proceedings unless modified at trial to prevent manifest injustice (citing Vaughn v. Smith). The trial chancellor, after a full hearing on the merits, modified and in effect superseded the earlier interlocutory ruling. The opinion reaffirmed that a trial court with continuing jurisdiction may review and revise prior orders (citing Bergovoy and related authorities), so the earlier Judge Warren interlocutory order was not the immutable law of the case.

  4. On whether the deposit constituted liquidated damages (Point 2 — the dispositive issue):

    The court grounded its analysis in Hyman v. Cohen and related Florida precedents, which establish a presumption that a security deposit forfeitable on premature termination of a lease is liquidated damages rather than a penalty, particularly where actual damages would be uncertain or difficult to ascertain. The opinion emphasized that this presumption may be rebutted by evidence of contrary intent but is reinforced when the deposit is not excessively disproportionate to anticipated damages (citing authorities and American Jurisprudence).

    Applying those principles to the record: the lease contained a clause fixing "actual damages" at a minimum of $90,000 if forfeiture occurred during the first nine years. The lessee deposited $60,000 upfront (with additional scheduled deposits to reach $90,000), annual rental for the ten-year term was $91,000, and the defendants' alleged special damages in their amended answer aggregated about $59,000. The chancellor found, on uncontroverted testimony (Anna Gates corroborated by Sylvia Joseph), that the parties intended to liquidate damages. Given these facts and the cited precedents (Hyman, Lewis, and others), the court concluded the presumption of liquidated damages applied and was in fact confirmed by the evidence presented.

Finally, on the petition for rehearing the court reiterated that the appellant sought to supply additional factual context not present in the record. The court stated its well-established rule that it cannot resolve assigned errors when the record is deficient and cited a series of Florida appellate decisions to support denial of rehearing for that reason.

Holding and Implications

Affirmed.

Holding: The District Court of Appeal affirmed the final decree of the trial court dismissing Stuco Corporation's complaint with prejudice and sustaining the trial court's determination that the $60,000 security deposit was properly characterized as liquidated damages under the lease and the governing Florida precedents.

Immediate consequences: The trial court's final decree stands — Stuco's claim for return of the deposit (or a declaratory judgment treating the deposit as a penalty) was denied and the defendants' right to retain the deposit as liquidated damages was upheld. The court also held that an earlier interlocutory pretrial order by another judge (that the deposit was not liquidated damages) was properly modified and not controlling after a full hearing.

Broader implications: The opinion applies and reaffirms existing Florida precedent (notably Hyman v. Cohen and Lewis v. Belknap) regarding the presumption that forfeitable security deposits are liquidated damages when damages are difficult to ascertain and the parties' intent supports that construction. The court did not purport to establish a new rule; rather, it applied settled Florida authorities to the facts before it.


Opinion authorship and disposition: Per curiam opinion by WHITE, Judge; SHANNON, C.J., and SAMPLE, WALLACE, Associate Judge, concur. Petition for rehearing denied.

STUCO CORP., AN ILLINOIS CORPORATION, AUTHORIZED TO DO BUSINESS IN THE STATE OF FLORIDA, APPELLANT, v. MORRIS GATES AND ANNA GATES, AS TRUSTEES OF SEMINOLE BEACH LAND TRUST, APPELLEES.

WHITE, Judge.

The Stuco Corporation, plaintiff below, appeals a final decree by which the Chancellor, upon final hearing, dismissed with prejudice the complaint seeking declaratory relief and a money judgment. Essentially the relief sought was the total or partial return to the plaintiff corporation of a sum held by the defendants as a security deposit for rent.

The plaintiff corporation had leased from the defendants property known as Gates Riviera Motel for a period of ten years from December 15, 1957. In accordance with the terms of the lease the plaintiff deposited $60,000.00 with the defendants as security for faithful performance of the lease covenants. The plaintiff-lessee failed to pay a $45,000.00 rent installment due May 15, 1958, thus breaching and prematurely terminating the lease. The defendant lessors thereupon instituted eviction proceedings resulting in a final judgment of eviction by default.

The plaintiff thereafter, having suffered judgment of eviction as aforesaid, brought suit in the Circuit Court for Dade County, Florida, praying that the security deposit of $60,000.00 be decreed a penalty returnable in whole or in such proportionate part as the court found justly due the plaintiff. A motion to dismiss for improper venue was denied but the order of denial was reversed on appeal. The plaintiff then brought the instant suit in the Circuit Court for Broward County seeking the same relief on the identical facts.

Fla.App. 1959, 112 So.2d 36.

On June 30, 1960 Judge Lamar Warren entered what we conceive to be an interim order pretrial and interlocutory in nature, ruling that the plaintiff's deposit was not for liquidated damages. The record does not disclose any motion or petition or notice of hearing pursuant to which such order was entered. Thereafter several motions were filed and an order was entered by Judge Warren permitting the parties to amend the pleadings, and the cause apparently was transferred to Judge Geo. W. Tedder, Jr., of the same circuit. The record does not disclose the circumstances of the transfer, there appearing no formal order with respect to reassignment of the case. The amended answer set forth a list of special damages, including waste, allegedly sustained by the defendant lessors. On final hearing Judge Tedder dismissed the complaint with prejudice and entered final decree for the defendants. The decree reads in pertinent part as follows:

"1. That the Plaintiff breached the lease in failing to pay the rental installment due the Defendants on May 15, 1958, in the amount of Forty-five Thousand Five Hundred and no/100 ($45,500.00) Dollars and that the Defendants have been guilty of no inequitable conduct.
"2. That the lease agreement dated November 25, 1957, entered into between the parties contains the following language on page 2 thereof:
"`* * * This deposit shall not be refundable in whole or part until the expiration of this Lease at the end of its term, the forfeiture thereof at an earlier date, or a premature termination thereof by mutual agreement of the parties; nor shall it be considered as liquidated damages in the event of Lessee's breach of any of its covenants hereunder, Lessors reserving the right to withhold only so much of this deposit as is truly representative of actual damages suffered by them on account of such breach; provided that in the event of a forfeiture at any time during the first nine years of this Lease, actual damages shall be fixed at a minimum of NINETY THOUSAND DOLLARS ($90,000.00) in lieu of Lessors' receipt of rent for the balance of the Lease. * * *' (Emphasis supplied) [by chancellor]
In determining whether the language used by the parties was a bona fide attempt to liquidate their damages, it is incumbent on this Court to determine the intention of the parties at the time the lease was executed, see Hyman vs. Cohen, [Fla.] 73 So.2d 393, and not at the time of the breach. On this question the evidence is unrebutted, since the testimony of the Defendant, ANNA GATES, corroborated by one of her witnesses, a Sylvia Joseph, established to the Court's satisfaction that the parties intended to liquidate their damages. This Court is of the further opinion that this finding is not inconsistent with nor does it do violence to the previous ruling of the Honorable Lamar Warren, who presided prior to transfer of the cause to this Court's division. By Judge Warren's ruling, under date of June 3, 1960, it was determined that the provision for the deposit was not for liquidated damages, however, this ruling since it was entered without benefit of proofs, must be considered interlocutory in nature and therefore subject to a final determination after all the proofs were considered." (Emphasis added.)

The plaintiff's four points on appeal are to the effect that the chancellor erred in (1) admitting extrinsic evidence with respect to the intention of the parties, (2) finding that the deposit was for liquidated damages, (3) overruling another judge's order in the same case determining the deposit to be not liquidated damages, and (4) refusing to grant summary judgment for the plaintiff. We note, but without further discussion, the defendants' position that the plaintiff has not presented an adequate record on appeal to authorize a consideration of assigned errors.

We shall dispose briefly of the first and fourth enumerated points, leaving for consideration only the second and third points which present the determinative questions. Under Point 1 the plaintiff submits that it was error to receive in evidence the testimony of two witnesses as to the circumstances surrounding the execution of the lease, that this was contrary to the parol evidence rule. The contention is not well founded. The testimony in question did not purport to vary, alter or contradict the terms of the written lease; nor did it actually do so. A broad scope of inquiry is permissible in order to shed full light on the question of whether the deposit was intended as a penalty or as liquidated damages. This is especially true where the provision in the lease contract contains equivocal language as in this case. So much for Point 1. The ensuing discussion will incidentally dispose of Point 4 which suggests error in the court's refusal to grant plaintiff's motion for summary judgment.

The plaintiff urges under its Point 3 on appeal that the earlier order in the case was tantamount to a final adjudication of the status of the security deposit and that the chancellor erred in not adhering thereto and in declining to enter summary decree for the plaintiff. In Vaughn v. Smith, Fla. 1957, 96 So.2d 143, the Supreme Court of Florida commented as follows on Rules of Civil Procedure 1.16, 30 F.S.A.:

"* * * This rule serves to expedite litigation by simplifying the issues to be tried. The rule specifically provides that a pre-trial order shall control the subsequent course of the action unless modified at the trial to prevent manifest injustice." (Emphasis added.)

It is apparent from the instant decree that the chancellor did modify and, in effect, supersede the previous order to conform to his ultimate conclusion after a full hearing on the merits. This involved a mixed question of law and fact. This court among others has emphasized the proposition that the rules of procedure do not foreclose the authority of the trial court, while having continuing jurisdiction of a cause, to review its previous orders therein entered. Bergovoy v. Atlantic Electric, Inc., Fla.App. 1962, 140 So.2d 885, and cases there cited. We accordingly hold that the earlier order was not the immutable law of the case.

The decree under attack was expressly bottomed on Hyman v. Cohen, Fla. 1954, 73 So.2d 393, a similar case involving a security deposit for rent. The lease contract was breached by failure to pay rent. The Supreme Court of Florida held that the breach terminated the lease and necessitated a consideration of damages "not readily ascertainable," and affirmed the chancellor's holding that the deposit was liquidated damages. It was noted that the deposit was not excessively disproportionate to the immediate and estimated prospective damages likely to devolve upon the lessor. After discussing the rights of a defaulting lessee to avoid forfeiture in equity under some circumstances, the court said at page 402:

"* * * [T]o hold that a provision for the forfeiture of a security deposit * * * upon the premature termination of the lease is presumptively a penalty is not only unrealistic — in our opinion, it does violence to the intent of the parties. We think the true rule is * * * `the sum thus to be retained is presumptively liquidated damages and not a penalty.'"

The presumption is dispelled, of course, if it is made to appear that the parties intended otherwise. Lewis v. Belknap, Fla. 1957, 96 So.2d 212; Hyman v. Cohen, supra. However, the presumption of liquidated damages is fortified when the deposit appears to be not excessively disproportionate to the damages. See 32 Am.Jur., Landlord and Tenant, § 543.

After using some equivocal language, the parties here agreed that in the event of a forfeiture within the first 9 years of the lease "actual damages shall be fixed at a minimum of NINETY THOUSAND DOLLARS * * *." The lease provided that the lessees were to deposit $60,000.00 at the time of its execution and $10,000.00 per year for the first three years in order to accumulate the entire $90,000.00. The annual rental for the 10 year term was $91,000.00. The special damages alleged by the defendants in their amended answer aggregated approximately $59,000.00. The chancellor decreed $60,000.00 "liquidated damages." It appears, on analysis, that the presumption is simply a guide or reasonable starting point for further inquiry as to intent. See and compare Lewis v. Belknap, Fla. 1957, 96 So.2d 212, supra; Young v. Cobbs, Fla. 1955, 83 So.2d 417; 6701 Realty v. Deauville Enterprises, Fla. 1955, 84 So.2d 325; Goldfarb v. Robertson, Fla. 1955, 82 So.2d 504; Hyman v. Cohen, supra.

It has been observed that in holding a forfeiture provision to be a stipulation for liquidated damages, the order should be based upon the provision that the actual damages would be uncertain or difficult to ascertain. The damages were, as in the Hyman case, in that category. In Hyman v. Cohen, supra, the Court said at page 401 of 73 So.2d:

"We know of no situation where the damages upon premature termination of a lease are less `readily ascertainable' than in the lease market in the Dade County area. Rentals on hotels and apartment houses in that area fluctuate not only from month to month and week to week, but even from day to day. It is impossible to say at the time of entering into a five-year lease agreement (which was the term of the instant lease) what the lease market will be at any given period during the life of the lease. If the lessee repudiates the lease, or the lessor is compelled to terminate it because of the default of the lessee, the lessor may be able to find a new tenant at a higher rental; or he may be forced to make a new lease at a much smaller rental. But we believe there is no way in which the parties can estimate, with reasonable certainty, what the lessor's damages will be in such case."

In Lewis v. Belknap, Fla. 1957, 96 So.2d 212, supra, the Florida Court reaffirmed the doctrine of the Hyman case and extended it to include executory contracts for the sale of realty. The opinion by Justice Drew states:

"We think the case decisive of the issue here is Hyman v. Cohen, Fla. 1954, 73 So.2d 393. A lease was involved in Hyman v. Cohen but the basic principles discussed are clearly applicable in this case. In that case we were dealing with the question of whether a security deposit under the provisions of the lease there involved constituted a penalty or liquidated damages. * *
* * * * * *
"* * * These were mature people dealing with each other at arms length and we hold that under the circumstances of this case and the conditions under which the sum was deposited, that such amount when accepted by the sellers and brokers is presumptively liquidated damages and not a penalty and we affirm conclusions reached in Hyman v. Cohen, supra, in this respect and apply it to executory contracts for the purchase of real estate." (Emphasis added.)

See also Goldfarb v. Robertson, Fla. 1955, 82 So.2d 504, supra, and 6701 Realty v. Deauville Enterprises, Fla. 1955, 84 So.2d 325, supra.

As in Lewis v. Belknap, supra, the parties here were mature people dealing at arms' length and we hold, in view of the circumstances and the conditions under which the sum was deposited and accepted, that the deposit was presumptively liquidated damages and not a penalty. This presumption was not dispelled but was, in fact, confirmed by the evidence.

Affirmed.

SHANNON, C.J., and SAMPLE, WALLACE, Associate Judge, concur.

WHITE, Judge.

On Petition for Rehearing

PER CURIAM.

On petition for rehearing the appellant insists inter alia that this court misunderstood the facts in this cause. It is first maintained that the original order was entered pursuant to three motions argued at a hearing on May 3rd, 1960. The record on appeal contains no transcript of such arguments or of any objections raised at the hearing; nor does the record reflect the circumstances of the transfer of the case from Judge Lamar Warren to Judge George W. Tedder, Jr. The record further fails to disclose what occurred at the pretrial hearing before Judge Tedder entered his pretrial order of March 2d 1961.

We have held repeatedly that we are without authority in civil cases to consider and resolve assigned error where the record is deficient or where the testimony with reference to the order appealed is not sent up in the transcript of record. See Widmeyer v. Olds, Fla.App. 1962, 144 So.2d 825, 1962; Joyner v. Andrews, Fla.App. 1962, 137 So.2d 870; Brown v. Householder, Fla.App. 1961, 134 So.2d 801; Gross v. Gross, Fla.App. 1961, 131 So.2d 487. The petition for rehearing accordingly is denied.

SHANNON, C.J., WHITE, J., and SAMPLE, WALLACE, Associate Judge, concur.

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STUCO CORP. v. GATES
(Oct 24, 1962)