U.S. Supreme Court
Kothe v. R. C. Taylor Trust, 280 U.S. 224 (1930)
Kothe v. R. C. Taylor Trust
Argued December 4, 1929
Decided January 6, 1930
280 U.S. 224
1. A stipulation in a contract to pay a fixed sum as liquidated damages in case the contract be broken will not be enforced if the amount fixed is plainly without reasonable relation to any probable damages from a breach. P. 280 U. S. 226.
2. In a lease for two years, the lessee agreed that the mere filing of a petition in bankruptcy against him should be deemed a breach, and that thereupon, ipso facto, the lease should terminate and the lessor become entitled to reenter and also to recover damages equal to the full amount of the rent reserved for the remainder of the term. The lessee became bankrupt, and the lessor claimed $5,000, equal to 15 months' rent. Held, that the claim should not be enforced against the trustee in bankruptcy, as, on the case submitted, the provision in the lease must be regarded as one for a penalty apparently designed to insure to the lessor preferential treatment in the event of the lessee's bankruptcy. P. 280 U. S. 226.
3. Agreements tending to defeat the purpose of the Bankruptcy Act to bring about an equitable distribution of the bankrupt's estate among creditors holding just demands based upon adequate consideration must be regarded with disfavor. P. 280 U. S. 227.
30 F.2d 77 reversed
Certiorari, 279 U.S. 830, to review a judgment of the circuit court of appeals reversing the district court and upholding a claim against Kothe, as trustee in bankruptcy.