Leeber v. Deltona Corp.

Supreme Judicial Court of Maine · Contracts

ContractsLiquidated damagesUnconscionabilityNonjury procedureliquidated damagespenaltyunconscionabilityFlorida law

Facts

Plaintiffs agreed in May 1980 to buy a Florida condominium unit from Deltona for $150,200 and paid a 15% deposit of $22,530 under a contract providing that the deposit would be retained by Deltona as liquidated damages if plaintiffs breached. After several extensions, Deltona sent a final notice setting closing for July 20, 1982 and warning that the agreement would be cancelled if plaintiffs did not close; plaintiffs did not close. Deltona then cancelled the agreement, retained the deposit, and resold the unit a few days later for $167,500. Plaintiffs sued, challenging the enforceability of the liquidated damages clause and asserting separate claims against Maine-Florida.

Issue

Under Florida law, could Deltona retain the 15% deposit under the liquidated damages clause after plaintiffs breached, or was retention of the deposit unconscionable because Deltona later resold the unit and had limited actual losses? Also, did the trial justice improperly dismiss Counts II and III instead of acting as factfinder under Rule 50(d)?

Rule

Under Florida law, a liquidated damages clause is enforceable if damages were not ascertainable at the time of contracting; if damages were ascertainable, the clause is an unenforceable penalty. Even when valid, equity may relieve against forfeiture only if post-breach circumstances make retention unconscionable, which requires circumstances that truly shock the conscience of the court. Where the liquidated sum is not unreasonable on its face, the buyer must prove one or more of these factors: fraud by the seller, misfortune beyond the buyer's control, mutual rescission, or a benefit to the seller whose retention, compared to the total contract price, is shocking to the conscience. In a nonjury case, a trial court's ruling at the close of plaintiff's evidence is treated as a Rule 50(d) judgment if the court weighs evidence and resolves facts, and appellate review is for clear error.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Miami, Sofia Patel signed a contract to buy a newly built townhouse from Gulf Meridian Homes for $400,000. The contract required a 12% deposit and stated that if Sofia defaulted, the seller would keep the deposit as liquidated damages; at trial both sides agreed that the seller's damages from a future breach could not be calculated with certainty when they signed.

If Sofia later defaults, which is the strongest argument that the deposit clause is enforceable under the governing rule?

Explanation. The majority applied Florida law: if damages were ascertainable when the contract was made, the clause is a penalty; if not, it is enforceable as liquidated damages, subject only to possible equitable relief if later circumstances make retention unconscionable. Labels alone do not control, resale is not the test, and the opinion emphasized that the seller is bound by the liquidated-damages remedy rather than receiving additional damages. (Derived from Leeber v. Deltona Corp. (n.d.).)