Brizendine v. Conrad
| Decision Date | 10 April 2001 |
| Docket Number | WD58266 |
| Parties | David Brizendine, Respondent v. Nora Lee Conrad, Appellant. WD58266 Missouri Court of Appeals Western District 0 |
| Court | Missouri Court of Appeals |
Appeal From: Circuit Court of Cole County, Hon. Thomas J. Brown, III
Counsel for Appellant: Lee R. Hardee, III and F. Russell Peterson
Counsel for Respondent: Timothy T. Stewart and Dale T. Smith
Opinion Summary: Nora Lee Conrad appeals judgment for David Brizendine, awarding him treble damages pursuant to Section 537.420 on his claim for waste with respect to certain real property being leased by her from him pursuant to a written lease-purchase agreement.
REVERSED AND REMANDED.
Division Four holds: Conrad claims on appeal that the lease-purchase agreement contained a liquidated damages clause that precluded an action for damages for waste. Parties to a contract may provide for liquidated damages in the event of a breach and such provisions are generally upheld by the courts provided they are reasonable and the parties agreed in good faith upon a sum as damages that would likely ensue if the contract were breached.
The waste that occurred would, in fact, be a breach of the parties' agreement with respect to certain lease provisions.
The parties labeled paragraph 14 as one for liquidated damages, which, while not controlling, has great weight in the determination. Further, the express language in paragraph 14 that "actual damages [for breach of the agreement were] difficult, if not impossible, to ascertain," has been recognized as being indicative of a true liquidated damages clause. Regardless of how Brizendine tries to spin it, paragraph 5 is nothing more than an earnest money provision with respect to the purchase of the property, a type of liquidated damages clause. Further, both paragraphs 5 and 14 provided for the payment of $15,000, the receipt of which was acknowledged in both. Given this fact and that the record indicates that Conrad only paid a total of $15,000, it is clear that the parties intended the $15,000 to be paid in accordance with both paragraphs and not simply paragraph 5.
Paragraph 14 was intended to apply to both the lease and purchase provisions of the parties' agreement.
Cases have uniformly held that an election of remedies provision, providing for both legal and equitable remedies, does not invalidate a liquidated damages clause.
Our courts have adopted the Restatement (Second) of Contracts, Section 356 (1979) rule as to the validity of liquidated damages clauses. A liquidated damages clause can be found to be unenforceable, as a matter of public policy, either as a penalty for being too large in light of the breach or as being unconscionable for being too small in light of the breach. Accordingly, because this Court is to affirm the judgment if it is supported by the record on any theory, if the record would support invalidating the liquidated damages clause either as a penalty for being too large or as being unconscionable for being too small, then this Court would affirm the judgment. Brizendine did not produce any evidence from which it could be inferred that $3,746.55 was unreasonably small as and for earnest money in light of the anticipated or actual loss caused by the breach in failing to purchase the property. Prior decisions have held that earnest money provisions of 2.0% and 2.5% were not unreasonably small. Thus, the record would not support the trial court's invalidating the liquidated damages clause of paragraph 14 as being unconscionable.
Because paragraph 14 is an enforceable liquidated damages clause as to both the lease and purchase provisions of the parties' lease-purchase agreement, Brizendine was thus limited to $15,000 in damages for any breach of the agreement, including a breach of sub-paragraphs 3(c) and (f) for damages for waste committed during the lease such that he necessarily waived any right to seek statutory damages for waste during the lease under Section 537.420.
Nora Lee Conrad appeals the judgment of the Circuit Court of Cole County for the respondent, David Brizendine, awarding him treble damages of $33,760.35 pursuant to Section 537.4201 on his claim for waste. The respondent alleged in his petition that the appellant committed waste with respect to certain real property being leased by her from him pursuant to a written lease-purchase agreement entered into by the parties.
In her sole point on appeal, the appellant claims2 that the trial court erred in entering judgment for the respondent on his claim for damages, pursuant to Section 537.420, because it was against the weight of the evidence, and erroneously declared and applied the law in that the lease-purchase agreement entered into by the parties contained a valid and enforceable liquidated damages clause, which precluded, as a matter of law, an action for actual damages for waste pursuant to Section 537.420.
We reverse and remand.
On September 30, 1997, the appellant entered into a written agreement with the respondent, entitled "Lease Purchase Agreement," as to a piece of real property owned by him, located at 301-303 Ash in Jefferson City, Missouri, consisting of nine apartment units and storage space. Under the terms of this agreement, the appellant was to lease the property from the respondent for one year, making payments of $725 per month, after which she was to purchase the property for $140,000. Pursuant to the agreement, the appellant was required to pay the respondent $15,000 at the time of the execution of the agreement, which was to be credited against the purchase price of the property, when the sale of the property was completed. The appellant was also required, by the agreement, for the duration of the lease, to manage the property by collecting rents from the tenants; to make repairs; and to generally fulfill the typical duties of a landlord. At the time the appellant took possession of the property, it was clean and in good repair.
At the end of the lease term, the appellant refused to purchase the property. The respondent advised the appellant that he would retake possession of the property, provided it was in the same condition, excluding normal wear and tear, as it was when she received it. However, upon inspecting the property in October 1998, the respondent found that it had been extensively damaged. As such, he refused to retake possession, and instead filed suit against the appellant on December 4, 1998. In his petition, the respondent alleged three counts: In Count I, he sought specific performance of the purchase agreement; in Count II, as an alternative to Count I, he sought damages for the appellant's failure to purchase; and in Count III, he sought damages for rent of $725 per month for each month past the one-year lease term that the appellant remained in possession of the property.
On January 1, 1999, the appellant dropped off the keys to the property at the respondent's attorney's offices. The appellant filed her answer and counterclaim on January 14, 1999, seeking dismissal of the respondent's claims, and damages for the expenses she had incurred in maintaining, repairing, and managing the property due to the respondent's refusal to retake possession of it. The respondent filed his reply and answer to the appellant's counterclaim on January 19, 1999.
On July 23, 1999, the respondent filed a motion for leave to file an amended petition, which was granted. His first amended petition alleged four counts: In Count I, in lieu of specific performance, he sought actual damages for the appellant's failure to purchase the property; in Count II, he sought rent for the months the appellant remained in possession of the property after the end of the lease period; in Count III, he sought statutory damages pursuant to Section 537.420 for the waste committed by the appellant during the leasehold; and in Count IV, as an alternative to Counts I-III, he sought recovery in quantum meruit for all losses incurred as a result of appellant's breach of the parties' agreement. The appellant filed her answer to this amended petition on July 30, 1999, alleging the affirmative defense that the lease-purchase agreement contained a binding liquidated damages clause for $15,000, which precluded any claims for actual damages as to the lease or purchase of the property, including damages for waste, pursuant to Section 537.420.
On July 30, 1999, the appellant filed a motion for judgment on the pleadings, asserting that the liquidated damages provision contained in paragraph 14 of the parties' agreement precluded an action pursuant to Section 537.420 for actual damages, and that the respondent's recovery was limited to the $15,000 already paid by her at the time of the signing of the agreement. The respondent filed his suggestions in opposition to this motion on August 2, 1999. On that same day, the court heard and overruled the appellant's motion.
On November 5, 1999, the respondent voluntarily dismissed all of the counts in his first amended petition except the count for statutory waste damages. The case proceeded to trial before the court on December 3, 1999. The respondent introduced evidence at trial as to the extensive damage done to the property during the leasehold. The respondent testified that, because it would have been too expensive to restore the property, he opted to sell it to another buyer for $90,000. The court took the case under advisement at the close of the evidence.
On December 10, 1999, the trial court entered its judgment:
Plaintiff presented evidence of both diminution in market value and cost to repair. The Court finds that the cost of repair is the appropriate measure of damages in that cost of repair is insignificant in relation to the value of the property damaged. The Court, upon consideration of all the evidence, finds for the Plaintiff and against the Defendant for statutory waste damages under Section 537.420 RSMo (1994). The Court therefore determines damages to be $11,253.45....
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