Liberty Life Ins. Co. v. Thomas B. Hartley Const. Co., Inc., 46093

• Court: Supreme Court of Georgia
• Citation: 375 S.E.2d 222,258 Ga. 808
• Docket Number: No. 46093,46093
• Parties: LIBERTY LIFE INSURANCE COMPANY v. THOMAS B. HARTLEY CONSTRUCTION COMPANY, INC.
• Decision Date: 19 January 1989

Page 222

375 S.E.2d 222

258 Ga. 808

LIBERTY LIFE INSURANCE COMPANY v. THOMAS B. HARTLEY CONSTRUCTION COMPANY, INC.

No. 46093.

Supreme Court of Georgia.

Jan. 19, 1989.

John A. Howard, Fortson & White, Atlanta, for Liberty Life ins. co.

W. Courtney La Fon, Beverly J. Hall, Roswell, for Thomas B. Hartley Const. Co., Inc.

MARSHALL, Chief Justice.

Thomas B. Hartley Construction Co., Inc., as buyer, sued Liberty Life Insurance Co., as seller, to recover a $37,000 earnest-money payment it had made to Liberty Life contemporaneously with the execution of a real-estate sales contract. The seller declined to return any portion of the payment (which was about 10% of the purchase price) in reliance on the following contractual provision:

In the event buyer elects not to close this contract on or before the specified closing date, then in such event the earnest money will be forfeited as full liquidated damages to seller.

The trial court granted summary judgment to the seller. The Court of Appeals reversed. Thomas B. Hartley Constr. Co. v. Liberty Life Ins. Co., 187 Ga.App. 849, 371 S.E.2d 657 (1988). We granted certiorari to determine: (1) who bears the burden of proof as to the reasonableness of the damages vis-a-vis the probable loss, and (2) whether the enforceability of a liquidated-damages provision is a question of fact for the jury or a question of law.

In answer to the first question, at trial the burden is on the defaulting party to show that the provision is a penalty. 25 A C.J.S., Damages, Section 144(f). In answer to the second question, the enforceability of a liquidated damages provision in a contract is a question of law for the court. Martin v. Lott, 144 Ga. 660, 665, 87 S.E. 902 (1916). However, in deciding that question, the court must make the tripartite inquiry outlined in Southeastern Land Fund, Inc. v. Real Estate World, Inc., 237 Ga. 227, 230, 227 S.E.2d 340 (1976) which necessarily requires the resolution of questions of fact. ¹

The case before us is on appeal, not from a bench trial, but from the trial court's grant of summary judgment in favor of the seller. The burden to be thrust upon the buyer, on trial, that of convincing the Court that the provision amounts to a penalty as a matter of law, does not yet apply. Here, the seller, as the movant for summary judgment, has the burden of showing that as to the three prongs of Southeastern, supra, no genuine issue of material fact exists, in which event, summary judgment would be appropriate. OCGA § 9-11-56. There is no burden on the buyer, as respondent, until the seller proves the nonexistence of any genuine issue of material fact. Only then is the buyer, in order to withstand summary judgment, required to show that there is a question of material...