Morris v. Flores
Decision Date | 12 September 1988 |
Docket Number | No. 2-88-0121,2-88-0121 |
Citation | 174 Ill.App.3d 504,124 Ill.Dec. 122,528 N.E.2d 1013 |
Court | United States Appellate Court of Illinois |
Parties | , 124 Ill.Dec. 122 John D. MORRIS, et al., Plaintiffs-Appellees, v. Fred FLORES, et al., Defendants-Appellants. |
Timothy F. Kohn, Edward G. Wells & Associates, Palatine, for Fred and Deborah Flores.
Peter F. Carroll, Steffen & Carroll, Elgin, for John D. and Sharon K. Morris.
Plaintiffs, John D. and Sharon K. Morris, filed suit in the circuit court of Kane County against defendants, Fred and Deborah Flores, seeking $2,100 in damages for breach of a real estate contract for the sale of plaintiffs' mobile home. Following a bench trial, the trial court found defendants in breach of the contract and assessed damages of $1,615 and costs of $133. Following denial of defendants' motion to reconsider, defendants filed this appeal.
The only issue raised on appeal is whether plaintiffs' damages are limited to the amount set forth in a liquidated damages clause of the real estate contract.
Briefly, the facts are as follows. On April 27, 1987, plaintiffs and defendants signed an agreement for the sale and purchase of plaintiffs' mobile home. The preprinted contract contains a liquidated damages clause which provides:
Pursuant to the contract, defendants paid $100 as earnest money. Although defendants obtained the necessary financing, they failed to close the transaction. Plaintiffs subsequently sold the mobile home to a different purchaser.
Plaintiffs then filed their complaint in which they alleged that they suffered $1,400 in damages partially as a result of selling at a lower price than that agreed upon with defendants and also due in part to an increased broker's commission. Also, they claimed various other expenses totaling $700 as additional damages. The trial court found for plaintiffs and awarded damages in the amount of $1,615 and costs of $133.
On appeal, defendants contend that their damages should have been limited by the terms of the liquidated damages clause of the real estate sales contract to the amount of earnest money paid, which in this case was $100. Plaintiffs respond that the parties did not intend to limit damages for breach by the purchasers to the earnest money, and, therefore, they could recover actual damages.
Courts will generally enforce a liquidated damages provision in a real estate contract where it can be shown (1) that the parties intended to establish an agreed upon amount of damages in the event of a breach; (2) that the amount provided as liquidated damages was reasonable at the time of contracting and bears some relation to the actual damages which might be sustained; and (3) that the actual damages would be difficult to prove and uncertain in amount. (Curtin v. Ogborn (1979), 75 Ill.App.3d 549, 554-55, 31 Ill.Dec. 391, 394 N.E.2d 593.) Furthermore, in the event of a default by a buyer, any earnest money may be retained by the seller without reference to any resulting actual damages, but the seller is not entitled to any additional recovery. (Curtin, 75 Ill.App.3d at 555, 31 Ill.Dec. at 396, 394 N.E.2d at 598; see Shelby v. Hankerson (1974), 17 Ill.App.3d 1040, 1043, 309 N.E.2d 115.) Whether a provision for damages is a penalty clause or a liquidated damages clause is a question of law. Weiss v. United States Fidelity & Guaranty Co. (1921), 300 Ill. 11, 16, 132 N.E. 749; M.I.G. Investments, Inc. v. Marsala (1981), 92 Ill.App.3d 400, 406, 47 Ill.Dec. 265, 414 N.E.2d 1381.
In this case, the contract contains a liquidated damages clause which provides, in substance, that in the event of a default by the purchasers, the purchasers shall relinquish all money deposited under the contract. Pursuant to this clause, all money forfeited shall be deemed to represent damages sustained, but the seller may still pursue other remedies. Construction of the terms of a contract ordinarily presents an issue of law for the court. (Lenzi v. Morkin (1984), 103 Ill.2d 290, 293, 82 Ill.Dec. 644, 469 N.E.2d 178.) Furthermore, the court must make the initial determination of whether contract language is...
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