Schrenko v. Regnante, 88-P-797

• Court: Appeals Court of Massachusetts
• Writing for the Court: FINE
• Citation: 27 Mass.App.Ct. 282,537 N.E.2d 1261
• Parties: Michael SCHRENKO et al. 1 v. Theodore C. REGNANTE et al. 2
• Docket Number: No. 88-P-797,88-P-797
• Decision Date: 10 May 1989

Page 1261

537 N.E.2d 1261 27 Mass.App.Ct. 282 Michael SCHRENKO et al. ¹
v.
Theodore C. REGNANTE et al. ²
No. 88-P-797. Appeals Court of Massachusetts,
Essex. Argued April 6, 1989.
Decided May 10, 1989.

Page 1262

[27 Mass.App.Ct. 283] George E. Richardson, Boston, for plaintiffs.

Carmen A. Frattaroli, Salem, for Theodore C. Regnante & others.

Before [27 Mass.App.Ct. 282] BROWN, SMITH and FINE, JJ.

[27 Mass.App.Ct. 283] FINE, Justice.

This dispute arose out of a failed real estate transaction. The buyers brought this action against the sellers for return of a deposit and against the sellers' attorneys, under G.L. c. 93A, for releasing the deposit to the sellers upon the buyers' default. A Superior Court judge ordered summary judgment for the defendants on both claims. We affirm the judgment ³ for the attorneys, but, because of one unusual aspect of the case, we reverse the judgment for the sellers on the buyers' claim for return of the deposit.

The undisputed facts are these. On July 24, 1985, the plaintiff buyers agreed to purchase the defendant sellers' property, a single-family residence in Marblehead, for $360,000. Upon signing the purchase and sale agreement, the buyers, represented by counsel, paid a $16,000 deposit. Concerning the deposit, the agreement provided: "If the buyer shall fail to fulfill the buyers' agreements herein, all deposits made hereunder by the buyer shall be retained by the seller as liquidated damages unless within thirty days after the time for performance of this agreement or any extension hereof, the seller otherwise notifies the buyer in writing." Title was to pass on November 11, 1985, and time was of the essence.

As the closing date approached, the buyers sought an extension. The sellers offered an extension but on terms unacceptable

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to the buyers. On the closing date (November 12, 1985, as November 11, 1985, was a holiday) the buyers defaulted. The property was returned to the market. On November 18, 1985, the sellers signed an agreement to sell the property to Mark H. and Susan W. Berey, not parties in this action, for $385,000. On the same date, the defendant attorneys, who had been holding the $16,000 deposit in escrow as attorneys for the sellers, [27 Mass.App.Ct. 284] released it to the sellers. On December 2, 1985, the sellers' attorneys wrote to the buyers: "[Y]ou are advised that it is sellers' present intention to retain your deposit in the amount of $16,000.00 as liquidated damages and to hold you liable for any additional damages that may be or are incurred by my clients, as the result of your failure to consummate the purchase of the premises on the date for performance thereunder."

The sale to the Bereys took place on December 19, 1985, with the sellers receiving $25,000 more than the price the buyers would have paid. As of that date, the sellers had incurred out-of-pocket expenses attributable to the buyers' default in the amount of $10,581.62. The sellers also had to pay a broker's commission which exceeded by $8,250 the commission which would have been due on a sale to the buyers. The sellers' therefore claimed total expenses due to the buyer's breach of $18,831.62.

The motion judge's award of summary judgment to the sellers was based upon his view that the buyers had paid the deposit pursuant to a valid liquidated damage clause. The judge reasoned that it would not have been appropriate for him to consider the fact that the sellers suffered no loss, the property having been sold at a profit soon after the default, because that would have allowed the party in breach to benefit from a fortuitous change in market conditions. According to the motion judge: "When a breach occurs, a snap shot of the situation should be taken. Simply put, the subsequent sale is not in the picture."

It is undisputed that, in the circumstances, a liquidated damages clause providing for forfeiture of a $16,000 deposit in the event of a breach by the buyers would have been reasonable. The amount of the deposit, 4.4% of the purchase price, was a moderate estimate of the loss the sellers were likely to suffer in the event of a buyers' default; the damages could be expected to be difficult to prove; and such deposits are routine in purchase and sale agreements. See A-Z Servicenter, Inc. v. Segall, 334 Mass. 672, 675, 138 N.E.2d 266 (1956); Lynch v. Andrew, 20 Mass.App.Ct. 623, 627, 481 N.E.2d 1383 (1985). See also Corbin, Contracts § 1060 (1964). Payment of a reasonable deposit pursuant to a liquidated damage[27 Mass.App.Ct. 285] clause would ordinarily have the...