Leeber v. Deltona Corp.
546 A.2d 452 (1988)
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Rule of Law:
Under Florida law, a seller's retention of a deposit under a valid liquidated damages clause is not unconscionable merely because the seller subsequently resells the property at a profit. Unconscionability is determined by the circumstances at the time of the breach and requires a showing that is so extraordinary it would 'shock the conscience' of the court.
Facts:
- On May 14, 1980, Donald A. Leeber, Jeremy Morton, and Jan Drewry (plaintiffs) signed an agreement to purchase a condominium unit from The Deltona Corporation for $150,200.
- The plaintiffs paid a 15% deposit of $22,530 at the time of signing.
- The purchase agreement included a liquidated damages clause, which stipulated that Deltona would retain the deposit if the plaintiffs breached the contract.
- After several extensions, Deltona set a final closing date for July 20, 1982.
- The plaintiffs failed to complete the purchase on the final closing date.
- On July 27, 1982, Deltona formally cancelled the agreement and notified the plaintiffs that their deposit would be retained.
- On July 31, 1982, Deltona sold the same condominium unit to a different party for $167,500.
Procedural Posture:
- Donald A. Leeber and other plaintiffs sued The Deltona Corporation in the Superior Court, Cumberland County (trial court), alleging the liquidated damages clause was unenforceable.
- Following a jury-waived trial, the trial justice found for the plaintiffs on Count I, concluding that enforcing the clause was unconscionable and awarded them their deposit minus Deltona's actual damages.
- The trial justice dismissed Counts II and III of the complaint.
- Defendants, The Deltona Corporation and Marco Surfside, Inc. (appellants), appealed the judgment on Count I to the Supreme Judicial Court of Maine.
- The plaintiffs (appellees and cross-appellants) cross-appealed the dismissal of Counts II and III.
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Issue:
Does a seller's retention of a 15% deposit as liquidated damages become unconscionable under Florida law when the seller resells the property for a higher price a few days after the buyer's breach?
Opinions:
Majority - Clifford, Justice
No, the seller's retention of the deposit does not become unconscionable. A liquidated damages provision that is not a penalty is enforceable unless subsequent circumstances make it unconscionable, which requires that the circumstances 'shock the conscience' of the court. Florida law views liquidated damages sums around 15% as reasonable. The fact that Deltona fortuitously resold the property for a profit subsequent to the plaintiffs' breach does not automatically convert the case into one for ordinary contract damages. The unconscionability analysis should be based on circumstances existing at the time of the breach, not on later events. To allow challenges based on subsequent resales would nullify the purpose of liquidated damages clauses, which is to provide an economical and certain alternative to litigation over actual damages.
Analysis:
This decision reinforces the significant deference courts give to liquidated damages clauses, especially in real estate transactions. It establishes that the test for unconscionability is applied at the time of the breach and is not typically affected by subsequent events, such as a profitable resale. This protects the certainty and efficiency of liquidated damages, preventing breaching parties from litigating the clause's validity based on the non-breaching party's successful mitigation of damages. The ruling solidifies the 'shock the conscience' standard as a high bar, requiring extraordinary circumstances beyond the mere fact that the seller suffered no actual financial loss.
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