Lombardo v. Deshotel
1994 WL 673957, 647 So. 2d 1086 (1994)
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Rule of Law:
A party to a contract with a stipulated damages clause is bound by that clause even if they first sue for specific performance and that remedy subsequently becomes impracticable. The stipulated amount can only be modified by a court if it is so manifestly unreasonable as to be contrary to public policy.
Facts:
- On October 1, 1985, Jennie Lombardo (seller) and Calvin Lee Deshotel (buyer) entered into an agreement for the purchase of a property for $115,000.
- The contract contained a clause stating that if Deshotel failed to comply, Lombardo had the right to either demand specific performance or to declare a $1,000 deposit forfeited.
- On the agreed-upon closing date of December 5, 1985, Lombardo was prepared to transfer title, but Deshotel refused to purchase the property.
- While a lawsuit against Deshotel was pending, Lombardo sold the property to a third party for $90,000.
Procedural Posture:
- Jennie Lombardo sued Calvin Deshotel in trial court, initially seeking specific performance of the real estate contract.
- After selling the property, Lombardo amended her petition to seek $25,000 in damages.
- The trial court initially granted summary judgment for Deshotel, but the intermediate appellate court reversed and remanded for trial.
- After a trial on the merits, the trial court rendered judgment for Lombardo, awarding her $25,000.
- Deshotel, as appellant, appealed to the First Circuit Court of Appeal, and Lombardo was the appellee.
- The Court of Appeal reversed the trial court, reducing Lombardo's award to the stipulated $1,000.
- The Supreme Court of Louisiana granted certiorari to review the court of appeal's decision.
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Issue:
Does a seller's initial suit for specific performance, which later becomes impracticable, release the seller from a stipulated damages clause in the contract, thereby allowing her to seek greater court-determined damages?
Opinions:
Majority - Dennis, J.
No. A seller who first seeks specific performance and then, upon that remedy becoming impracticable, seeks damages is still bound by the contract's stipulated damages clause. The Civil Code allows an obligee to demand either specific performance or stipulated damages, but not both. An unsuccessful attempt to obtain performance does not release the obligee from the reciprocal obligation of the stipulated damages clause. Such clauses are binding unless they are so manifestly unreasonable as to be contrary to public policy, a standard not met here. Furthermore, the duty to mitigate damages does not apply when a valid stipulated damages clause exists, because the obligor's liability is already fixed and cannot be increased or decreased by the obligee's actions. Therefore, Lombardo's sale of the property, which made specific performance impracticable, did not justify setting aside the $1,000 stipulated damage amount.
Analysis:
This decision significantly strengthens the enforceability of stipulated damages clauses in Louisiana, reinforcing the legislative intent of the 1984 Civil Code revisions. It establishes that such clauses are not mere options for one party but are binding obligations on both, limiting judicial interference to only the most extreme cases of unreasonableness. By clarifying that the duty to mitigate is inapplicable when damages are stipulated, the court provides certainty in contractual remedies. This precedent discourages parties from attempting to circumvent agreed-upon damages in pursuit of a larger, court-determined award after their initial choice of remedy fails.
