Rabin v. Blazas
1988 WL 94919, 537 So. 2d 221 (1988)
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Rule of Law:
A liquidated damages clause in a contract fixes the total amount of damages recoverable for a breach; a party who opts for liquidated damages cannot also recover additional actual damages, though contractually stipulated attorney's fees may be recovered separately.
Facts:
- Harry Frisch, an eighty-year-old man, and Margaret S. Blazas engaged with real estate agent Alex Seidenfield to purchase property from Estelle Polmer Rabin.
- On April 8 or 9, 1986, Frisch discussed interest rates, financing, and the benefits of a cash payment with Seidenfield.
- On April 11, 1986, Frisch and Blazas signed an agreement to purchase Rabin's property for $55,000 in cash.
- The agreement obligated the purchasers to deposit 10% of the purchase price ($5,500) with the seller's agent within 48 hours of acceptance.
- The contract stated that failure to make the deposit constituted a breach, giving the seller the option to demand liquidated damages equal to the deposit amount, plus attorney's fees and costs.
- Rabin accepted the offer on the same day, April 11, 1986.
- Neither Frisch nor Blazas paid the required $5,500 deposit within the 48-hour period.
- More than five months later, on September 19, 1986, Frisch was diagnosed with organic brain syndrome.
Procedural Posture:
- Estelle Polmer Rabin sued Harry Frisch and Margaret S. Blazas in a Louisiana trial court for breach of a real estate purchase agreement.
- A default judgment was entered against Blazas.
- Following a bench trial on the claim against Frisch, the trial court found for Rabin and awarded her $12,450 in damages and fees, which included liquidated damages, separate breach of contract damages, and lost rent.
- Frisch, as appellant, appealed the trial court's judgment to the Court of Appeal of Louisiana, Fourth Circuit, with Rabin as the appellee.
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Issue:
Does a liquidated damages clause in a real estate purchase agreement, which provides for damages equal to the amount of the deposit, limit a seller's recovery to that stipulated amount and preclude an additional award for actual damages such as lost rent?
Opinions:
Majority - Armstrong, J. (as amended on rehearing)
Yes. A liquidated damages clause limits a seller's recovery to the stipulated amount, precluding additional recovery for actual damages. The contract provided Rabin the option to seek either liquidated damages equal to the deposit ($5,500) 'or' specific performance. By awarding both liquidated damages and separate damages for breach of contract and lost rent, the trial court improperly allowed Rabin to recover both. The purpose of a liquidated damages clause is to substitute a pre-agreed sum for actual damages; therefore, actual damages like lost rent may not be awarded on top of it. The contract did, however, explicitly allow for the recovery of attorney's fees and costs in addition to either remedy. Regarding Frisch's capacity defense, under Louisiana Civil Code art. 1925, he failed to prove both that he was deprived of reason at the time of contracting and that the other party knew or should have known of his incapacity. His medical diagnosis occurred five months after the agreement was signed, and his interactions with the real estate agent showed no signs of mental infirmity. Finally, upon rehearing, the court determined that the contractual provision for attorney's fees extends to fees incurred in defending the appeal, thus awarding an additional $1,500.
Dissenting in part - Plotkin, J.
No, regarding the initial denial of appellate attorney's fees. While concurring with the reduction of the damage award, this opinion dissents from the majority's original refusal to award attorney's fees for the appeal. The contract expressly states the purchaser is liable for attorney's fees. This obligation should cover all fees incurred to enforce the contract, including those for defending an appeal, regardless of whether the appeal was partially successful. The seller should not have to bear the cost of defending her rights on appeal when the underlying issue stemmed from the buyer's breach.
Dissenting in part - Armstrong, J. (on rehearing)
No, regarding the award of appellate attorney's fees on rehearing. An award of attorney's fees for defending an appeal is unwarranted where the appeal was largely successful. Because the appellant, Frisch, succeeded in having the trial court's erroneous damage award significantly reduced, he should not be penalized by having to pay the appellee's attorney's fees for an appeal that corrected the lower court's error.
Analysis:
This decision reinforces the legal principle that liquidated damages are a substitute for, not an addition to, actual damages. It clarifies that contractual remedies styled as alternatives (e.g., liquidated damages 'or' specific performance) are mutually exclusive. The ruling underscores that parties cannot 'double dip' by claiming both a pre-agreed liquidated sum and other compensatory damages from the same breach. The case also serves as a practical example of the high evidentiary burden required to rescind a contract for lack of mental capacity for a non-interdicted person, requiring proof of incapacity at the time of contracting and the other party's awareness of it.
