61 A.3d 91
Md. Ct. Spec. App.2013Background
- Cuesport Properties sold Unit 4 to Critical Developments; seller to build a demising wall within 30 days at sole cost.
- Wall was completed on time but built without a building permit and violated county code.
- Critical Developments later had the wall modified to meet code; ~260 days elapsed from deadline to completion of modifications.
- $20,000 escrow was set aside for wall work and any liquidated damages; funds to be used for related costs.
- Trial court awarded Critical Developments $32,760 in liquidated damages plus $10,443.74 in attorneys’ fees; court treated the per‑diem as liquidated damages and acknowledged partial harmlessness of electrical delay.
- Electrical service was not timely completed and permit issues contributed to delays; occupancy permit for Unit 4 issued August 28, 2009.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liquidated damages vs. penalty | Cuesport argues the clause is a penalty. | Critical Developments contends it is lawful liquidated damages. | Valid liquidated damages clause; not a penalty. |
| Awarding damages under per‑diem clause | Damages for delay may be improper if the wall was completed within the period. | Court can award per‑diem liquidated damages; not duplicative of other losses. | Per‑diem damages upheld for 260 days. |
| Equitable considerations in damages | Equitable factors should reduce or negate some damages due to delay. | No duty to mitigate under Barrie School; damages are appropriate. | Trial court’s equitable considerations upheld; no error in damages. |
Key Cases Cited
- Traylor v. Grafton, 273 Md. 649, 332 A.2d 651 (Md. 1975) (defining liquidated damages and permissible constraints)
- Barrie School v. Patch, 401 Md. 497, 933 A.2d 382 (Md. 2007) (test for determining penalty vs. liquidated damages; reasonableness and proportionality)
- Janusz v. Gilliam, 404 Md. 524, 947 A.2d 560 (Md. 2008) (mutual mistake not grounds to rescind in sophisticated, arms-length deal)
- City of Boston v. New England Sales & Mfg. Corp., 386 Mass. 820, 438 N.E.2d 68 (Mass. 1982) (per diem damages limited to reasonable time to complete via substitute or owner’s efforts)
- Oregon State Highway Comm’n v. DeLong Corp., 9 Or. App. 550, 495 P.2d 1215 (Or. App. 1972) (context for per diem liquidated damages and completion timelines)