Karimi v. 401 North Wabash Venture, LLC, 952 N.E.2d 1278

Background

On September 25, 2003, Karimi and Kashani entered a purchase agreement for unit 46A (later 47A) and parking spaces at Trump International Hotel and Tower, with earnest money of $328,269.60 (15% of purchase price).
The anticipated closing was late 2008, later extended to May 15, 2009 due to financing; buyers failed to close on that date.
On July 6, 2009, defendants terminated the Purchase Agreement after the 20-day cure period, asserting purchaser breach and default.
Defendants retained the earnest money and earned interest as liquidated damages and later sold the unit to a third party for $2.5 million in November 2009.
Karimi and Kashani filed a seven-count first amended complaint seeking declaratory judgments, breach, unjust enrichment, conversion, and CFDBP Act claim; the trial court dismissed counts under section 2-615.
The appellate court affirmed the dismissal, holding the termination was proper and the liquidated damages provision enforceable, with dismissal of related counts proper.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether counts I-III, seeking declaratory relief, were proper given termination and sale	Karimi argues contract remained in effect; seeks declaration of rights.	Defendants contend the contract was terminated before sale; declaratory relief is improper for post-breach relief.	Counts I-III properly dismissed as breach of contract claims, not proper declaratory judgments.
Whether the liquidated damages clause (paragraph 12(a)) is enforceable or a penalty	Clause is unenforceable because it lacks a fixed sum and may be punitive.	Clause specifies a set amount (earnest money plus other fees) and is a valid liquidated damages provision.	Enforceable; 15% of purchase price as liquidated damages is reasonable at contracting and not a penalty.
Whether unjust enrichment claim is viable when a specific contract governs	Defendants unjustly retained funds despite no express contract governing the transaction.	Existence of a purchase agreement precludes unjust enrichment claim.	Dismissed; unjust enrichment inapplicable where a contract governs the relationship.
Whether conversion claim is viable for the earnest money and interest	Earnest money and interest were misappropriated by defendants.	Earnest money is tied to the contract and not property in possession; conversion not supported.	Dismissed; earnest money not a standalone identifiable chattel; not proper subject of conversion.
Whether the trial court properly dismissed the remaining breach/related claims	There were factual allegations supporting breach and related relief.	Allegations are conclusory or derivative of contract claims; no viable claim remains after dismissal.	Affirmed dismissal; Counts I-VI properly dismissed; the contract governs damages and remedy.

Key Cases Cited

Siegel v. Levy Organization Development Co., 182 Ill. App. 3d 859 (Ill. App. 2d Dist. 1989) (upheld liquidated damages where earnest money and extras were included)
Morris v. Flores, 174 Ill. App. 3d 504 (Ill. App. 2d Dist. 1988) (enforceable liquidated damages in real estate context)
Hamming v. Murphy, 83 Ill. App. 3d 1130 (Ill. App. 4th Dist. 1980) (installment contracts; it must be shown liquidated amount does not exceed fair rental value)
Maas v. First National Bank & Trust Co. of Barrington, 26 Ill. App. 3d 733 (Ill. App. 2d Dist. 1975) (liquidated damages upheld where not exceeding damages and agreed at contracting)
Grossinger Motorcorp, Inc. v. American National Bank & Trust Co., 240 Ill. App. 3d 737 (Ill. App. 2d Dist. 1992) (penalty for option to claim actual damages invalidates liquidated damages)
Catholic Charities of the Archdiocese of Chicago v. Thorpe, 318 Ill. App. 3d 304 (Ill. App. 1st Dist. 2000) (liquidated damages clause giving seller option to keep earnest money is unenforceable as penalty)
Weiss v. United States Fidelity & Guaranty Co., 300 Ill. 11 (1921) (upheld liquidated damages for delays in a remodeling contract when reasonable at contracting)
Newcastle Properties, Inc. v. Shalowitz, 221 Ill. App. 3d 716 (Ill. App. 2d Dist. 1991) (reasonableness of liquidated damages tied to contracting time and anticipated losses)
Penske Truck Leasing Co. v. Chemetco, Inc., 311 Ill. App. 3d 447 (Ill. App. 2d Dist. 2000) (windfall profits and dual computation of damages may render damages unreasonable)
Radloff v. Haase, 196 Ill. 365 (Ill. 1902) (historic precedent on liquidated damages vs. penalty; depends on ability to ascertain actual damages)
Jameson Realty Group v. Kostiner, 351 Ill. App. 3d 416 (Ill. App. 1st Dist. 2004) (reasonableness of liquidated damages depends on relation to potential losses at contracting)
Weiss v. United States Fidelity & Guaranty Co., 300 Ill. 11 (1921) (see above (duplicate entry listed for completeness))