163 Conn.App. 122
Conn. App. Ct.2016Background
- In October 2012 plaintiff Tsiropoulos signed a written contract to buy defendant Radigan’s Westport house for $716,000, tendering a $30,000 deposit and expressly waiving any mortgage/financing contingency.
- Plaintiff was unable to obtain acceptable financing and informed defendant in December 2012 that he could not close; he later offered to buy at a lower price.
- Defendant resold the property later in December 2012 for a slightly higher price and refused to return the $30,000 deposit, invoking the contract’s liquidated-damages clause.
- Plaintiff sued seeking return of the deposit (breach of contract and unjust enrichment); defendant counterclaimed to retain the deposit and recover attorneys’ fees.
- Trial court found the liquidated-damages clause enforceable, determined plaintiff’s breach was willful (he voluntarily waived financing contingency and sought high leverage), and awarded defendant retention of the $30,000 plus fees.
- On appeal, plaintiff argued the clause was an unenforceable penalty, that defendant suffered no damages, and that his breach was not willful; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of liquidated-damages clause | Clause is a penalty and unenforceable because defendant suffered no actual damages | Clause meets test for liquidated damages; deposit (4.2%) is presumptively reasonable and plaintiff failed to prove lack of actual damages | Clause enforceable; plaintiff failed to meet burden to show it was penalty |
| Burden of proof on damages | Defendant suffered no damages because she quickly resold at similar/higher price | Seller need not show post-breach market rise; plaintiff must show resale made seller whole at time of breach | Plaintiff did not show defendant was unjustly enriched or made whole; court’s finding supported by record |
| Willfulness of plaintiff’s breach | Failure to obtain financing excused performance; breach not willful | Plaintiff voluntarily waived finance contingency and pursued highly leveraged financing; risk was deliberate | Breach was willful because plaintiff knowingly assumed risk by waiving mortgage contingency |
| Right to restitution/unjust enrichment | Plaintiff entitled to return of deposit if breach not willful and seller not damaged | Plaintiff’s breach was willful and he failed to prove seller’s damages were nil; unjust enrichment claim fails | Unjust enrichment/restoration denied; deposit retained due to willful breach and insufficient proof of seller’s lack of loss |
Key Cases Cited
- Berger v. Shanahan, 142 Conn. 726 (liquidated damages enforceable when intended as reasonable pre-estimate, not penalty)
- Vines v. Orchard Hills, Inc., 181 Conn. 501 (purchaser whose breach is not willful may recover deposits; 10% rule as presumptive benchmark)
- American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296 (three-part test for distinguishing liquidated damages from penalties)
- Norwalk Door Closer Co. v. Eagle Lock & Screw Co., 153 Conn. 681 (liquidated damages not enforced where nonbreaching party sustained no damages)
- Stabenau v. Cairelli, 22 Conn. App. 578 (factors to assess whether breach is willful or excusable)
- Blumenthal v. Kimber Mfg., Inc., 265 Conn. 1 (court may presume proper application of law to facts when party fails to request articulation of findings)