## Facts

- A developer recorded CC&Rs for an Anchorage subdivision, including a covenant requiring completion of dwelling construction within one year to protect subdivision aesthetics.
- The CC&Rs included a liquidated damages provision imposing a $25-per-day charge for any CC&R violation.
- A lot owner began construction on September 20, 1999, but had not completed it by October 31, 2000.
- The developer provided written notice that the owner was in violation of the one-year completion covenant.
- The developer sued to compel completion of construction and to recover liquidated damages under the $25-per-day clause.
- During the litigation, the lot was sold through judicial foreclosure and later conveyed to another purchaser, who was substituted as the real party in interest.

## Issues

1. Whether a flat-rate, per diem liquidated damages clause in subdivision CC&Rs is enforceable for delayed construction completion where the asserted harm is primarily aesthetic.
2. Whether a $25-per-day amount constituted a reasonable forecast of likely damages or an unenforceable penalty.

## Decision

- The Alaska Supreme Court reversed the summary judgment ruling that invalidated the liquidated damages clause.
- The court held the $25-per-day liquidated damages provision was enforceable under the circumstances.
- The court concluded actual damages from aesthetic harm and delay were difficult to ascertain.
- The court determined the per diem structure reasonably tracked the duration of the harm and did not operate as a penalty.
- The court explained that prior precedent did not categorically invalidate flat-rate per diem provisions; enforceability turns on the standard liquidated-damages test.

## Legal Principles

- Liquidated damages are enforceable when (1) actual damages would be difficult to ascertain at the time of contracting and (2) the stipulated amount is a reasonable forecast of probable damages.
- A liquidated damages clause is unenforceable if it functions as a penalty rather than a genuine pre-estimate of loss.
- Per diem liquidated damages provisions are not invalid per se; they may be reasonable when the extent of harm increases with the duration of the breach.
- Aesthetic and related delay harms in a residential subdivision context may be sufficiently uncertain and hard to quantify to support liquidated damages.

## Conclusion

The court enforced the $25-per-day CC&R liquidated damages clause for failure to complete construction within one year, holding that aesthetic harm was difficult to measure and the daily amount reasonably estimated increasing damage over time rather than imposing a penalty.


Carr-Gottstein Props., Ltd. P'ship v. Benedict, 72 P.3d 308 (Alaska 2003)