## Facts

- San Francisco Distribution Center, LLC (buyer) and Stonemason Partners, LP (seller) entered a January 2012 contract for the buyer to purchase commercial property in Miami Beach for $5.25 million.
- The contract required closing within 45 days of the January 16, 2012 effective date.
- The contract required a $400,000 deposit to be held in escrow (Wells Fargo). The buyer’s broker, Thomas Martino, also acted as the closing agent.
- The contract gave the seller an election of remedies if the buyer defaulted: (1) retain all deposits “paid or agreed to be paid” as liquidated damages and terminate the contract, or (2) seek specific performance.
- The contract also addressed broker compensation if the seller retained the deposit, requiring payment of a portion of forfeited deposits to the listing/cooperating brokers up to the brokerage fee.
- The buyer failed to close as required.
- The seller demanded the $400,000 deposit as liquidated damages, but the seller was told by Martino that the deposit had been returned to the buyer.
- The seller sued for breach of contract (and also sued Martino). The record indicated the buyer had actually paid only $100,000 of the $400,000 deposit required by the contract.
- The buyer admitted it did not close, but raised defenses: (1) the seller later sold the property for $200,000 more and therefore suffered no damages; (2) the liquidated-damages clause was unconscionable and unreasonable; and (3) the clause was an unenforceable penalty because it allowed the seller to choose between liquidated damages and specific performance.
- The trial court entered final summary judgment for the seller on the breach-of-contract claim, awarding $400,000 plus interest, attorneys’ fees, and costs.
- The buyer appealed to the Florida Third District Court of Appeal.

## Issues

1. Whether a liquidated-damages clause becomes an unenforceable penalty when it permits the seller to elect between retaining the buyer’s deposit as liquidated damages or seeking specific performance.
2. Whether a $400,000 deposit (about 7.6% of a $5.25 million purchase price) is so excessive or unreasonable that it is unenforceable as liquidated damages.
3. Whether the seller’s later resale of the property for a higher price defeats or reduces the seller’s right to recover the contractually specified liquidated damages after the buyer’s default.

## Decision

- The Third District Court of Appeal affirmed the final summary judgment in favor of the seller.
- The court upheld enforcement of the contract’s liquidated-damages provision and the award of $400,000 (plus interest, fees, and costs) based on the buyer’s failure to close.
- The court rejected the buyer’s argument that the clause was an unenforceable penalty merely because the contract also allowed the seller to seek specific performance.
- The court rejected the buyer’s argument that the seller’s later resale at a higher price eliminated the seller’s right to liquidated damages.
- The court found no basis to invalidate the liquidated-damages amount as unconscionable or unreasonable under the circumstances presented.

## Legal Principles

- A liquidated-damages provision is not invalid solely because the non-breaching party may elect specific performance as an alternative remedy; specific performance is an equitable remedy and is not the same as an option to recover actual damages in addition to liquidated damages.
- Under Florida law, a forfeited deposit set at less than 10% of the purchase price in a real-estate contract is generally treated as a reasonable liquidated-damages amount rather than an unconscionable penalty (as applied to the contract and amount at issue here).
- The enforceability of liquidated damages is evaluated based on the contract and the parties’ allocation of risk at the time of contracting, not by looking back to later market movements or a subsequent resale price.
- When the material facts are undisputed (including an admitted failure to close) and the liquidated-damages clause is enforceable as a matter of law, summary judgment awarding the contractual liquidated damages is proper.

## Conclusion

San Francisco Distribution Center v. Stonemason Partners, LP holds that a seller may enforce a real-estate contract’s liquidated-damages deposit after the buyer fails to close even if the contract also permits the seller to seek specific performance and even if the seller later resells the property for more than the original contract price; the Third District affirmed summary judgment awarding the seller the $400,000 deposit as liquidated damages plus interest, fees, and costs.


San Francisco Distribution Center v. Stonemason Partners, LP, 183 So. 3d 391 (2014)