| Central Irrigation Supply v Putnam Country Club Assoc., LLC |
| 2008 NY Slip Op 10576 [57 AD3d 934] |
| December 30, 2008 |
| Appellate Division, Second Department |
| Central Irrigation Supply, Appellant, v Putnam CountryClub Associates, LLC, Respondent. |
—[*1] Welby, Brady & Greenblatt, LLP, White Plains, N.Y. (Alan D. Singer of counsel), forrespondent.
In an action to recover damages for breach of contract, in which the defendantcounterclaimed to recover liquidated damages under the parties' contract, the plaintiff appealsfrom a judgment of the Supreme Court, Putnam County (O'Rourke, J.), entered June 26, 2007,which, upon a decision of the same court dated June 8, 2007, made after a nonjury trial, is infavor of the defendant on the counterclaim and against it in the total sum of $63,429.75.
Ordered that the judgment is reversed, on the law, without costs or disbursements, thecounterclaim is dismissed, and the matter is remitted to the Supreme Court, Putnam County, forthe entry of an amended judgment in favor of the plaintiff and against the defendant in theprincipal sum of $11,104.27, plus statutory interest from May 26, 2000.
Pursuant to a contract dated March 8, 2000, the plaintiff agreed to install an irrigation systemat a golf course owned by the defendant. The contract provided that, if the system was not"installed and fully operational" by May 26, 2000 the plaintiff would be liable to the defendantfor liquidated damages in the sum of $200 for each day of delay. After recurrent problems withthe system, which necessitated frequent repairs and a modification of a major component, thesystem became fully operational in November 2002. By that time, the plaintiff had alreadycommenced this action to recover amounts allegedly due under the contract, and the defendanthad counterclaimed alleging breach of contract, seeking recovery under the liquidated damagesclause. After a nonjury trial, the Supreme Court found that the system did not become "fullyoperational" until November 19, 2002, 907 days after its scheduled completion. Consequently,under the liquidated damages provision, the defendant would be entitled to the sum of $181,400,less any amounts due the plaintiff. The Supreme Court, however, found that amount to beexcessive inasmuch as the liquidated damages clause did not take into account that the golfcourse was never required to be closed by reason of the delay, but [*2]was open, even though not at "optimal efficiency." Additionally, theclause did not reduce or eliminate the daily amount of liquidated damages on days when thecourse was closed due to the season or the weather. Consequently, the Supreme Court "fixe[d]liquidated damages" at $100 per day for a total of 500 days. The plaintiff appeals.
A contractual provision for liquidated damages will be upheld only if the amount fixed is areasonable measure of the probable actual loss in the event of a breach, and the actual losssuffered is impossible or difficult to determine with precision (see JMD Holding Corp. vCongress Fin. Corp., 4 NY3d 373, 380 [2005]; Evangelista v Ward, 308 AD2d 504,505 [2003]). If, however, the amount of actual damages that would be suffered upon a breach isreadily ascertainable when the contract is entered, or the amount fixed as liquidated damages isconspicuously disproportionate to the foreseeable losses, the liquidated damages provision isunenforceable as a penalty (see Bates Adv. USA, Inc. v 498 Seventh, LLC, 7 NY3d 115,120 [2006]). Where a court finds a liquidated damages provision enforceable, the measure ofdamages for a breach will be the sum fixed in the clause, no more, no less (see JMD HoldingCorp. v Congress Fin. Corp., 4 NY3d at 380; Zeer v Azulay, 50 AD3d 781, 785[2008]). Where, however, a liquidated damages provision is found to be an unenforceablepenalty, the recovery is limited to actual damages proven (see Bates Adv. USA, Inc. v 498Seventh, LLC, 7 NY3d at 120; Zeer v Azulay, 50 AD3d at 786; Jackson Hgts.Care Ctr., LLC v Bloch, 39 AD3d 477, 479 [2007]). Here, by fixing the amount of liquidateddamages at $50,000, less than one third of the amount that would have been due under theliquidated damages provision of the contract, the Supreme Court implicitly found that theliquidated damages clause did not constitute a reasonable measure of the probable actual lossand, therefore, amounted to a penalty. Consequently, it should not have enforced the liquidateddamages provision at all. As the defendant did not prove any actual damages, it was not entitledto any recovery for the plaintiff's alleged breach of contract.
Without any setoff for liquidated damages, the plaintiff is entitled to judgment in theprincipal sum of $11,104.27, plus statutory interest from May 26, 2000. That sum represents theamount due and owing on the contract.
The parties' remaining contentions either are without merit or need not be reached in light ofour determination. Skelos, J.P., Fisher, Dickerson and Belen, JJ., concur.