FOR PUBLICATION

ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:

THOMAS E. DENSFORD GEOFFREY M. GRODNER

ALICIA C. SANDERS KENDRA G. GJERDINGEN

Bauer & Densford Mallor Grodner, LLP

Bloomington, Indiana Bloomington, Indiana

IN THE

COURT OF APPEALS OF INDIANA

DEAN V. KRUSE FOUNDATION, INC., )

DEAN KRUSE and KRUSE INTERNATIONAL, )

)

Appellants-Defendants, )

)

vs. ) No. 59A05-1201-CT-37

)

JERRY W. GATES, )

)

Appellee-Plaintiff. )

APPEAL FROM THE ORANGE CIRCUIT COURT

The Honorable Roger D. Davis, Special Judge

Cause No. 59C01-0610-CT-312

August 7, 2012

OPINION - FOR PUBLICATION

RILEY, Judge
2

STATEMENT OF THE CASE

Appellants-Defendants/Counterclaim Plaintiffs, Dean V. Kruse Foundation

(Foundation), Dean V. Kruse (Kruse), and Kruse International (collectively, the Kruse 

Parties), appeal the trial court’s judgment against Appellee-Plaintiff/Counterclaim 

Defendant, Jerry W. Gates (Gates).

We reverse and remand with instructions.

ISSUE

The Kruse Parties raise two issues on appeal, which we consolidate as the 

following issue: Whether the trial court erred when it interpreted the parties’ agreement 

to contain a liquidated damages clause.

FACTS AND PROCEDURAL HISTORY

The Foundation is a charitable organization operating a World War II and 

automobile museum in Auburn, Indiana. In 2003, Kimball International donated its 

furniture factory, a 42.79-acre parcel of real estate with a 300,000 square foot 

manufacturing facility, located in West Baden, Indiana, to the Foundation. Although the 

facility housed at least one tenant, the high cost of maintaining the property adversely 

impacted the Foundation. The Foundation encountered a number of difficulties, 

including the payment of property taxes, utility bills, and insurance as well as theft and 

vandalism. The Foundation continued to lose money on the property, and had to take out 

loans and requesting advances from a tenant to pay expenses. 
3

Beginning in 2004 or 2005, the Foundation made a number of attempts to sell the 

property. Although the property was sold once, the Foundation later took back the 

property because the buyer failed to make payments. In March 2006, the Foundation 

retained Colliers Turley, Martin, Tucker (Colliers), a real estate broker, to list and market

the property. Colliers conducted a market survey for the property, providing three values 

for the property based on three classifications of potential buyers. The first tier of 

potential buyers included those who would make the highest and best use of the property, 

i.e., as an income producing property, resulting in a sales range of $4.5 million to $5.2 

million. The second tier included those buyers who would put the property to secondary 

uses. The value range in this case was between $3.5 million and $4.5 million. The third 

tier of potential buyers consisted of speculators for whom the property had a value range 

of $2 million to $3.5 million. Based on these values, Colliers generated an asking price 

of $5,750,000 for the property. 

Thereafter, Colliers was unsuccessful in locating a buyer. Kruse, an auctioneer

and licensed real estate broker, decided to auction the property. Kruse believed the 

property to be worth five million dollars given its size, which even then was a “junk 

price.” (Transcript p. 129). Kruse International and Colliers conducted marketing efforts 

advertising the auction.

On July 12, 2006, the property was auctioned on site. The auction was conducted 

as a final, rather than as a reserve, auction. Each bidder received a brochure, disclosures, 

a bidder’s agreement, and the Purchase Agreement, which was a standardized agreement 
4

from the Indiana Realtors Association. The terms of the Purchase Agreement were 

published in the packet, including the amount of earnest money and the date of closing. 

According to Kruse, “[e]very single bidder” had to sign the documents in order to qualify 

as a bidder. (Tr. p. 122). Seven to nine bidders registered and four to six bidders 

participated, including Gates. Gates was a professional and experienced real estate 

developer, whom Kruse had known and served with on the Board of the Indiana 

Association of Realtors for many years. At the end of the bidding process, Gates was the 

high bidder with a bid of $4 million, which, with a 5% buyer’s premium, resulted in a

purchase offer of $4,200,000. Thereafter, both Gates and Kruse filled out the blank 

portions of the Purchase Agreement. 

The Purchase Agreement provided, in relevant part, as follows:

[Buyer] agrees to pay therefore the sum of Four Million Dollars 

($4,000,000) on the following terms: Cash At Closing Plus 5% Buyers 

Premium[.] One Hundred Thousand Dollars ($100,000) of said purchase 

price is hereby deposited as earnest money with Kruse Real Estate[,] same 

to be refunded if the above offer is not accepted on or before today or if the 

title to the above property is found defective and said defects cannot be 

remedied within a reasonable time. However, if the buyer fails to complete 

the purchase within a reasonable time due to no fault of the seller, then the 

earnest money deposited is forfeited, and seller may sue for specific

performance. 

(Appellant’s App. p. 27). 

On August 9, 2006, Gates informed the Kruse Parties in writing that he was 

terminating the Purchase Agreement. Prior to that, Kruse spoke with Gates regarding 

problems with the property’s title and condition. Gates expressed his reluctance to handle 
5

a large project. Kruse threatened specific performance of the Purchase Agreement, which 

Gates rebuffed. 

Subsequently, Kruse and Colliers contacted the other bidders and other potential 

buyers of the property. Through the combined efforts of Colliers and the Kruse Parties, 

over a thousand potential buyers, ranging from institutional to individuals, were solicited 

for offers. In the end, Colliers received an offer for $5 million, which fell through for 

lack of financing; an offer for $1.1 million, which was rejected for being too low; and one 

offer of $2 million, to which Colliers and the Kruse Parties made a counter-offer of $3.5 

million. The $1.1 million and $2 million offers were both made in September 2006, and 

written on the same form as the Purchase Agreement. Ultimately, the Kruse Parties and 

French Lick-West Baden Development Park, the latter offeror, agreed upon a sales price 

of $2,350,000 and executed a purchase agreement. 

On October 4, 2006, Gates filed suit against the Kruse Parties and Colliers for 

breach of contract, fraud, and conversion. On November 27, 2006, The Kruse Parties 

filed a counterclaim for breach of contract and slander of title. On February 27, 2009, 

Gates moved for partial summary judgment on the breach of contract claims. On July 10, 

2009, the Kruse parties filed their response and cross-motion for partial summary 

judgment on breach of contract, fraud, and conversion. On December 21, 2009, the trial 

court granted summary judgment in Gates’ favor and the Kruse Parties were ordered to 

return the earnest money with interest. 
6

The Kruse Parties appealed. In Dean V. Kruse Foundation v. Gates, 932 N.E.2d 

763 (Ind. Ct. App. 2010), trans. denied (Kruse I), we reversed the trial court and 

remanded with instructions to enter summary judgment in favor of the Kruse Parties on 

Gates’ breach of contract claim as well as on the Kruse Parties’ breach of contract, fraud, 

and conversion claims. Further, we instructed the trial court to hold a hearing on the 

appropriate amount of damages. On August 5, 2011, Gates’ guardians were substituted 

by joint stipulation, and on August 19, 2011, the trial court entered a summary judgment 

order in favor of the Kruse Parties.

On December 2, 2011, the trial court held a hearing on damages. The Kruse 

Parties sought damages in the amount of $2,468,794. This amount was based on the 

difference between the purchase price in the Purchase Agreement ($4 million) and the 

purchase price from the subsequent sale of the property to French Lick-West Baden 

Development LLC ($2,350,000). In addition, the Kruse Parties sought the buyer’s 

premium of $200,000 and prejudgment interest in the amount of $718,794. The amount 

of $100,000, the earnest money deposit, was credited against the foregoing. 

On December 20, 2011, the parties filed their Joint Request for Court to Enter 

Judgment. On January 3, 2012, the trial court issued its Entry Determining Damages as 

Required by the Court of Appeals. The trial court awarded damages to the Kruse Parties 

in the amount of $100,000 based on its conclusion that the Purchase Agreement 

contained a liquidated damages provision coupled with an option for the Kruse Parties to 
7

pursue specific performance against Gates. In particular, the trial court concluded as 

follows.

In this case the amount of $100,000.00 is not grossly excessive or unjust 

considering the four million dollar purchase price. The trial court finds the 

evidence as to the value of the property was uncertain. The [c]ourt also 

finds the property in question may have been sold for more if a longer 

period of time were available to market it. Mr. [Luke] Wessel [(Wessel) of 

Colliers] testified the value of the property was $3.5 million after the sale 

fell through with Gates. Therefore, the damages were uncertain. Any 

certainty arises solely from the sale of the property to a different buyer.

Regarding the evaluation of whether the $100,000.00 provision is a 

liquidated damages clause or a penalty, the trial court notes the Kruse 

[P]arties would be required to mitigate damages if they were entitled to 

claim legal damages. The trial court heard evidence at trial for damages 

from Mr. Wessel and the evidence was far from clear regarding the value of 

the property before the sale to Gates and the value after the sale fell 

through. 

Mr. Wessel testified as to value before the sale to Gates and gave his 

opinion of the value in ranges. For highest and best use the range was $4.5 

to $5.2 million. For secondary use the range was $3.5 to $4.5 million for 

speculator price the range was $2.0 to $3.5 million. Mr. Wessel testified 

that the two top tiers (other than the speculator price) would be 90% of 

prospective buyers. Mr. Wessel’s opinion of value of the property in 

September of 2006 after the sale fell through was $3.5 million. Mr. Kruse 

had been initially advised the property would bring $4-5 million and it was 

listed for $5.75 million. The uncertainty regarding the value of the property 

and what it could be sold for within a certain time frame supports a 

conclusion that the ease of determining actual damages in this case is not 

what it may seem on the surface.

The trial court finds the provisions in the [P]urchase [A]greement prepared

by the Kruse Parties to be unambiguous regarding what was to happen in 

the event of a breach by the purchaser. The Seller “may sue for specific 

performance[.”] The Kruse [P]arties elected not to pursue specific 

performance. Also, the Seller got to keep the $100,000.00. It was 

“forfeited[.”] Nothing more was provided in the way of remedies for the 

purchaser’s breach of the contract prepared by the Kruse Parties and the 

document had an integration clause that it contained “all the terms and 
8

conditions agreed upon” and there were no others “not stated in this 

instrument[.”] The court should give unambiguous liquidation clauses

“force and effect[.”] [See Beck v. Mason, 580 N.E.2d 290, 294 Ind. Ct. 

App. 1991)].

The trial court finds and concludes the $100,000.00 provision in the 

[P]urchase [A]greement prepared by the Kruse Parties was a liquidated 

damages clause and the Kruse Parties chose not to pursue specific 

performance. The [P]urchase [A]greement did not provide for any further 

remedies and the [P]urchase [A]greement contained all of the terms, 

conditions, and agreement of the parties according to the language of the 

[P]urchase [A]greement. The [P]urchase [A]greement was prepared by the 

Kruse Parties. The Kruse Parties were sophisticated and experienced in 

commercial real estate transactions. Therefore since the Kruse parities have 

already received the $100,000.00 the trial court finds they are not entitled to 

anything further. The trial court finds the Kruse Parties damages to be 

$100,000.00 pursuant to the [P]urchase [A]greement prepared by the Kruse 

Parties. 

(Appellant’s App. pp. 9-12).

The Kruse Parties now appeal. Additional facts will be provided as necessary.

DISCUSSION AND DECISION

I. Standard of Review

Here, the parties jointly requested an entry of judgment, and the trial court issued 

its Entry Determining Damages as Required by the Court of Appeals, which contains 

findings of fact and conclusions of law. Ind. Trial Rule 52(A) governs the trial court’s 

use of findings and conclusions when matters are adjudicated at a trial by the court 

without a jury. Pursuant to T.R. 52(A), we will set aside the judgment only upon a 

showing that the judgment is clearly erroneous. Ream v. Yankee Park Homeowner’s 

Ass’n, Inc., 915 N.E.2d 536, 540 (Ind. Ct. App. 2009), trans. denied. In determining 

whether a judgment is clearly erroneous, we will neither reweigh the evidence nor 
9

determine the credibility of witnesses, but will consider only the evidence supporting the 

judgment and the reasonable inferences to be drawn from that evidence. Id. Where, as 

here, the trial court has issued written findings and conclusions, we engage in a twotiered review, determining first, whether the evidence supports the findings and second, 

whether the findings support the judgment. Id. In deference to the trial court's proximity 

to the issues, we will disturb the judgment of the trial court only where there is no 

evidence supporting the findings or the findings fail to support the judgment. Id. 

However, when a question of law is dispositive, we owe no deference to the trial court 

and review the issue de novo. Id.

The issue before us is whether the forfeiture provision in the Purchase Agreement 

constitutes liquidated damages or an unenforceable penalty. “The question whether a 

liquidated damages clause is valid, or whether it constitutes a penalty, is a pure question 

of law for the court.” Gershin v. Demming, 685 N.E.2d 1125, 1128 (Ind. Ct. App. 1997). 

The trial court interpreted the Purchase Agreement to contain a liquidated damages clause

thereby limiting the Kruse Parties’ damages to the earnest money deposit. 

On appeal, the Kruse Parties contend that the forfeited earnest money deposit

constituted a penalty, rather than liquidated damages. In support of this interpretation the 

Kruse Parties assert that (1) the parties intended that the earnest money was to secure 

performance of Gates’ obligation to purchase the property; (2) their damages were 

ascertainable; and (3) the language of the Purchase Agreement did not limit their 

remedies for breach solely to retention of the earnest money and specific performance.
10

Arguing in support of the trial court’s ruling, Gates contends that the forfeited 

earnest money deposit represents liquidated damages as evidenced by (1) our opinion in 

Kruse I, which Gates contends determined the forfeiture provision to be a liquidated 

damages clause; (2) the Kruse Parties’ refusal to return the earnest money following 

breach; and (3) interpretation of the forfeited earnest money as an unenforceable penalty 

would render other provisions of the Purchase Agreement meaningless.

II. Law of the Case

We first address Gates’ argument that because this court’s opinion in Kruse I

impliedly found the forfeited earnest money to be liquidated damages, the law of the case 

doctrine precludes further consideration of this issue. Specifically, because this court 

recognized that the earnest money was forfeited under the Purchase Agreement, Gates 

contends that this court by implication must have first concluded that the forfeiture 

provision equated to an enforceable liquidated damages provision. As a result, Gates 

argues that the issue has been decided and the law of the case precludes our further 

consideration of whether the forfeited earnest money constitutes liquidated damages or a 

penalty. 

The law of the case doctrine provides that an appellate court determination of a 

legal issue is binding on the trial court and this court in any subsequent appeal in the 

same case and involving the same facts. In re Guardianship of Stalker, 953 N.E.2d 1094, 

1101-02 (Ind. Ct. App. 2011). The purpose of the doctrine is to minimize unnecessary 

relitigation of legal issues once they have been resolved by an appellate court. Id. at 
11

1102. All issues decided directly or by implication in a prior decision are binding in all 

further portions of the same case. Id. However, we also note that the law of the case 

doctrine is a discretionary tool. Id. To invoke this doctrine, the matters decided in the 

earlier appeal must clearly appear to be the only possible construction of an opinion. Id. 

Thus, questions not conclusively decided in the earlier appeal do not become the law of 

the case. Id. Moreover, statements that are not necessary in the determination of the 

issues presented are dicta, are not binding, and do not become the law of the case. Id.

We find that the law of the case doctrine does not apply for the following reasons. 

First, Kruse I does not analyze whether the forfeiture clause at issue is a liquidated 

damages clause; it merely noted that under the express terms of Purchase Agreement the 

earnest money is forfeited. Kruse I, 932 N.E.2d at 767, 769. Second, the issues before us 

in Kruse I were expressly limited to those raised by the parties in their respective motions 

for summary judgment. Those included 1) whether either party breached the Purchase 

Agreement; 2) whether the Kruse Parties committed fraud; and 3) whether the Kruse 

Parties’ retention of the earnest money constituted conversion. See Kruse I, 932 N.E.2d 

at 767-69. For the third issue, this court reasoned that Gates could not show that the 

Kruse Parties were “aware that there was a high probability that [their] control over the 

property was unauthorized,” since retention of the earnest money “was expressly allowed 

under the contract in the event of the purchaser’s breach.” Id. at 769. We therefore 

found that Kruse was “contractually entitled to keep the earnest money when Gates 

refused to close the sale.” Id. 
12

Gates’ argument assumes that retention of earnest money forecloses any other 

monetary remedy. If anything, Kruse I would seem to imply that the provision at issue 

was a penalty as evidenced by this court’s remand for consideration of the damages 

issues. 

In their counterclaim, the Kruse Parties request “all damages incurred as a 

result of the breach ... including all transaction costs, auction fees, buyer 

premiums, realtor commissions, costs of collection and reasonable attorney 

fees, and for all other proper relief. Because the record before us does not 

include this information, we reverse and remand for a determination of 

damages. 

Id. at 768 (internal citations omitted). In light of the foregoing, we find that the issue was 

not decided directly or by implication. Therefore, the law of the case doctrine does not 

preclude our subsequent determination.1 

III. Liquidated Damages

A liquidated damages clause provides for the forfeiture of a stated sum of money 

upon a breach of contract without proof of damages. Rogers v. Lockard, 767 N.E.2d 982, 

990 (Ind. Ct. App. 2002). Liquidated damages clauses are generally enforceable where 

the nature of the agreement is such that damages for breach would be uncertain, difficult, 

or impossible to ascertain. Id. 

 

1 Gates also argues that the Kruse Parties impliedly argued that the earnest money was liquidated 

damages in Kruse I and to assert the opposite now is incongruous with their prior position. However, the 

opinion in Kruse I contains no mention that the Kruse Parties asserted that the forfeited earnest money 

constituted liquidated damages, but merely mentions that the Kruse Parties sought damages for Gates’ 

breach. 
13

While liquidated damages clauses are ordinarily enforceable, contractual 

provisions constituting penalties are not. Id. at 991. The distinction between a penalty 

provision and one for liquidated damages is that a penalty is imposed to secure 

performance of the contract and liquidated damages are to be paid in lieu of performance. 

Gershin, 685 N.E.2d at 1128. To determine whether a stipulated sum payable upon 

breach of contract constitutes liquidated damages or a penalty, the facts, the intention of 

the parties, and the reasonableness of the stipulation under the circumstances of the case 

are all to be considered. Id. The use of the words “damages,” “penalty,” “forfeiture,” 

and “liquidated damages” are not conclusive, but should be considered in connection 

with other provisions in the contract to determine the nature of the provisions. Rogers, 

767 N.E.2d at 991. However, despite the plethora of abstract tests and criteria for the 

determination of whether a provision is one for a penalty or liquidated damages, there are 

no hard and fast guidelines to follow. Id. 

A. Purchase Agreement

Here, the Purchase Agreement does not label the forfeited earnest money as 

liquidated damages. Instead, the Purchase Agreement only provides that the earnest 

money is part of the purchase price, forfeitable upon breach by Gates. The parties cite to 

three cases to identify relevant characteristics analogous to the kind of contractual 

provision involved in this case. However, only one of these cases involves a contractual 

provision not expressly referred to as liquidated damages and none address a sale 

conducted in the manner as was done in this case. 
14

In Mandel v. Owens, 330 N.E.2d 362, 363 (Ind. Ct. App. 1975), trans. denied, we 

considered a provision in a residential housing purchase agreement that called for 

forfeiture of earnest money in the event of the purchaser’s breach. The purchaser failed 

to complete the transaction and the seller brought suit to collect its damages. Id. The 

agreement provided that the earnest money constituted part of the purchase price but was 

otherwise silent on whether the earnest money was liquidated damages. Id. at 366. The 

court could not determine from the language whether the forfeiture provision constituted 

liquidated damages or a penalty. Id. Relying upon the presumptions that “a lump sum 

named by the parties to a contract is a penalty rather than liquidated damages” and that 

ambiguities in the contract must be construed against the drafter, the court ultimately 

concluded the provision was an unenforceable penalty. Id. 

In Rogers v. Lockard, 767 N.E.2d 982 (Ind. Ct. App. 2002) and Beck v. Mason, 

580 N.E.2d 290 (Ind. Ct. App. 1991), the court reviewed contractual provisions expressly 

cast as liquidated damages. Beck also involved the sale of residential real estate, with the 

purchaser providing a $1,000 deposit on the property. Id. at 291. The purchase 

agreement explicitly labeled the deposit as “liquidated damages and not as a penalty or 

forfeiture.” Id. The purchasers did not obtain financing and requested return of the 

deposit. Id. The seller kept the deposit and sued for actual damages, claiming that the 

deposit, even as liquidated damages, did not preclude recovery of their actual damages. 

Id. Though concluding that a liquidated damages clause does not necessarily bar 

additional damages, the court held that the provision at issue reflected the parties’ intent 
15

that the deposit constituted liquidated damages because of its express labeling as such. 

Id. at 293. 

In Rogers, the court considered a provision that expressly labeled earnest money

as liquidated damages, but also permitted the sellers to seek their legal and equitable 

remedies. Rogers, 767 N.E.2d at 989. In its interpretation of a residential real estate 

contract, the court compared its provision to that appearing in Mandel and Beck. Id. at 

991-92. It distinguished Beck by concluding that the addition of the sellers’ right to seek 

equitable and legal remedies rendered an interpretation of the provision as a liquidated 

damages clause inconsistent. Id. at 991. As a result, the court concluded that the 

provision operated as punishment for the purchaser’s breach and “not as an estimation of 

the actual damages.” Id. at 992.

Applying these precedents to the case at bar, we find that the provision before us 

indicates an intent to penalize the purchaser for a breach rather than an intent to 

compensate the seller in the event of breach. The earnest money deposit is clearly 

specified as partial payment of the purchase price, suggesting that the earnest money was 

not paid in lieu of performance, but rather as compulsion for the purchaser to complete 

his purchase of the property following the auction. Although there is no mention of 

forfeiture as a penalty, the provision is also not labeled as liquidated damages. Further, 

the Purchase Agreement provides that the remedy of specific performance may be 

available to the seller in the event of default, suggesting that there is no ability for the 

purchaser to simply ‘walk away’ in the event of his breach. These features arguably 
16

favor interpretation of the provision as a penalty rather than as one providing for 

liquidated damages. 

Support for this interpretation also emerges from the facts and circumstances of 

the transaction itself. Mandle, Beck, and Rogers all involved residential real estate 

purchases between individuals. The case at bar involves an auction of commercial real 

estate to the highest bidder. The Foundation auctioned the property in the face of 

unsustainable maintenance costs and failed attempts to sell the property. Kruse believed

the property to be worth five million dollars based on its size. As the trial court found, 

“both parties to the [P]urchase [A]greement were sophisticated individuals with extensive 

experience in commercial real estate transactions for decades.” (Appellant’s App. p. 9). 

The contract used was a form agreement from the Indiana Association of Realtors and 

both Kruse and Gates had been board members of said association. Kruse testified that 

all bidders were informed of the required earnest money amount. Kruse also stated that 

the earnest money was used to pre-qualify bidders for participation in the auction. Kruse 

stood ready to perform his part of the bargain and, even without a breach, would have 

been entitled to retain the earnest money, applying to part of the purchase price under the 

express terms of the Purchase Agreement. This suggests that the earnest money was not 

intended to be taken in lieu of purchase. Thus, the facts and circumstances point to an 

interpretation of the provision as compulsion for the purchaser to consummate the 

transaction, rather than a reasonable forecast of the damages to be paid in lieu of 

performance. 
17

B. Additional Factors

We consider two additional factors to determine whether a provision constitutes 

liquidated damages or a penalty. We consider the proportion of the amount claimed to be 

liquidated damages with the amount of the loss likely to occur in the event of breach. 

Gershin, 685 N.E.2d at 1128. We also consider whether the damages were certain or 

ascertainable in the event of breach. See Rogers, 767 N.E.2d at 992-93.

First, a party seeking to enforce a liquidated damages provision must demonstrate 

some proportionality between the loss and the sum established as liquidated damages. 

Harbours Condominium Ass’n , Inc. v. Hudson, 852 N.E.2d 985, 993 (Ind. Ct. App. 

2006). If the sum is not greatly disproportionate to the loss likely to occur or the loss 

sought to be avoided, the provision will be accepted as a liquidated damages clause and 

not as a penalty. Gershin, 685 N.E.2d at 1128. However, if the sum sought to be fixed is 

grossly disproportionate to the loss which may result from the breach, courts will treat the 

sum as a penalty rather than as liquidated damages. Id. 

Here, the trial court found that the earnest money of $100,000 represented 2.5% of 

the purchase price. Citing Mandle, the trial court concluded that 2.5% of the purchase 

price in this case was not grossly excessive or unjust because the purchase agreement in 

Mandle specified an earnest money deposit of 1% of the purchase price. However, Kruse 

testified that the amount of the earnest money deposit was known to bidders beforehand

in order to pre-qualify them for participation at the auction. Presumably, neither the 

parties nor the other bidders would know what proportion the earnest money would bear 
18

to the winning bid. We therefore do not find the proportion of the forfeited amount to the 

sales price to be dispositive.

Next, we turn to trial court’s determination that damages in the event of breach 

were uncertain, except as determined by the sales price later received by the Kruse 

Parties. The trial court concluded that evidence of the property’s value was uncertain 

because of the different market values for the property provided by Wessel. Wessel 

testified to Colliers’ appraisal of the property based on multiple uses, with value ranges 

listed for each type of potential buyer – up to $5.2 million for an investor using the 

property for income purposes and $2 million for speculators. Upon Gates’ breach, 

Colliers noted that the property was thereafter tainted: potential buyers would learn of 

Gates’ refusal to purchase and being inquisitive as to why Gates refused to consummate 

the transaction, would therefore be reluctant to purchase the property, resulting in lower 

offers. 

Wessel was equivocal on the approximate percentage of potential buyers per 

category and insisted on the original asking price of $5.6 million because he was without 

instructions to offer less following Gates’ breach. However, Wessel testified that he 

believed the fair market value of the property at the time of the breach to be $3.5 million, 

which represented the Kruse Parties’ counter-offer to the eventual buyer of the property 

following its sale in October 2008. Finally, Wessel offered his opinion that the Kruse 

Parties may have been able to receive more for the property if they had more time to 

market the property. Based on this testimony, the trial court concluded “[t]he uncertainty 
19

regarding the value of the property and what it could be sold for within a certain time 

frame supports a conclusion that the ease of determining actual damages in this case is 

not what it may seem on the surface.” (Appellant’s App. p. 11).

We cannot agree with the trial court that evidence of the property’s value was

uncertain. “[I]n most real estate purchase agreements, a measure of damages should be 

readily ascertainable.” Rogers, 767 N.E.2d at 990, fn. 6. The measure of damages in a 

breach of real estate contract is the difference between the sale price of the property to be 

sold and the fair market value of the property at the time of breach. Showalter, Inc. v. 

Smith, 629 N.E.2d 272, 275 (Ind. Ct. App. 1994), abrogated on other grounds by 

Mitchell v. Mitchell, 695 N.E.2d 920 (Ind. 1998). The price paid by a subsequent 

purchaser following the breach may also be admissible as evidence of the property’s fair 

market value. See id. 

Here, there was sufficient evidence for the trial court to determine the fair market 

value of the property at the time of breach. Wessel testified to his opinion of fair market 

value at the time of breach, $3.5 million. Approximately two months following the 

breach, by October 2008, the Kruse Parties sold the property for $2.35 million. This 

evidence was uncontested at the hearing. Further, we note that the lapse of time between 

the breach and the date of the subsequent sale does not necessarily render the foregoing 

amounts “unsuitable for determining the fair market value of the property at the time of 

the breach.” Showalter, 629 N.E.2d at 275. Accordingly, because the Kruse Parties 

provided sufficient evidence to allow the trial court to determine the fair market value of 
20

the property following Gates’ breach, we find that the trial court erred by concluding that 

damages were uncertain. Cf. Patel v. United Inns, Inc., 887 N.E.2d 139, 150-51 (Ind. Ct. 

App. 2008), reh’g denied. 

C. Exclusivity of Remedies

Finally, we examine the trial court’s conclusion that the Kruse Parties were 

precluded from exercising any remedy except specific performance upon Gates’ breach. 

The Purchase Agreement provided that upon forfeiture of the earnest money deposit, “the 

seller may sue for specific performance.” (Appellant’s App. p. 27). The trial court found 

this language to be unambiguous and limited the Kruse Parties to retention of the earnest 

money and specific performance. Further, the trial court relied upon an integration clause 

in the Purchase Agreement to determine that the Kruse Parties could only avail 

themselves of specific performance and the forfeited deposit as remedies following 

breach. Because the Kruse Parties elected to sell the property, the trial court concluded 

that they waived the availability of specific performance and their damages were limited 

to the earnest money deposit. The integration clause provided that the Purchase 

Agreement contained all “the terms and conditions agreed upon, it being agreed that there 

are no conditions, representations, warranties or agreements not stated in this 

instrument.” (Appellant’s App. p. 27).

Here, the Kruse parties contend that the provision at issue is permissive in scope 

and thus its damages are not limited solely to specific performance and the forfeited 

deposit. The Kruse parties argue that the language of the Purchase Agreement does not 
21

contain the word ‘exclusive’ and that there is no other express or implied limitation on 

their contractual remedies. They also contend that the integration clause does not exclude 

their remedies at law because an exclusion of remedies must be stated definitely and 

affirmatively in the contract to show clear intent to exclude a remedy. 

In contrast, Gates relies upon his argument that the forfeited earnest money 

constitutes liquidated damages as well as the integration clause to argue that the Purchase 

Agreement “did not provide for any other remedies, and specified it contained all the 

terms and conditions agreed upon by the parties.” (Appellee’s Br. p. 12). As such, Gates 

contends that the Kruse Parties are without a remedy, except as specified in the Purchase 

Agreement. 

We cannot agree with the trial court that the Kruse Parties are precluded from 

asserting legal damages. Generally, a party is entitled to damages at law unless 

specifically excluded in the agreement. See Four Seasons Mfg., Inc. v. 1001 Coliseum, 

LLC, 870 N.E.2d 494, 502 (Ind. Ct. App. 2007). While it is true the Purchase Agreement 

makes no mention of remedies other than specific performance, the clear import is that 

the Kruse Parties were entitled to such remedies as the law may allow and may elect from 

among them the remedy of specific performance. The remedy of specific performance is 

preceded by the word “may,” which connotes permission rather than a requirement. 

Moreover, providing a party with a remedy does not necessarily make it exclusive. Thus, 

the language indicates that the Kruse Parties had a choice between either remedies – it 

could pursue specific performance, an equitable remedy, but was not required to do so. 
22

See Rogers, 767 N.E.2d at 992. As such, we find that the provision does not provide a 

definite and affirmative limitation. Thus, the Kruse Parties’ remedies were not limited 

solely to the forfeited earnest money deposit and specific performance. 

The integration provision in the Purchase Agreement does not alter this 

conclusion. Generally, where the parties to an agreement have reduced the agreement to 

a written document and have stated in an integration clause that the written document 

embodies the complete agreement between the parties, the parol evidence rule prohibits 

courts from considering parol or extrinsic evidence for the purpose of varying or adding 

to the terms of the written contract. I.C.C. Protective Coatings, Inc. v. A.E. Staley Mfg. 

Co., 695 N.E.2d 1030, 1035 (Ind. Ct. App. 1998), trans. denied. The underlying 

assumption advanced by the trial court and by Gates is that legal remedies contradict the 

terms of the Purchase Agreement. As discussed above, they do not. Accordingly, we 

conclude that the Kruse Parties’ remedies were not limited by the Purchase Agreement to 

the forfeited earnest money and specific performance, but instead also include the full 

measure of damages for breach of contract. 

In sum, we hold the contractual provision to be an unenforceable penalty based on 

the following factors. First, the language of the Purchase Agreement, the facts and 

circumstances of the transaction demonstrate that the parties intended the provision at 

issue to act as a penalty, rather than an agreed measure of damages. Second, evidence of 

damages presented to the trial court was reasonably certain, therefore precluding a 

finding of liquidated damages. Finally, the Purchase Agreement does not preclude the 
23

Kruse Parties from seeking damages for Gates’ breach. Thus, we conclude that the 

provision at issue cannot be enforced as a liquidated damages provision and instead 

represents an unenforceable penalty. 

Because the trial court concluded that the provision at issue constituted a 

liquidated damages provision, it necessarily did not determine the amount of contractual 

damages awardable to the Kruse Parties. Having determined the earnest money forfeiture 

provision to be a penalty, we remand to the trial court for a proper determination of 

damages consistent with this opinion. 

CONCLUSION

Based on the foregoing, we conclude that the trial court erred in determining that 

the forfeiture provision in the Purchase Agreement constituted a liquidated damages 

clause. We reverse the judgment of the trial court and remand with instructions to the 

trial court to calculate the measure of damages as a result of Gates’ breach of contract. 

Reversed and remanded with instructions. 

DARDEN, S.J. and MAY, J. concur