Title: Douglas Osborn v. Harold Dennison
Citation: 2009 WI 72
Docket Number: 2007AP001799
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 9, 2009

2009 WI 72 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2007AP1799 
COMPLETE TITLE: 
 
 
Martha Osborn and Douglas Osborn, 
          Plaintiffs-Appellants-Petitioners, 
     v. 
Harold Dennison, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2008 WI App 139 
Reported at: 314 Wis. 2d 75, 758 N.W.2d 491 
(Ct. App. 2008-Published) 
 
 
OPINION FILED: 
July 9, 2009   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
April 22, 2009   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Kenosha   
 
JUDGE: 
Barbara A. Kluka   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiffs-appellants-petitioners there were briefs 
by John A. Becker and Becker, French & DeMatthew, Racine, and 
oral argument by John A. Becker. 
 
For the defendant-respondent there was a brief by Harold C. 
Dennison and oral argument by Harold C. Dennison. 
 
An amicus curiae brief was filed by Debra P. Conrad, 
Madison, on behalf of the Wisconsin REALTORS® Association. 
 
 
 
2009 WI 72
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2007AP1799   
(L.C. No. 
2006CV638) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Martha Osborn and Douglas Osborn, 
 
          Plaintiffs-Appellants-Petitioners, 
 
     v. 
 
Harold Dennison, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
JUL 9, 2009 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
DAVID T. PROSSER, J.   This is a review of a published 
decision of the court of appeals, Osborn v. Dennison, 2008 WI 
App 139, 314 Wis. 2d 75, 758 N.W.2d 491, affirming the judgment 
of the Kenosha County Circuit Court, Barbara A. Kluka, Judge.  
The case requires interpretation of the now-mandatory WB-11 
Residential Offer to Purchase form approved for residential real 
estate transactions by the Wisconsin Department of Regulation 
and Licensing.  See Wis. Admin. Code § RL 16.03 (Note) (Oct. 
2008). 
¶2 
The issue presented may be stated as follows:  
No. 
  2007AP1799 
 
2 
 
Does the seller in a failed real estate transaction 
lose the right to sue the defaulting buyer for actual 
damages if the seller fails to direct the seller's 
broker to return the defaulting buyer's earnest money 
prior to the date the seller sues the defaulting buyer 
for actual damages?     
¶3 
We 
conclude 
that 
the 
Default 
provision 
in 
the 
Residential Offer to Purchase form gives the seller two separate 
options to seek damages in the wake of the buyer's default.  The 
seller has the option to seek either liquidated damages or 
actual damages, but not both.  If a seller seeks actual damages, 
the seller must direct the broker holding the buyer's earnest 
money to return the money to the buyer before or at the same 
time suit is filed for actual damages.  When seeking actual 
damages, the seller must be able to plead that the seller has 
directed the return of the earnest money to the buyer.  The 
seller may not tie up the buyer's earnest money while the seller 
is seeking actual damages.  According to the terms of the 
Residential Offer to Purchase, the seller's failure to direct 
return of the buyer's earnest money prior to or at the same time 
suit is filed for actual damages forecloses the seller's option 
to seek actual damages for the alleged breach.  Consequently, we 
affirm the decision of the court of appeals. 
I. BACKGROUND AND PROCEDURAL HISTORY 
¶4 
The facts in this case are not disputed.  The issue 
presented 
lurks 
in 
almost 
every 
residential 
real 
estate 
transaction in Wisconsin. 
¶5 
On March 1, 2005, Douglas and Martha Osborn (the 
Osborns) accepted Harold Dennison's (Dennison) offer to purchase 
No. 
  2007AP1799 
 
3 
 
their home at 1726 34th Avenue in Kenosha.  Dennison's initial 
offer was made on a standard form, WB-11 Residential Offer to 
Purchase.  This offer was amended by a counter offer, using 
another standard form (WB-44 Counter Offer) that incorporated by 
reference the basic "terms and conditions" in the original Offer 
to Purchase, and it was revised again by other amendments on 
standard forms.   
¶6 
The parties agreed to a final purchase price of 
$482,500 and an original closing date of no later than May 15, 
2005.  The purchase offer was contingent upon the home being 
appraised for the purchase price and the successful closing of 
an unrelated commercial property in a transaction then pending.  
The offer also called for the Osborns to provide Dennison "with 
documentation that the cause of the water stain on the floor in 
the basement ha[d] been rectified" within ten days of the 
offer's acceptance.  In addition, the parties agreed that 
Dennison would deposit $2,000 of earnest money with the Osborns' 
broker, One Month Realty. 
¶7 
The purchase offer included a buyer-default clause 
that set forth the seller's options if the buyer defaulted on 
the offer.  The language reads as follows: 
If Buyer defaults, Seller may: 
(1) sue for specific performance and request the 
earnest money as partial payment of the purchase 
price; or 
(2) terminate the Offer and have the option to: 
(a) request the earnest money as liquidated damages; 
No. 
  2007AP1799 
 
4 
 
or (b) direct Broker to return the earnest money and 
have the option to sue for actual damages. 
¶8 
On April 29, 2005, the parties agreed to a firm 
closing date of May 11.  However, on May 11, several hours prior 
to the closing, Dennison went to the home and discovered that 
the Osborns had left several pieces of personal property, 
including a large boat, on the premises.  Dennison decided not 
to go to the scheduled closing because the Osborns did not have 
the residence free of their personal property and all debris 
upon closing, as the purchase offer required.  Following the 
failed closing, the Osborns and Dennison negotiated a new 
closing date of May 18, 2005. 
¶9 
On May 16, 2005, in accordance with the purchase offer 
and with the Osborns' authorization, Dennison went to the 
property with representatives from his real estate firm and a 
representative from the Osborns' real estate firm to conduct a 
final, pre-closing inspection.  Dennison alleges that he 
discovered wet insulation and water on the basement walls during 
the inspection.  Following the inspection and prior to the 
May 18 closing date, Dennison and the Osborns attempted to 
negotiate 
an 
amended 
purchase 
offer. 
 
However, 
these 
negotiations failed, and the sale never closed. 
¶10 Douglas Osborn stated that he decided "[s]ometime in 
May"——after the transaction did not close——that he was going to 
file suit against Dennison for his failure to execute the 
purchase offer.  This was confirmed by the Osborns' attorney in 
a letter to Dennison dated May 23, 2005, which stated that the 
No. 
  2007AP1799 
 
5 
 
Osborns were going to sue Dennison for their alleged actual 
damages under the purchase offer.  Douglas Osborn later 
testified as follows: 
[On or around May 25, 2005,] I directed the real 
estate agent to put the house back on the market, and 
continue to hold the [earnest] money, and when I had 
actual damages and I had them tallied up, and I had 
legal counsel in place, then I was going to sue Mr. 
Dennison for the difference. 
¶11 In response to the Osborns' threat to sue, Dennison 
had a letter prepared and sent to the Osborns.  The May 25 
letter stated the following: 
Please 
be 
advised 
that 
[Dennison] 
intends 
to 
vigorously defend any such lawsuit, and upon receipt 
of the earnest money, [Dennison] reserves [his] rights 
under the [purchase o]ffer to sue [the Osborns] for 
actual damages caused by [the Osborns'] defaults, 
including seeking any and all remedies available in 
law or equity, including attorney's fees and costs.   
¶12 Dennison's letter included an express request that the 
earnest money be returned: "Please forward the earnest money at 
your earliest convenience to Buyer as directed in the Offer."1 
                                                 
1 According to the purchase offer, the broker holding the 
earnest money was permitted to release the earnest money only 
under the following conditions: 
If negotiations do not result in an accepted offer, 
the earnest money shall be promptly disbursed . . . to 
the person(s) who paid the earnest money. . . .  If 
[the transaction] does not close, the earnest money 
shall be disbursed according to a written disbursement 
agreement 
signed 
by 
all 
[p]arties 
to 
[the 
offer]. . . .  If said disbursement agreement has not 
been delivered to [the] broker within 60 days after 
the date set for closing, [the] broker may disburse 
the earnest money: (1) as directed by an attorney who 
has reviewed the transaction and does not represent 
[the b]uyer or [s]eller; (2) into a court hearing a 
No. 
  2007AP1799 
 
6 
 
¶13 In October 2005, the Osborns sold the home at 1726 
34th Avenue to a third-party purchaser for $42,500 less than 
Dennison's offer to purchase.  At that time, the Osborns 
continued to have their broker hold Dennison's earnest money in 
escrow.   
¶14 Approximately six months later, on April 28, 2006, the 
Osborns filed suit against Dennison in Kenosha County Circuit 
Court, alleging a breach of contract and demanding "compensatory 
damages."   
¶15 Dennison responded on June 5, moving the circuit court 
to dismiss the breach of contract claim.  He argued that the 
Osborns' claim for compensatory damages should be dismissed for 
failing to state a claim "because the Osborns elected the remedy 
of liquidated damages" by filing suit for compensatory damages 
without first directing return of the earnest money to Dennison 
as was required by the purchase offer.2  In addition, Dennison 
filed a June 8 answer to the complaint, denying that he breached 
the purchase offer and arguing "[t]hat return of the earnest 
money was a condition precedent to filing an action for 
damages."  Because the Osborns did not return the earnest money 
before filing suit, Dennison argued, they "failed to abide by 
the terms of the contract."  Instead, he asserted, they "have 
                                                                                                                                                             
lawsuit involving the earnest money and all [p]arties 
to [the o]ffer; (3) as directed by court order; or (4) 
any other disbursement required or allowed by law. 
2 Dennison also filed an affidavit in support of his motion 
in which he denied liability for breach of contract. 
No. 
  2007AP1799 
 
7 
 
elected a remedy of liquidated damages," and their claim should 
be dismissed with prejudice. 
¶16 On June 23, 2006, the Osborns directed their broker to 
return the earnest money to Dennison.  Dennison apparently 
refused to accept the money.   
¶17 On June 30, the Osborns filed a memorandum in 
opposition to Dennison's motion to dismiss, arguing that their 
complaint stated a claim for breach of contract, "[p]lain and 
simple."  Moreover, the Osborns contended that Dennison's motion 
should be treated as one for summary judgment, considering that 
Dennison submitted an affidavit, which is "not appropriate when 
bringing a motion to dismiss based on failure to state a claim."  
Ultimately, the Osborns concluded that Dennison's motion for 
dismissal should be denied.  
¶18 At the motion hearing, on July 5, 2006, Kenosha County 
Circuit Judge Wilbur W. Warren heard arguments from both 
parties.  Counsel for Dennison made the following statements: 
 
It's our position that by failing to direct that 
the earnest money be returned to our clients before 
filing this lawsuit, the Osborns have . . . elected a 
remedy and are not now, after the fact, able to sue 
for damages and then direct that the earnest money be 
returned. 
 
. . . . 
 
The Galatowitsch[ v. Wanat, 2000 WI App 236, 239 
Wis. 2d 558, 620 N.W.2d 618,] case is clear that you 
can't have it both ways.  You can't have both 
liquidated damages and . . . sue for actual damages.  
But it goes a little further than that.  On two 
occasions in that opinion, the [c]ourt states that 
before you can sue for actual damages, you have to 
direct that that earnest money be returned . . . . 
No. 
  2007AP1799 
 
8 
 
 
. . . . 
 
Now there's been a complaint in the [m]emorandum 
[in opposition to the motion to dismiss] that this is 
not really a motion to dismiss. . . .  It may be 
treated as a motion for summary judgment.  I think 
either way that the [c]ourt treats this motion, 
whether it is for a motion to dismiss . . . or a 
motion for summary judgment, the fact . . . is the 
earnest money was not returned, nor was it directed to 
be returned to my client[] until well after this 
lawsuit was started.  And due to that, they cannot now 
sue for actual damages. 
 
The reason that I think it's still appropriate to 
treat this as a motion to dismiss is because under the 
Galatowitsch case, it's a condition precedent to 
filing an action for actual damages to direct return 
of the earnest money.   
 
. . . . 
 
Keep in mind, of course, we're not admitting 
or . . . conceding any default on our part.  In fact, 
if we have to go to trial, we certainly will 
vigorously defend this.  It wasn't a default on our 
part.  But for purposes of this motion, they can keep 
the earnest money.  That's what they elected to do.  
The lawsuit for actual damages ought to be dismissed.   
¶19 In response, counsel for the Osborns reiterated that 
Dennison's motion was not a motion for dismissal because he 
submitted affidavits with his motion.  According to the Osborns' 
counsel, affidavits cannot be considered on a motion to dismiss.  
If they are considered, counsel argued, the motion must be 
analyzed as a motion for summary judgment.  The Osborns' counsel 
summarized his arguments regarding the substantive issue as 
well: 
No. 
  2007AP1799 
 
9 
 
Just like in Galatowitsch, [the Osborns] initially 
sued for the $2,000 for the liquidated damages.[3]  And 
then after, later, they amended the complaint and 
directed the return of the money.  So that's after.  
After we got their [m]emorandum [in support of the 
motion to dismiss], we made it clear.  We had Mr. 
Osborn authorize the release of the money.  He's done 
that.  I don't know.  My understanding is it has not 
been accepted. 
 
But the Galatowitsch case says that [the seller] 
has to get the money, the $2,000, and accept it as 
liquidated damages, and that's never been done here.  
It's never been alleged by the defendant here.  So I 
guess I'm kind of puzzled as to what the issues are.  
I mean, there's a claim for breach of contract.   
¶20 In making his decision, Judge Warren focused on the 
standard related to a motion to dismiss and stated that the 
complaint "alleges existence of a contract, it alleges a breach 
of that contract, and it alleges damages under the notice 
pleadings."  Therefore, Judge Warren decided that the motion to 
dismiss was "not supported . . . based upon what the four 
corners of the complaint say because [the complaint] does state 
a cause of action for breach of contract."  He added that on a 
motion for summary judgment, Dennison might very well prevail. 
¶21 Following 
Judge 
Warren's 
rejection 
of 
Dennison's 
motion to dismiss, the case was reassigned by judicial transfer 
to Judge Barbara A. Kluka.   
¶22 On October 2, 2006, the Osborns supplemented their 
original complaint by including a sentence stating that the 
                                                 
3 This statement is premised on counsel's argument that the 
complaint asks for "compensatory damages," which he claims could 
be either liquidated damages or actual damages.  We address this 
argument in ¶51, infra. 
No. 
  2007AP1799 
 
10 
 
Osborns "authorized the release of the earnest money to Mr. 
Dennison."   
¶23 In early March 2007, both parties filed separate 
motions for summary judgment.  On March 6, the Osborns filed a 
motion for partial summary judgment.  They argued that Dennison 
failed to complete the transaction in May 2005 as required by 
the purchase offer which constituted a breach of contract.  
Three days later, Dennison filed a motion for summary judgment, 
arguing that, even if he breached the contract,4 the Osborns were 
limited to the earnest money as liquidated damages and they had 
no right to sue for actual damages.5 
¶24 On April 5, 2007, Judge Kluka decided both motions for 
summary judgment.  She stated that Dennison's position with 
respect to liquidated damages was correct.  She began by noting 
that "the purchase contract . . . says the seller may upon 
default or breach sue for specific performance and request the 
earnest money as partial payment of the purchase price."  That, 
she said, did not happen.  She stated the purchase contract then 
provides that the seller may "terminate the offer and have the 
                                                 
4 Dennison denied the breach of contract in response to the 
Osborns' motion for summary judgment, claiming that his failure 
to execute the contract was excused for several reasons: (1) the 
property was not ready for immediate occupancy; (2) the Osborns 
failed to provide Dennison with the documentation explaining the 
water issues in the basement; and (3) Dennison discovered more 
water 
problems 
during 
his 
pre-closing 
inspection 
of 
the 
property. 
5 Dennison's arguments related to his motion for summary 
judgment are ultimately the same arguments he made in relation 
to his motion to dismiss. 
No. 
  2007AP1799 
 
11 
 
option to request the earnest money as liquidated damages."  The 
third option, Judge Kluka continued, is to "direct the broker to 
return the earnest money and have the option to sue for actual 
damages." 
¶25 The court noted that none of these things happened in 
the way the purchase contract contemplated.  Judge Kluka stated 
that the buyer, Dennison, asked "for the earnest money, and the 
seller[, the Osborns,] denied that request or instructed the 
broker to hold on to [the earnest money], which I think is 
significant."  The Osborns, the court said, "sought actual 
damages because they filed th[is] lawsuit."   
[W]hen 
the 
motion 
to 
dismiss 
was 
filed 
they . . . directed the broker to return the earnest 
money on June 23rd of 2006.  So, I think they 
exercised the option to retain that earnest money when 
they denied sending the earnest money to the buyer.  
The buyer requested it back, and they directed the 
broker to hold it until the property was sold and then 
would sue for actual damages; and I don't think that's 
an option that they had under the terms of their 
contract. 
 
. . . . 
 
. . .  [Directing the return of the earnest money 
is] a condition precedent for suing for actual 
damages.  It doesn't dismiss the lawsuit.  It limits 
the remedy [to liquidated damages]. 
¶26 In addition, Judge Kluka denied the Osborns' summary 
judgment motion on breach because there were "lingering issues" 
of material fact that remained unresolved.  Specifically, the 
circuit court noted there were unresolved facts that were 
material to whether Dennison's failure to close the transaction 
No. 
  2007AP1799 
 
12 
 
was excusable, as a matter of law, according to the purchase 
offer. 
¶27 On April 19, 2007, Judge Kluka denied the Osborns' 
motion for reconsideration, and at the request of the Osborns' 
counsel, she took time to clarify her ruling from April 5.  
Specifically, the Osborns' counsel wanted to know whether Judge 
Kluka dismissed their claim for actual damages with or without 
prejudice.  The following exchange then took place: 
 
THE COURT: . . .  [I]f there is not a closing, 
the seller has some elections to make.  One of which 
is to retain the earnest money.  The other of which 
basically is to return the earnest money and sue for 
actual damages. 
 
Based on my ruling and findings in the hearing on 
the motion for summary judgment, I have concluded that 
the first option is what the plaintiffs are limited to 
now given the way the events in this case unfolded.  
That is, they may retain their earnest money; and 
therefore, I will order that the dismissal be with 
prejudice. 
. . . . 
[OSBORNS' 
COUNSEL]: . . .  
[I]f 
the 
court's 
ruling is that he's entitled to the earnest money 
because 
the 
sale 
did 
not 
take 
place, 
then 
my 
understanding would be that based upon the undisputed 
facts that my client is entitled to $2,000. 
So, in terms of dismissing this at this point, 
the judgment would be for my client for $2,000 and a 
dismissal with prejudice. 
¶28 On June 11, 2007, Judge Kluka entered an order for 
judgment reflecting her on-the-record decision.  The order 
required that the $2,000 in earnest money, plus costs, be paid 
No. 
  2007AP1799 
 
13 
 
to the Osborns as liquidated damages, and the matter was 
"dismissed with prejudice."6 
¶29 The court of appeals unanimously affirmed the circuit 
court's decision on August 6, 2008.  See Osborn, 314 Wis. 2d 75.  
On appeal, the Osborns argued that, "[t]o sue for actual 
damages, it is not a requirement that the seller direct the 
return of the earnest money immediately upon the request of the 
buyer, but [it] is a condition precedent to recovering on a 
claim for breach of contract."  Id., ¶10 (internal quotations 
omitted) (alteration in original).  They argued that the 
purchase offer "does not require the return of the earnest money 
upon request of the buyer and the failure to do so does not 
constitute an election of liquidated damages."  Id.  The Osborns 
assert that, even if they did elect the remedy of liquidated 
damages, under Galatowitsch, the election is not irrevocable.  
Id. 
¶30 The court of appeals interpreted the plain language of 
the purchase offer and determined that "the buyer-default 
provision forecloses the Osborns' interpretation, i.e., that 
directing the return of the earnest money is a condition 
precedent to recovering on a claim for breach of contract and 
not a condition precedent to sue for actual damages."  Id., ¶11 
                                                 
6 The Osborns' counsel proposed a bill of costs equaling 
$1,839.25, bringing the total judgment against Dennison to 
$3,839.25.  Dennison satisfied this judgment and the money is 
being held in trust by the Osborns' counsel.  This judgment was 
satisfied with funds separate from the earnest money Dennison 
previously deposited. 
No. 
  2007AP1799 
 
14 
 
(emphasis added).  The court stated bluntly, "[T]he seller needs 
to first direct the broker to return the earnest money to the 
buyer in order to have the option to sue for actual damages."  
Id.   
¶31 The court of appeals also distinguished Galatowitsch 
from the Osborns' situation by pointing out that the seller in 
Galatowitsch first requested the earnest money as liquidated 
damages and sued only after the buyer refused to release the 
earnest money.  See id., ¶¶15-17.  Because "the Osborns did not 
request the earnest money as liquidated damages before they sued 
for actual damages . . . the option to elect the remedy of 
actual damages was not available to the Osborns, as it was to 
the Galatowitsches."  Id., ¶¶16-17. 
¶32 The Osborns petitioned this court for review, which we 
granted on December 16, 2008. 
II. Standard of Review 
¶33 The 
resolution 
of 
this 
case 
depends 
on 
the 
interpretation of the purchase offer.  The purchase offer is a 
contract, the interpretation of which is a question of law that 
we review de novo.  See Zimmermann v. Thompson, 16 Wis. 2d 74, 
76, 114 N.W.2d 116 (1962); see also Columbia Propane, L.P. v. 
Wisconsin Gas Co., 2003 WI 38, ¶12, 261 Wis. 2d 70, 661 
N.W.2d 776 (stating that the interpretation of a written 
agreement between two parties is a question of law that is 
reviewed de novo). 
No. 
  2007AP1799 
 
15 
 
 
III. Discussion 
¶34 This case requires the court to interpret the Default 
provision in the standard, mandatory Wisconsin Residential Offer 
to Purchase form.  The Default provision reads in its entirety: 
 
Default.  Seller and Buyer each have the legal 
duty to use good faith and due diligence in completing 
the terms and conditions of this Offer.  A material 
failure to perform any obligation under this Offer is 
a default which may subject the defaulting party to 
liability for damages or other legal remedies. 
 
If Buyer defaults, Seller may: 
 
(1) sue for specific performance and request the 
earnest money as partial payment of the purchase 
price; or 
 
(2) terminate the Offer and have the option to: 
(a) request the earnest money as liquidated damages; 
or (b) direct Broker to return the earnest money and 
have the option to sue for actual damages. 
 
If Seller defaults, Buyer may: 
 
(1) sue 
for 
specific 
performance; 
or 
(2) 
terminate the Offer and request the return of the 
earnest money, sue for actual damages, or both. 
¶35 This case involves an alleged breach by the buyer.  
Consequently, the ball is in the seller's court.  The seller did 
not choose to sue for specific performance of the offer.  As a 
result, the focus is on the two options for damages after the 
seller terminates the offer. 
¶36 The first option is to "request the earnest money as 
liquidated damages."  Here, the sellers did not "request" the 
earnest money as liquidated damages from the buyer.  Instead, 
No. 
  2007AP1799 
 
16 
 
they denied the buyer's request to return the money by directing 
their broker to hold the money for future disbursement.   
¶37 The second option is to direct the broker "to return 
the earnest money and have the option to sue for actual 
damages."7  Here, the sellers sued for actual damages after 
directing their broker to hold the earnest money.  In effect, 
they directed their broker not to return the money to the buyer.  
In other words, the sellers tried to obtain the best of both 
options without faithfully following either one.  This was 
plainly contrary to the Residential Offer to Purchase and 
contrary to the principles established in Zimmermann. 
¶38 Zimmermann 
dealt 
with 
a 
similar, 
although 
not 
identical, offer to purchase.  The contract provided the seller 
certain options in case the buyer defaulted.8  After discussing 
the terms of the contract, the court made the following 
observations about the default provision of the contract: 
 
This 
gives 
the 
seller 
an 
option 
to 
take 
liquidated damages or to take whatever actual damages 
he can prove, but it does not give him the right to 
both.  If he chooses liquidated damages he may retain 
                                                 
7 This limited option should be compared with one of the 
buyer's options in the face of a default by the seller:  "Buyer 
may . . . terminate the Offer and request the return of the 
earnest money, sue for actual damages, or both."  (Emphasis 
added.) 
8 The provision at issue in Zimmermann v. Thompson, 16 
Wis. 2d 74, 75, 114 N.W.2d 116 (1962), read as follows: "'Should 
the undersigned buyer fail to carry out this agreement, all 
money paid hereunder shall, at the option of the seller, be 
forfeited as liquidated damages and shall be paid to or retained 
by the seller . . . .'"   
No. 
  2007AP1799 
 
17 
 
the down payment [earnest money] without further fuss 
or bother.  If he chooses actual damages the contract 
gives him no additional present, simultaneous, right 
to retain the down payment.  [Here, he] has retained 
it and is now trying to expand the limited right of 
retention into a right to keep the money and apply it 
on whatever larger damages he can establish.  The 
contract does not so provide. 
Id. at 76-77 (emphasis added). 
 
¶39 The 
principles 
in 
Zimmermann 
were 
affirmed 
and 
insightfully explained by Judge Vergeront in Galatowitsch, where 
the buyer-default provision was identical to the one at issue 
here: 
[W]hen the buyer breaches and the seller receives the 
earnest money 
as liquidated damages, the seller 
benefits by having a speedy and inexpensive means to 
recover some damages, although perhaps not all.  The 
buyer also benefits by not having to defend an action 
in court with the exposure of greater damages. 
Galatowitsch, 239 Wis. 2d 558, ¶16. 
¶40 Judge Vergeront added the following: 
[I]f 
the 
seller 
requests 
the 
earnest 
money 
as 
liquidated damages for a breach but does not receive 
it, the seller must expend the time and money to file 
a lawsuit. . . .  
 
. . . . 
. . .  The seller may request the earnest money 
as liquidated damages without the risk of having to 
file a suit in which the seller cannot recover all 
damages even if the seller proves a breach.  Upon the 
seller's request, the buyer has the opportunity to 
evaluate the strength of the seller's claim of breach, 
the likely amount of damages and their susceptibility 
of proof, and to either agree or disagree to the 
disbursement of the earnest money as liquidated 
damages.  If the buyer agrees, the dispute is 
resolved. 
 
If 
the 
buyer 
disagrees, 
the 
buyer 
understands he or she may have to defend a suit for 
No. 
  2007AP1799 
 
18 
 
breach of the agreement and may have to pay actual 
damages; however, the seller must direct the return of 
the earnest money to the buyer before seeking actual 
damages. 
Id., ¶¶16, 18 (emphasis added). 
 
¶41 The court explicated these dynamics in a case in which 
a residential real estate transaction failed when the buyers 
were unable to follow through on their offer to purchase.  Id., 
¶¶3-4.  Upon this default, the sellers requested the $2,000 of 
earnest money, meaning they requested the buyers to authorize 
the broker to release the $2,000 to the sellers and end the 
matter without "fuss or bother."  Id., ¶4; see also Zimmermann, 
16 Wis. 2d at 76.  The buyers did not release the money.  
Galatowitsch, 239 Wis. 2d 558, ¶4.  As a result, the sellers 
filed suit to obtain the $2,000, plus interest and costs.  Id.  
In short, they filed suit to obtain only the earnest money——only 
the "liquidated damages"——and they did not direct their broker 
to release the earnest money to the buyers because they were not 
seeking more.   
¶42 Thereafter, the sellers sold their home to other 
buyers for less money than the Wanats' original offer.  Id., ¶5.  
This prompted the sellers to amend their complaint to seek 
actual damages.  Id.  They simultaneously directed their broker 
to release the earnest money to the buyers.  Id.  The buyers 
insisted that a suit for actual damages was impermissible under 
these circumstances because the sellers had previously elected 
the option of liquidated damages.  Id., ¶9.  The courts 
disagreed.  As the court of appeals put it: "We conclude that a 
No. 
  2007AP1799 
 
19 
 
seller's request for the earnest money as liquidated damages 
under option (a) does not foreclose the exercise of option (b) 
if the seller does not receive the earnest money."  Id., ¶19 
(emphasis added).  
¶43 The court said this construction of the contract was 
more consistent with the purpose of liquidated damages and would 
more likely lead to the settlement of more disputes in the 
context 
of 
this 
type 
of 
transaction 
than 
the 
buyer's 
interpretation.  Id. 
¶44 Here, the sellers (the Osborns) try to utilize certain 
facts and phrases in the Galatowitsch opinion, such as the 
emphasized phrase in ¶42, supra, to support their position.  
They contend that option (2)(b) does not require the seller to 
direct return of the earnest money before suing for actual 
damages because (2)(b) does not expressly state that the earnest 
money must be directed for return "prior to," "first," or 
"before" the seller has the option to sue.  Instead, they argue, 
the provision uses the word "and" which does not connote the 
order in which events must occur.  They claim that directing 
return of the earnest money is a condition precedent to recovery 
of actual damages rather than a condition precedent to filing 
suit for actual damages.   
¶45 Furthermore, 
the 
Osborns 
argue 
that, 
under 
Galatowitsch, "the failure to authorize the return of the 
earnest money does not constitute an election of remedies."  
Instead, the Osborns assert, "[i]t is the actual receipt and 
retention of the earnest money that potentially triggers the 
No. 
  2007AP1799 
 
20 
 
election of liquidated damages."  Therefore, the Osborns 
conclude that, because they did not actually receive the earnest 
money, they should not be precluded from seeking actual damages 
by way of a supplemented complaint.   
¶46 Ultimately, the Osborns claim to be confused as to how 
they ended up with an order for judgment for the $2,000 in 
earnest money when they filed a claim for actual damages. 
¶47 In response, Dennison contends that the plain language 
of the purchase offer requires the Osborns to direct return of 
the earnest money prior to instituting a suit against him for 
actual damages.  He also asserts that such a construction is 
consistent with the court of appeals' opinion in Galatowitsch, 
because that case states that the seller must direct the broker 
to return the earnest money on or before the date the seller 
files suit for actual damages.  He claims the difference between 
Galatowitsch and this case is that the sellers in Galatowitsch 
abided by the buyer-default provision throughout the entire 
transaction, whereas the Osborns violated that provision when 
they filed suit for actual damages without directing that the 
earnest money be returned.  
¶48 We agree with Dennison.  The overriding principle in 
this commonplace consumer transaction is that, when the buyer 
defaults 
and 
the 
seller 
wants 
damages 
(not 
specific 
performance), 
the 
seller 
has 
the 
option 
to 
seek 
either 
liquidated 
damages 
or 
actual 
damages, 
but 
not 
both.  
Galatowitsch, 239 Wis. 2d 558, ¶18; Zimmermann, 16 Wis. 2d at 
76.  Thus, if the buyer defaults, the seller may terminate the 
No. 
  2007AP1799 
 
21 
 
offer and "request the earnest money as liquidated damages."  
Under option (a), the seller need not release the earnest money 
to the buyer because the seller is requesting the buyer to 
release the money to the seller and thereby end the dispute.  If 
the buyer does not agree to release the money, the seller may 
sue for the earnest money alone and be assured that the money 
will remain in escrow where it will be available to the seller 
if and when breach is established.  A seller may have no actual 
damages and still be entitled to liquidated damages because the 
buyer breached the offer to purchase. 
¶49 Under option (b), the seller may seek actual damages, 
but the seller may not tie up the buyer's earnest money while 
the seller is seeking actual damages.  Galatowitsch, 239 
Wis. 2d 558, ¶18.  Rather, the seller must direct the broker 
holding the earnest money to return it to the buyer.  Id.  The 
seller must direct the release of the money before or at the 
same time as filing suit for actual damages.  Id.; see also 
Zimmermann, 16 Wis. 2d at 76.  In filing suit for actual 
damages, the seller must be able to plead that the seller has 
directed the return of the earnest money to the buyer.  If the 
seller is unable to plead this condition precedent, the seller 
has limited himself to seeking the earnest money as liquidated 
damages.  By his own action, the seller has foreclosed the other 
remedy. 
¶50 If we were to accept the Osborns' theory that a seller 
may hold the earnest money until some point after the seller 
files suit for actual damages, we would cause uncertainty as to 
No. 
  2007AP1799 
 
22 
 
how long this advantage could continue, we would create 
imbalance between the parties, and we would undermine the 
purpose of the default provision of the Residential Offer to 
Purchase.  We agree with the Osborns that the buyer cannot, 
merely by demanding the return of the earnest money, force the 
seller into making a decision on whether to pursue a claim for 
actual damages or take the earnest money as liquidated damages.  
The buyers' request for return of the earnest money is 
inconsequential to the seller's decision.  What matters is 
whether the seller directs the earnest money to be returned 
before or at the same time he files a lawsuit seeking actual 
damages.  See Galatowitsch, 239 Wis. 2d 558, ¶18 ("[T]he seller 
must direct the return of the earnest money to the buyer before 
seeking actual damages.").  If he does not, then he has no right 
to sue for actual damages under the purchase offer.  The problem 
for the Osborns is that they did, in fact, file suit for actual 
damages prior to directing return of the earnest money. 
¶51 The Osborns try one additional gambit to get around 
this determination.  They assert that, in their initial 
complaint, they sought "compensatory damages," which they say 
could be either liquidated damages or actual damages.  We are 
not convinced.  In our view, a claim for compensatory damages 
was undeniably a claim for actual damages under the language of 
the purchase offer.  First, the record before us is quite clear 
that liquidated damages were never seriously contemplated by the 
Osborns.  For example, within a couple days of the failed 
transaction, the Osborns sent Dennison a letter threatening to 
No. 
  2007AP1799 
 
23 
 
sue him for actual damages.  Moreover, the Osborns never 
requested that Dennison authorize the release of the earnest 
money so they could take it as liquidated damages.  Finally, 
Black's Law Dictionary 395 (7th ed. 1999) states that liquidated 
damages are "contractually stipulated as a reasonable estimation 
of actual damages to be recovered by one party if the other 
party breaches."  (Emphasis added.)  On the other hand, 
compensatory damages are considered synonymous with actual 
damages.  Black's, supra, at 394. 
¶52 Because the Osborns' suit for actual damages was filed 
almost two months prior to the time the Osborns directed their 
broker to return the earnest money, their suit for actual 
damages is not allowed.  Supplementing the complaint does not 
cure the defect that the Osborns' suit was filed for actual 
damages before the earnest money was directed to be returned.  
Therefore, the complaint filed by the Osborns is inconsistent 
with the options set out in the purchase offer.  The language of 
the purchase offer controls, and the purchase offer does not 
provide authority for a suit for actual damages unless the 
seller directs return of the earnest money on or before the date 
the suit is filed. 
IV. Conclusion 
¶53 We 
conclude 
that 
the 
Default 
provision 
in 
the 
Residential Offer to Purchase form gives the seller two separate 
options to seek damages in the wake of the buyer's default.  The 
seller has the option to seek either liquidated damages or 
actual damages, but not both.  If a seller seeks actual damages, 
No. 
  2007AP1799 
 
24 
 
the seller must direct the broker holding the buyer's earnest 
money to return the money to the buyer before or at the same 
time suit is filed for actual damages.  When seeking actual 
damages, the seller must be able to plead that the seller has 
directed the return of the earnest money to the buyer.  The 
seller may not tie up the buyer's earnest money while the seller 
is seeking actual damages.  According to the terms of the 
Residential Offer to Purchase, the seller's failure to direct 
return of the buyer's earnest money prior to or at the same time 
suit is filed for actual damages forecloses the seller's option 
to seek actual damages for the alleged breach.  Consequently, we 
affirm the decision of the court of appeals. 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
 
 
No. 
  2007AP1799 
 
 
 
1