Court Opinion

ID: 5644031
Source: CourtListenerOpinion
Date Created: 2022-01-11 06:35:52.85011+00
Date Added: 2024-06-11T08:38:18.467542
License: Public Domain

McMurray, Presiding Judge,
dissenting.
I cannot agree that the damages provided in the lease agreement are liquidated and not a penalty as a matter of law. Accordingly, I dissent.
“In deciding whether a contract provision is enforceable as liquidated damages, the court makes a tripartite inquiry to determine if the following factors are present: ‘First, the injury caused by the breach must be difficult or impossible of accurate estimation; second, the parties must intend to provide for damages rather than for a penalty; and third, the sum stipulated must be a reasonable pre-estimate of the probable loss.’ [Cits.]” Southeastern Land Fund v. Real Estate World, 237 Ga. 227, 230 (227 SE2d 340). In making this inquiry, we must keep in mind that “in cases of doubt the courts favor the construction which holds the stipulated sum to be a penalty, and limits the recovery to the amount of damage actually shown, rather than a liquidation of the damages.” Mayor &c. of Brunswick v. Aetna Indem. Co., 4 Ga. App. 722, 728 (62 SE 475).
“[Wjhether a provision represents liquidated damages or a penalty does not depend upon the label the parties place on the payment but rather depends on the effect it was intended to have and whether it was reasonable. [Cit.] Where the parties do not undertake to estimate damages in advance of the breach . . . the amount, even though *643called liquidated damages, is instead an unenforceable penalty. [Cit.]” Southeastern Land Fund v. Real Estate World, 237 Ga. 227, 228, supra.
An examination of the record in the case sub judice demonstrates a failure on the part of plaintiff to establish the late interest charges and service charges as a reasonable pre-estimate of the loss. Asked how plaintiff arrived at the $10 per day service charge, plaintiffs agent simply deposed that that amount was “printed on the form.” Thus, it would appear that the service charge was to bear no real connection to the actual loss incurred by plaintiff in the event defendant failed to pay the monthly rent timely.
Concerning the intention of the parties, plaintiff’s agent averred that the service charge “provides a penalty for a tenant who is consistently a slow payer.” Although the agent also deposed otherwise, this averment must be construed against plaintiff in weighing its motion for summary judgment. Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27 (343 SE2d 680). At the very least, it demonstrates the existence of a genuine issue of material fact regarding the parties’ intention.
Besides, I think the lease agreement itself casts doubt upon the intention of the parties. Unlike Krupp Realty Co. v. Joel, 168 Ga. App. 480 (309 SE2d 641), in which the lease agreement contained a flat monthly charge for the failure to timely pay the rent, the lease agreement in the case sub judice contains a service charge which accrues daily, in addition to interest charges. Given this, I am inclined to view the lease agreement as imposing a penalty rather than as providing liquidated damages. As it is said: “In determining whether a designated sum that is to be paid to one party in the event that the other breaches the contract is a penalty, we must ascertain whether it was inserted for the purpose of deterring the party from breaching his contract, and of penalizing him in the event he should do so, or whether it was a sum which the parties in good faith agreed upon as representing those damages which would ensue if the contract should be breached. If A borrows $100 from B, agreeing that if he does not repay it by October 1, he will pay $1 per day as liquidated damages for the detention thereof, this is plainly a penalty, an attempt to coerce prompt performance of the contract, rather than an attempt to estimate what the legal damage to B will be; for the law fixes the legal damages in such a case at the lawful rate of interest.” (Emphasis supplied.) Florence Wagon Works v. Salmon, 8 Ga. App. 197, 199 (68 SE 866).
I am authorized to state that Judge Sognier and Judge Benham join in this dissent.
*644Decided November 1, 1989
Rehearing denied November 22, 1989
Aiken & Ward, Lewis E. Hassett, Annette K. McBrayer, for appellant.
Silfen, Segal, Mills & Fryer, Keith E. Fryer, for appellee.