Court Opinion

ID: 9852420
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:30:10.647248+00
Date Added: 2024-06-11T09:22:27.619003
License: Public Domain

Thompson, J.,
concurring:
I concur, but wish to add a comment. The difficult question presented here is whether the contract provision for liquidated damages is enforcible, or invalid as *113a penalty. In short, the provision is that, upon the user-lessee’s default, the owner-lessor may declare the entire unpaid rental balance due, and the lessee agrees to pay that amount. Here the unpaid balance at the time of default was $39,103.43, the amount for which judgment was entered.
As a general proposition a liquidated damage provision is prima facie valid. The party challenging it must show that its application amounts to a penalty. (Lu-Mi-Nus Signs v. Jefferson Shoe Stores, Inc., 257 111. App. 150) or, to put it differently, that the damages stipulated bear no reasonable relationship to the actual loss sustained. In searching the record to ascertain whether the lessee (Silver Dollar Club) has met its burden in this regard, I find nothing of moving significance. The contract before us is in the form of a lease (or bailment) of personal property for 5 years. Title does not pass unless the user-lessee elects to exercise its option to purchase. The owner-lessor must construct and install the display and thereafter maintain and service it. In return the user-lessee is to pay rent every month. Of major significance is the agreed fact that the display was made and installed for the particular needs of the user at a special location. Once designed and put in place the display has little value to the owner-lessor, except for minimal salvage. The right to repossess the sign is usually of no practical worth, for it has no resale potential. Thus in most instances the owner is not able to reduce the loss incurred upon the user’s default. The intrinsic worth of the display has evaporated.1 Though it is true that, upon the user-lessee’s default in the payment of rent, the owner may declare the entire unpaid balance due, it is also true that, if such occurs and the lessee pays that balance, the owner’s obligation *114to maintain and service the display for the balance of the term is revived. Thus it is clear that the user’s default merely permits the owner to receive full payment immediately. It does not excuse further performance by the owner if the user pays (voluntarily or after litigation) the accelerated amount declared to be due. In such circumstances there cannot be (as the user-lessee contends) a “failure of consideration.”
Though it is true in this case that the lessee (theoretically) could have exercised its option to buy the display by paying approximately $17,000, it does not follow from this alone that the judgment for liquidated damages becomes a penalty. The bald fact is that the lessee did not elect to purchase the display, nor did it continue to pay the monthly rental required. Absent proof in the record that the owner’s actual loss is substantially less than the amount stipulated by the contract, we may not declare that contract provision unenforcible as a matter of law. The owner, in these circumstances, is entitled to recover the full benefit of the bargain.

TMs fact alone places tliis case apart from land lease cases containing similar clauses for liquidated damages. See, for example, Kothe v. R. C. Taylor Trust, 280 U.S. 224, 50 S.Ct. 142, 74 L.Ed. 382. In those cases the lessor can usually minimize his damage by leasing to another person. If such is done, the lessor’s actual damage may not bear a reasonable relationship to the damage stipulated by the lease.