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Rumsey v. Gillis

The defendants were not entitled to pursue a counterclaim for the return of earnest money paid pursuant to a lease/purchase agreement, as the agreement contained an enforceable provision under which the plaintiff retained the earnest money as liquidated damages for the defendants' breach of the agreement.

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Peter Rumsey sued Ray and Nancy Gillis for damages for breach of a “Lease/Purchase Agreement” the Agreement by which the Gillises agreed to lease and then purchase Rumsey’s residence. We consider Rumsey’s appeal from the trial court’s grant of summary judgment in favor of the Gillises on all of his claims. For the following reasons, we affirm in part and reverse in part.

In April 2011 the Gillises and Rumsey entered into the Agreement, which provided that the Gillises agreed to purchase the residence from Rumsey for the sum of $550,000.00; that the closing would occur on or before April 30, 2014; that, commencing in May 2011 until the closing date, the Gillises would lease the residence from Rumsey pursuant to a lease attached as an exhibit to the Agreement; and that, when the Agreement was entered into by the parties, the Gillises paid earnest money in the amount of $10,000.00 held by Rumsey. The Agreement also contained a liquidated damages clause providing that earnest money retained in the event of default constitutes liquidated damages in full settlement of all claims. The Agreement provided that, if the lease was terminated before the closing date by default of the Gillises, that was considered a default of the Agreement entitling Rumsey to pursue available remedies. The attached lease provided for payment of rent in the amount of $3,500.00 per month for a lease term commencing on May 3, 2011, and ending on the closing date of the purchase. The Gillises did not purchase the residence pursuant to the Agreement; rather, the Gillises vacated the residence and ceased paying rent in November 2011, and Rumsey retained the $10,000.00 in earnest money and subsequently sold the residence to a third party.

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