Court of Appeals of Missouri, Eastern District, First Division
from the Circuit Court of St. Louis County 11SL-CC04781
Honorable Gloria Clark Reno
P. PAGE, JUDGE.
Arcese ("Plaintiff") filed suit against Daniel
Schmitt & Co. ("Defendant") alleging, inter
alia, violations of the Missouri Merchandising Practices
Act ("MMPA"), Section 407.010, et seq., in
connection with the sale of a 1954 Cadillac convertible. In
response thereto, Defendant filed a counterclaim for breach
of contract. After a bench trial, judgment was entered in
favor of Defendant and against Plaintiff. The judgment of the
trial court is affirmed in part and reversed in part.
December 2010, with the assistance of his adult children,
Plaintiff, a New York resident, began exploring the purchase
of a classic automobile. Upon reviewing and searching eBay,
an online auction and shopping website, Plaintiff discovered
a 1954 Cadillac convertible ("Cadillac") that was
listed for sale. This Cadillac was owned by and listed on
eBay by Defendant, a classic car automotive dealer located in
St. Louis County.
son contacted Defendant, via email, to express
Plaintiff's interest in purchasing the Cadillac. Prior to
presenting an offer to Defendant for purchase of the
Cadillac, Plaintiff employed, at the cost of $350, the
services of Mark Hiatt ("Hiatt"), a Missouri
certified appraiser of classic cars. Hiatt prepared and
delivered to Plaintiff a report, indicating several cosmetic
items in need of repair.
upon the report developed by Hiatt, Plaintiff contacted
Defendant to request certain repairs be performed. Defendant
agreed to undertake said repairs; however, there exists
considerable conflicting evidence as to who was to pay for
January 5, 2011, Defendant prepared the necessary paperwork,
including a Retail Buyers Order ("RBO"), to
effectuate the purchase of the Cadillac, and faxed this
paperwork to Plaintiff. The RBO represented a sale price of
$60, 000 and required a $1, 500 non-refundable deposit. The
RBO included no language or representation regarding
Plaintiff's requested repairs or which party was to pay
for said repairs.
receipt, Plaintiff executed the paperwork, including the RBO,
and faxed the same back to Defendant on January 5, 2011. On
that same date, Plaintiff provided to Defendant a $1, 500
deposit, via a credit card transaction, and Defendant removed
the Cadillac from the eBay website.
on that same date, Plaintiff mailed to Defendant a $5, 500
check. The purpose of the $5, 500 check is the source of
contention. Defendant claims the $5, 500 check was an
additional deposit, made to secure the purchase of the
Cadillac and was to be used toward the balance of the
purchase price and requested repairs. Plaintiff contends
Defendant verbally requested $7, 000 as a deposit, with only
$1, 500 being non-refundable, in order to effectuate the sale
of the Cadillac and to remove the Cadillac from the eBay
January 19, 2011, Plaintiff and his son traveled from the
State of New York to St. Louis to inspect the Cadillac at
Defendant's business. Upon a personal inspection of the
Cadillac, Plaintiff discovered several faults and defects
that Plaintiff was purportedly unaware of at the time of
executing the RBO and paying Defendant pursuant to the
parties' RBO and verbal agreement. These defects prompted
Plaintiff's hesitation to follow through with the
purchase. After returning to New York, on January 23, 2011,
Plaintiff's son sent an email to Defendant rescinding the
contract for the sale of the Cadillac.
January 25, 2011, Defendant responded to the email, informing
Plaintiff that the full $7, 000 deposit would be retained by
Defendant and not returned to Plaintiff.
April 2013, Plaintiff filed a three count petition
("Petition") in the Circuit Court of St. Louis
County against Defendant, alleging, inter alia,
Defendant violated the MMPA through unlawful retention of the
full $7, 000 deposit. In support thereof, Plaintiff asserted
the liquidated damages provision of the RBO permitted
Defendant to retain only $1, 500 of the deposit, not the full
$7, 000. The liquidated damages provision of the RBO read as
FAILURE OR REFUSAL TO ACCEPT DELIVERY: Unless this Purchase
Order shall have been cancelled by Purchaser under and in
accordance with the provisions of paragraphs "1"
and "9" above, Dealer shall have the right, upon
failure or refusal of Purchaser to accept delivery of the
vehicle ordered and to comply with the terms of this Purchase
Order, to retain as liquidated damages any cash
deposit made by the Purchaser, and in the event a
vehicle has been traded in as part of the consideration for
the vehicle ordered by the Purchaser hereunder to sell such
traded-in vehicle and reimburse himself with the proceeds of
such sale for the expenses specified in paragraph
"1" above and for such other expenses and losses as
Dealer may incur or suffer as a result of such failure or
refusal by Purchaser.
filed a counterclaim for breach of contract. After a two day
bench trial, the trial court entered judgment in favor of
Defendant and against Plaintiff: (1) finding Defendant did
not violate the MMPA by retaining the full $7, 000 deposit;
(2) awarding Defendant $16, 019.85 in actual damages on
Defendant's breach of contract counterclaim; and (3)
awarding Defendant $43, 033.75 in attorney's fees and $5,
147.92 in court costs.
advances three points on appeal. In his first point,
Plaintiff contends the trial court erred as a matter of law
in finding against Plaintiff in his cause of action under the
MMPA, in that Defendant unlawfully retained $5, 500 under the
guise of liquidated damages. Plaintiff maintains the
RBO's liquidated damages provision limited
Defendant's damages to only $1, 500.
Plaintiff avers the trial court erroneously declared or
misapplied the law by awarding Defendant both liquidated
damages in the amount of $7, 000 and actual damages
in the amount of $16, 019.85.
Plaintiff disputes the trial court's award of $43, 033.75
in attorney's fees in favor of Defendant. Specifically,
Plaintiff argues an award of attorney's fees in favor of
a defendant under the MMPA is erroneous as matter of law, in
that said award contravenes the legislative intent and
purpose of the MMPA.
court will affirm the judgment of the trial court in a
bench-tried case unless there is no substantial evidence to
support it, it is against the weight of the evidence or it
erroneously declares or applies the law. Murphy v.
Carron, 536 S.W.2d 30, 32 (Mo. banc 1976); see also
Repair Masters Const., Inc. v .Gray, 277 S.W.3d 854, 857
(Mo. App. E.D. 2009). We view the evidence and any inferences
therefrom in the light most favorable to the trial
court's judgment, and we will disregard all contrary
evidence and inferences. Star Dev. Corp. v. Urgent Care
Assocs., Inc., 429 S.W.3d 487, 491 (Mo. App. W.D. 2014).
We defer to the trial court's determination of witness
credibility and the weight given thereto. Id.
when the issue to be determined on appeal is a question of
law, such as issues of statutory interpretation and contract
interpretation, "no deference is due to the trial
court's judgment and our review is de
novo." City of Richmond Heights v. Waite,
280 S.W.3d 770, 774 (Mo. App. E.D. 2009).
I-Validity of Liquidated Damages Provision
first point on appeal, Plaintiff contends the trial court
erred as a matter of law in overruling Plaintiff's cause
of action under the MMPA and awarding Defendant $7, 000 as
and for liquidated damages. Specifically, Plaintiff argues
the liquidated damages provision incorporated in the RBO
limits Defendant's liquidated damages to only $1, 500,
and Defendant's retention of any sum over that amount
violated the MMPA.
Plaintiff maintains, in the alternative, should this court
find the liquidated damages provision does not, as a matter
of law, limit Defendant's liquidated damages to only $1,
500, the trial court's award of $7, 000 in liquidated
damages to Defendant was, nevertheless erroneous. In support
thereof, Plaintiff avers that $7, 000 was neither a
reasonable forecast of Defendant's harm, nor were
Defendant's damages difficult to accurately discern.
Rules Governing Liquidated Damages
damages are a measure of compensation which, at the time of
contracting, the parties agree shall represent damages in a
case of breach." Paragon Grp., Inc. v.
Ampleman, 878 S.W.2d 878, 880 (Mo. App. E.D. 1994).
Conversely, "a penalty [clause] is not a measure of
compensation for contract breach, but rather, a punishment
for default or a security for actual damages sustained due to
non-performance which incorporates the idea of
punishment." Goldberg v. Charlie's Chevrolet,
Inc., 672 S.W.2d 177, 179 (Mo. App. E.D. 1984); see
also Star Dev. Corp, 429 S.W.3d at 491 ("[P]enalty
clauses serve as punishment for a default or breach.").
"penalty clauses" are disguised as liquidated
damages clauses. Cf. Muhlhauser v.
Muhlhauser, 754 S.W.2d 2, 5 (Mo. App. E.D. 1988) (a
clause demarcated as a "penalty" clause, may,
nevertheless, be a liquidated damages clause); see
also Restatement of Contracts § 339, cmt.
b. ("The payment promised may be a penalty, though
described as liquidated damages, and vice versa."). The
mere branding of a provision in a contract as one of
"liquidated damages" does not, however, make it so.
Hawkins v. Foster, 897 S.W.2d 80, 85 (Mo. App. S.D.
1995). If, in fact, said provision is a penalty, the labeling
of the clause is of no consequence. Id.;
Boulware v. Crohn, 99 S.W. 796, 800 (Mo. App. 1907)
("Calling a sum liquidated damages is not conclusive of
its character."). Accordingly, the import of construing
purported liquidated damages provisions cannot be overstated,
in that, generally, liquidated damages clauses are valid and
enforceable, whereas "penalty clauses" are invalid
and unenforceable. Grand Bissell Towers, Inc. v. Joan
Gagnon Enters., Inc., 657 S.W.2d 378 (Mo. App. E.D.
is no bright line separating a liquidated damages clause from
a penalty clause." Burst v. R.W. Beal & Co.,
Inc., 771 S.W.2d 87, 90 (Mo. App. E.D. 1989). However,
in construing and distinguishing between valid liquidated
damages clauses and invalid penalty clauses, this court is
guided by Restatement of Contracts § 339 (1932), which
has been adopted by the Supreme Court of Missouri. Taos
Const. Co., Inc. v. Penzel Const. Co., Inc., 750 S.W.2d
522, 525-26 (Mo. App. E.D. 1988); see also Grand Bissell
Towers, Inc., 657 S.W.2d at 379 (adopting Restatement of
Contracts § 339). Pursuant to § 339 of the
Restatement of Contracts:
(1) An agreement, made in advance of breach, fixing the
damages therefor, is not enforceable as a contract and does
not affect the damages recoverable for the breach, unless
(a) the amount so fixed is a reasonable forecast of just
compensation for the harm that is caused by the breach, and
(b)the harm that is caused by the breach is one that is
incapable or very difficult of accurate estimation.
of Contracts § 339; see also Restatement
(Second) of Contracts § 356 (1981) (cited with approval
by Paragon Grp, Inc., 878 S.W.2d at
in deciphering alleged liquidated damages provisions, the
intent of the parties governs. Star Dev. Corp., 429
S.W.3d at 492; see also Goldberg, 672 S.W.2d at 179
("The case law and treatises indicate that . . . it is
the intent of the parties and the special circumstances of
the cases which control; not the contract
terminology."). As such, "whether an agreement sets
forth a penalty or liquidated damages [clause], we look to
the intention of the parties as ascertained from the contract
as a whole." Diffley v. Royal Papers, Inc., 948
S.W.2d 244, 246 (Mo. App. E.D. 1997).
Liquidated Damages Provision Does Not, Per Se, Limit
the Damages that May be Awarded.
it must be noted that Plaintiff does not contend the
liquidated damages provision of the RBO is invalid per
se. Rather, Plaintiff merely asserts the liquidated
damages provision limits, as a matter of law, Defendant's
liquidated damages to only $1, 500. Essentially, Plaintiff
concedes a liquidated damages award of $1, 500 as valid and
enforceable, but challenges a liquidated damages award
greater than $1, 500. Although we note the novelty of
Plaintiff's argument, we are not persuaded.
January 5, 2011, upon execution of the RBO, Plaintiff
provided to Defendant a $1, 500 "non-refundable"
deposit via a credit card transaction. Shortly thereafter, on
the same date, Plaintiff provided to Defendant a check valued
at $5, 500.
instant matter, the RBO included a liquidated damages
provision which provided for the forfeiture of "any cash
deposit made by the Purchaser[.]" The full liquidated
damages provision is set forth, in toto,
trial, there was conflicting evidence adduced regarding the
purpose of the $5, 500 payment and whether said payment was
non-refundable or refundable. However, grounded upon the
liquidated damages provision incorporated in the RBO and the
evidence presented at trial, the trial court awarded
Defendant $7, 000 in liquidated damages and denied
Plaintiff's Petition alleging a violation of the MMPA. In
calculating the liquidated damages award, the judgment of the
trial court stated, in relevant part, as follows:
39. On January 5, 2011[, ] [Plaintiff] signed each of the
above documents, and returned them ...