Appeal from the Superior Court of the District of Columbia (SC10566-01) (Hon. Jeanette Clark, Trial Judge)
Before Steadman, Schwelb, and Ruiz, Associate Judges.
The opinion of the court was delivered by: Schwelb, Associate Judge
This case concerns a dispute between S. Brooke Purll, Inc., t/a Purll Construction (the contractor), and Patrick Darrell Vailes (the owner) over the alleged breach of a contract for the renovation of a house belonging to the owner. The trial judge found that the owner had failed to perform certain initial demolition work within the time specified in paragraph 1 of the contract and to make a payment of $7,031.71 as required in paragraph 3. The judge concluded, however, that paragraph 5 of the contract, which the contractor described as a liquidated damages clause, was unenforceable as a penalty, and she declined to award liquidated damages. The judge also rejected the contractor's alternative request for damages for lost profits, holding that these losses had not been adequately proved, and that the contractor had, inter alia, failed to mitigate his damages. The judge awarded the contractor a total of only $2,937.48, including counsel fees.*fn1 The contractor appeals, *fn2 arguing that the trial judge erred by striking down the liquidated damages clause.*fn3 We agree and reverse.
I. THE TRIAL COURT PROCEEDINGS
This case began as a suit by the owner in the Small Claims and Conciliation Branch for return of the $5,000.00 deposit that he had paid to the contractor as an initial payment under the construction contract, which was dated January 30, 2001. The contractor counterclaimed for liquidated damages in the amount of $36,102.04, and also requested an award of counsel fees. He invoked paragraph 5 of the contract, which reads as follows:
The [owner] further agrees that if he shall cancel this Contract for any reason, whatsoever, then he shall pay to the contractor as fixed and liquidated damages, without proof of loss, the sum of money equal to Thirty Five Percent (35%) of the full contract price hereinabove stated. Furthermore, if it becomes necessary for the Contractor to file suit or take other legal action on this Contract because of a breach on the part of the party of the second part, the party of the second part agrees to pay reasonable attorney fees and court costs incurred by the Contractor when enforcing the terms of this Contract. *fn4
Paragraph 9 of the contract provided that the full contract price was to be $103,148.71.
A bench trial was held on May 20 and 21, 2002. At the trial, the judge made oral findings from the bench. She found, as we have previously noted, that the owner had committed two material breaches of the contract.*fn5 With respect to damages, however, the judge ruled as follows:
The Court finds that the liquidated damages requested and stated under the contract is actually a penalty and therefore cannot be awarded in total. First of all, the Court finds that it's a penalty, because it's not anywhere close to the actual damages incurred and that the - if there were lost profits, it would not have been that difficult to present sufficient evidence to the Court on that issue.
The Court finds that the lost profits and the amount requested by the defendant are not supported by sufficient evidence in the record an[d] that the plaintiff did not prove by a preponderance of the evidence that the amount stated in its exhibits were supported by sufficient evidence.
And that therefore, the Court is left in a position to guess and speculate about exactly how much lost profit the defendant actually incurred as a result of the plaintiff's breach.
The Court also recognizes and there was no evidence that, of course, when there is this issue of lost profits, there is also a duty of mitigation. That issue, of course, was not - there was no evidence, of course, in terms of what mitigation efforts were taken or not taken.
Therefore, the Court does not award any lost profits to the defendant. As stated before, the defendant did not meet its burden of proof by a preponderance of the evidence and there was no[t] sufficient evidence for the Court to determine that the ...