Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC

JUSTICE TIMMER,

opinion of the Court:

¶ 1 A liquidated damages contract provision is enforceable if the pre-determined amount for damages seeks to compensate the non-breaching party rather than penalize the breaching party. We here hold that a nearly $1.4 million late fee assessed on a final loan balloon payment constitutes an unenforceable penalty.

I. Background

¶2 In 2006, Canadian Imperial Bank of Commerce loaned Dobson Bay Club II DD, LLC and related entities (“Dobson Bay”) $28.6 million for Dobson Bay’s purchase of four commercial properties. The loan was secured by a deed of trust…