Pima Savings and Loan Association v. Rampello

In April 1988, John and Nancy Rampello (defendants) signed a contract to buy a 65-unit condominium complex from Pima Savings and Loan Association (Pima) (plaintiff) for $4.7 million. The contract contained a liquidated-damages provision requiring payment of $290,000 if the closing could not occur due to the Rampellos’ default. John sent checks totaling $290,000 as a downpayment to Pima, and Pima agreed to finance the remaining balance. Thereafter, the checks bounced for insufficient funds, and the Rampellos attempted to rescind the agreement. Pima sued the Rampellos for breach of contract and sought to enforce the liquidated-damages provision. Pima filed a motion for summary judgment on the issue, supported by the testimony of its employee Michael Foor. Foor had negotiated the contract with the Rampellos and calculated the liquidated-damages figure. Foor testified that it was difficult to estimate the actual harm from a breach for various reasons, including that sales opportunities may be lost while a property is in escrow, a failed sale can impact market value, and a building continues to depreciate while unsold. Pima’s actual damages from the Rampellos’ breach were around $77,500, not including certain administrative expenses. At the time of the motion for summary judgment, most of the condominium units had been sold. The Rampellos argued that the liquidated damages were an unenforceable penalty. The trial court granted summary judgment for Pima, and the Rampellos appealed.