Thursday, January 22, 2009

Synopsis of 'Osborn v. Dennison'


(See Review granted in 'Osborn v. Dennison' for a statement of issues)
This case involves a dispute over a failed residential real estate transaction and whether the sellers elected the remedy of liquidated damages, preventing the sellers from obtaining their actual damages.

Some background: Harold Dennison offered to purchase the home of Douglas and Martha Osborn, using the standard WB-11 Residential Offer to Purchase form approved by the Department of Regulation and Licensing. He deposited $2,000 in earnest money with the broker in connection with his offer. The parties reached an agreement.

After two previously scheduled closing dates had passed, Osborn elected to take advantage of his right to conduct a pre-closing inspection. He and the brokers for both parties discovered damp insulation and damp walls in the basement. Dennison requested another extension of the closing date to address these issues, but the Osborns rejected that request and the deal did not close.

The Osborns subsequently directed their broker to hold the earnest money and place the house back on the market. They also told their broker that they intended to sue Dennison for actual damages after the house had been sold. Dennison requested his earnest money be returned, but did not receive it at that time.

The Osborns sold their house to another buyer in October 2005. In April 2006, they filed a complaint against Dennison, which alleged breach of the sales agreement and sought actual damages.

The Osborns say they never requested nor received the earnest money and that Dennison never authorized it to be released to them. Dennison filed a motion to dismiss, which apparently raised the defense that the Osborns had elected the liquidated damages represented by the earnest money. On June 23, 2006, the Osborns directed their broker to return the earnest money to Dennison. The circuit court denied the motion to dismiss in July 2006. The Osborns then filed an amended complaint, which noted that they had authorized the return of the earnest money and which again sought actual damages.

Summary judgment motions were filed by both sides. The circuit court granted the partial summary judgment motion filed by Dennison and ruled that the Osborns were limited to collecting the $2,000 in earnest money as liquidated damages. The circuit court believed that the Osborns had irrevocably elected the remedy of liquidated damages when they had refused Dennison's request in May 2005 for the return of his earnest money. The Court of Appeals affirmed.

The Osborns ask the Supreme Court to review if under these circumstances they “retained” the earnest money and thereby irrevocably elected the remedy of liquidated damages and forfeited their right to actual damages. From Kenosha County.