Dobson Bay Club Ii Dd, LLC v. La Sonrisa De Siena, LLC

393 P.3d 449 (2017)

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Nature of the Case

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Facts

Bank loaned P $28.6 million for the purchase of four commercial properties. P was to tender interest-only payments until the loan matured in September 2009, when the entire principal would become due-the 'balloon' payment. In 2009, the parties extended the loan maturity date to September 2012. The delay in payment required P to pay interest but also an additional default interest, collection costs, including reasonable attorney fees, and a 5% late fee assessed on the payment amount. If Bank foreclosed the deed of trust, P was also obligated to pay costs, trustee's fees, and reasonable attorney fees. The 2012 maturity date passed, and P failed to make the balloon payment. La Sonrisa (D) bought the note and deed of trust from Bank and promptly noticed a trustee's sale of the secured properties. D claims P owes more than $30 million, including a nearly $1.4 million late fee. P sued D and also eventually secured new financing. P deposited the disputed amounts with the superior court pending the litigation. The superior court granted partial summary judgment for D, ruling that the late fee was enforceable as liquidated damages. The court of appeals reversed, holding 'as a matter of law, that absent unusual circumstances the imposition of a flat 5% late-fee on a balloon payment for a conventional, fixed-interest rate loan is not enforceable as liquidated damages.' D appealed.