Phonco Communications, Inc v. Chicago Central Food Mart, Inc

2022 IL App (1st) 210559-U

• Court: Appellate Court of Illinois
• Decided: August 8, 2022
• Docket: 1-21-0559
• Status: Unpublished

Opinion

2022 IL App (1st) 210559-U No. 1-21-0559 August 8, 2022 First Division ________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ PHONCO COMMUNICATIONS INC, ) Appeal from the Plaintiff-Appellee, ) Circuit Court of ) Cook County, Illinois. v. ) ) CHICAGO CENTRAL FOOD MART, INC., ) D/B/A YEMEN GAS AND MINI MART. ) No. 2019 L 000151 Defendants-Appellants ) ) ) ) Honorable ) Judge Hubbard ) Judge Presiding.

JUSTICE WALKER delivered the judgment of the court. Justices Pucinski and Coghlan concurred in the judgment.

ORDER ¶1 Held: A liquidated damages clause is enforceable if it provides a reasonable estimate of actual damages and the parties could not know, at the time of entering the contract, whether they could accurately prove actual damages if a party breached the contract.

¶2 Following a bench trial, the trial court entered a judgment in favor of Phonco

Communications, Inc., in its action against Chicago Central Food Mart (CCFM) for breach of No. 1-21-0559

contract. The court set damages in accord with the contract’s liquidated damages clause. CCFM

argues on appeal that the court should not have enforced the liquidated damages clause and Phonco

did not present sufficient evidence of damages. We find the clause enforceable, and the evidence

permitted calculation of the liquidated damages. We affirm the trial court’s judgment.

¶3 BACKGROUND

¶4 In 2002, CCFM allowed Phonco to install an ATM in a store operated by CCFM, and

Phonco agreed to pay CCFM $0.75 per transaction. The lease automatically renewed every four

years. Phonco later agreed to increase the payment to $1.25 per transaction. The lease included the

following liquidated damages clause: “In the event of a breach of this Lease *** by [CCFM,

Phonco] is entitled to recover as liquidated damages (and not as a penalty) a sum equal to the

average transactions of said ATM times the number of months left in the current term of this Lease,

times one dollar and fifty cents ($1.50).”

¶5 In July 2016, with 27 months remaining in the four-year term that started with the automatic

renewal in 2014, CCFM unplugged Phonco’s ATM and directed Phonco to remove its ATM from

the store. Phonco sued CCFM for breach of contract in 2019. At the trial a witness for Phonco

identified the checks Phonco sent to CCFM each month from August 2015 through July 2016. Ali

Mohamed, the president of CCFM, admitted he received the checks as payment in accord with the

lease. Mohamed also testified that he installed his own ATM in the store in 2016, and he directed

Phonco to remove its ATM.

¶6 CCFM argued Phonco failed to prove damages. The trial court found the lease’s liquidated

damages clause enforceable. Using the payment per transaction and the checks sent from August

2015 through June 2016, the court could calculate the number of transactions each month and the

average number of transactions per month. The court multiplied the average, 941.36 transactions,

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by 27 months times $1.50 per transaction to find liquidated damages of $38,125.08. The court

added attorneys’ fees and costs (as allowed according to the lease) and entered a judgment against

CCFM for $69,090.36. CCFM now appeals.

¶7 ANALYSIS

¶8 On appeal, CCFM argues that the trial court erred by enforcing the liquidated damages

clause, and the evidence did not support the award of damages. We will not disturb the trial court’s

award of damages unless it is contrary to the manifest weight of the evidence. Union Tank Car Co.

v. NuDevco Partners Holdings, LLC, 2019 IL App (1st) 172858, ¶ 26, 123 N.E.3d 1177.

¶9 Liquidated Damages

¶ 10 According to the Restatement (Second) of Contracts:

"Damages for breach by either party may be liquidated in the agreement but only

at an amount that is reasonable in the light of the anticipated or actual loss caused

by the breach and the difficulties of proof of loss. A term fixing unreasonably large

liquidated damages is unenforceable on grounds of public policy as a penalty."

Restatement (Second) of Contracts sec. 356 (1981). See ICD Publications, Inc. v.

Gittlitz, 2014 IL App (1st) 133277.

¶ 11 The party resisting enforcement of a liquidated damages clause bears the burden of

proving it is void as a penalty. Pav-Saver Corp. v. Vasso Corp., 143 Ill. App. 3d 1013, 1019 (1986).

CCFM contends the court should not have enforced the liquidated damages clause because the

parties could easily prove actual damages. CCFM proposes the number of transactions on the ATM

is the proper measure of damages. According to CCFM, Phonco cannot recover any damages

because it presented no evidence of the actual number of transactions on CCFM’s ATM.

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¶ 12 The difficulty or ease of proof of loss is determined at the time of contracting, not at the

time of breach, as CCFM suggests. Id. When the parties signed the lease, nothing required CCFM

to replace Phonco’s ATM if CCFM breached the lease. If CCFM had not replaced the machine,

Phonco would have great difficulty establishing damages with reasonable certainty by any means

other than the estimate set out in the liquidated damages clause.

¶ 13 CCFM also contends that an ambiguity in the lease makes it unenforceable. The contract

refers to the “average transactions of said ATM times the number of months left in the current

term.” CCFM claims “average transactions” could mean the average number per day, per week,

or per year. However, using any of those averages times the number of months remaining in the

current lease term would not produce a reasonable estimate of the number of transactions lost due

to the breach. Multiplying the average number of transactions per month times the number of

months remaining in the lease term provides a reasonable estimate of the number of transactions

lost due to the breach. “A court will consider only reasonable interpretations of the contract

language and will not strain to find an ambiguity where none exists.” Lease Management

Equipment Corp. v. DFO Partnership, 392 Ill. App. 3d 678, 686 (2009). We find the lease

unambiguous.

¶ 14 The liquidated damages clause uses the average number of transactions in past months as

an approximation for the number of transactions lost each month due to the breach. CCFM does

not challenge the contract damages of $1.50 per transaction as a reasonable estimate of the amount

Phonco should recover due to each lost transaction. The lease fixed liquidated damages at an

amount that reasonably approximates actual damages without any penalty. The court correctly

found the liquidated damages clause enforceable. See Stone v. City of Arcola, 181 Ill. App. 3d 513,

525 (1989).

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¶ 15 Calculation of Damages

¶ 16 CCFM contends no evidence supports the court’s award of damages because no witness

testified that Phonco’s ATM in CCFM’s store averaged 941.36 transactions per month.

¶ 17 A party seeking damages must prove its damages to a reasonable degree of certainty, and

the evidence it presents must not be remote, speculative, or uncertain. Furthermore, a plaintiff need

only present evidence that provides a basis upon which to compute damages with a fair degree of

probability. Doornbos Heating & Air Conditioning, Inc. v. Schlenker, 403 Ill. App. 3d 468, 485

(2010).

¶ 18 After the agreed upon increase of $1.25 per transaction, Phonco sent CCFM checks each

month paying CCFM. This evidence allowed the trial court to calculate the number of transactions

each month by dividing each month’s check by the payment per transaction. The court could then

add the number of transactions for the last 11 months before the breach and divide by 11 to find

the average number of transactions per month. The evidence gave the court a reasonable basis for

computing the liquidated damages. CCFM has not shown any error in the trial court’s finding of

the average. The court’s award of damages is not contrary to the manifest weight of the evidence.

¶ 19 CONCLUSION

¶ 20 The trial court correctly enforced the liquidated damages clause of the lease as the clause

made a reasonable estimate of Phonco’s actual damages, and the parties agreed to the clause when

the parties did not know whether they could prove actual damages. The evidence permitted the

court to calculate the liquidated damages, and CCFM has not shown any error in the calculation.

Accordingly, we affirm the trial court’s judgment.

¶ 21 Affirmed.

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