APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FOURTH DIVISION
539 N.E.2d 182, 183 Ill. App. 3d 461, 131 Ill. Dec. 829 1989.IL.290
Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.
JUSTICE JOHNSON delivered the opinion of the court. LINN and McMORROW, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE JOHNSON
This is an appeal from that portion of the summary judgment order of the circuit court of Cook County holding that a provision in a lease that allowed defendant, Inland Real Estate Corporation, to retain money deposited by plaintiff, Charles Likens, is unenforceable as a penalty. The sole issue presented for review is whether an agreement between the parties that provided defendant the right to retain plaintiff's deposit in certain circumstances is enforceable as liquidated damages or is unenforceable because it is a penalty.
On August 11, 1984, plaintiff gave defendant $359 along with his application to lease the apartment in question. The lease was to run slightly less than one year for the first year. Only one year prior to his submittal of this application, plaintiff had completed the same application form to rent another apartment from defendant. The following provision was contained in both applications:
"I also agree that if I am accepted and fail to complete this transaction by signing your lease, my entire deposit will be forfeited to you. I understand that this application is subject to your approval, and if my application is not accepted, my deposit will be returned in full."
After plaintiff's first application was approved, he entered into a one-year lease with defendant which started October 1, 1983, and ran through September 30, 1984. Plaintiff's second application was approved August 14, 1984. He was scheduled to move into the new apartment on October 13, 1984.
On October 18, 1984, defendant learned that plaintiff did not intend to rent the new apartment. After plaintiff's refusal to execute the lease or take possession of the apartment, defendant retained the $359 as liquidated damages pursuant to their agreement.
On May 5, 1986, plaintiff filed a five-count complaint against defendant to recover the $359. Plaintiff alleged conversion, breach of implied contract, willful and wanton conduct, and breach of fiduciary duty. In the fifth count, plaintiff requested leave to proceed as a class action.
Defendant then filed a motion for summary judgment on October 15, 1986. On October 16, 1986, plaintiff filed a motion for declaratory judgment or partial summary judgment. Partial summary judgments were granted to both parties. The court held, pursuant to Steinberg v. Chicago Medical School (1977), 69 Ill. 2d 320, that the parties' agreement was valid and enforceable. The court also found that defendant was not entitled to retain the $359 as the damages provision was an unenforceable penalty. There was no determination made with respect to the class action issue., Defendant appeals on the basis that the agreement contained a valid liquidated damages provision which the court should have found enforceable.
As a threshold matter, the trial court found that the application to lease was valid. The court noted that, although these application agreements are standard within the residential leasing field, there is virtually no case law dealing with the ...