Question: Liquidated Damages versus Penalties. Every homeowner in the Putnam County, Indiana, subdivision of Stardust Hills must be a member of the Stardust Hills Owners Association, Inc., and must pay annual dues of $200 for the maintenance of common areas and other community services. Under the association's rules, dues paid more than ten days late "shall bear a delinquent fee at a rate of $2.00 per day." Phyllis Gaddis owned a Stardust Hills lot on which she failed to pay the dues. Late fees began to accrue.
Nearly two months later, the association filed a suit in an Indiana state court to collect the unpaid dues and the late fees. Gaddis argued in response that the delinquent fee was an unenforceable penalty. What questions should be considered in determining the status of this fee? Should the association's rule regarding assessment of the fee be enforced? Explain. [Gaddis v. Stardust Hills Owners Association, Inc., 804 N.E.2d 231 (Ind.App. 2004)]