Citation. 22 Ill.672 S.W.2d 752 (Tenn. 1984)
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This case involves a real estate contract where the buyer breached, causing the seller to incur substantial expense.
Synopsis of Rule of Law.
Special damages are recoverable from a breach of a real estate transaction to the extent that they directly stem from the breach and they are in reasonable contemplation of the parties at the time the contract was made.
Facts.
The Plaintiffs, Robert and Anna Turner (Plaintiffs), entered into a contract to sell their residence to the Defendants, Jerry and Janice Benson (Defendants). The purchase price was stated in the contract as $75,000. When the contract was made, the Defendants were aware that the Plaintiffs operated a day-care out of their home. The Defendants were also aware that the Plaintiffs planned to move to a smaller home because they planned to terminate their day-care business. After the Defendants secured financing, the Plaintiffs entered into a contract to purchase another home. The Defendants failed to show up at the closing and they never completed the transaction. The Plaintiffs brought suit for damages claiming: (i) loss of income from the day-care facility, (ii) interest on the payment due at closing, (iii) loss resulting from the forced sale of their vehicle to avoid foreclosure, (iv) advertising expenses to try to sell the property at auction, (v) charges for moves, (vi) commis
sion difference on the resale of the property, (vii) plumping repairs, (viii) reissuance of insurance, (ix) utilities cost and (x) interest paid to mother on the loan. Approximately one year after the breach, the Plaintiffs were able to sell the residence for $76,000. Therefore, the suit was tried only on the damage claim. The trial court awarded special damages, except for loss of income from the day-care business. The Court of Appeals remanded the case to determine the proper measure of damages.
Issue.
Are special damages recoverable from a breach of a real estate contract?
Held.
Yes. Judgment affirmed and this case remanded to determine the proper measure of damages.
Generally, the proper measure of damages in a breach of a real estate transaction is the difference between the contract price and the fair market value of the property at the time of the breach.
Special damages may be recovered where they are caused by the breach and they are made in reasonable contemplation of the parties when the contract was made.
In the instant case, lost income from the day-care business did not stem from the breach, nor was it in reasonable contemplation of the parties because Plaintiff planned to terminate the business.
In the instant case, Plaintiffs are entitled to all expenses they incurred from owning two houses at once, interest from the amount due at the closing, the loss of their automobile which was sold to avoid foreclosure, moving expenses, plumbing repairs and costs involved with insurance and utilities.
Discussion.
The court examined each item that the Plaintiff claimed as damages to determine which items directly stemmed from the Defendants’ breach and which damages the parties could reasonably contemplate when the contract was made. The court examined the testimony and evidence presented in the lower court. It reasoned that both parties were aware that the Plaintiffs planned to quit the day-care business and therefore, loss of income from this business was not recoverable because it was not in reasonable contemplation of the parties. On the other hand, the Defendants were aware that the Plaintiffs were relying on the proceeds of their sale to finance the purchase of their new home. Therefore, all expenses stemming from the fact that the Plaintiffs were forced to own two homes at once were recoverable. The advertising costs, moving expenses, plumbing expenses, utilities, and insurance were all related to the Plaintiffs’ attempt to mitigate damages stemming from the breach. Therefor
e, they are a normal and foreseeable result of the breach and within contemplation of the parties. The claim for the difference in the realtor’s commission had not merit because it involved a net gain to the Plaintiffs.
