Appellant buyer challenged the damage award

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Appellant buyer challenged the damage award ordered by the Superior Court of San Bernardino County (California) in a breach of contract action claiming that the award should have been offset by savings realized by respondent seller for not having to pay brokers fees, respondent did not mitigate her damages, and damages resulting from adverse tax consequences were erroneous.

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Overview

Appellant buyer contracted to buy respondent seller’s land and deposited a sum in escrow. When appellant could not obtain financing, he breached the contract, but refused to release escrow. Respondent did not resell the land due to the open escrow. Escrow was eventually cancel and the property was condemned by the city who paid respondent the same price. Appellant sought a refund of his deposit. The trial court awarded respondent damages for adverse tax consequences incurred due to the property’s belated sale and did not allow appellant an offset for the savings realized by respondent upon resale due to the absence of a broker’s commission. Appellant sought review of the damage award and contended that respondent did not exercise diligence in mitigating damages. The court affirmed finding that as evidence was not presented as to the property’s value at the time of breach, it could not determine whether the broker’s commission should be deducted from the contract price. However, the court reduced the damage award because the tax damages were not foreseeable. Finally, the court ruled that since appellant would not cancel escrow, respondent could not reasonably mitigate damages.

Outcome

Damages awarded to respondent seller were affirmed because the court could not determine whether an offset was warranted because appellant buyer did not present evidence of the market value of the land on the date of breach and respondent could not reasonably mitigate her damages where appellant refused to release escrow. However, damages due to adverse tax consequences were erroneous as they were unforeseeable.

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