Seller Wins Against Defaulting Buyer
By Deborah Elkins
Published: March 22, 2012
Published: March 22, 2012
A lawyer and her husband who breached a contract to buy a house in Alexandria, when they decided to move to Texas so wife could accept an in-house counsel position, are liable for damages for the difference in their contract price and the house’s ultimate sale price, seller’s brokerage fees and commission and utility and improvement expenses, but not for capital gains taxes the seller paid when she sold IBM stock so she could buy property in Florida after the first sale in Virginia fell through, says an Alexandria U.S. District Court magistrate judge.
Under Virginia law, the listing agreement is considered a general contract and not a special contract. Paragraph 26 of the contract states that in the event of a default by the purchaser, the seller may accept the deposit as liquidated damages but if the seller does not elect to accept the deposit as liquidate damages, the deposit may not limit the purchaser’s liability in the event of default. In this case, the plaintiff seller elected not to accept the $20,000 deposit as liquidated damages.
Defendants acknowledge their failure to proceed to closing and the parties agree plaintiff’s resale of the property following defendants’ breach was an expected result of that breach. Plaintiff originally marketed the property with the intention of selling it and relocating to Florida with her elderly mother and trial testimony established that plaintiff had taken significant steps to prepare for her move before the March 29, 2011 closing date.
Trial testimony established that the $50,100 difference in the expected price of the sale to defendants ($750,000) and the actual price of the later sale ($699,900) was reasonable given the state of the real estate market in northern Virginia at the time. Trial testimony further established that plaintiff re-marketed the property in a reasonable time. The court concludes the difference in sales prices is reasonable and is a natural, expected and compensable consequence of defendants’ breach of the parties’ sales contract, and that plaintiff acted reasonably to mitigate damages.
The court concludes plaintiff is entitled to an award of $50,100 for the difference in the sales price of the property as damages sustained as a direct result of defendants’ breach. The court also awards damages for utility costs incurred by seller and for improvement expenses incurred for her efforts to remarket the property; as well as brokerage fees and commission.
However, the court declines to award as damages to the seller capital gains taxes she incurred when she allegedly was forced to sell her IBM stock in order to finance her purchase of a home in Florida. Even if plaintiff’s plan to purchase property in Florida was within the contemplation of the parties, plaintiff’s decision to sell IBM stock to finance the Florida purchase and to incur significant capital gains taxes cannot be considered a reasonably foreseeable consequence of defendants’ breach. Further, plaintiff failed to make reasonable efforts to mitigate those damages. A sales contract addendum for the Florida property provided the contract was contingent on the sale of plaintiff’s Virginia property. Given defendants’ breach, plaintiff was not obligated to go through with the purchase on the Florida property and there was no evidence she made any inquiries concerning the possibility of delaying the closing on the Florida property to allow for the sale of her Virginia home.
The court finds a total damages award in favor of plaintiff of $76,224.51 is appropriate: $50,100 for the difference in sales price; $2,121.51 in utility costs and improvement expenses and $24,003 in brokerage fees.
Sandbeck v. Reyes (Anderson) No. 1:11cv761, March 19, 2012; USDC at Alexandria, Va. VLW 012-3-109, 13 pp.
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