DEBORAH MORENO ROSSETTI v. MARIA RANGEL (2010)

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

INTRODUCTION

Plaintiff Maria Rangel defaulted after agreeing to purchase real property from the Estate of Catherine L. Moreno.   The probate court vacated the order confirming sale of the real property to Rangel and ordered a resale.   The property was later sold for considerably less than the purchase price of the sale on which Rangel defaulted.  Probate Code section 10350, subdivision (e) establishes the statutory measure of damages, and makes the defaulting purchaser liable to the estate for the amount that is the difference between the contract price of the first sale and the price paid by the purchaser at the resale.   The probate court awarded statutory damages to the Estate of Moreno.   Rangel contends that her damages are limited to the amount of the deposit she paid on the real property.   No authority supports this limitation on damages.   We affirm the order awarding damages to the Estate of Moreno.

FACTUAL AND PROCEDURAL HISTORY

On May 9, 2007, Rangel entered into a contract to purchase real property at 1304 N. Chester Avenue, Inglewood, California from the Estate of Catherine L. Moreno for $472,500.   Rangel paid a $12,000 deposit.   An August 8, 2007, order confirmed the sale.

Unable to obtain a loan, Rangel defaulted on the purchase.   The Administrator of the Estate of Moreno petitioned for an order vacating the order confirming the sale and awarding damages against Rangel.   On December 11, 2007, the court vacated the order confirming the sale of the 1304 N. Chester Avenue property to Rangel, ordered a resale, and reserved the issue of damages.

The property was later sold for $271,100, which sale was confirmed by a January 27, 2009, court order

Trial on the issue of damages was held on June 8, 2009.   The trial court found that Rangel's failure to comply with the terms of sale caused the Estate of Moreno to incur damages of $191,028.95.   The trial court found that of Rangel's $12,000 deposit, the Estate held $10,37.05 pending a determination of damages.   The contract price of the sale on which Rangel defaulted was $472,500.   The resale price was $271,100, for a difference of $201,400.   Rangel's breach caused resale expenses of $1,628.95.   Rangel's $12,000 deposit, credited against damages, left $191,028.95 in damages against Rangel pursuant to Probate Code section 10350, subdivision (e)(1)-(3).¹  The order awarding damages filed on July 27, 2009, awarded $191,028.95 in damages to the Estate of Moreno against Rangel.

Rangel filed a timely notice of appeal.

ISSUE

The issue is whether section 10350, subdivision (e)(1), which makes the defaulting purchaser liable for the difference between the contract price of the first sale and the amount paid by the purchaser at the resale, provides the correct measure of damages, or whether, as Rangel argues, damages are limited to the amount of the deposit paid by the defaulting purchaser.

DISCUSSION

Section 10350 sets forth a procedure for vacating a probate sale because of the purchaser's default, and establishes the defaulting purchaser's liability for damages.   It states, in relevant part:

“(a) If after court confirmation of sale of real or personal property the purchaser fails to comply with the terms of sale, the court may, on petition of the personal representative, vacate the order of confirmation, order a resale of the property, and award damages to the estate against the purchaser.

“[¶] ․ [¶]

“(e) If the property is resold, the defaulting purchaser is liable to the estate for damages equal to the sum of the following:

“(1) The difference between the contract price of the first sale and the amount paid by the purchaser at the resale.

“(2) Expenses made necessary by the purchaser's breach.

“(3) Other consequential damages.”

Rangel argues against the statutory measure of damages in section 10350, subdivision (e)(1), which makes the defaulting purchaser liable for the difference between the contract price of the first sale and the amount paid by the purchaser at the resale.   Instead, Rangel argues that damages are limited to the amount of the deposit paid by the defaulting purchaser, plus, in some cases, expenses incurred by the selling estate.   None of the cases cited support this limitation on damages.

In Estate of Long (1907) 5 Cal.App. 684, the estate accepted Fox's $15,400 bid to purchase real property, Fox paid $1,550 on the purchase price, and the court confirmed the sale.   When Fox failed to pay the balance of the purchase price, the estate obtained an order setting aside the sale and ordering resale of the property.  Estate of Long affirmed that order, but said nothing about damages and did not limit those damages to the amount of the deposit paid by the defaulting purchaser.  (Id. at pp. 685-686.)

The estate in Estate of Mesner (1951) 37 Cal.2d 563 accepted Singer's $83,975 bid to purchase real property and Singer's deposit of $8,500.   When Singer later attempted to rescind, he petitioned the probate court to vacate the order confirming the sale and return his deposit;  the estate also petitioned the probate court to vacate the order of confirmation and order a resale.   The probate court denied Singer's petition and granted the estate's petition.   Singer appealed, claiming that the probate court erroneously vacated the order of confirmation on the ground of his failure to complete the purchase (as contended by the estate) rather than on the ground that the order of confirmation was void or that the estate's fraud induced the sale (as Singer contended).  “Had relief been granted to [Singer] on either of the latter grounds his right to the return of his down payment would have been established.”  (Id. at p. 565.)   Estate of Mesner, however, determined that no fraud by the estate occurred and that the order confirming the sale was not void.   Because Singer had not established his right to have the sale to him vacated because it was void or was induced by fraud, “any order directing the disposition of the down payment would be premature.   Under the provisions of [ section 788],² if a resale is conducted, [Singer] will be liable to the estate for the deficiency.  [The estate] is entitled to retain the down payment as security for [Singer's] obligation until the extent thereof is determined․  When and if the property is resold the rights of the respective parties to the down payment will be determined.   If, on the other hand, respondent does not resell the property, [Singer's] right to the return of any part of the down payment will depend on his successfully asserting a claim based on proof that the amount of the down payment exceeded the damages caused by his breach of the contract.”  (Id. at p. 567.)   Thus Estate of Mesner did involve any award of damages, and did not impose the limitation on damages proposed by Rangel.

In Estate of Williamson (1957) 150 Cal.App.2d 334, Lichtenfeld agreed to buy real property of the estate for $325,000 and paid a $16,750 deposit, with the balance to be paid within 60 days.   The probate court confirmed the sale.   Sixty days passed without further payment by Lichtenfeld.   The executor petitioned to vacate the sale and order a resale, and Lichtenfeld petitioned to vacate the sale on the ground that the broker's false representations induced Lichtenfeld's bid.   The probate court vacated the sale, authorized a resale, and instructed the executor of the estate to retain the $16,750 deposit until further order of the court.  (Id. at pp. 336-337.)   Estate of Williamson stated that the vendor (the estate) held the deposit as security pending determination of the amount of the vendor's loss.   If the deposit exceeded the damages caused by the defaulting purchaser, the vendor was not allowed to retain that excess amount, which would be an unjust enrichment.   Thus it was proper for the probate court to direct the executor of the estate to retain the deposit until a resale was conducted.   At that time the defaulting purchaser would be liable to the estate for the deficiency if the amount realized on resale did not cover the bid and expenses of the previous sale (citing former section 788).   The Estate of Williamson opinion stated that the executor was entitled to retain the deposit as security for the defaulting purchaser's obligation until the amount of that obligation was determined.  (Estate of Williamson, at p. 337.)   The property was later resold to other purchasers for $325,000, the amount of the previous sale.   But because the court allowed a $16,250 broker's commission, the amount realized on resale, in the words of former section 788, “did ‘not cover the bid and the expenses of the previous sale.’  “ Thus after finding against Lichtenfeld's claim that the purchasers were fraudulently induced to buy, the probate court ordered disposition of the $16,750 deposit to pay $10,485.35 of expenses of the previous sale, and return the remaining $6,264.65 to Lichtenfeld.  (Id. at pp. 337-338.)

Estate of Williamson affirmed the probate court's order.   In so doing, it set forth the rationale for the statutory measure of damages in former section 788, which rationale continues to underpin current section 10350, subdivision (e)(1) and (2).   In the absence of a resale, the measure of damages would be the amount by which the sale price exceeds the value of the property at the time the defaulting purchaser breached, plus expenses made necessary by that breach.  “[S]ection 788 substitutes the amount realized upon the second sale for the value at the time of the breach, and the expenses of the first sale for expenses made necessary by the purchaser's breach.   A purchaser doing business with a probate estate does so in contemplation of this measure of damages just as if the provisions of section 788 were typed into the contract of sale.  [¶] The purpose of this measure of damages seems clearly to be that of making the estate whole, of preventing any loss to the estate when the purchaser defaults and there is a resale.   This is accomplished by using the sale price (instead of the value at the time of the breach) as the yardstick.   The estate is not subjected to the hazards of a fluctuating market.   Even if the value at the time of the breach equals or exceeds the original sale price and the resale ․ produces considerably less, the defaulting purchaser makes good the difference between the two sales prices.”  (Estate of Williamson, supra, 150 Cal.App.2nd at p. 339.)

Estate of Williamson does not limit damages to the amount of the defaulting purchaser's deposit.

In Estate of Felder (2008) 167 Cal.App.4th 518, the estate owned an undivided one-half interest in real property.   The owner of the other one-half interest agreed to sell the property on the same terms as the estate.   Grigsby agreed to purchase the property for $480,000, with $240,000 payable to the estate, but then could not complete the purchase.   The probate court vacated the order confirming sale to Grigsby and ordered that the estate retain the deposit until the court made a determination of damages resulting from Grigsby's inability to complete the sale.   The property was then sold to Carlisle for $368,500, with $184,250 paid to the estate.   The probate court ordered that the estate administrator retain Grigsby's $48,000 deposit as damages under section 10350, subdivision (e).  (Estate of Felder, at p. 520.)

Grigsby appealed, contending that the probate court erroneously ordered that the estate retain all of his $48,000 deposit, instead of half that amount.   Estate of Felder found the provisions of section 10350, subdivision (e) to be unambiguous.   Because Grigsby defaulted on the purchase, the order confirming the sale was vacated, and the property was resold, Grigsby was liable to the estate for $55,750 (the difference between the contract price of the first sale of the estate's one-half interest in the real property and the amount Carlisle paid at the resale) and $3,800 in expenses incurred as a result of Grigsby's breach, for a total of $59,550.   This amount exceeded Grigsby's $48,000 deposit.  (Estate of Felder, supra, 167 Cal.App.4th at pp. 521-522.)   Grigsby argued that the probate court erroneously forced him to forfeit the deposit as to the one-half interest in the real property not owned by the estate.  Estate of Felder, however, held that section 10350, subdivision (e)(1) obligated the defaulting purchaser to pay the estate “the ‘difference between the contract price of the first sale and the amount paid by the purchaser at the resale,’ not a pro rata share depending on the sellers' respective interest in the property.”  (Estate of Felder, at p. 522.)   Because the estate was entitled to hold the deposit as security when a purchaser defaulted, pending a determination of the defaulting purchaser's statutory liability to the estate, the probate court could order that the estate retain the entire deposit as statutory damages.  (Ibid.)

Estate of Felder recognized that “Grigsby's statutory liability to the estate, $55,750, exceeded the amount of the $48,000 deposit.   Therefore, the probate court could order that the estate retain the entire deposit.   The estate was entitled to retain the entire $48,000 as statutory damages and not as a deposit.   It makes no legal difference that Mr. Grigsby's $48,000 deposit as such covered both the estate's interest in the real property and that of the co-owner.  Section 10350, subdivision (e)(1) expressly allows the probate court to award to the estate damages in an amount equal to the difference between the defaulting and successful purchase prices.”  (Estate of Felder, supra,167 Cal.App.4th at p. 522.)  Estate of Felder did not limit the amount of damages allowed by section 10350, subdivision (e)(1) to the amount of the deposit.

Rangel has not shown any legal authority limiting the amount of damages awarded pursuant to section 10350, subdivision (e) to the amount of the deposit paid by the defaulting purchaser.   We find no error in the trial court's application of section 10350, subdivision (e) to the award of damages against Rangel and in favor of the Estate of Moreno.   We affirm the order.

DISPOSITION

The order is affirmed.   Costs on appeal are awarded to the Estate of Catherine L. Moreno.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

We concur:

FOOTNOTES

FN1. Unless otherwise specified, statutes in this opinion will refer to the Probate Code..  FN1. Unless otherwise specified, statutes in this opinion will refer to the Probate Code.

FN2. Section 788, the predecessor to current section 10350, established liability for damages similar to section 10350, subdivision (e)(1).   At the time of Mesner's Estate, section 788 stated:  “If, after the confirmation, the purchaser neglects or refuses to comply with the terms of the sale, the court, on motion of the executor or administrator, and after notice to the purchaser, may vacate the order of confirmation and order a resale of the property.   If the amount realized on such resale does not cover the bid and the expenses of the previous sale, such purchaser is liable to the estate for the deficiency.”  (Stats.1931, c. 281, pp. 639-640.)   Section 788 did not limit the defaulting purchaser's liability for damages to the amount of the deposit..  FN2. Section 788, the predecessor to current section 10350, established liability for damages similar to section 10350, subdivision (e)(1).   At the time of Mesner's Estate, section 788 stated:  “If, after the confirmation, the purchaser neglects or refuses to comply with the terms of the sale, the court, on motion of the executor or administrator, and after notice to the purchaser, may vacate the order of confirmation and order a resale of the property.   If the amount realized on such resale does not cover the bid and the expenses of the previous sale, such purchaser is liable to the estate for the deficiency.”  (Stats.1931, c. 281, pp. 639-640.)   Section 788 did not limit the defaulting purchaser's liability for damages to the amount of the deposit.

CROSKEY, Acting P. J. ALDRICH, J.