Summary of Roesch v. Bray
Citation: 46 Ohio App. 3d 49 (1988)
Relevant Facts: John and Janie Roesch entered into a contract with Harry and Carol Bray to sell the Roesch’s home in Huron, Ohio to the Brays. Five days after entering into the contract, the Brays informed the Roeschs that they would be unable to perform on the contract. Prior to the breach, Harry Bray (father of Appellant Janie Roesch) had encouraged the Roeschs to purchase another home so that the Brays could move into the Roesch’s current home. The contract between the parties required the Brays to pay the Roeschs $45,000 at closing, and an additional $20,000 upon the sale of their home, with no interest charged until that sale was completed. Following the breach, John Roesch was forced to borrow $65,000 from a third-party at sixteen percent interest in order to meet his contractual obligation to purchase the new home he and his wife had contracted to buy. The Roesch’s ultimately resold their first home for $63,500. At trial, the judge granted the Roesch’s motion for partial summary judgment as to breach and referred the case to a referee for determination of damages. The trial Court adopted the referee’s report in most respects, awarding the Roesch’s damages for utilities, insurance, taxes, maintenance, advertising, and interest on the amount due at closing. The Roesch’s appealed the damages award, claiming they were entitled to the difference between the contract price and the price realized in the subsequent sale, plus interest.
Issue: Are purchasers of residential real estate that breach the sales contract responsible for damages when the resale price realized is less than the contract price? Are breaching buyers responsible for consequential damages related to expenses incurred while holding property awaiting resale to another buyer?
Holding: Yes, sellers are entitled to the benefit of their bargain with breaching buyers, calculated by the difference between contract price and fair market value plus interest. No, breaching buyers are not responsible for costs relating to holding real estate for subsequent resale, as those expenses are properly viewed as incidents of ownership that the Court was unwilling to impart to breaching buyers indefinitely.
Reasoning: In a per curiam opinion, the Court explained that under Ohio law, a seller may recover against a buyer in breach of contract for the difference between contract price and fair market value. However, the Court pointed out that the trial judge concluded that there was no evidence in the record as to the home’s fair market value at the time of breach. The price realized in a subsequent sale within a reasonable time following breach is generally admissible as evidence of fair market value, and here the Court explained that while a year had passed between breach and ultimate sale, the price realized was a fair indicator of fair market value. The Appellants were entitled to the benefit of their bargain, which in this case meant the difference between contract price and sale price. The Court disagreed that Appellants were entitled to the difference between the net proceeds of the subsequent sale (adjusted for expenses) and the contract price, explaining that in either sale the Appellants would have borne expenses related to the sale. Next, the Court considered the Bray’s cross-appeal, where they claimed they should not be responsible for interest on the $45,000 they failed to pay at closing and the costs to the Roeschs in holding the property until it could be resold. Here the Court explained that the expenses of holding the property were incidents of ownership, and that holding a breaching party responsible for such losses could open them up to liability for expenses for months or years- well beyond what might be foreseeable. Accordingly, the Court reversed the damages award below, granting the Roesch $1500 in damages for the difference in contract price and the price realized, plus interest, but no other damages.
Conclusion: Under Ohio law, a buyer that breaches a purchase contract for residential real estate is responsible for the difference in contract price and fair market value, but is not responsible for expenses related to holding the property until it can be resold to another buyer.