Daybreak Const. Specialties, Inc. v. Saghatoleslami
| Decision Date | 30 May 1985 |
| Docket Number | No. 82CA0809,82CA0809 |
| Citation | 712 P.2d 1028 |
| Parties | DAYBREAK CONSTRUCTION SPECIALTIES, INC., a Colorado corporation, Plaintiff-Appellee and Cross-Appellant, Lunsford Brothers Mechanical Contractors, Inc., a Colorado corporation; Norm Gould & Sons Construction, Inc., a Colorado corporation; Peter Goldstein d/b/a Rocky Mountain Wall and Ceiling Doctor; John R. Crump d/b/a Valley Paint and Decorating; and Patrick I. McGehee d/b/a Valley Roofing, Plaintiffs-Appellees, v. Ebrahim SAGHATOLESLAMI; Sirous Saghatoleslami; Aspen-Glenwood Associates, Defendants and Third-party Plaintiffs-Appellants and Cross-Appellees, SUN SAVINGS & LOAN ASSOCIATION, a Colorado corporation; Louis Koutsoubos, Defendants and Third-party Plaintiffs-Appellees and Cross-Appellants, v. Martine BOONE; Gourmet Junk Foods, Inc., a Corporation; Madeleine Larson; Bonnie S. Miller; and Uldis Praulins, Third-party Defendants-Appellees, and Janice Rustia, Intervenor-Appellee. and Pitkin County Real Estate Management Corporation Intervenor-Cross-claimant. . III |
| Court | Colorado Court of Appeals |
Blockwick, Garn & Neiley, Craig N. Blockwick, Eugene M. Alder, Aspen, for defendants and third-party plaintiffs-appellants and cross-appellees Ebrahim and Sirous Saghatoleslami.
Calkins, Kramer, Grimshaw & Harring, T. Edward Icenogle, Pamela A. Gibson-Mull, Charles B. Hecht, Denver, for defendant and third-party plaintiff-appellee and cross-appellant Sun Savings and Loan Association.
Clark, Wright & Schumacher, Gary A. Wright, Aspen, for third-party defendants-appellees Boone, Larson, Miller and Praulins Intervenor Cross-Appellant Pitkin County Real Estate and Management Corporation.
Goluba & Goluba, David A. Goluba, Glenwood Springs, for plaintiff-appellee and cross-appellant Daybreak Construction Specialties, Inc., and Plaintiff-Appellee, Norman Gould & Sons Construction, Inc.
Defendants, Ebrahim Saghatoleslami and Sirous Saghatoleslami, d/b/a Aspen-Glenwood Associates, (developer) appeal from judgments of the trial court for breach of contract in favor of third-party defendants Martine Boone, Gourmet Junk Foods, Inc., Madeline Larson, Bonnie S. Miller, and Uldis Praulins and intervenor Janice Rustia (contract purchasers). The developer also appeals the trial court's denial of its claims against defendant Sun Savings and Loan Association (Sun). Sun cross-appeals denial of its claims against the developer. Pitkin County Real Estate and Management Company (broker) cross-appeals the denial of its claim for commissions from the developer. We reverse the trial court's ruling that the contract purchasers were entitled to damages for lost profits, and we affirm the judgment in all other respects.
In August 1979, the developer initiated a project to build the Red Cliff Condominiums in Glenwood Springs, Colorado. Sun provided construction financing which required that ten of the units be pre-sold and the earnest money deposited with it. In late August 1979, the developer entered into a contingent contract for the sale of the proposed units to the contract purchasers. The construction loan closed on August 31, 1979, with the developer's execution of the construction loan agreement, note, and deed of trust.
Construction commenced and proceeded normally through May 1980. The earnest money held by the developer was invested in the project. In May 1980 Sun refused to authorize further draws on the construction loan, asserting that the developer had failed to deposit the required earnest money with it, that basements were added to the structures which were not provided for in the project plan, that mechanics' liens had been recorded against the project, and that cost overruns were inevitable. Although the developer disputed some of these contentions, it did not dispute the fact that completion costs would exceed original estimates.
Subsequently Sun and the developer entered into a series of negotiations for additional funds, but these negotiations proved to be unsuccessful. Construction ceased and litigation was initiated in the fall of 1981. Sun instituted foreclosure proceedings and, at the public trustee's sale, bid the full amount of indebtedness, without reserving a deficiency. The developer did not redeem and the property passed to Sun.
At trial, a number of different claims were asserted by various parties. Unpaid mechanics' lien claims were asserted against Sun as owner of the project and against the developer on the underlying contracts; Sun asserted a claim against the developer for amounts paid to satisfy the mechanics' liens; the developer asserted a claim against Sun for indemnification or contribution toward any liability to the contract purchasers; the contract purchasers asserted claims against the developer for damages and for return of their earnest money; the broker asserted a claim for commissions due on the purchase contracts; and the developer asserted a claim against Sun for indemnification.
Sun's claims were denied as having been merged into its bid at foreclosure. The trial court held that the developer had breached its obligations to Sun and its claims against Sun were denied. The contract purchasers were awarded return of their earnest money and damages against the developer. The broker's commission claim was denied.
While the developer concedes that the contract purchasers were entitled to return of their earnest money, it contends that inasmuch as the contract purchasers failed to tender performance or to show an ability to perform, the trial court erred in awarding them damages. We agree.
It is undisputed that the contract was bilateral and contained mutual promises. Each party was under a legal duty to the other; each had made a promise and each was an obligor. See Howlett v. Greenberg, 34 Colo.App. 356, 530 P.2d 1285 (1974). When the obligations of a contract for sale and purchase of land are mutual and concurrent, so long as one party makes no tender of deed and the other no offer of payment, neither is in default. Kepler v. Burns, 137 Colo. 329, 324 P.2d 785 (1958).
A party's duty to pay damages for non-performance of a contract is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise. Restatement (Second) of Contracts § 244 (1981). See Rubinger v. Rippey, 201 Misc. 135, 110 N.Y.S.2d 5 (1951). Thus, where both parties to a contract are in default, there can be no recovery by either against the other. Yale Development Co. v. Aurora Pizza Hut, Inc., 95 Ill.App.3d 523, 51 Ill.Dec. 409, 420 N.E.2d 823 (1981).
Accordingly, the contract purchasers may not recover for an alleged breach of contract unless they can establish by a preponderance of the evidence that, except for its breach, the developer would have received "substantially what it bargained for." Hodes v. Hoffman International Corp., 280 F.Supp. 252 (S.D.N.Y.1968).
The trial court concluded that the developer was in default, that it had breached the contract, that it had failed to take the necessary steps to close in accordance with the contract terms in a reasonable time, and therefore, that the contract purchasers were entitled to damages in the amount of the difference between the market price and the contract price, plus the return of their earnest money and other fees paid.
But, undisputed evidence showed that, although a clause in each sales contract stated that the agreement was expressly contingent upon the purchaser obtaining financing within 30 days from the date of execution of the agreement, none of the contract purchasers obtained such a commitment even though the construction difficulties did not occur until several months later. The undisputed evidence also established that none of the purchasers were ready, willing, and able to perform their obligations at any time. None had sufficient funds necessary to close, none had entered into binding loan commitments or contracts for other financing, nor did they have sources of funds from which they could pay the amounts necessary to close.
Since each party's duty to render performance was conditioned on the other party's performance or readiness to perform, the developer's duty to pay damages was discharged by the failure of performance by the contract purchasers. See United States v. Penn Foundry & Manufacturing Co., 337 U.S. 198, 69 S.Ct. 1009, 93 L.Ed. 1308 (1949). Consequently, the trial court erred in awarding the purchasers damages on the contract.
The broker entered into an "open listing contract" with the developer to pre-sell the condominium units. It contends that the trial court erred when it found that the broker had not met its burden in proving that it had procured "ready, willing, and able" purchasers. The broker asserts that, since the contract purchasers paid a down payment directly to the seller, and since there was a listing agreement along with unit purchase contracts, the purchasers were ready, willing, and able, and thus, it is entitled to its commission. We disagree.
In the absence of a completed sale, a broker is entitled to a commission only if he has procured a purchaser who is ready, willing, and able to consummate the sale on the terms and conditions prescribed by the seller, and the broker must prove that he has presented such a purchaser to the seller. Becker v. Arnold, 42 Colo.App. 178, 591 P.2d 596 (1979). To be considered an "able" purchaser, an offeror must be shown to have had the financial ability to complete the purchase within the time permitted by the offer. McGill Corp. v. Werner, 631 P.2d 1178 (Colo.App.1981).
Here, the broker offered no evidence to show that the contract purchasers were ready, willing, and able to purchase. Although the purchase contracts were entered into through the efforts of the broker, the record shows that the purchasers had insufficient personal funds to close, and that...
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