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Donovan v. Bachstadt

Decided: November 5, 1981.

EDWARD DONOVAN AND DONNA DONOVAN, FORMERLY KNOWN AS DONNA RELLINGER, PLAINTIFFS-APPELLANTS,
v.
CARL BACHSTADT, DEFENDANT-RESPONDENT



On appeal from the Superior Court of New Jersey, Law Division Middlesex County.

Bischoff, King and Polow. The opinion of the court was delivered by King, J.A.D.

King

The issue here is whether real estate purchasers may recover increased mortgage interest costs as damages from a seller who breached an agreement of sale. The Law Division judge summarily held that any alleged mortgage interest increment was too speculative to be recoverable as damages. The disappointed buyers appeal.

On January 19, 1980 plaintiffs Edward and Donna Donovan entered into a contract with defendant Carl Bachstadt to purchase real property at 80 Weehawkin Avenue in Middletown

Township for $58,900. The standard-form real estate sales contract, completed by a realtor, required that the seller take back a purchase-money mortgage of $44,000 for 30 years at 13% interest.

Defendant did not own the property at the time the contract was executed. He intended to acquire title from his companion Joan Lowden just before the closing scheduled for May 1, 1980 and then convey to plaintiffs. Bachstadt in good faith believed that Lowden owned the property under a deed from the township dated December 1, 1977. A title search conducted in February 1980 disclosed that the record owners were Anthony and Jane Mettrick, and not Lowden. Apparently the township's 1977 tax foreclosure action against the property while owned by the Mettricks was conducted improperly. Therefore, the township never had obtained good title to convey to Lowden. Plaintiffs were told of the title problem before the closing. They have admitted that Bachstadt never affirmatively represented owning the property when the agreement was executed.

On May 5, 1980 plaintiffs filed a complaint in the Chancery Division demanding specific performance and seeking reformation of the interest clause to 10 1/2%, the maximum legal rate at the time the agreement was executed. On June 4, 1980 the Chancery Division judge granted summary relief ordering that "Carl Bachstadt specifically perform all obligations required of him under the contract, subject, however, to the interest rate stated therein of 13% being reformed to be 10 1/2. . . ." No claim for damages for breach of contract was asserted in the Chancery Division action. No appeal was ever taken from the judgment.*fn1

When it became inevitable that defendant could never specifically perform, this proceeding for money damages was brought

in July 1980. In January 1981 plaintiffs moved for summary judgment seeking these damages:

1. $142.85 for the costs of searches, which disclosed that the defendant did not and never had clear title to said property,

2. $145.00 for a survey of the subject property,

3. Compensatory ...


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