Opinion ID: 774014
Heading Depth: 3
Heading Rank: 2

Heading: The Remedy of Reliance Damages

Text: 43 Landmark also appeals the trial court's denial of compensation for the 1983 contribution under a theory of reliance damages. The purpose of reliance damages is to compensate the plaintiff for loss caused by reliance on the contract. Restatement (Second) of Contracts §§ 344(b). In order to be recoverable as reliance damages, however, plaintiff's loss must have been foreseeable to the party in breach at the time of contract formation. See Restatement (Second) of Contracts §§ 351(1) (Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.). Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. Restatement (Second) of Contracts §§ 351(2). In order to be entitled to reliance damages, a plaintiff must prove that both the magnitude and type of damages were foreseeable. See 5 Arthur Corbin, Corbin on Contracts, §§ 1012 at 88 (1964) ([In order to have been foreseeable] the injury that occurs must be one of such a kind and amount as a prudent man would have realized to be a probable result of his breach.); see also Restatement (Second) of Contracts, §§ 351, cmt. a (The mere circumstance that some loss was foreseeable, or even that some loss of the same general kind was foreseeable, will not suffice if the loss that actually occurred was not foreseeable.). 44 The trial court found that the 1983 contribution was not foreseeable. The 1983 contribution was comprised of $3.3 million worth of real estate, and 100% of the stock of Unique Golf Concepts, Inc., a subsidiary of Landmark with substantial real estate assets and a value of approximately $31.5 million. The trial court did not distinguish between the real estate and stock components of the 1983 contribution in finding that the entire contribution was not reasonably foreseeable. Further, in its principal brief on appeal, Landmark states that [t]here is no valid theoretical distinction between the $3 million [real estate] contribution or the 1983 [stock] contribution. Thus, we will review the trial court's finding that the 1983 contribution as a whole was not foreseeable, without considering whether the real estate or stock components of that contribution, considered separately, would have been foreseeable. 45 In finding that the 1983 contribution was not foreseeable, the trial court stated: 46 The government was aware that Landmark was in the property development business, but it had no reason to foresee that Landmark would contribute essentially all of its assets to Dixie. It could not foresee at the time of contracting that a breach of the Assistance Agreement would cause Landmark to lose its entire business. 47 Landmark, 46 Fed. Cl. at 270. Foreseeability is a question of fact. Climatic Rainwear Co., Inc. v. United States, 115 Ct. Cl. 520, 533 (1950). Landmark argues that its contribution was foreseeable because section 17 of the Assistance Agreement provides that [i]t is the purpose of this Agreement to provide a means by which . . . [Dixie] may be provided with property development and loan opportunities. Further, Landmark points to a letter sent prior to contract formation from Landmark's counsel to the government's representative. In this letter, Landmark stated that: 48 As we discussed, it is probable that, from time to time, Landmark will contribute additional real estate to [Dixie], whether it needs additional net worth or not. In this regard, we understand that there would be no limit to the amount of real estate that could be contributed to [Dixie] for capital purposes. 49 While the letter indicates that the government was on notice that Landmark intended to possibly contribute real estate to Dixie beyond that required under the contract, it fails to provide any indication of the certainty or magnitude of any additional contribution. In the letter, Landmark did assert its understanding that there would be no limit to the amount of real estate that could be contributed, but this provides no insight into the actual magnitude of the additional contribution Landmark might make. The issue of foreseeability is admittedly close in this case. However, we are not left with the definite and firm conviction that the magnitude of the 1983 contribution was foreseeable at the time of contract formation. United States Gypsum Co., 333 U.S. at 395. Thus, Landmark has failed to show that the trial court's finding that the 1983 contribution was not foreseeable was clearly erroneous. Thus, we will not disturb the trial court's denial of reliance damages.