Opinion ID: 2614170
Heading Depth: 1
Heading Rank: 6

Heading: damages on count ii

Text: The question here presented is as follows: Did the trial court err in granting defendants Kimbrough's and Corey's motion for a new trial as to damages on Count II? The trial court in granting the motion, believed that it erred in failing to allow defendants to introduce evidence as to a subsequent resale of the property by State Savings to a third party after State Savings had purchased the property at the second foreclosure sale. The facts show that State Savings' damages on Count II were determined in the following manner: The court, in the previous mortgage foreclosure suit, originally ordered the property sold at public auction at an upset price of $1,051,200.80. This amount included the balance due on the mortgage, the mechanic's liens and the foreclosure expenses. At the second sale State Savings bought the property for $913,000.00. This left a loss of $138,200.80 on the sale. State Savings, in the present case on appeal, recovered the amount of the mechanic's liens, $28,506.70, on Count I. The balance, $109,694.10, was the amount returned by the jury on Count II. It is not disputed that the mortgage foreclosure sale itself was conducted properly under the law. The sale was conducted and confirmed by the court in that action. As such this court considers it irrelevant to the action at hand that State Savings itself was the buyer of the property at that sale. Concerning the issue of damages in the present case, the only fact resulting from the sale that is relevant is the amount of the proceeds from the foreclosure sale. State Savings' damages would certainly not be computed any differently had it not resold the property or had another party bought the property at the foreclosure sale. Therefore, the fact that State Savings subsequently sold the property has no bearing on this case and the facts surrounding this sale were properly disallowed. State Savings confuses this issue by going into a lengthy discussion in its brief on the difference between the benefit of the bargain theory of computing damages for fraud and the out of pocket theory. It would have the court at this time adopt one theory or the other for this jurisdiction. Under the benefit of the bargain rule, State Savings would be entitled to have its mortgage note paid in full, that is what it bargained for. Using the out of pocket theory, the loss is the deficiency under the mortgage note. In both instances the expenses of the foreclosure sale that were a portion of the upset price would be included in the damages computation. It is conceded by State Savings that in this case it makes no difference which theory is used, the monetary damages are the same. The benefit of the bargain rule, as used in this context, is ordinarily applicable in those situations where the buyer of property is defrauded as to its value at the time of sale. Louis Steinbaum Real Estate Co. v. Maltz, 247 S.W.2d 652 (Mo. 1952). In such a situation the price of a subsequent resale is admitted to show the actual value of the property when fraudulently sold. It is evident that that situation is entirely different from the case at hand. Here we have a mortgagee who was defrauded not as to the value of the property but as to the value of a construction contract upon which the amount of the loan was determined. As such a sale of the property by anyone subsequent to the foreclosure sale when the damages were determined is completely irrelevant to the damage issue. Some jurisdictions have taken the view that no strict rule should be adopted and have held that either the benefit of the bargain or the out of pocket rule should be applied depending on the rule most applicable to the case at hand. In such situations a flexible rule is used which would apply a different theory depending on the equities and proof available in each case. Rice v. Price, 340 Mass. 502, 164 N.E.2d 891 (1960); Hunt v. Sherrill, 195 Miss. 688, 15 So.2d 426 (1943); Zeliff v. Sabatino, 15 N.J. 70, 104 A.2d 54 (1954); Gnash v. Saari, 44 Wash.2d 312, 267 P.2d 674 (1954). We are of the opinion that this court should not bind itself to any one rule at this time.