This opinion is uncorrected and subject to revision before
publication in the New York Reports.
St. Lawrence Factory Stores,
Ogdensburg Bridge and Port
David C. Buran, for appellant.
A. Paul Britton, for respondent.
In this breach of contract case, we hold that plaintiff
is entitled to recover the expenses, if any, that it reasonably
incurred in preparing to perform the contract.
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Defendant agreed to sell, and plaintiff to buy,
approximately 12 acres of land, on which plaintiff intended to
build a shopping center.
Supreme Court found that defendant
breached the contract by failing to close, and defendant does not
now challenge that finding.
Plaintiff sought damages in three categories: lost
profits (money it claims it would have made if the shopping
center had been built); the "benefit of its bargain" (the alleged
difference between the agreed-upon price of the property and its
market value); and reliance damages (money allegedly spent in
preparing for performance including, among other things, efforts
to arrange financing and obtain tenants for the shopping center).
Supreme Court dismissed the claims for lost profits and reliance
damages before trial, and the Appellate Division affirmed (St.
Lawrence Factory Stores v Ogdensburg Bridge and Port Authority,
26 AD3d 700 [3d Dept 2006]).
Plaintiff's benefit of bargain
claim was rejected at trial, and the Appellate Division again
affirmed (St. Lawrence Factory Stores v Ogdensburg Bridge and
Port Authority, 49 AD3d 1069 [3d Dept 2008]).
We granted leave
to appeal from the Appellate Division's 2008 order, bringing up
for review also its 2006 order.
As to the lost profits and benefit of bargain claims,
we affirm the rulings below.
The lost profits claim was
speculative, and the record supports the findings of the lower
courts that the market value of the property at the time of the
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aborted closing did not exceed the contract price.
However, the dismissal before trial of plaintiff's
claim for reliance damages was error.
The Appellate Division
held that, under "a contract for the sale of land requiring
plaintiff to tender defendant the sale price upon closing,"
reliance damages are limited to "only those ordinarily incurred
regarding such a contract, such as a title search, survey and
attorney's closing fees" (St. Lawrence Factory Stores v
Ogdensburg Bridge and Port Authority, 26 AD3d at 702).
In land transactions, as in other contracts, the rule
is the one stated in the Restatement (Second) of Contracts § 349:
as an alternative to expectation-based damages (which would
include lost profits and benefit of bargain), a plaintiff may
recover "damages based on his reliance interest, including
expenditures made in preparation for performance or in
performance, less any loss that the party in breach can prove
with reasonable certainty the injured party would have suffered
had the contract been performed."
The principle expressed in the
Restatement has long been part of New York law (Friedland v
Myers, 94 Sickels 432, 436-437 ; Bernstein v Meech, 85
Sickels 354, 359 ; see also Freund v Washington Square
Press, Inc., 34 NY2d 379, 383  ["reliance losses suffered .
. . in making necessary preparations to perform" would be
recoverable "if foreseeable and ascertainable"]).
Accordingly, the order of the Appellate Division should
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be modified to reinstate plaintiff's claim for reliance damages,
and as modified affirmed, without costs, and the case remitted to
Supreme Court for further proceedings in accordance with this
Order modified, without costs, by remitting to Supreme Court, St.
Lawrence County, for further proceedings in accordance with the
opinion herein and, as so modified, affirmed. Opinion by Judge
Smith. Chief Judge Lippman and Judges Ciparick, Graffeo, Read,
Pigott and Jones concur.
Decided October 20, 2009
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