Home > Uncategorized > Kuish v. Smith Case covers the return of a Deposit in a rising Real Estate Market.

Kuish v. Smith Case covers the return of a Deposit in a rising Real Estate Market.

The California Court of Appeals Fourth District recently decided the case of Bradford Kuish v. William W. Smith, Jr., et al., Case No. G040743, which covers one circumstance of the return of a purchase deposit for real estate.  Plaintiff Kuish entered into a written agreement to purchase defendants Smith’s Laguna Beach residence for $14 million, but later Kuish unilaterally cancelled the escrow. Defendants promptly sold the property to a third party for $15 million, and in essence suffered no actual damages by the cancellation of the escrow.  Despite this, Smith refused to return plaintiff’s $620,000 deposit, relying on the purchase agreement’s description of the deposit as “non-refundable.”  Plaintiff Kuish filed suit to recover the deposit.  The trial court’s judgment in favor of defendants was reversed and remanded by the Court of Appeals.  Held, that in in a rising market, the seller of real property is limited to the recovery of consequential damages and interest against the buyer who breached the purchase agreement, and in this case the defendants’ retention of the deposit in the circumstance of a rising market, constituted an invalid forfeiture. 

Of course, recently the real estate market has not been rising or at least not rising significantly.  However, in pockets of communities and in the future, there still will be rising markets and this case interpretation gives some guidance.  If an escrow for real estate is cancelled by a Buyer, and a Seller is able to resale for more that the cancelled escrow price, then the Seller is not entitled to retain the full deposit, in the absence of a valid liquidated damages clause.  Such a Seller is still entitled to actual consequential damages he can prove.  In any event, and regardless of the market conditions. Buyers are forewarned to always think twice about ever making a deposit that is termed non-refundable or to signing a liquidated damage clause. 

Nothing herein should be construed as legal advice or creating any attorney-client relationship. Please consult with an attorney for specific legal advice. Thank you.

All Rights Reserved © 2010 by Michael L. Mau, Esq.

The Mau Law Firm

Blog: http://maulaw.spaces.live.com

Website: www.MauLaw.com

Categories: Uncategorized
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