Speculative Damages in Small Claims

[mo42186]

What is the name of your state (only U.S. law)? Las Vegas, NV

Hi. Do small courts in NV award speculative damages? Situation:

Entered into contract with seller for short sale of property in Las Vegas. Original price to be $66k. Bank accepted and set their bottom line to be $57k (it's common for the lender to receive less than the contract amount due to the extra costs associated with closing or paying off 2nd liens in short sales / distressed real estate). We did our due diligence and then found mold in the house. We negotiated the price down to $64k and the bank accepted. However, their bottom line went UP to $59k, which is counter-intuitive because they are receiving less total proceeds. We proceed thinking that we're only going to have to come out of pocket $64k regardless. The day before closing, Bank tells us that there is an extra $2k home owners association lien on the property that they will NOT pay and would make us come up with the money or else the transaction would fall apart. We refused. They were just trying to get an additional $2k out of us by allocating to us the lien they originally embedded in the $66k sale price.

We are trying to sue for speculative damages in small claims court for the difference in a successful close on the property and our $64k. Does it sound like we have a case, and if so, is this a remedy that's likely to be awarded by a small claims court?

THANK YOU FOR RESPONSES!

 

[Antigone*]

What is the name of your state (only U.S. law)? Las Vegas, NV

Hi. Do small courts in NV award speculative damages? Situation:

Entered into contract with seller for short sale of property in Las Vegas. Original price to be $66k. Bank accepted and set their bottom line to be $57k (it's common for the lender to receive less than the contract amount due to the extra costs associated with closing or paying off 2nd liens in short sales / distressed real estate). We did our due diligence and then found mold in the house. We negotiated the price down to $64k and the bank accepted. However, their bottom line went UP to $59k, which is counter-intuitive because they are receiving less total proceeds. We proceed thinking that we're only going to have to come out of pocket $64k regardless. The day before closing, Bank tells us that there is an extra $2k home owners association lien on the property that they will NOT pay and would make us come up with the money or else the transaction would fall apart. We refused. They were just trying to get an additional $2k out of us by allocating to us the lien they originally embedded in the $66k sale price.

We are trying to sue for speculative damages in small claims court for the difference in a successful close on the property and our $64k. Does it sound like we have a case, and if so, is this a remedy that's likely to be awarded by a small claims court?

THANK YOU FOR RESPONSES!

Not going to happen in small claims court.

 

[justalayman]

why do you think the bank has any liability here?

The bank has nothing to do with the HOA fees.

We did our due diligence and then found mold in the house.

If you had done your due diligence, you would have discovered the $2k lien.

They were just trying to get an additional $2k out of us by allocating to us the lien they originally embedded in the $66k sale price.

Huh? This is a short sale. The bank doesn't own the property. They have no liability for the lien. If you want to chase somebody, chase the seller.

 

[tranquility]

I agree with both the previous posters. You are not going to get expectation damages in small claims court and I don't really see this as a breach on the part of the bank here in any event. If it is found to be a breach, you might be able to get specific performance, but that is not going to be a small claims suit. What you're trying to do is reduce what is a large and encompassing legal argument into a small one you can do in small claims court. The whole deal with all the parties will have to be brought in to assure full and fair resolution of the disagreement. It will not be a small claims matter.

 

[mo42186]

why do you think the bank has any liability here?

The bank has nothing to do with the HOA fees.

If you had done your due diligence, you would have discovered the $2k lien.



Huh? This is a short sale. The bank doesn't own the property. They have no liability for the lien. If you want to chase somebody, chase the seller.

The lien was not available in public records. It was discovered in the HOA resale documents package, which was legally the obligation of the Seller to provide in Nevada. They did not provide such information until a few days before closing so there is no way we could have discovered it. We are not claiming BoA should have paid for it - we are claiming that they fraudulent misrepresented the transaction. When we were in contract to buy the property for $66k, their bottom line was $57k after expenses. When we renegotiated to $64k, their bottom line adjusted UPWARDS by $2k, the same amount of the lien. Mathematically we did the calculation and it adds up.

Seller is an old couple - very insolvent, in poor health, and not able to be located. They have 0 assets (hence the short sale), and moved to somewhere in CA.

 

[justalayman]

mo42186;3092461]The lien was not available in public records. It was discovered in the HOA resale documents package, which was legally the obligation of the Seller to provide in Nevada.

well, there's your target then.

They did not provide such information until a few days before closing so there is no way we could have discovered it. We are not claiming BoA should have paid for it

Yes you are or you wouldn't be considering suing them. If you don't think they should have paid it, they you are barking up the wrong tree.

-

we are claiming that they fraudulent misrepresented the transaction. When we were in contract to buy the property for $66k, their bottom line was $57k after expenses. When we renegotiated to $64k, their bottom line adjusted UPWARDS by $2k, the same amount of the lien

.they didn't have to accept any short sale. As such, they can pick and choose what they will accept.

Seller is an old couple - very insolvent, in poor health, and not able to be located. They have 0 assets (hence the short sale), and moved to somewhere in CA

Ah, so you think since you won't be able to get anything from the seller, you will shoot for the bank. Sorry but it won't fly.

 

[Mass_Shyster]

Seller is an old couple - very insolvent, in poor health, and not able to be located.

So who will sign the deed?

 

[mo42186]

So who will sign the deed?

Presumably the listing agent knows of there whereabouts. We have not been given such requested information by the listing agent. LA has been acting as Seller for all intents and purposes.

 

[mo42186]

well, there's your target then.


Yes you are or you wouldn't be considering suing them. If you don't think they should have paid it, they you are barking up the wrong tree.

-.they didn't have to accept any short sale. As such, they can pick and choose what they will accept.



Ah, so you think since you won't be able to get anything from the seller, you will shoot for the bank. Sorry but it won't fly.

The premise of the lawsuit is a misrepresentation of their acceptance of our offer. They had 0 intention to sell it to us at the price they accepted. The pre-existing duty rule (which I presume you are referencing when you say they can pick and choose what they will accept) has its limits with respect to its ability to be used in an abusive way.

 

[OHRoadwarrior]

If you don't like the price, don't buy it.

 

[justalayman]

The premise of the lawsuit is a misrepresentation of their acceptance of our offer. They had 0 intention to sell it to us at the price they accepted. The pre-existing duty rule (which I presume you are referencing when you say they can pick and choose what they will accept) has its limits with respect to its ability to be used in an abusive way.

pre-existing duty rule? Again, you are trying to place something on the bank that is the obligation of the seller. If anything, scream and yell at their agent but the bank does not have the duty to disclose the lien. Heck, as you even stated; it was not of public record so just how are you going to prove they even knew about it before the time they told you? I'm actually kind of surprised the bank was even aware of the lien.

They had 0 intention to sell it to us at the price they accepted.

well, that's actually good because they aren't selling the house to you. They do not have an ownership interest in the house and therefor, cannot sell it to you. Then are the holders of a security interest (a lien if you will) and have simply agreed to take less than what is owed to them to release that security interest.

I think you need to read your contract. Who is your contract with? What does the seller promise you? What does the current lender promise you in any contract?

 

[mo42186]

pre-existing duty rule? Again, you are trying to place something on the bank that is the obligation of the seller. If anything, scream and yell at their agent but the bank does not have the duty to disclose the lien. Heck, as you even stated; it was not of public record so just how are you going to prove they even knew about it before the time they told you? I'm actually kind of surprised the bank was even aware of the lien.


well, that's actually good because they aren't selling the house to you. They do not have an ownership interest in the house and therefor, cannot sell it to you. Then are the holders of a security interest (a lien if you will) and have simply agreed to take less than what is owed to them to release that security interest.

I think you need to read your contract. Who is your contract with? What does the seller promise you? What does the current lender promise you in any contract?

You misinterpret what the pre-existing duty rule is. The pre-existing duty rule is what allows the bank to accept whatever they want, as you said earlier. There is a pre-existing duty for the mortgagor to pay the mortgagee (the bank) an amount, say $200k. Now, the mortgagor is short the funds and is selling it for less (say, $66k). The reason why the bank doesn't have to accept any offer (and thus not obligated to anything they sign) is because there is no additional consideration being exchanged. Hence, the pre-existing duty to PAY THE BANK, still exists and me as a short sale buyer am only performing a pre-existing duty passed to me by the mortgagor.

You are correct that I do not have a contract with them, however they are an approving party within the transaction. They are the sole party that determines whether or not the property will be sold to me. Believe me, I have read this contract above and beyond what you think. The primary cause of action is misrepresentation of acceptance.

How could the bank not have known that the lien didn't exist? Do you really think that a debtor is going to pay HOA fees when they aren't even paying the mortgage? The bank knows this. It is evidenced by the fact that their initial acceptance of $66k allocated 9k (their bottom line is $57k) for closing expenses, but the reoffer of $64k only allocated $7k (hence, their bottom line would still be $57k) - The HOA lien was $2k. They knew about it, originally allocated for it, but then fraudulently tried to transfer it to us the day before closing so their bottom line proceeds would not have changed. We would've had to pay $66k in the end, despite their acceptance of our $64k offer.

 

[OHRoadwarrior]

The fallacy in your argument is that for the preexisting duty rule to apply, the change must be going to them. That is not the case in this situation. They are benefiting no more than they were, before the lien was disclosed. The difference is going to someone else. The legal duty rule does not apply if the parties mutually agree to change the terms of the contract.

 

[tranquility]

You're not in privity with the bank so let's forget about breach of contract claims and now focus on the misrepresentation claims. In MacKOVSKA v. RECONTRUST COMPANY, NA, Dist. Court, D. Nevada 2012 (No. 2:12-CV-421 JCM (CWH).), in similar facts on our issue(s), the court held:

The complaint alleges five causes of action against Hastings: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) injunctive relief; (4) wrongful foreclosure; and (5) misrepresentation/fraud. As the complaint fails to allege a contractual relationship between Ms. Mackovska and Hastings, the court summarily dismisses the first two causes of action as to Hastings. See Tene v. BAC Home Loan Servicing LP, 2012 U.S. Dist. LEXIS 8285, *4 and n.1 (D. Nev. Jan. 24, 2012) (dismissing breach of contract claim and breach of the covenant of good faith and fair dealing claim for failure to allege existence of a valid contract). Similarly, the third cause of action is actually a request for relief, and is therefore dismissed. See Josephson v. EMC Mortg. Corp., 2010 WL 4810715, *3 (D. Nev. Nov. 19, 2010).

Ms. Mackovska's claim for wrongful foreclosure also fails. "An action for the tort of wrongful foreclosure will lie [only] if the trustor or mortgagor can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor's or trustor's part which would have authorized the foreclosure or exercise of the power of sale." Collins v. Union Federal, 662 P.2d 610, 623 (Nev. 1983). Ms. Mackovska has failed to allege that she was not in breach. See Compl. �� 36-45. In fact, the complaint illustrates that Ms. Mackovska had breached her loan agreement. Id. at � 11. Accordingly, Ms. Mackovska has failed to state a claim for wrongful foreclosure.

"To state a claim for fraudulent misrepresentation in Nevada, a plaintiff must allege that (1) defendant made a false representation; (2) defendant knew or believed the representation to be false; (3) defendant intended to induce plaintiff to rely on the misrepresentation; and (4) plaintiff suffered damages as a result of his reliance." Larson v. Homecomings Fin., LLC, 680 F. Supp. 2d 1230, 1235 (D. Nev. 2009). "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Plaintiff has failed to identify any misrepresentations made (or material omissions) by Hastings. Without identifying the basis for the fraud allegation, this court cannot find that plaintiff has met the particularity requirements of Fed. R. Civ. P. 9(b), or properly alleged a fraud action against Hastings.

It seems you have a problem in alleging damages. How were you hurt? Not how you believe you didn't profit enough, but how were you hurt?

 

[justalayman]

mo42186;3092561]

How could the bank not have known that the lien didn't exist? Do you really think that a debtor is going to pay HOA fees when they aren't even paying the mortgage? The bank knows this.

but how did they even know the house was in a development that had an HOA and that there were fees? Are they psychic? Could they psychically divine that there was a $2k lien on the property?

It is evidenced by the fact that their initial acceptance of $66k allocated 9k (their bottom line is $57k) for closing expenses, but the reoffer of $64k only allocated $7k (hence, their bottom line would still be $57k) - The HOA lien was $2k. They knew about it, originally allocated for it, but then fraudulently tried to transfer it to us the day before closing so their bottom line proceeds would not have changed. We would've had to pay $66k in the end, despite their acceptance of our $64k offer.

Hey, look at that; magic numbers. They are seeking the exact same amount of money to them as before; $57k. Who'ld a thunk?

Ya think maybe they wouldn't accept the sale if they were paid anything less than $57k? I'm not a betting man but I would consider putting money on that one. While you want to argue they somehow, in the second price, snuck the charge onto you, in reality, they did no such thing. The put their bottom line at $57k and stuck with that. Just because you negotiated a lower price doesn't mean they have to reduce what they will accept as a payoff.