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A-S Development, Inc. v. W.R. Grace Land Corporation

537 F. Supp. 549 (1982)

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A-S Development, Inc. v. W.R. Grace Land Corporation

United States District Court for New Jersey

537 F. Supp. 549 (1982)

Facts

In 1974, A-S Development, Inc. (plaintiff) entered into an agreement to sell a number of real estate holdings to W.R. Grace Land Corporation (Grace) (defendant). One of the parcels, a condominium project, was separately listed in a supplement to the agreement and had a purchase price of $9,632,364. However, Grace refused to complete the purchase and take title to that parcel. Grace asserted that there were problems with the marketability of A-S Development’s title. Over the next five years, A-S Development sold off individual apartment units in the condominium project. A-S Development received a total of $13,806,695 for these units. A-S Development then sued Grace, alleging breach of contract. After a bench trial, the court ruled that Grace had breached the contract. Subsequently, the court held a damages trial. A-S Development submitted expert testimony regarding its damages, including several alternative methodologies. One method was considering the sales price as an involuntary loan from A-S Development to Grace, with receipts from the sales of apartments units considered as payments on the loan. Under this method, the interest rate was calculated at 4 percent above the prime interest rate. The total damages were calculated to be approximately $5.8 million under this method. The second method was based on the rate of return that A-S Development’s parent corporation received on its operations. The method assumed that the sales price was invested in the parent corporation and would have returned an amount approximately equal to the overall rate of return. Under this second method, the damages were calculated to be approximately $7.6 million. The third method was based on the time value of money. Under this method, the receipts from the sales of the apartments were discounted back to the March 1975 sale date, resulting in damages of approximately $2.6 million as of March 1975. That damage amount was then brought forward using the yield rate on maturity bonds from publicly traded real estate development companies, resulting in total damages of approximately $7.8 million. Grace argued that no damages were due because A-S Development received more than the contract sales price after selling the individual apartments, even after including the costs of selling the properties.

Rule of Law

Issue

Holding and Reasoning (Thompson, J.)

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