Pipkin v. Thomas & Hill, Inc.

P. W. D. & W. (the borrowers) (plaintiffs), a partnership of T. A. Pipkin and others, bought property to build a motel and restaurant and secured a construction loan. The borrowers then contracted with Thomas & Hill, Inc. (the lender) (defendant) to take a long-term loan to repay the construction loan. Two months before the loan’s closing, the lender refused to provide the loan, and the borrowers, to prevent a foreclosure on the property and a loss of the borrowers’ equity, refinanced the construction loan at a higher fluctuating rate of interest for 18 months. The borrowers sued the lender for breach-of-contract damages, and the trial court awarded the borrowers general damages by measuring the difference between the new interest rate and the contracted interest rate with a discount for the likelihood of early payment in view of testimony that the average life of a commercial loan was seven years. The trial court also awarded special damages by measuring the amount the borrowers spent in refinancing the loan and in the 18 months of unsuccessfully trying to secure a replacement loan. The trial court denied recovery of the interest the borrowers had to pay on the new loan during the 18 months. The court of appeals denied the reduction in damages made by predicting the average lifetime of a commercial loan and allowed the borrowers to recover the interest paid on the new loan.