Phillip A. Corbitt v. Rolanda Amos

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

May 22, 2012 Session

PHILLIP A. CORBITT ET AL. v. ROLANDA AMOS

Appeal from the Chancery Court for Davidson County

No. 1081-I Claudia Bonnyman, Chancellor

No. M2011-01916-COA-R3-CV - Filed September 27, 2012

The sellers of real estate brought this action against the successful bidder at a real estate

auction after the bidder failed to close because she was unable to obtain a loan sufficient to

purchase the property. The sellers later auctioned the property for a substantially lower price.

It is undisputed that the buyer breached the contract by not closing and that the sellers are

entitled to recover certain special damages; the buyer challenges the trial court’s award of

$55,300 for the seller’s general damages for their loss of the benefit of the bargain. We have

determined the trial court’s decision is not supported by competent evidence in the record and

that the sellers failed to prove the fair market value of the property on the date of the breach

was less than the contract price. Therefore, we reverse the award of $55,300 for the loss of

the benefit of the bargain. We, however, affirm the award of special damages, specifically

the expense of conducting a second auction and sale, property taxes paid between the date

of the breach and the second sale, and prejudgment interest, which shall be calculated based

upon the judgment as modified.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed in Part; Reversed in Part

F RANK G. C LEMENT, J R., J., delivered the opinion of the Court, in which A NDY D. B ENNETT,

J., and B EN H. C ANTRELL, S P. J., joined.

Douglas Berry, Nashville, Tennessee, for the appellant, Rolanda Amos.

Michael K. Radford, Brentwood, Tennessee, for the appellees, Phillip A. Corbitt and Vera

A. Corbitt.

OPINION

Plaintiffs Phillip A. Corbitt and Vera A. Corbitt lived in their home located at 2113

Cliff Drive, just off Clarksville Pike in the Bordeaux area of Nashville, Tennessee, for over

twenty years. They also owned an unimproved parcel immediately adjacent to their home.1

Together, the two parcels comprise three acres. The area is generally residential with some

commercial property located around the Corbitts’ property, including a trailer court located

between the Corbitts’ property and Clarksville Pike.

In 2005, the Corbitts began making plans to relocate and decided to list their property

for sale; the listing price for both parcels together was slightly under $250,000. The property

remained on the market for several years and was listed with four or five different real estate

agents, yet the Corbitts only received one written offer, which ultimately fell through.2

Finally, in April 2009,3 the Corbitts decided to attempt to sell their property at auction and

engaged the services of Prudential Rowland Auction Division (“Prudential”).

The auction was held on June 13, 2009. At the beginning of the auction, prospective

bidders were informed, inter alia, that the sale was not contingent on financing. There were

several serious bidders; in the end, Ms. Rolanda Amos, a real estate agent who also lived on

Cliff Drive, made the winning bid of $174,000.

Following the auction, Ms. Amos and the Corbitts signed an “Auction Contract for

Sale of Real Estate” and Ms. Amos paid $8,700 (5% of the purchase price) in earnest money

to Prudential, which was to be held in escrow until closing. The closing was scheduled to

take place within thirty days, on or before July 13, 2009. The contract also provided that in

the event of a buyer’s default, the earnest money “shall be retained” by the sellers for “partial

liquidated damages.”

Soon after the auction, Ms. Amos’s financing fell through, and she informed the

Corbitts that she would be unable to close. Attempts to contact the second highest bidder

1

The Corbitts acquired the parcels in April of 1990 and October of 1993, respectively. They

purchased the vacant lot to serve as a buffer between their property and a trailer park that was expanding into

a lot directly adjacent to the vacant lot the Corbitts purchased. The parcel with the small house on it was

purchased for $44,000; the vacant parcel was purchased for $30,000. Each parcel was approximately one and

one-half acres.

2

The Corbitts did not accept the offer because the buyer was “involved in a real estate scam.”

3

The Corbitts decided to auction the property because they had purchased a home with their daughter

and relocated to Smyrna, Tennessee. The Cliff Drive home was left unoccupied and had several break-ins.

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were unsuccessful and the third highest bidder was no longer interested in the property. On

the advice of Prudential, the Corbitts decided to have a second auction. There was a delay

in scheduling the second auction due to Ms. Amos’s failure to timely provide a signed release

of the earnest money, which the Corbitts needed in advance of the second auction for

advertising. Ms. Amos signed a release to the earnest money on September 14, 2009, and the

second auction took place October 17, 2009.

The bidding at the second auction was less competitive than the first, and the highest

bid was $100,000. The sale was subject to a 10% buyer’s premium to cover the auctioneer’s

fees; therefore, the total purchase price was $110,000. The closing took place on November

2, 2009.

The Corbitts filed this action against Ms. Amos for breach of contract on January 19,

2010. They requested $74,000 in general damages for the difference between Ms. Amos’s

contract price and the price for which they ultimately sold the property. They also requested

special damages for the property taxes and maintenance costs on the property incurred

between July 13 and November 2, the costs of the second auction, and prejudgment interest.

In her answer, Ms. Amos asserted that the Corbitts had agreed to assist her with securing

alternative financing but failed to do so, and that they failed to take the appropriate measures

to mitigate their damages.

On October 13, 2010, the Corbitts filed a motion for summary judgment. The trial

court partially granted the motion by order dated December 17, 2010, finding that the

undisputed facts established Ms. Amos breached the contract by failing to close by July 13,

2009. The trial court found there were disputed facts as to the amount of damages and

scheduled an evidentiary hearing for April 14, 2011.

Before the hearing began, the parties agreed and the trial court found that the Corbitts’

general damages were to be determined by calculating the difference between the contract

price of $174,000 and the fair market value of the property at the time of the breach, July 13,

2009. Mr. and Mrs. Corbitt testified on their own behalf, as did David Gilliam, the Prudential

real estate broker/auctioneer who handled both auctions. Ms. Amos also testified.

At the conclusion of the hearing, the trial court made the following findings:

The contract price between the plaintiffs and the defendant was $174,000. The

court finds that the market value of the property at the time of the breach was

$110,000, which was the purchase price of the property at the second sale. The

defendant paid $8,700 earnest money upon contracting that was eventually

paid to plaintiffs for which she is entitled to credit. Thus, the damages

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attributable to the loss of the plaintiffs’ bargain are $55,300 ($174,000 -

$110,000 - $8,700).

The trial court further found that the Corbitts were entitled to recover $1,363.48 for property

taxes paid between July 13, 2009 and November 2, 2009; $2,323.00 for the costs of the

second auction, and prejudgment interest. The trial court denied the Corbitts’ request for an

award for property maintenance costs. Ms. Amos filed a timely appeal challenging the award

to the Corbitts of $55,300 for general damages.

A NALYSIS

I.

When a plaintiff alleges breach of contract, he or she is responsible for proving: “(1)

the existence of an enforceable contract, (2) nonperformance amounting to a breach of the

contract, and (3) damages caused by the breach of the contract.” BancorpSouth Bank, Inc.

v. Hatchel, 223 S.W.3d 223, 227 (Tenn. Ct. App. 2006). It is undisputed that an enforceable

contract existed and that Ms. Amos breached the contract; therefore, the issues on appeal

concern whether the trial court erred in awarding $55,300 for general damages.4

The trial court found the fair market value of the property at the time of the breach,

July 13, 2009, to be $110,000. Ms. Amos contends that the trial court arrived at this value

by relying solely on the opinion testimony of the Corbitts and the purchase price at the

second auction, neither of which, Ms. Amos asserts, constitutes competent evidence of the

fair market value on the date of the breach in this case. As a result, Ms. Amos argues, the

Corbitts failed to carry their burden of proof and the trial court’s award for general damages

must be reversed.

A.

The purpose of assessing damages in a breach of contract action is to make the non-

breaching party whole, to place the non-breaching party “in the same position he [or she]

would have been in had the contract been performed.” Hiller v. Hailey, 915 S.W.2d 800, 805

4

Ms. Amos does not contest the trial court’s award to the Corbitts for special damages, which amount

includes $1,363.48 for property taxes the Corbitts paid between July 13 and November 2, 2009 and $2,323,00

for the costs of the second auction, plus prejudgment interest. The Corbitts also did not appeal the trial

court’s decision to deny them payment for the maintenance costs they incurred between July 13 and

November 2, 2009. Thus, except where otherwise indicated, any reference to “damages” in the analysis

section refers to the general damages award for the Corbitts’ loss of the benefit of the bargain.

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(Tenn. Ct. App. 1995). That is to say, “[o]nly persons who have actually sustained an injury,

or who have suffered an actual loss, may recover damages.” Custom Built Homes v. G.S.

Hinsen Co., Inc., No. 01A01-9511-CV-00513, 1998 WL 960287, at *3 (Tenn. Ct. App. Feb.

6, 1998).

When a buyer has breached a contract for the purchase/sale of real estate, the proper

measure of damages available to the seller is “the difference between the contract price and

the fair market value of the property at the time of the breach.” Turner v. Benson, 672

S.W.2d 752, 754-55 (Tenn. 1984) (citations omitted). The date of the breach is generally held

to be the closing date of the transaction. Hatchell, 223 S.W.3d at 229. “The fair market value

of realty is the price a reasonable buyer would pay if he were willing to buy but did not have

to and that a willing seller would accept if he were willing to sell but did not have to.”

Nashville Hous. Auth. v. Cohen, 541 S.W.2d 947, 950 (Tenn. 1976). Thus, to be entitled to

damages, the seller must prove that on the closing date, the “price a reasonable buyer would

pay . . . and that a willing seller would accept,” is less than the contract price. See Turner v.

Benson, 672 S.W.2d 752, 755 (Tenn. Ct. App. 1984).

A party seeking damages must present sufficient evidence “to enable the trier of fact

‘to make a fair and reasonable assessment of damages.’” BancorpSouth Bank, Inc. v.

Hatchel, 223 S.W.3d 223, 230 (Tenn. Ct. App. 2006) (quoting Wilson v. Farmers Chem.

Ass’n, Inc., 444 S.W.2d 185, 189 (Tenn. Ct. App. 1989)). While the party seeking damages

is not required to prove the exact amount of his or her damages, there must be “proof of

damages within a reasonable degree of certainty.” Redbud Coop. Corp. v. Clayton, 700

S.W.2d 551, 561 (Tenn. Ct. App. 1985).

“Determinations concerning the amount of damages are factually driven. Thus, the

amount of damages to be awarded in a particular case is essentially a fact question.”

Hatchel, 223 S.W.3d at 229 (quoting Beaty, 15 S.W.3d at 827). We review a trial court’s

findings of fact “de novo upon the record of the trial court, accompanied by a presumption

of correctness of the finding, unless the preponderance of the evidence is otherwise.” Tenn.

R. App. P. 13(d). Because of the presumption of correctness, we defer to the trial court’s

findings of fact. The Realty Shop, Inc. v. RR Westminster Holding, Inc., 7 S.W.3d 581, 596

(Tenn. Ct. App. 1999); Taylor v. Trans Aero Corp., 924 S.W.2d 109, 112 (Tenn. Ct. App.

1995)).

B.

The Corbitts were the only witnesses to render an opinion as to the fair market value

of the property as of the date of the breach, July 13, 2009. Thus, the dispositive issue in this

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case is whether the Corbitts’ opinion testimony is sufficiently certain “to enable the trier of

fact to make a fair and reasonable assessment of damages” as a matter of law.5

An owner of property is competent to testify as to the value of his or her property. See

Tenn. R. Evid. 701(b); see also Sikora v. Vanderploeg, 212 S.W.3d 277, 283 n.5 (Tenn. Ct.

App. 2006). However, an owner’s valuation testimony is not competent evidence of value

if it is based on pure speculation or an erroneous standard.” Airline Const., Inc. v. Barr, 807

S.W.2d 247, 256 (Tenn. Ct. App. 1990) (“Although an ‘owner’ of real property is deemed

to have special knowledge about his property to offer an opinion as to its value, the owner’s

opinion will be given little weight when founded upon pure speculation. There must be some

evidence, apart from mere ownership, that this ‘value’ is a product of reasoned analysis.”).

Mere ownership is not, by itself, sufficient to make the valuation opinion. Id.

Ms. Corbitt’s testimony regarding the fair market value as follows:

Q. On July 13 you and your husband still owned this property. What was the

value of this property in your opinion?

A. In my opinion on the 13th the property was about worth a hundred thousand

at that point in time.

Q. Why do you believe that?

A. I believe it dropped from the one fifty that I felt it was worth at the

beginning in the first sale to one hundred after it didn’t close. The market was

still soft and Ms. Amos had not closed, and by not closing that put a bad

reputation on our property because everyone is thinking it had sold and it had

never. It damaged it. So now it’s back in our hands, again not sold, so it makes

it look kind of like tarnished property. It’s not good for the reputation of the

property.

5

Ms. Amos’s opinion testimony as to the fair market value of the property was excluded due to the

fact that she was no longer licensed as a realtor by the date of the trial. Ms. Amos also entered into evidence

the 2009 tax appraisal on the property, which showed a value of $193,000; however the trial court did not

consider the tax appraisal when determining the fair market value, stating, “[t]he Court must find that the tax

appraisals by the tax appraiser were not for the purposes of setting fair market value, but for a wholly

different purpose; that is, for taxation.” Ms. Amos asserts both holdings are in error; however, these issues

are pretermitted by our holding in this matter and we decline to rule upon them.

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Ms. Corbitt also testified that the property had been vandalized since she and Mr. Corbitt

moved to Smyrna and that it would cost “several thousand dollars to get it ready to maybe

rent or live in . . . .”

We find Ms. Corbitt’s opinion is based on “pure speculation.” Barr, 807 S.W.2d at

256. First, Ms. Amos’s failure to close could not have affected the value of the property until

after July 13 and so is not relevant to this analysis. Second, there is nothing in the record to

support Ms. Corbitt’s opinion that the property was worth $150,000 prior to the breach.6 The

record simply reflects that the Corbitts purchased the property in two transactions totaling

approximately $74,000 in the early 1990s, that property was listed at $250,000 for several

years without selling, and that the Corbitts had the property re-zoned at some point to

increase its value but were unable to sell. Finally, even assuming there is proof the property

was worth $150,000 on the date of the first auction, there is no explanation or proof as to

how Ms. Corbitt calculated the $50,000 decrease in value in order to arrive at the $100,000

figure.7 Cf. Barr, 807 S.W.2d at 256 (Where a property owner was seeking damages from a

contractor for the diminution in value of his property due to defective construction, the court

held, inter alia, that the owner failed to provide a rational basis for his valuation because he

“never stated how he arrived at this arbitrary ten percent reduction figure or the correlation

between the defects and this numerical ten percent figure.”). Thus, Ms. Corbitt’s opinion

does not constitute competent evidence of the fair market value. Barr, 807 S.W.2d at 256.

As for Mr. Corbitt, it is abundantly clear that his opinion is based solely on the highest

bid at the second auction. When he was first questioned by his attorney about the value of

the property on the date of the breach, July 13, 2009, he replied, “$150,000.” What followed

was a confusing series of questions and answers, concluding with the following exchange:

Q. And was your - was the value you gave, $150,000, is that your opinion of

the value of the property on [the date of the breach]?

A. On the first auction.

Q. I am asking on July 13th , the day Ms. Amos breached the contract.”

6

When Mr. Corbitt was questioned about the $150,000 pre-breach value, he testified that the figure

“was just an assumption I made.”

7

In other words, Ms. Corbitt failed to “show her work” in arriving at the $50,000 figure; for example,

proof that comparably priced/sized/situated properties lost $20,000 in value due to the real estate market

between June 13 and July 13, 2009, and that repairing the damage done to the property during that 30-day

period would cost approximately $30,000.

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A. That would have brought it down to like one hundred thousand.

Q. So is that your opinion, $100,000?

A. Yes sir.

Exhibit 21, a summary showing his claim for the loss of the “benefit of his bargain”

as $65,300.00, was introduced through Mr. Corbitt on direct examination. On cross-

examination, Mr. Corbitt was asked the factual basis of his opinion of the value of the

property on the date of breach and the benefit of the bargain sum, to which he replied:

Okay. What that is, that’s - We got a hundred thousand at the second sale. So

a hundred thousand is knocked off. $74,000.00 was missed out on. We

[subtracted] her earnest money that she put in, and that sixty five thousand is

what you come up with.

Thus, because Mr. Corbitt’s opinion is entirely based on the sale price at the second

auction, we must determine whether that price itself is competent evidence of the fair market

value.

C.

When evaluating cases involving a breach of a real estate contract, “the amount a

seller is eventually able to obtain for the property may constitute evidence of its fair market

value at the time of the breach.” Hatchel, 223 S.W.3d at 231 (emphasis added) (citations

omitted). However, “[t]his rule is conditioned upon the second sale being made on the same

or equally favorable terms as the initial sale, the price obtained from the resale be the highest

price obtainable for the property and the resale be accomplished within a ‘reasonable time’

after the vendee’s breach.” Id. (citation omitted).

David Gilliam, the Prudential auctioneer/broker who handled both auctions for the

Corbitts, testified about the circumstances under which each of the auctions was conducted.

Mr. Gilliam has been a licensed real estate broker and in the auction business since 1995 and

is the head of Prudential’s auction division. The auction contract for the first auction required

the Corbitts to pay $2,993.31 for auction expenses and labor, of which $1,000 was required

to be paid in advance. The commission on the sale for Prudential was six percent. Mr.

Gilliam stated that the vast majority of the auction fee was dedicated to paying advertising

costs. He stated that he advertised the first auction in The Tennessean, local advertising in

Murfreesboro, and on the Internet. He also advertised the first auction through flyers that

were distributed to businesses, convenience stores, and which were posted on bulletin boards

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anywhere there were large numbers of people. Signs were posted on the property and leading

into the property from various directions for ten days before the first auction. He stated the

turnout was moderate but there were three primary bidders. The first auction was advertised

as a “reserve auction.” The bidding at the first auction started out at $50,000. During the

bidding, the auctioneer announced the auction was being changed from a reserve auction to

an absolute auction.

For the second auction, which took place October 19, 2009, Mr. Gilliam advertised

the auction as an absolute auction instead of a reserve auction. In publicizing the second

auction, Mr. Gilliam did not advertise on the Internet or in the local Murfreesboro newspaper

as he had done to promote the first auction; instead, he chose to advertise in a consortium

newspaper that goes out in Green Hills and other “exclusive areas” in Nashville. Mr. Gilliam

spent $2,533.31 on advertising the first auction; he only spent $1,799 to advertise the second

auction.8 Although Mr. Gilliam testified that he believed the advertising was “largely the

same” for the second auction as for the first auction, he acknowledged there was a smaller

crowd in the second auction. Mr. Gilliam also testified that he was “a little concerned that

the crowd might not include serious buyers,” thus, just before the bidding began on the day

of the auction, it was announced that the auction was being changed from an “absolute

auction” to a “reserve auction.” Mr. Gilliam explained this last minute change stating, “I

thought it was in [the Corbitts’] best interest not to expose themselves to an absolute sale.”

The two opening bids at the second auction were $15,000 and $20,000; the opening bid at

the first auction was $50,000.

Once the bidding reached a certain amount, the auctioneer announced that the auction

was being changed again, back to an “absolute auction” as advertised. Mr. Gilliam testified

that he thought changing the auction back to absolute would “spur more interest” in the

middle of the auction. He further explained that he felt this was necessary because:

When there’s been a property that’s been auctioned twice, once or more times,

sometimes it’s stigmatized by the fact that it didn’t sell the first time or didn’t

close, when in fact it would appear to the public that it had sold. We thought

that saying that we were going to sell the property absolute would remove that

stigma or would prove to the public that while there was a problem, that the

seller’s intent was the second time to sell the property no matter what.

8

The Corbitts paid the auctioneer a total of $2,933.31 for the first auction of which $400 was for

“labor cost” and the balance of $2,533.31 was spent to advertise the first auction. For the second auction,

the Corbitts paid the auctioneer a total of $2,324 of which $500 was for “labor cost,” $25 for fuel, and the

balance of $1,799 was spent to advertise the second auction.

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When asked to explain the difference in prices between the first and second auction,

Mr. Gilliam stated that, “the market conditions had changed” from the date of the first

auction, and that “we had a smaller crowd and probably less interest from a bidders’

perspective the second time than we did the first time;” however, Mr. Gilliam did not render

an opinion as to the fair market value of the property as of the date of the breach.

Whether the price obtained in a second sale is sufficient to establish the fair market

value of a piece of property at the time of the breach in an auction contract was at issue in

BancorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d 223 (Tenn. Ct. App. 2006). At the

conclusion of the trial in that case, the trial court found the buyer, Hatchel, had breached the

contract and that the seller, BancorpSouth Bank, was entitled to damages but, noting that the

parties presented “scant proof” as to fair market value of the property on the date of the

breach, the court reserved ruling on the amount of damages. Id. at 226. Four days later, the

bank sold the property for $400,000 at a second auction, and immediately moved the trial

court to consider the second sale price as additional evidence of the fair market value at the

time of the breach. Id. at 226-27. In entering its final judgment, the trial court found that the

bank failed to establish fair market value at the time of breach and was thus not entitled to

general damages. Id. at 227. On appeal, the bank insisted it had established the fair market

value of the property at the time of the breach through Hatchel’s testimony (that he believed

the value of the property on the date of the trial was $400,000), and the amount the bank

received at the second sale. Thus, the bank insisted, it was entitled to $175,000 in general

damages. Id.

In the Hatchel appeal, we examined the trial court’s finding that insufficient proof was

presented at trial to prove the fair market value of the property at the time of the breach:

The Bank argues that this conclusion is in error because the record

demonstrates that sufficient evidence was presented at trial to prove that

$400,000 represented the fair market value of the property on the date of the

breach. In support of this assertion, the Bank points to Hatchel’s testimony to

the effect that he believed the fair market value of the property to be $400,000.

Further, the Bank points to the testimony of an auctioneer called by Hatchel

who stated that he too would value the property at $400,000. The record

establishes that both Hatchel and the auctioneer have extensive experience in

the real estate business. The Bank’s vice president testified concerning a

valuation previously conducted by the Bank, which valued the property at

$600,000. The Bank, however, never introduced the valuation as an exhibit at

trial, and the vice president never elaborated on the veracity or timing of the

valuation. The Bank acknowledges that this testimony constitutes the extent

of proof proffered at trial in regards to the fair market value of the property,

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and it urges this Court to reject the testimony of its vice president and adopt

that of Hatchel.

“Without proof of damages, there can be no award of damages.” Inman v.

Union Planters Nat’l Bank, 634 S.W.2d 270, 272 (Tenn. Ct. App. 1982). “The

party seeking damages has the burden of proving them.” Overstreet v.

Shoney’s, Inc., 4 S.W.3d 694, 703 (Tenn. Ct. App. 1999) (citing Inman, 634

S.W.2d at 272). Courts are not permitted to award damages based on mere

conjecture or speculation. Id. “However, uncertain and speculative damages

are prohibited only when the existence of damages is uncertain not when the

amount of the damage is uncertain,” Moore Constr. Co., Inc. v. Clarksville

Dep’t of Elec., 707 S.W.2d 1, 15 (Tenn. Ct. App. 1985) (citing Cummins v.

Brodie, 667 S.W.2d 759, 765 (Tenn. Ct. App. 1983)); see also Jennings v.

Hayes, 787 S.W.2d 1, 3 (Tenn. Ct. App. 1989), or when the evidence presented

by the plaintiff is insufficient to enable the trier of fact “to make a fair and

reasonable assessment of damages,” Wilson v. Farmers Chem. Ass’n, Inc., 60

Tenn. App. 102, 444 S.W.2d 185, 189 (Tenn. Ct. App. 1969).

....

Despite the fact that the Bank had the burden of proving its damages, it

presented no proof at trial that would enable the trial court to establish those

damages with a reasonable degree of certainty. The Bank readily concedes as

much on appeal by arguing that this Court should disregard the testimony of

its vice president concerning the Bank’s previous valuation of the property. As

the Bank admits in its brief, it presented no evidence tending to prove the

method used in conducting the valuation, the purpose for the valuation, or the

timing of the valuation. Instead, the Bank asks this Court to accept the proof

offered by Hatchel to the effect that $400,000 represented the fair market value

of the property on the date of the breach. The trial court, however, discounted

this testimony because it went to prove the fair market value of the property at

the time of trial, not the fair market value at the time of the breach.

Id. at 229-30.

In Hatchel, we concluded that the trial court properly did not consider Hatchel’s

valuation testimony, and, concerning the weight of the second sale price in determining fair

market value at the time of the breach, we found that “the amount a seller is eventually able

to obtain for the property may constitute evidence of its fair market value at the time of the

breach,” but that: “In order for the price received at a subsequent sale to represent the fair

market value of the real property, the subsequent sale must be conducted under

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circumstances similar to those present at the initial sale and in an arms-length fashion.” Id.

at 232 (emphasis added). We then focused on the different circumstances of the two sales.

The contract giving rise to the dispute and the contract arising from the second sale both

originated from a forced sale of the property at auction, one occurring a few months after the

other, and the court went on find “[t]hus it initially would appear that the two sales are

similar.” Id. However, we went on to identify material differences in the two foreclosure

sales:

At the first sale, however, the Bank clearly was motivated to achieve the

highest possible price for the property. Further, the evidence in the record

supports the inference that the bid placed by Hatchel at the first sale was

somewhat influenced by certain incentives offered by the Bank should he place

the highest bid. Thus, while the manner of conducting the sale was the same

in both instances, there is a drastic change in the circumstances and

motivations of the Bank between the first and second foreclosure sale. After

Hatchel breached the parties’ contract by refusing to consummate the

transaction, the real property at issue was not sold on the open market but in

a forced sale at auction. At the second foreclosure sale, the Bank, in essence,

stood on both sides of the transaction acting as both buyer and seller. While it

was entirely permissible for the Bank to do this, this environment is not

conducive to enabling a fact finder to determine the fair market value of the

property with a reasonable degree of certainty.

Our appellate courts previously have expressed the view that the price received

for real property in a forced sale at auction might not be indicative of its actual

fair market value on the date of breach. See Turner v. Benson, 672 S.W.2d

752, 755 (Tenn. 1984) (“In addition, considering the resale to have taken place

only about one year after the breach, and it being an arms-length transaction,

rather than a forced sale at auction, we think it reasonable to infer that the fair

market value of plaintiffs’ residence at the time of the breach was roughly

equivalent to the contract price.” (emphasis in original)); Tinkham v. Beasley,

No. M1999-02809-COA-R3-CV, 2000 Tenn. App. LEXIS 776, at *8, 2000

WL 1727780, at *3 (Tenn. Ct. App. Nov. 22, 2000) (“The fact that the house

sold for $155,000 in a forced sale at auction some four months later does not

undermine the trial court’s decision not to value the home at less than

$167,000 because . . . one would expect that property sold at auction would

bring a lower price.”).

Id. at 232-33.

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Based upon the foregoing analysis, we reached the following conclusion:

Given the circumstances surrounding the post-trial foreclosure sale in this

case, we hold that the trial court did not err when it decided to reject the price

received by the Bank at the second foreclosure sale as it cannot be determined

with a reasonable degree of certainty that this amount represented the fair

market value of the property on the date of Hatchel’s breach of the parties’

contract.

Id. at 233.

Another persuasive case involving damages for breach of a contract for real estate is

Tinkham v. Beasley, No. M1999-02809-COA-R3-CV, 2000 WL 1727780 (Tenn. Ct. App.

Nov. 22, 2000). In that case, the trial court held that the contract price and the fair market

value at the time of the breach were the same notwithstanding the fact the house was sold a

few months later for less than the contract price; therefore, the court awarded only special

damages. Id. at *2.

The contract price in Tinkham was $167,000, the house subsequently sold for

$155,000, and the trial court rejected the subsequent sales price finding it insufficient to

prove the fair market value as of the date of the breach, which was affirmed on appeal. As

we explained in Tinkham:

Kathy Tinkham testified that the fair market value of the house was $167,000,

although she also stated that the house had been appraised at $171,000. The

real estate agent, Mr. Penix, agreed that he felt the fair market value of the

property was $167,000. This evidence is not inconsistent with the rule

requiring that the fair market value be measured from the date of the breach.

See Turner, 672 S.W.2d at 754. The fact that the house sold for $155,000 in

a forced sale at auction some four months later does not undermine the trial

court’s decision not to value the home at less than $167,000 because, as Mrs.

Tinkham testified, one would expect that property sold at auction would bring

a lower price. See Turner, 672 S.W.2d at 755 (inferring that the sales price of

property sold in a forced sale at auction might not be a reliable measure of the

fair market value).

Id. at *3.

In the case at bar, the trial court found “nothing amiss about either the first or the

second sale” and that the proof established the fair market value at the time of the breach was

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$110,000, which was the price the property sold for at the second auction.9 The evidence

does not preponderate against the finding that nothing was amiss about either auction;

however, the second auction was not promoted or conducted under circumstances similar to

the first auction. See Hatchel, 223 S.W.3d at 229-30. As discussed earlier in this opinion, the

advertising and promotion for the second auction was different from the first auction and

they only spent 72% of what had been spent to promote the first auction to promote the

second auction. As a result, fewer bidders were present at the second auction; Mr. Corbitt

estimated as few as one-half the people who attended the first auction. The second auction

was also conducted in a different manner for the second auction was publicized as an

absolute auction, then just before the bidding began it was announced that it was changed

from absolute auction to reserve auction, and during the bidding it was changed back to

absolute auction. Further, the second auction was different from the first in that a 10%

buyer’s premium was to be added to the successful bid to pay the auctioneer’s commission;

in the first auction, the commission was deducted from the successful bid. Furthermore, at

the first auction, the successful bidder only paid 5% down and had 30 days to close; at the

second auction, the successful bidder had to pay 10% down and only had 15 days to close.

Based upon the above facts and other facts in the record, we have concluded that the

second auction was not conducted under circumstances similar to those present at the first

auction.

We also find it significant that the property suffered from vandalism and destruction

of property after the first auction, some of which occurred before the breach and some after

the breach but prior to the second auction, all of which most assuredly diminished the fair

market value of the property. For example, at some point, either before or after the date of

the breach, someone tore out the back door, homeless people were living there from time to

time and vandalized the property, and all of the copper was removed from the heating units

to the house. The testimony of the Corbitts concerning when these events occurred, meaning

whether they occurred prior to or subsequent to the date of breach, is equivocal at best. Thus

it cannot be determined from this record when the damage occurred. Moreover, there is no

evidence in the record concerning the amount of the damage to the property. As discussed

earlier in this opinion, to be entitled to damages, the seller must prove that the “price a

reasonable buyer would pay . . . and that a willing seller would accept,” on the day of the

breach – the closing date – was less than the contract price. See Turner, 672 S.W.2d at 755.

Due to the damage to the property, much of which was sustained after the date of the breach,

and the fact the Corbitts failed to establish what damage occurred before and what occurred

after the date of breach, the price obtained at the second auction months later cannot serve

9

The highest bid at the second sale was $100,000 and the buyer was also required to pay a $10,000

“buyer’s premium.”

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as a reliable indicator of the fair market value at the time of the breach. As a further

consequence, Mr. Corbitt’s opinion as to the fair market value is not supported by competent

evidence in the record.

D.

We have determined that the Corbitts failed to provide competent, reasonably certain

proof as to the fair market value of the Cliffside Drive property on the date of the breach, a

value which is essential for determining damages in this case. “Without proof of damages,

there can be no award of damages.” Id. at 229. Accordingly, the award to the Corbitts of

$55,300 for their general damages is reversed.

II.

The above holding notwithstanding, the Corbitts are entitled to recover their special

damages resulting from Ms. Amos’s breach of the contract. See Turner, 672 S.W.2d at 755

(The non-breaching vendor “may recover special damages that arise out of the breach of

contract in order to compensate the vendor for any loss or injury actually sustained by reason

of the vendee’s breach.”). Accordingly we affirm the award to the Corbitts of their special

damages including $2,323 for the expense of conducting a second auction and sale and

$1,363.48 for property taxes paid between the date of the breach and the second sale. Further,

as the trial court concluded, the Corbitts are entitled to recover prejudgment interest in

accordance with Tennessee Code Annotated § 47-14-123, which shall be calculated based

upon the judgment as modified. See also Otis v. Cambridge Mut. Fire Ins., 850, S.W.2d 439,

446 (Tenn. 1992).

I N C ONCLUSION

The judgment of the trial court is affirmed in part and reversed in apart, and this

matter is remanded for the entry of judgment consistent with this opinion. One-half of the

costs of appeal are assessed against Ms. Amos and one-half of the costs are assessed against

the Corbitts.

______________________________

FRANK G. CLEMENT, JR., JUDGE

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