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

537 F. Supp. 549 (1982)

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Nature of the Case

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Facts

P decided to terminate its real estate activities and to sell to D all of its real estate holdings located in various parts of the United States. A controversy developed at one property titled Channel Club Tower (CCT). It was removed from the main agreement and a supplemental agreement contained the specific conditions and contingencies relating to the transfer of CCT. The sales price was to be the book value of CCT as of the close of business on the day prior to closing. By letter of March 12, 1975, A. S. advised Grace that the book value was $ 9,632,364 subject to review and certification by Arthur Young & Co. Plaintiff obtained a review and certification of that figure in a report dated January 23, 1980. That report set forth a sales price of $ 9,721,754. D refused to close on CCT on March 13, 1975. D sold the units one at a time. It took almost five years to sell out the building. The cash receipts amounted to a total of $ 13,806,695 by June 1980. D contends that this figure or the 1975 real estate tax assessment figure of $11,192,000 are indisputable evidence of the property's market value. D concludes that P suffered no damages. P claims that it suffered the loss of the use of the nine million dollar sales price for nearly five years. P presented expert testimony for different methods of damages based on 1) the contract price of $ 9,721,754, 2) the monthly receipts for the sale of the units, less the cash disbursements for completion and marketing of the project from March 13, 1975, to the present, and 3) the time value of money. P presented three methodologies to reflect the damages it claims to have suffered. Under theory 1 an involuntary loan was made to D of $ 9,721,754. The monthly net receipts which P received from the sales of condominiums were viewed as payments on the 'loan.' P used an interest rate of 4 percentage points above prime. This theory apportions the monthly net receipts from CCT as monthly payments on interest and principal to repay a loan. P introduced an amortization table showing the growth and reduction of the debt on a monthly basis from March 1975 to December 1981. The balance due to P is $ 5,846,518 as of December 31, 1981. Under theory 2 P used the rate of return on capital earned by American Standard, Inc. on its operations from March 1975 to the present. The measure of damages is the difference between the amount of money to which the contract price would have grown, compared with the amount of money to which the net cash receipts grew. Damages under this method were $7,598,412 as of the end of December 1981. Under theory 3, P uses an alternative sale price. The future net cash flow receipts were discounted by using an interest rate to convert them to a single price as of March 13, 1975, showing the difference between the price P received and the contract price to which it was entitled (an alternative sales price). The difference was $2,646,823 and represents an estimate of damages as of that date. Those damages were brought forward to the present time. As of December 31, 1981, that amount was $7,807,240. P used an interest rate of 16%. P’s expert placed the greatest reliance on Methodology No. 1, secondary reliance on Methodology No. 3, and the least reliance on Methodology No. 2. D presented no expert witness to critique P's methodologies or to counter them.