CITATION: Vigneswarajah et. al. v. Tummala et. al., 2024 ONSC 4254

COURT FILE NO.: CV-22-00002937-0000

DATE: 2024 07 06

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

VIGNESWARAJAH, GAYATHRI and ANANDARAJ, VIMALSPADMARAJ

S. TAYLOR, for the Plaintiffs

• and -

TUMMALA, CHENNAKESAVA RAO and TUMMALA, SUNEETHA

J. VIRTUE, for the Respondants

HEARD: May 27, 2024 in person

REASONS FOR JUDGMENT

L. B. STEWART J.

OVERVIEW

1The plaintiffs move for summary judgment arising from an incomplete real estate transaction.

2The plaintiffs owned a property in Caledon on 25 Ash Hill Avenue. The defendants agreed to purchase the property for $1.65M, but failed to close the transaction, despite the plaintiffs agreeing to two extensions. The defendants admit this breach.

3The plaintiffs then relisted the property and started this action against the defendants. A month after breaching the original agreement of purchase and sale, and days after the issuance of the statement of claim, the defendants offered to purchase the property at a lower price with conditions. This new offer was unacceptable to the plaintiffs, but that became irrelevant as the defendants admitted that they could not meet the conditions of their new offer in any event.

4The plaintiffs then accepted an offer from a third party for $1.2M and the sale closed on February 3, 2023. The plaintiffs have proven their damages stemming from the defendants breach of the agreement of purchase and sale. The plaintiffs are entitled to summary judgment on the damages they proved which include the difference in sale price and several consequential loss items.

ISSUES

5This motion raises the following issues:

a. Did the defendants breach the original agreement of purchase and sale?

b. If yes, were the plaintiffs obligated to accept the plaintiff’s new offer?

c. If no, was the sale to the ultimate buyers improvident?

d. If no, what are the plaintiffs damages?

e. Is this an appropriate case for summary judgment?

Issue One: the defendants breached the original agreement of purchase and sale.

6The defendants breached the original agreement of purchase and sale.

7The plaintiffs accepted the defendants’ first offer of $1.65M with a closing date of June 30, 2022. The defendants paid a deposit of $60,000.

8The transaction did not close on June 30, 2022. The plaintiffs agreed to two extensions, on conditions: first, from June 30 to August 24, 2022 and then to September 15, 2022. The transaction did not close on September 15.

9The plaintiffs issued a statement of claim against the defendants on October 12, 2022. In their statement of defence¹, the defendants admitted the breach of the agreement of purchase and sale. The defendants only argument pertained to mitigation of damages (addressed below).

Issue Two: the plaintiffs were not obligated to accept the new offer from the defendants.

10Following the failed real estate transaction with the defendants on September 15, 2022, the plaintiffs relisted the property a week later at $1.485M.

11Six weeks after breaching the original agreement and two weeks after the statement of claim was issued, the defendants made a new, second offer to purchase the house for $1.485M plus the following conditions:

a. Closing date of December 29, 2022;

b. There would be no deposit additional to the deposit made on the first transaction;

c. The defendants had five days after acceptance to arrange financing. If the defendants were unable to arrange financing, the original deposit would be returned to the defendant; and

d. Upon closing the transaction, the claims in the statement of claim would be null and void.

12Following the new offer, in late November, 2022, the defendants allegedly told the plaintiff’s real estate agent that they could not obtain financing and proposed a vendor take-back mortgage (VTB), but then admitted that they could not complete the purchase even with a VTB. The defendants deny this allegation, stating that they were simply trying to explore all possible avenues for financing. The plaintiffs did not provide any evidence from the real estate agent on this motion, but that is irrelevant as this entire issue is a red herring. There is simply no evidence that the defendants had the financial means to close on the new offer at any time.

13The plaintiffs rejected the new offer as the conditions were not acceptable to them. The defendants contend that the plaintiffs had to accept or counter this new offer in order to mitigate.

14I disagree. There was no obligation on the plaintiffs to accept or counter the defendant’s new offer. That defence theory goes beyond hypothetical and into the world of fiction. If the plaintiffs accepted the new offer in November, 2022, the defendants never could have closed on it. If the plaintiffs countered in November, 2022, the defendants could not have closed on a counteroffer. The bottom line is that the defendants never got the financing needed to purchase the property. The new offer was a nullity from the start.

15Further, the courts have found that there is no obligation on a seller to negotiate with a defaulting purchaser for a second time, given that the seller cannot have confidence in the defaulting purchaser. Simply put, the duty to mitigate does not go that far².

16In this case, the defendants seized on a quote from the Azzarello case to argue that the case is distinguishable. The defendants rely on the following from the Court of Appeal decision in Azzarello:

39. The duty to mitigate is derived from the proposition that the wronged party cannot recover from the defaulting party for losses that could have reasonably been avoided….It cannot be reasonable for a vendor to be obliged to reduce the loss it claims from the defaulting party by reselling the property to that party, then suing him or her for the difference. This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way. Yet the defaulting party would secure a significant tactical and procedural advantage over the innocent vendor.

40. The effect of endorsing the proposition advanced by the appellant would be to undermine the sanctity of the bargain by encouraging purchasers to default, particularly in a falling market, and to offer a lower price for the same property, leaving vendors with the risk and expense of recovering the balance of the original contract price in an action. The duty to mitigate does not go that far. [bolding added by defence counsel]

17The defendants argue that, had the plaintiffs negotiated with them, they would have been saved having to pay a larger damages amount when the plaintiffs accepted a much lower offer from another bidder. This argument fails for the following reasons:

a. As noted above, there is no obligation to continue to deal with a defaulting purchaser who comes back at a lower price.

b. At no time did the defendants have the financing necessary to be able to make good on their new offer; as such, the offer was moot.

c. This entire argument hinges on the plaintiffs being able to look into the future to know what offers they might receive after rejecting the defendants new offer.

The defendants’ position does not distinguish the Azzarrello case at all; indeed, it simply reinforces the findings in Azzarello.

Issue Three: the ultimate sale was not improvident.

18On December 5, 2022, the plaintiffs accepted an offer from a third-party buyer. The selling price was $1.2M with a closing date of January 23, 2024 (which was later extended to February 3, 2023).

19The plaintiffs felt that they had no realistic option but to accept this offer given the length of time the house had been listed, the lack of interest from prospective buyers, the general state of the real estate market and their mounting damages.

20The defendants argue that this sale appears improvident and points to the fact that the same property was resold on August 23, 2023 for $150,000 more than the plaintiff’s sold for in December, 2022. The defendants lead no evidence on this issue but argue that “more investigation” is needed as to the home’s proper value in December, 2022.

21A motion for summary judgment is not the time to argue for more investigation. Over the years, the courts have put it different ways: the responding parties on a motion for summary judgment must “lead trump or risk losing”³, “put their best foot forward”⁴, etc. Whatever phraseology is used, “more investigation” is not a winning argument on summary judgment.

22The defendants offer nothing more than their subjective opinion that the sale was improvident. On cross examination, the defendant, Mr. Tummula, admitted that they have no expertise or direct evidence of what the plaintiffs could have done to obtain a higher purchase price.

23The defendants further argue that the court should take judicial notice of certain facts pertaining to interest rates in Ontario and conclude that the house “should” have decreased, not increased, in value in 2023. This argument fails for a few reasons:

a. The “facts” that the defendants ask the court to take judicial notice of should have been the subject of an expert report.

b. That the house sold for more in 2023 when, in the opinion of the defendants, the house should have dropped in value is just that: opinion.

c. The sale price in August, 2023 is irrelevant. That transaction involved neither of the parties to this litigation. There is no evidence about any of the motivations of the sellers or vendors.

24In the case of Darminan, the court rejected this very argument when a defendant argued that a plaintiff failed to mitigate his damages by obtaining a higher price for the house. The court noted that in the absence of any such evidence, a trial was not required on the issue of whether the property was “undersold”⁵.

Issue Four: Damages Proved by Plaintiffs

25In failed real estate transactions, generally, the best measure of damages is the difference between the original contract price and the new price once the property sale closes, plus any additional carrying costs incurred by the seller in mitigating the seller’s losses and dealing with the buyer’s breach⁶. In this case, in addition to the difference in the sale price, the plaintiffs sustained other damages, which fall into two time periods:

a. June 30, 2022 to September 15, 2022 (date of breach by defendants); and

b. September 15, 2022 to February 3, 2023 (date that transaction with new sellers closed)

a. Damages for June 30, 2022 to September 15, 2022

26At the time of the second extension of the closing date to the defendants, I find that the defendants agreed to the following conditions and damage quantification:

a. Release of $48,000 of the original $60,000 deposit to the plaintiffs;

b. The defendants pay all costs in connection with the mortgages in place on the property from June 30, 2022 to September 16, 2022;

c. The defendants pay $200 per month for insurance costs on the property from June 30, 2022 to September 15, 2022;

d. The defendants pay $1,496.12 for credit card interest incurred by the plaintiffs incurred between June 30, 2022 and September 15, 2022.

e. The defendants pay all additional cost incurred by the plaintiffs in respect of the purchase of the plaintiff’s new house, including any and all interest and fees incurred by the plaintiffs on their bridge loan between June 30, 2022 and September 16, 2022; and

b. Damages for September 16, 2022 to February 3, 2023

27Further, the defendants claim additional damages in the form of interest on their mortgage, home equity line of credit and bridge loan from September 16, 2022 and February 3, 2023. I find that the evidence supports all of these heads of damages. These are interest charges which the plaintiffs incurred solely because of the defendants failure to close on the house deal which forced the plaintiffs to put the house back on the market.

c. Quantification of Damages

28The plaintiffs have proven the quantification of their damages as follows:

Item	Amount	Calculations
Difference in sale price	$367,500	Difference between two sale prices ($450,000) less $60,000 deposit already received and less difference in 5% real estate commission that plaintiffs would have paid on original sale price ($82k) and what was actually paid ($60k)
Interest on mortgage from June 30, 2022 to February 3, 2023	$21,718.03	$5,931.17 from June 20 to Sept 15, 2022 $15,786.86 from September 16, 2022 to February 3, 2023
Interest on home equity line of credit from	$4,960.62	$1775.77 from June 30 and Sept 15, 2022 $3,184.85 from Sept 16, 2022 and Feb 3, 2023
Property insurance	$500	$200 per month from June 30 to Sept 15, 2022
Credit card interest	$1,496.12	From June 30 to Sept 15, 2022
Interest on Bridge loan	$61,895.36	$23,659.67 from June 30 to Sept 15, 2022 $38,235.60 from Sep 16, 2022 to Feb 3, 2023
TOTAL	$458,070.13

Issue Five: This is an appropriate case for summary judgment.

29Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if there is no genuine issue requiring a trial with respect to a claim or a defence⁷.

30This is an appropriate case for summary judgment. There are no genuine issues requiring a trial. I have been able to make the necessary findings of fact and apply the law to those facts. This motion is the most proportionate, expeditious and cost-effective means of arriving at a just result. The plaintiffs/moving parties have proven both liability and damages.

Costs

31Costs were not addressed during oral argument. The parties are encouraged to agree on costs. If they will not, costs will be addressed on the following timetable:

a. Plaintiff’s costs submissions shall be served, filed and delivered to Marilyn.Turingia@ontario.ca by August 30, 2024 at 4pm.

b. Defendant’s costs submissions shall be served, filed and delivered to Marilyn.Turingia@ontario.ca by September 30, 2024 at 4pm.

32Submissions will be limited to three pages, exclusive of the bill of costs, any offers exchanged and authorities. Submissions will be double spaced and in 12-point font.

Orders Made

33I therefore grant judgment to the plaintiffs in the amount of $458,070.13. Post judgment interest (7%) will run from 30 days of the date of this judgment.

L. B. Stewart J.

Released: August 06, 2024

CITATION: Vigneswarajah et. al. v. Tummala et. al., 2024 ONSC 4254

Footnotes

1. 1Statement of defence dated March 14, 2023.
2. 2Azzarello v. Shawqi, 2019 ONCA 820, at paras 37 to 41; Darmanin v. Dhiman, 2024 ONSC 233, paras 38 to 41.
3. 31061590 Ontario Ltd. v. Ontario Jockey Club, 1995 CanLII 1686 (ON CA) at para 36.
4. 4Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753, at para 9.
5. 5Darmanin v. Dhiman, 2024 ONSC 233, at paras 31 to 34.
6. 6Goldstein v. Goldar, 2018 ONSC 607 at para 25.
7. 7Hryniak v. Maulin, 2014 SCC 7 at para 49.