Forfieted Deposit as Damages in Failed Probate Sale

In Estate of Felder, the California Second Appellate District upheld the award of $48,000 as damages for a buyer's withdrawal from the purchase of real property in a probate sale. The $48,000 was the amount of the buyer's deposit.

California Probate Code section 10350 allows the seller to recover damages from a buyer who pulls out of a transaction involving real or personal property after the court has approved the sale. The damages can include the difference between the original buyer's purchase price and the price the property later sold for, plus expenses made necessary by the purchaser's breach, and other "consequential" damages. The court here held that the first buyer's breach caused a total of over $55,000 in damages. The court ordered that the buyer forfeit his $48,000 to cover the damages caused by the breach, even though the actual damages were higher.

The buyer appealed, claiming that the court had no authority to order the forfeiture of the deposit. The Court of appeals upheld the lower court's order, noting that "The estate was entitled to retain the entire $48,000 as statutory damages and not as a deposit."

If you are involved in a probate sale of real property, you can get damages if your buyer withdraws after you have received court approval of the sale. If you are buying property subject to a probate court approval, BEWARE, you could be on the hook for serious damages if you cancel after the court has approved the sale.