I put $1000 down for a dealer to take a vehicle off the market while I got financing for it. I had 30 days to pay or the car could be sold to someone else and I lose my $1000. I gave them the money and the paperwork was drawn up.
I called today to let them know my status and apparently, the guy who I was dealing with no longer works there and the guy I talked to on the phone had sold the vehicle, and told me to come get my deposit.
Can they do this? This is a hard to find used vehicle and it was a miracle to find one in my area. Needless to say, I'm pretty upset about the whole thing. Is there any legal action I can take?

Did you have anything drawn up saying that you had paid a deposit and how long they have to keep the car for before selling it? If not I don't think there is anything you can do. They can't go and take back the vehicle they sold to someone else to give back, it is their vehicle now! If you have got a signed agreement stating the time you had been allowed, I would read the small print very carefully, see if there is anything about it all in there.

Thanks... it just happened so I don't have the paperwork in front of me, but the short answer is yes, it was documented that I had 30 days. I will add more info after I look over the documents.

If I were in your situation, based on the info you've provided here, I would send a letter to the dealer by certified mail, with a copy sent by regular mail. I would say in the letter that they have violated the terms of the agreement by selling the car that they contracted to sell to you, and they have 10 days to find another car for you that is identical to the one for which you gave them the deposit. Then say that if they don't find another one within 10 days then you will go find one yourself, buy it, and if it costs more than you agreed to pay them originally then you will hold them responsible for the difference in price.

See if that gets any kind of response out of them.

I got my $1000 back... and the guys who sold says he's looking for a different one (not likely). I plan to do the letter thing and formally give them the opportunity to find one or make some other settlement. Otherwise it's off to small claims! Does anyone know technically what I would sue for? Breach of contract? How do I value the damages?

The measure of damages would be the difference in price between the car you eventually buy and the car they were supposed to sell to you. So you will have to find another car and buy it before you can file a lawsuit.

And don't hold wait too long to send that letter. Do it now so you can put them on notice that you're holding them responsible.

Cory, not mentioned here in the answers is that you may successfully seek restituion from the surety (bonding) company of the dealer if that dealer is required as a precondition to his obtain a license to engage in the business of buying and selling automobiles. Your profile does not state in which state you reside nor in which state the dealer is located or in which state you made the deal with the dealer. Call the city, county, state where the dealer is located. Most states regulate motor vehicle dealers and quite a few require a surety bond that if a consumer looses money in reference to the sale or puchase of an automobile, the consumer can file a claim against the dealer's surety bond to seek restitution. Of curse, you need to furnish proof of your financial loss or other proof that the dealer violated the terms of your contract that resulted in loss to you. Understand the dealer will then receive a call, letter from the surety in reference to your claim for damages and without this one bond (keep in mind your state must require a bond) if your claim is not handled properly or results in a claim against the bond, the dealer will have a very difficult time continuing in business without the bond.

You probably don't have a whole lot to stand on, other than getting your deposit back. The salesman who initially sold you the vehicle in question is at fault for not properly communicating with his coworkers prior to his departure, that the car in question had been sold to you, pending your approval for financing or 30 days, whichever came first. The salesman who replaced him made an honest mistake by selling the car to someone else, not knowing it was already sold to you. Also, it's possible that the new buyer was immediately qualified for financing or paid cash for the car. In the dealer's view, that trumps you having to wait up to 30 days and then maybe not being able to buy the car at all if you don't get approved for financing. I don't think you'd get much sympathy in court. The only one who really did anything wrong is the original salesman who doesn't even work there anymore, so there's really no chance of having him reprimanded.