Opinion ID: 2064916
Heading Depth: 1
Heading Rank: 1

Heading: Did plaintiffs furnish an adequate evidentiary basis to justify submission of compensatory damages to the jury?

Text: Trial court's instruction on compensatory damages relevantly provided: [Y]ou can only allow damages, if any, as are shown by a preponderance of the evidence. You cannot allow more than the lesser of: (1) the difference between the fair and reasonable value of the premises at the time of delivery of possession in September, 1973, and its fair and reasonable value at that time had the house been constructed in accordance with the contract; or (2) the fair and reasonable cost of labor and materials required in September, 1973, to correct or repair any defects or omissions, if there were any, so that the Plaintiffs would have received a house which was constructed in accordance with the terms of the contract. Under the evidence an award of actual damages cannot exceed $26,000 and it may be a lesser amount or none. Fullerton objected to the instruction on the ground there was no evidence to show value of the house as actually constructed and therefore nothing on which to calculate the diminished value of the home. After carefully examining the transcript, we are convinced the objection should have been sustained. Pogges' expert witness on construction testified that to gut the house to replace the insulation and joists and make other corrections would cost $46,592 at time of trial (less of course in 1973), but that it would be cheaper to build a new house. Another expert valuation witness placed the 1973 value of the house, if constructed in compliance with the contract, at $26,000. He did not place a 1973 value on the house as actually built, but volunteered that as a lending institution appraiser he would have rejected it for loan purposes. Neither Pogges nor any one else gave an opinion on the actual 1973 value of the house as constructed. Other evidence disclosed the home was carried on the tax rolls at a market value of $33,000, and Pogges did not object until the value was raised to $50,420 as of January 1, 1977. A colloquy between counsel and the court when the above objection was under discussion discloses the court had arrived at a maximum of $26,000 in actual damages on the basis of the value of the house had it been built in conformance with the contract. Trial court remarked the expert valuation witness had testified that as actually constructed the house in all practical purposes has no value other than salvage; and by inference, salvage would be minimal. But the only reference the witness made to salvage was elicited by leading question and was stricken by the court upon proper objection. In this case the parties apparently agreed to the basic formula for ascertaining damages contained in the above instruction. But there was no agreement to submit the formula even though evidence essential to its application was lacking. On use of the reduction in value rule vis-a-vis the cost rule and the effect of unreasonable economic waste in reconstruction, see Busker v. Sokolowski, 203 N.W.2d 301, 303-04 (Iowa 1972), and citations, and J. Calamari & J. Perillo, The Law of Contracts § 230, at 362-63 (1970). Fullerton's objection to this instruction should have been sustained. Although this error alone requires a new trial, the remaining issues Fullerton raises are treated because they may recur.