Opinion ID: 1218992
Heading Depth: 1
Heading Rank: 5

Heading: the trial court's award of damages is reversed and remanded for recalculation

Text: The Van Ordens argue that the trial court did not employ a correct measure of damages. The Van Ordens raise four issues in this regard: (1) whether the trial court erred in arbitrarily reducing by one-half their recovery for expenses incurred repairing defects which existed when Ervin left the construction site; (2) whether the trial court failed to award damages for the diminution in value of the home caused by existing defects; (3) whether the trial court erred in entering separate judgments with respect to both Ervin and the Van Ordens rather than entering a single judgment; and (4) whether the trial court erred in awarding Ervin prejudgment interest. We will address each of these issues in turn. We first address whether the trial court erred by reducing the damages awarded to the Van Ordens by one-half. The trial court entered the following conclusion of law: Because of the issues stated above [that some of Ervin's work was substandard and defective and that Ervin left the job before the work was completed because they had not been paid], the Court concludes that since there were defects in the workmanship and since the Ervins were forced off the job site before they could attempt to remedy these defects, a reasonable balance must be found in this case. Therefore, the Court will award to the Van Ordens one-half of all the labor and material costs incurred by Mr. Grimmett to complete and repair the Van Orden home. There was work that Mr. Grimmett performed on the home that was in addition to what the Ervins were contracted to complete. The Court found it difficult to determine from the evidence which costs were for the additional work. However, the Court believes that the total labor costs incurred by Mr. Grimmett of $5,840.33, and the materials he purchased totaling $4,508.33 did not include any of the additional work done by Mr. Grimmett. Therefore, the sum of these figures is $10,348.66 and half of that figure is $5,174.33 which is the total damages that will be awarded to the Van Ordens. We can find no basis in the record to substantiate what the trial court called a reasonable balance in reducing the damages awarded the Van Ordens by one-half. While the trial court may have been grappling with the sufficiency of the proof to establish the costs to repair the defects (as opposed to the costs to complete the home, for which Ervin was not responsible), it was nevertheless clearly erroneous for the trial court to create a damage figure which it deemed reasonable. We therefore reverse the trial court on this issue and for the reasons stated hereafter, remand this case back to the trial court for a recalculation of the Van Ordens' damages consistent with the evidence presented. The Van Ordens next challenge the trial court's measure of damages arguing they should have been awarded damages for diminution in value, rather than simply the cost to repair. The general rule in Idaho is a contractor may recover the contract price of a structure which substantially conforms to the terms of the contract, less the cost of repairing minor defects in the structure. Eldred v. C.L. Folkman Co., 93 Idaho 131, 133, 456 P.2d 775, 777 (1969). The question of whether the contractor's performance is substantial and whether the defect is minor is one of degree, turning upon circumstances such as the particular structure involved, its intended purposes, and the nature and relative expense of the repairs, as well as equitable considerations. Id. Whether a contractor has substantially performed a contract is a question of fact. See Puget Sound National Bank of Tacoma v. C.B. Lauch Construction Co., 73 Idaho 68, 75-76, 245 P.2d 800, 804-05 (1952). The Court has previously endorsed the following definition of substantial performance:    There is a substantial performance of a contract to construct a building where the variations from the specifications or contract are inadvertent and unimportant and may be remedied at a relatively small expense and without material change of the building; but where it is necessary, in order to make the building comply with the contract, that the structure, in the whole or in material part, must be changed, or there will be damage to parts of the building, or the expense of such repair will be great, then it cannot be said that there has been a substantial performance of the contract. White v. Mitchell, 123 Wash. 630, 213 P. 10, 13 (1923), cited with approval in Nelson v. Hazel, 89 Idaho 480, 488, 406 P.2d 138, 143 (1965); cf. Bott v. Idaho State Bldg. Auth., 122 Idaho 471, 476-77, 835 P.2d 1282, 1287-88 (1992) (instruction on substantial performance which measured whether the obligee under the contract received the important essential benefits for which it contracted up until the time of termination accurately stated the law of substantiual performance). In Hafer v. Horn, 95 Idaho 621, 515 P.2d 1013 (1973), a building contractor who had completed construction on a house sued the owners of the house after they withheld a portion of the contract price for alleged defects in the construction of the home. The owner counterclaimed for breach of the implied warranty of fitness. The trial court found a number of defects or deficiencies in the residence and awarded damages based on the cost of repair. Although the Court remanded the case back to the trial court for a recomputation of damages because of ambiguities in the trial court's calculation of damages, the Court upheld the trial court's use of repair costs as a measure of damages. In doing so, the Court endorsed the following measure of damages discussed in Restatement of Contracts § 346: § 346. Damages for Breach of a Construction Contract. (1) For a breach by one who has contracted to construct a specified product, the other party can get judgment for compensatory damages for all unavoidable harm that the builder had reason to foresee when the contract was made, less such part of the contract price as has not been paid and is not still payable, determined as follows: (a) For defective or unfinished construction he can get judgement for either (i) the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or (ii) the difference between the value that the product contracted for would have had and the value of the performance that has been received by the [buyer], if construction and completion in accordance with the contract would involve unreasonable economic waste. . . . . . 95 Idaho at 623, 515 P.2d at 1015. Thus, if the court determined that Ervin substantially performed under the contract, Hafer afforded the trial court two alternative measures of damages. In order for Ervin to have substantially performed, the court had to find that any variations from the contract were inadvertent and unimportant and could be remedied at relatively little expense. The trial court then could have awarded the Van Ordens the cost to repair the defects in their home if repair were possible and would not involve economic waste. In the alternative, if the trial court found that the cost to repair would involve unreasonable economic waste, the correct measure of damages would be the difference between the value of the house as contracted and the value of the performance received. In Nelson we held that a construction contract that is not performed in a workmanlike manner is not substantially performed and it is error to so hold. 89 Idaho at 489, 406 P.2d at 144. The trial court in this case found that only certain parts of the construction on the home were not performed in a workmanlike manner, rather than the contract as a whole. Thus this case does not come within the rule announced in Nelson and we decline in this instance to follow the broad pronouncement stated there. In certain instances, such as the case at bar, there can be components of the construction which are not performed in a workmanlike manner, but such a finding does not mean that the project as a whole was not completed in a workmanlike and timely manner. If the defective portions of the construction are not such as to destroy the important essential benefits for which the parties contracted, then there still may be substantial performance. See Bott, 122 Idaho at 476-77, 835 P.2d at 1287-88. In this instance, the trial court personally observed the home and heard the testimony from the parties and their witnesses about the construction. As such the trial court was in the best position to determine the credibility of the witnesses and the condition of the home. The trial court found that there was no evidence presented to indicate that Ervin could not have repaired the defects had they been given the opportunity to do so. Implicit in that conclusion is a finding that there is no reason to believe the defects were so pervasive that they could not be repaired. While the trial court's findings of fact and conclusions of law do not use the specific phrase substantial performance, this finding is inherent from the trial court's other findings and use of cost to repair as a measure of the Van Ordens' damages. Both parties acknowledged at oral argument and in their briefing that the trial court had found substantial performance and we agree. Because repairs were made without unreasonable economic waste, and evidence to this effect was offered, the cost to repair was a reasonable method of damage calculation. As to the remaining alleged defects which have not been repaired, the trial court implicitly found that these defects were curable. Since there was no evidence presented detailing cost to repair these defects, the trial court was correct in awarding no damages for those additional repairs. Although we find that the trial court utilized the proper method of calculating damages, i.e., the cost to repair, we find the actual award of damages deficient in several respects. First, the Van Ordens were not entitled to damages for the cost to complete the house under the terms of the contract. The trial court's award of damages included expenses incurred by Grimmett to both complete and repair the home. Second, as specified in Footnote 1, supra, the figures used by the trial court in calculating the Van Ordens' damage award are not supported by the evidence. Third, the trial court erred in arbitrarily reducing by one-half the damage award. Thus, we remand this case back to the trial court for a recalculation of the Van Ordens' damages which is consistent with the foregoing. The Van Ordens also argue that the trial court incorrectly entered separate judgments for both Ervin and the Van Ordens. They argue the damages awarded each party should be offset against each other and one judgment entered. We agree. I.R.C.P. 54(b) provides that: If any parties to an action are entitled to judgments against each other such as on a claim and counterclaim, or upon cross-claims, such judgments shall be offset against each other and a single judgment for the difference between the entitlements shall be entered in favor of the party entitled to the larger judgment. Based on the clear and unambiguous language of the foregoing, the trial court should enter a single judgment on remand. We next consider, the trial court's award of prejudgment interest. I.C. § 28-22-104 provides for the award of prejudgment interest of 12% for money due by express contract. A trial court may award prejudgment interest from the date of the breach of contract when the amount upon which the interest is to be based is mathematically and definitely ascertainable. Barber v. Honorof, 116 Idaho 767, 770, 780 P.2d 89, 92 (1989). Prejudgment interest is warranted only when the principal amount of liability is liquidated or ascertainable by mere mathematical process. Id.; see also Stoor's Inc. v. Idaho Dep't of Parks & Recreation, 119 Idaho 83, 86, 803 P.2d 989, 992 (1990). The construction contract in the instant case provided that the Van Ordens could terminate the contract at any time by paying Ervin an appropriate percentage of work completed based on net contract amount and value of materials installed. At the time of the Van Ordens' breach of the contract, the net contract amount was readily ascertainable but the value of materials installed was not. The trial court found that numerous defects existed not only in the construction of the home, but in some of the material used. These defects would affect the value of the installed materials. We therefore find that the principal amount of liability at the time of the Van Ordens' breach was not mathematically and definitely ascertainable. We reverse the trial court's award of prejudgment interest.