Court Opinion

ID: 8126936
Source: CourtListenerOpinion
Date Created: 2022-09-09 15:59:34.154768+00
Date Added: 2024-06-11T16:39:16.268655
License: Public Domain

NAKAMOTO, J.,
concurring.
We hold, contrary to the customary burden of proof, see North Pacific Lbr. v. Moore, 275 Or 359, 366, 551 P2d 431 (1976), that third-party defendant Sharabarin — not third-party plaintiff La Noue Development, LLC — had the burden to establish the amount of damages that La Noue could recover under the alternative measure of damages that Sharabarin argued should apply. 259 Or App at 665 n 3. Although I agree that Sharabarin was required to establish the amount of the diminution in value of the buildings, I disagree with the majority’s reasoning.
The majority explains the rationale for the holding as follows:
“While McComb is not directly on point, it supports the conclusion that, in a breach of contract claim where it is alleged that a party failed to build a building in accordance with the contract, the measure of damages is the difference between the value of the building as constructed and what the value of the building would have been if built according to the contract. 140 Or at 679. In McComb, where the parties sought damages based on that measure and failed to establish by competent evidence the amount of those damages, they were not entitled to recover any damages. Id. We infer that a party seeking to limit damages based on economic waste has the burden of producing evidence establishing the value of the building as actually built.”
Id. I write separately to note that (1) McComb v. Cogswell, 140 Or 676, 15 P2d 716 (1932), can be read to support our *685holding, but not in the way the majority describes, and (2) cases from other jurisdictions support our conclusion that Sharabarin bore the burden to adduce evidence of the diminished value of the Montara buildings.
Initially, I disagree that McComb suggests that the correct measure of damages in a case “where it is alleged that a party failed to build a building in accordance with the contract,” 259 Or App at 665 n 3, is diminished value rather than cost of repairs. The normal measure of damages in such a case is cost of replacement or repair. In Beik v. American Plaza Co., 280 Or 547, 555, 572 P2d 305 (1977), the Supreme Court stated the “rule in Oregon” as follows: “the cost of replacement or repair is the correct measure of damage for defects in work unless that remedy generates undue economic waste.”
In addition, the majority suggests that McComb is a “failure of proof’ case on the part of a proponent of “diminished value” damages. But the defendant homeowners in McComb, who had filed a counterclaim and sought damages for breach of the construction contract, had not contended that the proper measure of damages was diminished value. Rather, they attempted to establish the normal measure of damages due to the plaintiff contractor’s departures from the plans and specifications in their contract through testimony from an expert as “to what it would cost to replace or reconstruct according to contract.” 140 Or at 679. The Supreme Court, however, noted that “[u]nder the pleadings and facts,” the proper measure of damages was diminished value and not “what it would cost to tear out and replace or rebuild according to the plans and specifications.” Id. The court concluded that the homeowners had “failed to establish, by competent evidence, the amount of their damages” and affirmed the trial court’s denial of relief. Id.
Nevertheless, McComb may still lend support to the conclusion that Sharabarin had to adduce evidence of the amount of the diminished value of the buildings at trial. That is because of the Supreme Court’s emphasis on the pleadings and facts. McComb may suggest that notice to a party that an alternative measure of damages could apply is important. Here, Sharabarin did not plead that the economic *686waste doctrine applied, and his own proposed jury instruction would have allowed La Noue to obtain typical damages for a breach of contract, that is, expectation damages.
La Noue also relies on cases from other jurisdictions, such as Panorama Village Homeowners v. Golden Rule, 102 Wash App 422, 428,10 P3d 417, 422 (2000), rev den, 142 Wash 2d 1018, 16 P3d 1266 (2001), and Andrulis v. Levin Constr. Corp., 331 Md 354, 376, 628 A2d 197, 208 (1993), for the proposition that, once it established the cost to remedy the defects that Sharabarin caused, Sharabarin was required to come forward with evidence of the diminished market value of the buildings. La Noue’s position appears to be the majority view. See also Shell v. Schmidt, 164 Cal App 2d 350, 366, 330 P2d 817, 827 (1958), cert den, 359 US 959 (1959); P. G. Lake, Inc. v. Sheffield, 438 SW2d 952, 956 (Tex Ct Civ App 1969); Stangl v. Todd, 554 P2d 1316, 1320 (Utah 1976). Although the contours of the economic waste doctrine in Oregon are not as specifically defined as in cases from other jurisdictions, such as Andrulis, given the present circumstances, where Sharabarin did not make it evident that he was going to rely on the economic waste doctrine at trial, I concur that Sharabarin bore the burden to produce evidence of the diminution in the value of the buildings before the jury was instructed on his theory of damages. As the majority opinion explains, that proof was lacking, and so giving the damages instruction was error.