Court Opinion

ID: 9564023
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:52:45.589433+00
Date Added: 2024-06-11T09:18:11.203810
License: Public Domain

CARLEY, Justice,
dissenting.
We granted certiorari to determine whether proof of the property’s market value is a prerequisite to a recovery for breach of a construction contract or for negligent construction. The majority answers that question in the negative. I disagree and, therefore, respectfully dissent.
“There are three measures of damages applicable to injury to improved realty.” Link & Hertz, Ga. Law of Damages, § 27.2, p. 473 (2007). The general rule permits the plaintiff to recover the cost of restoration; when that cost is unreasonable considering the property’s pre-injury market value, recovery of the diminution in the *475market value of the improved realty is the measure of damages; and, if the property has historic or other intrinsic worth to the owner, the measure of damages is the cost of repair notwithstanding that that results in a recovery which exceeds the pre-injury market value. Link & Hertz, supra.
However, the complaint in this case did not allege that John Thurmond & Associates, Inc. (JTA) damaged Mr. Kennedy’s house. That structure had already sustained substantial damage in a fire, and JTA was hired to make repairs for a contract price of $311,156. Mr. Kennedy contends that JTA breached the contract and performed the repairs negligently. Thus, recovery is sought for failing to improve the property in accordance with the contract, not for damaging existing improvements to the realty.
Obviously, fair market value of the property as it should have been improved must be shown, since that is what Mr. Kennedy claims that he lost as the result of JTA’s breach or negligence.
As a general rule, the measure of damages in such a case is
“the difference between the value of the work as actually done and the value which it would have had if it had been done properly under the contract.... (T)his difference in value can be shown by evidence of the reasonable cost of correcting the defect.” [Cit.]
City of Atlanta v. Conner, 262 Ga. App. 423, 425 (585 SE2d 634) (2003). Thus, Mr. Kennedy must show the fair market value of property had it been improved properly according to the contract and the fair market value of the property as it was actually improved by JTA. The difference between those two fair market values is the measure of recoverable damages. The cost of repairs is not admissible as an alternative measure of damages, but as evidence showing the recoverable difference in the market values.
“[T]his difference in value can be shown by evidence of the reasonable cost of correcting the defect. Proof of the cost of repair because of the defective construction is illustrative of the difference in value claimed as damages, and is more likely to represent the true damage suffered from the failure of a contractor to complete his contract than would the opinion of an expert as to the difference in values, though such proof would also have been permissible.” [Cit.]
Magnus Homes v. DeRosa, 248 Ga. App. 31, 32 (1) (545 SE2d 166) (2001).
As is true in cases involving damage to improved property, there is an alternate measure of damages in cases involving the breach and *476negligent performance of a construction contract. When the improvements made to the property
cannot be reasonably repaired, the measure of damages is “the property’s value as diminished by irremediable defects ... deducted from the value of the house as it should have been completed according to the contract.... If the damage cannot be repaired, it seems pointless error to insist the value be determined by cost of repair.” [Cit.]
City of Atlanta v. Conner, supra. Thus, this alternate measure of damages for irremediable defects also requires proof of the difference in market values, but since recovery is sought for irreparable defects, that difference cannot be shown by evidence of the cost of repairs.
Recognition of the general and alternate measure of damages in construction cases “is not a new rule, nor is it necessarily limited to breach of contract cases. [Cit.]” Ray v. Strawsma, 183 Ga. App. 622, 624 (1) (359 SE2d 376) (1987). Which measure of damages applies “must necessarily vary with the facts of the particular case and be determined according to these facts.” Small v. Lee & Bros., 4 Ga. App. 395, 397 (61 SE 831) (1908).
Regardless of the measure of damages, however, the fair market value of the property must be proven, and, although exact figures are not necessary, the trier of fact must be able to “reasonably estimate (the fair market value) without resort to guesswork.” [Cits.]
City of Atlanta v. Conner, supra. Proof of fair market value at the time of the breach is necessary in all cases because that is what was allegedly lost and “the plaintiff is entitled only to the benefit of the bargain or to be made whole and not to recover a windfall.” Ryland Group v. Daley, 245 Ga. App. 496, 502-503 (7) (537 SE2d 732) (2000). The only variation is how that recoverable loss can be shown. If the defect is reasonably repairable, the loss in fair market value can be shown by the cost of repair. If the defect is not reasonably repairable, the cost of repair cannot be used to show the loss in fair market value.
The determinative factor as to which measure of damages applies is that “ ‘[t]he cost of restoration may not be disproportionate to the diminution in the property’s value. Rather, “ ‘the cost of repair must be reasonable and bear some proportion to the injury sustained.’ (Cit.)” [Cit.]’ [Cits.]” (Emphasis omitted.) Wise v. Tidal Constr. Co., 270 Ga. App. 725, 729 (1) (608 SE2d 11) (2004). Thus, if the cost of repair is reasonable when compared to the diminishment *477in the fair market value of the property at the time of the breach, the defect is deemed remedial and the general measure of damages applies. On the other hand, if the cost of repair is unreasonable when compared to the diminishment in the fair market value, the alternate measure of damages applies.
Ideal Pool Corp. v. Hipp, 187 Ga. App. 273, 274 (370 SE2d 32) (1988) is illustrative. There, the contract specified that a swimming pool with a diving board would be built for $14,500, but, after construction of the pool, the diving board could not be installed for reasons of safety. To redesign and rebuild the pool so as to accommodate a diving board would cost between $12,000 and $15,000. However, “[t]he uncontroverted evidence at trial was that the presence or absence of a diving board would have virtually no effect on the value of the completed swimming pool.” Ideal Pool Corp. v. Hipp, supra at 275 (1). Thus, to apply the general measure of damages whereby the homeowner could recover between $12,000 and $15,000 to “repair” the pool by rebuilding it “ ‘would be to give an unconscionable advantage to the owner, and would deprive the contractor of adequate compensation for his work and materials.’ [Cit.]” Ideal Pool Corp. v. Hipp, supra. Accordingly, the alternate measure of damages was applicable, whereby the homeowner was entitled to recover only the actual “diminution in the value of the swimming pool as constructed when compared to its value had it been constructed in strict conformity with the contract.” Ideal Pool Corp. v. Hipp, supra. To permit a recovery of “repairs” in an amount which far exceeds any diminishment in the fair market value of the property would constitute a windfall, and “the owner cannot be placed in a better position than if the contract had not been breached. [Cits.]” Magnus Homes v. DeRosa, supra.
Here, Mr. Kennedy claimed some $751,631 in repairs to a residence that JTA contracted to rebuild for $311,156. Obviously, $751,631 to “repair” a house that was rebuilt for $311,156 is unreasonable, just as a sum between $12,000 and $15,000 to “repair” a $14,500 swimming pool in Ideal Pool Corp. was unconscionable. Thus, Mr. Kennedy was not entitled to rely on the cost of repairs as his measure of damages, but was required to show the diminishment in the fair market value of the house as a result of the defects. The residence
has some value, if only for scrap ([cit.]), and that value may obviously be whatever it is worth as a result of the irremediable defects. The owner should not have the benefit of that value, however low, by recovering [more than double] the entire contract price; the property’s value as diminished by irremediable defects should be deducted from the value *478of the house as it should have been completed according to the contract.
Decided October 27, 2008.
Penna & Mendicino, Derek A. Mendicino, for appellant.
Jerry C. Carter, Jr., David S. Kennedy, Jr., Marmur & Associates, Angela C. Henderson, for appellee.
Ray v. Strawsma, supra at 623-624 (1). Because Mr. Kennedy failed to prove his recoverable damages, but relied instead on the evidence of the cost of “repairs,” the trial court correctly granted JTA’s motion for directed verdict and the Court of Appeals incorrectly reversed the trial court. Therefore, I dissent to the majority’s affirmance of what I believe to be an erroneous judgment of the Court of Appeals.