Jim Mahoney, Inc. v. Galokee Corp., 47273
| Decision Date | 11 May 1974 |
| Docket Number | No. 47273,47273 |
| Citation | 522 P.2d 428,214 Kan. 754 |
| Parties | JIM MAHONEY, INC., Appellant, v. The GALOKEE CORPORATION, Appellee, and Mid-Continent Casualty Co., Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. The measure of damages recoverable for a breach of contract is limited to such damages as may fairly be considered as arising in the usual course of things from the breach itself, or as may reasonably be assumed to have been within the contemplation of the parties as the probable result of such a breach. The evidence allowed to support damages for breach of contract is the best evidence obtainable under the circumstances of the case to show the natural and ordinary consequences of the breach and which will enable the court or the jury to arrive at a reasonable estimate of the loss which resulted. (Following Phillips & Easton Supply Co., Inc. v. Eleanor International, Inc., 212 Kan. 730, 512 P.2d 379.)
2. When a building contract has been so far performed that the building is occupied and used by the owner for the purposes contemplated by the contracting parties and where correction or completion would not involve unreasonable destruction of the work done by the contractor evidence of the cost of correcting the defects and completing the omissions will, as a general rule, be a fair measure of the damages.
3. Where the parties to a construction contract provide that if the contractor defaults or neglects to carry out the work in accordance with the contract the owner may terminate the contract, take possession of the site and finish the work at the expense of the contractor it may be presumed that evidence of the cost of repairs and work necessary to bring the building up to specifications was reasonably contemplated by the parties as proper in establishing the damages which would arise from a breach.
4. When findings on specific items of damage are used by the trier of fact to arrive at the total amount of the judgment these findings on specific items of damage control the amount of the total judgment and if one or more of the special findings are not supported by substantial competent evidence the amount of the total judgment should be corrected accordingly on appeal.
5. Where there is a conflict between, or an inconsistency in, the provisions of a building contract and the provisions of the plans and specifications, the positive language of the contract should prevail.
6. The record is examined in an action on a claim to recover the balance due on a construction contract and on a cross-claim to recover the cost of repairs necessary to complete the project and comply with the plans and specifications for a 64-bed nursing home and it is held the net judgment entered by the trial court against the contractor for cost of such repairs should be and the same is modified as to those amounts not supported by competent evidence of the dollar value of the cost of repairs.
John B. Towner, of Weir, Angwin & Towner, Pittsburg, argued the cause and was on the brief for appellants.
Paul R. Wunsch, of Wunsch, Wunsch & Gaumer, Kingman, argued the cause, and James G. Shaw, Galena, now deceased, was on the brief for appellee.
The appellant Jim Mahoney, Inc., contracted to build a 64-bed nursing home at Galena, Kansas, under a standard form contract with the appellee, The Galokee Corporation. The contract sum for completion of the project was $179,500.00. The appellant Mid-Continent Casualty Co. furnished the performance bond for the contractor. Construction of the building was begun in February and continued to mid-November, 1969. The building was occupied by The Galokee Corporation in December, 1969, and received approval from the state of Kansas for use as a nursing home. The building has been so used continuously since that time. A dispute arose between Jim Mahoney, Inc., which we will call the contractor, and The Galokee Corporation, which we will call the owner, over failure to complete and construct the building according to the plans and specifications.
Suit was filed by the contractor to recover a balance remaining due under the contract. The owner answered and filed a cross-petition claiming the contractor had defaulted by failing to complete construction, by using inferior materials, by providing poor workmanship and by failing to comply with the plans and specifications of the contract. The case was tried to the court and the court made specific findings of fact on which a final judgment was entered after offsetting a $16,215.48 balance found due the contractor against the sum of $58,960.00, which was the amount of repairs found necessary to bring the facilities up to contract specifications. A net judgment of $42,744.52 was entered in favor of the owner and against the contractor. From this judgment the contractor and its bonding company appeal.
The first point raised by appellants, which we need to consider, is that the court accepted and erroneously used evidence of the 'cost of repairs' to establish the damages. They argue that, since the trial court found the contractor did not substantially perform its contract on seven specific items, it should have used evidence of 'diminution of value' instead of 'cost of repairs'.
In Phillips & Easton Supply Co., Inc. v. Eleanor International, Inc., 212 Kan. 730, 512 P.2d 379, the general rule as to measure of damages for breach of contract is stated as follows:
Cases are cited by both parties in which this court has accepted evidence of 'cost of repairs' to establish a proper measure of damages. (McCullough v. Hayde, 82 Kan. 734, 109 P. 176; McCune v. Ratcliff, 88 Kan. 653, 129 P. 1167; Big Chief Sales Co., Inc., v. Lowe, 178 Kan. 33, 283 P.2d 480; Thompson Construction Co. v. Schroyer, 179 Kan. 720, 298 P.2d 239.) A more recent case approving the use of such evidence to establish a correct measure of damages for breach of a construction contract is Steffek v. Wichers, 211 Kan. 342, 351, 507 P.2d 274.
However, Lofsted v. Bohman, 88 Kan. 660, 129 P. 1168; Thomas v. Warrenburg, 92 Kan. 576, 141 P. 255; and most of the cases cited in the foregoing paragraph recognize that evidence of 'diminution of value' may be accepted under particular circumstances where such evidence will more reasonably establish the true measure of damages set forth in Phillips & Easton Supply Co., Inc. case quoted above. It should be noted that this measure of damages is limited to those damages which may fairly be considered as arising in the usual course of things from the breach itself, or as may reasonably be assumed to have been within the contemplation of the parties as probable result of such breach.
Under Article 25 of the present contract the parties provided for default as follows:
'If the Contractor defaults or neglects to carry out the Work in accordance with the Contract Documents or fails to perform any provision of the Contract, the Owner may, after seven days' written notice to the Contractor and without prejudice to any other remedy he may have, make good such deficiencies and may deduct the cost thereof from the payment then or thereafter due the Contractor or, at his option, may terminate the Contract and take possession of the site and of all materials, equipment, tools and construction equipment and machinery thereon owned by the Contractor and may finish the Work by whatever method he may deem expedient, and if the unpaid balance of the Contract Sum exceeds the expense of finishing the Work, such excess shall be paid to the Contractor, but if such expense exceeds such unpaid balance, the Contractor shall pay the difference to the Owner.'
The record in the present case contains substantial and convincing evidence that the contract was not completed and that the contractor failed to fulfill the requirements of the specifications in seven particulars. Regardless of the finding of the trial court that the contractor had not substantially performed the contract the trial court was correct in accepting evidence on the 'cost of repairs' to establish the amount of damages suffered. When a building contract has been so far performed that the building is occupied and used by the owner for the purposes contemplated by the contracting parties and where correction or completion would not involve unreasonable destruction of the work done by the contractor evidence of the cost of correcting the defects and completing the omissions will, as a general rule, be a fair measure of the damages. Not only is this rule firmly entrenched in our case law but the parties, in effect, provided for applying the rule in this case by inserting Article 25 in their contract. Where the parties to a construction contract provide that if the contractor defaults or neglects to carry out the work in accordance with the contract the owner may terminate the contract, take possession of the site and finish the work at the expense of the contractor it may be presumed that evidence of the cost of repairs and work necessary to bring the building up to specifications was reasonably contemplated by the parties as proper to establish the damages which would arise from a breach.
The appellant-contractor next contends that, even if evidence of the 'cost of repairs' was proper, there was no...
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