John Thurmond & Associates, Inc. v. Kennedy

• Decision Date: 27 October 2008
• Docket Number: No. S07G1776.,S07G1776.
• Citation: 284 Ga. 469,668 S.E.2d 666
• Parties: JOHN THURMOND & ASSOCIATES, INC. v. KENNEDY.
• Court: Georgia Supreme Court

668 S.E.2d 666

284 Ga. 469

JOHN THURMOND & ASSOCIATES, INC. v. KENNEDY.

No. S07G1776.

Supreme Court of Georgia.

October 27, 2008.

Penna & Mendicino, Derek A. Mendicino, Conyers, for appellant.

Jerry C. Carter, Jr., Gainesville, David S. Kennedy, Jr., Marmur & Associates, Angela C. Henderson, for appellee.

THOMPSON, Justice.

We granted John Thurmond & Associates, Inc.'s (JTA) petition for writ of certiorari to the Court of Appeals to determine whether a plaintiff in a breach of contract and negligent construction case must prove fair market value of the property as a prerequisite to any recovery. See Kennedy v. John Thurmond & Assoc., 286 Ga.App. 642, 649 S.E.2d 762 (2007). For the reasons that follow, we hold that fair market value need not be proven in every construction defect case and affirm.

David Kennedy is a homeowner whose home was substantially damaged by fire. JTA is a residential restoration/construction company hired by Kennedy to make repairs to his home for an agreed upon contract price of $311,156. Kennedy subsequently discovered problems with the construction and initiated an action against JTA for breach of contract, breach of warranty, negligent construction, and negligence. At trial Kennedy presented evidence of the cost of repairing the allegedly faulty construction estimated at $751,632.¹ After the close of evidence, the trial court granted JTA's motion for a directed verdict on the ground that Kennedy did not present evidence of the fair market value of his home after the allegedly faulty repairs. Kennedy appealed and the Court of Appeals reversed, concluding that evidence of the fair market value of the home after the repairs were made was not required. Kennedy, supra at 644, 649 S.E.2d 762.

1. We begin our analysis of the proper measure of damages in this case by acknowledging that damages are intended to place an injured party, as nearly as possible, in the same position they would have been if the injury had never occurred. See BDO Seidman v. Mindis Acquisition Corp., 276 Ga. 311(1), 578 S.E.2d 400 (2003); Redman Dev. Corp. v. Piedmont Heating, etc., 128 Ga.App. 447, 197 S.E.2d 167 (1973). Juries, therefore, are given wide latitude in determining the amount of damages to be awarded based on the unique facts of each case. See Atlanta Metallic Casket Co. v. Hollingsworth, 107 Ga.App. 594, 131 S.E.2d 61 (1963) (court has no power to review jury verdict absent evidence its finding was due to prejudice or bias, or was influenced by corrupt means). See also Rafferzeder v. Zellner, 272 Ga.App. 728, 613 S.E.2d 229 (2005) (questions of value are peculiarly for determination of fact finder where there is any data upon which fact finder may exercise its own knowledge and ideas).

As a general rule, damages for defective construction, whether those damages are the result of a breach of contract or negligence of the contractor, are determined by measuring the cost of repairing or restoring the damage, unless the cost of repair is disproportionate to the property's probable loss of value. Hall v. Chastain, 246 Ga. 782, 784, 273 S.E.2d 12 (1980); Central R & B Co. v. Murray, 93 Ga. 256, 257, 20 S.E. 129 (1893); Empire Mills Co. v. Burrell Engineering, etc., Co., 18 Ga.App. 253, 256, 89 S.E. 530 (1916). Where demanded by the facts of a case, courts also have determined damages in such cases by measuring the diminution in value of the property after the injury occurred. See Harrison v. Kiser, 79 Ga. 588(8), 4 S.E. 320 (1887); Ryland Group v. Daley, 245 Ga.App. 496, 537 S.E.2d 732 (2000) (damages measured by diminution in value where defects are permanent); Mercer v. J & M Transp. Co., 103 Ga.App. 141, 118 S.E.2d 716 (1961) (measuring damages by diminution in value where restoration would require construction of entirely new home). Frequently, both measures of damages are in evidence and are complementary to the other, inasmuch as "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." (Punctuation omitted.) Williams Tile, etc., Co. v. Ra-Lin & Assoc., 206 Ga.App. 750, 752(4), 426 S.E.2d 598 (1992). See also Morrison Homes of Fla. v. Wade, 266 Ga.App. 598, 598 S.E.2d 358 (2004); Ray v. Strawsma, 183 Ga.App. 622, 623, 359 S.E.2d 376 (1987).

These principles are repeated in the Restatement (Second) of Contracts, which states:

(2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on

(a) the diminution in the market price of the property caused by the breach, or

(b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.

Restatement (Second) of Contracts: Alternatives to Loss in Value of Performance, § 348. See also Restatement (Second) of Torts, § 929(2) ("If a thing attached to the land but severable from it is damaged, [injured party] may at his election recover the loss in value to the thing instead of the damage to the land as a whole.").

Thus, under Georgia law, cost of repair and diminution in value are alternative, although oftentimes interchangeable measures of damages in negligent construction and breach of contract cases.² An injured party may choose to present his case using either or both methods of measuring damages, depending on his particular circumstances.³ If, as in the instant case, he seeks to recover based on the cost of repair method, evidence of the fair market value of the improved property is not a necessary element of his claim for damages.⁴ See Rafferzeder v. Zellner, supra, 272 Ga.App. at 728(1), 613 S.E.2d 229 (evidence of repair costs provided basis for fact finder to calculate damages); Morrison Homes of Fla. v. Wade, supra, 266 Ga.App. at 599-600, n. 1, 598 S.E.2d 358 (same); Jack V. Heard Contractors v. Moriarity, 185 Ga.App. 317, 363 S.E.2d 822 (1987) (evidence of fair market value not required where plaintiff presented evidence of cost of repair). The burden to produce evidence supporting a claim for damages under either method rests, of course, on the injured party and this must be done by evidence which will furnish the jury data sufficient to enable them to estimate with reasonable certainty the amount of damages. David Enterprises v. Kingston Atlanta Partners, 211 Ga.App. 108, 111, 438 S.E.2d 90 (1993); Wipo, Inc. v. Cook, 187 Ga.App. 7(1), 369 S.E.2d 306 (1988). In response, the defendant has the burden to present any contradictory evidence challenging the reasonableness or proportionality of those damages and where appropriate, evidence of an alternative measure of damages for the jury's consideration. See American Pest Control v. Pritchett, 201 Ga.App. 808, 810, 412 S.E.2d 590 (1991) (whether repair of house is "absurd undertaking" is question of fact for jury); Corbin on Contracts, § 60.1 (2005) (burden on contractor guilty of breach to prove award of repair costs constitutes economic waste).

2. Against this background, and relying on several Court of Appeals cases, JTA argues that evidence of fair market value is necessary regardless of the measure of damages applied because recoverable damages in construction defect cases can never exceed the fair market value of the property at the time of the breach or tort. While Georgia courts may not always have been clear in their application of the rules of damages in construction defect cases, we find no authority in the cases JTA relies upon to support his contention that courts have created an inflexible rule limiting the amount of recoverable damages.

In Small v. Lee & Bros., supra, 4 Ga.App. 395, 61 S.E. 831, the homeowner, who contracted with a builder for the construction of a home, claimed that the builder failed to comply with the terms of the contract and that she was entitled to damages in an amount equal to what it would cost to make the house as built conform to the house as contracted for, i.e., the cost of adding two feet in both length and width to the size of each room in the home. Recognizing that the measure of damages must vary with the facts of each case, the Court of Appeals determined that in that case, where the builder had substantially complied with the contract specifications and the homeowner had accepted and was living in the home, the appropriate measure of damage,

and one which would not be unjust in its application to either party, would be the difference between the value of the house as finished and the house as it ought to have been finished. To require that the house should be rebuilt, and that the contractor should pay the cost of rebuilding, or that the estimated cost of making the house conform to the contract should be allowed as damage, would be to give an unconscionable advantage to the owner, and would deprive the contractor of adequate compensation for his work and materials.

Id. at 398, 61 S.E. 831. Thus, the court in Small correctly recognized that in some cases defects cannot be remedied without great expense and/or substantial damage to the rest of the structure and determined that in such cases, where the cost of remedying the defect would far exceed the value of the improvement and provide a windfall to the injured party, an alternative measure of damages should be applied. See also Mercer, supra, 103 Ga.App. at 143, 118 S.E.2d 716 (measuring damages by diminution in value where restoration would have required construction of entirely new home).

In Song v. Brown, 255 Ga.App. 562, 565 S.E.2d 884 (2002), the plaintiff homeowner argued that the trial court's damage award was too little and contrary to the evidence. The Court of Appeals affirmed the reduced damage award, noting...