Roman Catholic Church of Archdiocese of New Orleans v. Louisiana Gas Service Co.

Decision Date24 May 1993
Docket NumberNo. 92-C-0071,92-C-0071
Citation618 So.2d 874
CourtLouisiana Supreme Court
PartiesThe ROMAN CATHOLIC CHURCH OF the ARCHDIOCESE OF NEW ORLEANS and United States Fidelity & Guaranty Company v. LOUISIANA GAS SERVICE COMPANY and Western Preferred Casualty Company.

Leonard A. Young, Peter B. Hays, III, Bienvenu, Foster, Ryan & O'Bannon, New Orleans, for applicant.

William H. Howard, III, Sallye G. Webb, Phelps Dunbar, New Orleans, for respondent.

DENNIS, Justice. *

This case presents the question of what is the proper measure of damages when recovery is sought for the negligent damage to a building, when the property can be repaired or restored, the cost of replacing the property in its original condition is not disproportionate to the value of the property before the injury, there is reason personal to the owner for restoring the original condition and the owner has, in fact, made repairs fully restoring the property.

FACTS

On December 16, 1976, the Department of Housing and Urban Development (hereinafter referred to as "HUD"), in consideration for cancellation of a $3,300,000.00 promissory note, acquired ownership of the Villa D'Ames Apartment complex in Marrero, Louisiana. In 1977, HUD entered into an agreement with the Roman Catholic Church of the Archdiocese of New Orleans (hereinafter referred to as the "Archdiocese") to manage the Villa D'Ames complex. From 1977 to 1980 the complex, which provided federally subsidized housing to 200 low income families, was substantially renovated at a cost of approximately $3,000,000.00.

After managing the complex for almost five years, the Archdiocese agreed to purchase the property without public bid. The sale was effected in August 1981 for $1,700,000.00, subject to the resolutory condition that should the Archdiocese fail to continuously maintain the complex for low income rental for 200 families during the next fifteen years, the property would revert to HUD. The Archdiocese purchased the property on these terms in order to further its interest in providing housing for poor families affiliated with its newly placed parish church.

On the night of December 24, 1983, a fire occurred at the Villa D'Ames apartment complex. The complex consisted of 13 detached apartment buildings as well as an office/laundry building and a community building. The fire was restricted to building 3 of that complex.

At the time of the fire the actual owner of the complex was Villa D'Ames, Inc., a wholly-owned, non-profit subsidiary corporation of the Archdiocese. The property was insured by United States Fidelity and Guaranty Company, (hereinafter referred to as "USF & G"), with Villa D'Ames, Inc. as a named insured under the USF & G policy.

The defendant, Louisiana Gas Service Company (hereinafter referred to as "Louisiana Gas") supplied natural gas to the apartments in the complex. On the evening of December 24, 1983, there was a hard freeze, which caused a malfunction of the natural gas regulating equipment utilized by Louisiana Gas to supply gas to the apartment units. As a result of this malfunction, dangerous amounts of gas surged into the apartments, eventually causing the fire and resulting damages.

Suit was filed by Villa D'Ames, Inc., the Archdiocese, and USF & G against Louisiana Gas for recovery of the damages sustained as a result of the fire.

Prior to trial, Louisiana Gas acknowledged that it was legally liable for the damages sustained by plaintiffs as a result of the fire in question. The case went to trial solely to determine the quantum of damages. Regarding the only issue before this court, the trial court ruled that since the cost of restoration exceeded the market value of the building before the damage, plaintiffs' recovery was limited to the amount expended to restore the building to its pre-fire condition reduced by depreciation. The plaintiffs appealed. The Court of Appeal affirmed, 592 So.2d 14 (La.App. 5th Cir.1991). We granted certiorari, 592 So.2d 1321 (1992).

ISSUE

The single issue presented is whether the lower courts erred in limiting plaintiffs' damages to replacement cost, less depreciation, rather than awarding the plaintiffs the full cost of restoration that had been reasonably incurred.

ANALYSIS

Every act of man that causes damage to another obliges him by whose fault it happened to repair it. La.Civ.Code art. 2315. One injured through the fault of another is entitled to full indemnification for damages caused thereby. Coleman v. Victor, 326 So.2d 344 (La.1976); Jordan v. Travelers Ins. Co., 257 La. 995, 245 So.2d 151 (1971). In such a case, "[t]he obligation of defendant ... is to indemnify plaintiff--to put him in the position that he would have occupied if the injury complained of had not been inflicted on him." Coleman v. Victor, supra, at 346, quoting, Lambert v. American Box Co., 144 La. 604, 613, 81 So. 95, 98 (1919). See also, Ayala v. Bailey Elec. Co. Inc., 318 So.2d 645 (La.App. 4th Cir.1975).

Consequently, "[w]hen property is damaged through the legal fault of another, the primary objective is to restore the property as nearly as possible to the state it was in immediately preceding the damage...." Coleman v. Victor, supra, at 346. Accordingly, "the measure of damages is the cost of restoring the property to its former condition. In assessing damage to property, generally, courts have considered the cost of restoration as the proper measure of damage where the thing damaged can be adequately repaired." Id. at 346-47, citing Lambert v. American Box Co., supra; Hayward v. Carraway, 180 So.2d 758 (La.App. 1st Cir.1965), writ ref. 248 La. 909, 182 So.2d 662 (1966). "[N]o mechanical rule can be applied with exactitude in the assessment of property damage under Article 2315." Coleman v. Victor, supra, at 347, citing Jordan v. Travelers Ins. Co., supra.

These basic precepts have been reaffirmed and strengthened indirectly by the Declaration of the Right to Property of our state constitution. Article I, Sec. 4 of the Louisiana Constitution of 1974, in pertinent part, provides:

"Every person has the right to acquire, own, control, use, enjoy, protect, and dispose of private property.... Property shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation paid to the owner or into court for his benefit.... In every expropriation, a party has the right to trial by jury to determine compensation, and the owner shall be compensated to the full extent of his loss."

Thus, our constitution does not simply require that the owner of condemned or damaged property be compensated with the market value of the property taken and severance damage to his remainder, but that he be "compensated to the full extent of his loss" and "placed in as good a position pecuniarily as [he] enjoyed prior to the taking." State v. Bitterwolf, 415 So.2d 196, 199 (La.1982), quoting State v. Constant, 369 So.2d 699, 702 (La.1979). Accordingly, justice, reason, and the principle of full reparation of Louisiana Civil Code article 2315 require that where an individual's property is damaged unlawfully by a tortfeasor for no good reason, he be compensated at least as fully as when his property is damaged by the state for a public purpose pursuant to the owner's obligation of citizenship to the community. See La.Civ.Code art. 2626.

In contrast with these fundamental principles, some jurisdictions have placed more restrictive limits on when an owner whose property has been tortiously damaged can recover the full cost to repair or restore. Although expressed in differing ways, many of these courts essentially limit the owner's damage to the lesser of cost to repair and diminution in market value caused by the damage. See, e.g., Blanton & Co. v. Transamerica Title Ins. Co., 24 Ariz.App. 185, 188, 536 P.2d 1077, 1080 (1975); Charles v. Rueck, 179 Cal.App.2d 145, 146-48, 3 Cal.Rptr. 490, 491-92 (1960); Kirst v. Clarkson Constr. Co., 395 S.W.2d 487, 493-94 (Mo.Ct.App.1965); Newsome v. Billups, 671 S.W.2d 252, 253-55 (Ky.Ct.App.1984); Stony Ridge Hill Condominium Owners Ass'n v. Auerbach, 64 Ohio App.2d 40, 41, 48, 410 N.E.2d 782, 784, 788 (1979); Mozzetti v. City of Brisbane, 67 Cal.App.3d 565, 576, 136 Cal.Rptr. 751, 757 (1977). Other courts, although applying cost to restore as the appropriate measure of damages in all cases of reparable injury to property, use the fair market value of the property before the injury, rather than the diminution in value, as a ceiling on the damage award. See, e.g., Southern Indiana Gas & Electric Co. v. Indiana Ins. Co., 178 Ind.App. 505, 517, 383 N.E.2d 387, 395 (1978); "L" Invs., Ltd. v. Lynch, 212 Neb. 319, 321, 322 N.W.2d 651, 653 (1982); Stratford Theater, Inc. v. Town of Stratford, 140 Conn. 422, 424, 101 A.2d 279, 280 (1953). Some of our own courts of appeal have approved such limitations, including a rigid "cost of replacement, less depreciation," test, evoking this court's pointed admonitions that no mechanical rule can be applied with exactitude in the assessment of property damage under Article 2315 and that every case must rest on its own facts and circumstances. Coleman v. Victor, supra at p. 347 and nn. 4 and 5.

Recently, courts and commentators have criticized these types of simplistic tests which require the automatic application of limitations on an owner's recovery of the cost to restore or repair his damaged property. See generally, D. Dobbs, Handbook on the Law of Remedies Sec. 5.1 (1973). "Such ceilings on recovery not only seem unduly mechanical but also seem wrong from the point of view of reasonable compensation. If the plaintiff wishes to use the damaged property, not sell it, repair or restoration at the expense of the defendant is the only remedy that affords full compensation. To limit repair costs to diminution in value is to either force a landowner to sell the property he wishes to keep or to make repairs partly out of his own pocket." Id. at 317...

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