Ryland Group v. Daley

• Decision Date: 21 July 2000
• Docket Number: No. A00A1656, No. A00A1657.
• Citation: 245 Ga. App. 496,537 S.E.2d 732
• Parties: RYLAND GROUP v. DALEY et al. Daley et al. v. Ryland Group.
• Court: Georgia Court of Appeals

537 S.E.2d 732

245 Ga. App. 496

RYLAND GROUP v. DALEY et al.

Daley et al. v. Ryland Group.

Nos. A00A1656, A00A1657.

Court of Appeals of Georgia.

July 21, 2000.

Reconsideration Denied August 9, 2000.

Certiorari Denied February 2, 2001.

King & Croft, F. Carlton King, Jr., Atlanta, for appellant.

Weinstock & Scavo, Richard J. Capriola, Atlanta, Jet Harris, Athens, for appellees. ELDRIDGE, Judge.

This is an appeal and cross-appeal on a claim and counterclaim wherein a Fulton County jury found for plaintiff homeowners Donna Jones Daley and Raymond Daley ("Daleys") against defendant seller/builder Ryland Group, Inc. ("Ryland") on their complaint for breach of a building contract, negligent construction, and breach of warranty; the jury found for Ryland on its counterclaim alleging breach of an agreement entered into at closing regarding the installation of granite countertops in the kitchen of the Daleys' house. For the reasons that follow, we affirm the trial court's partial judgment notwithstanding the verdict ("j.n.o.v.") and denial of a motion for new trial. Viewed in a light to uphold the jury's verdict,¹ Ryland built the Daleys' "Master's Collection" house pursuant to a contractual agreement entered into in June 1994. The contract was amended in order to include the purchase and installation of Baltic Brown granite countertops in the kitchen of the house. The countertops were installed at the completion of construction so that they would not be damaged by the subcontractors working on other parts of the house. The Daleys saw the countertops for the first time the day before closing. Ryland had installed three-centimeter thick Dakota Mahogany countertops with granite overhangs on the edges of the counters. The color was unsatisfactory to the Daleys and not as specified. Ryland agreed that the countertop installation was incorrect because of the color; however, rather than delay closing, Ryland and the Daleys agreed to hold in escrow $8,000 out of the purchase price, pending installation of Baltic Brown granite countertops.

The parties closed on the house in September 1994. The agreement regarding reinstallation of the proper color countertops was reflected in a document generated at closing, and $8,000 was placed in escrow pending release by satisfactory installation. Ryland reinstalled the countertops in November 1994. The color of the granite was correct, but the granite was two centimeters thick, and there were no granite overhangs on the edges of the counters. The Daleys were dissatisfied with the second installation. In January 1995, Ryland refused to reinstall the countertops a third time and informed the Daleys that any changes between the first and second granite installation were consistent with the blueprint specifications and, thus, not in violation of contract. The Daleys would not agree to the release of the escrowed funds until the kitchen countertops were reinstalled using three-centimeter-thick Baltic Brown granite with granite overhangs on the edges consistent with the first installation.

Meanwhile, during the early months of 1995, the Daleys compiled a punch list of repairs, replacements, and defects in the construction of the house, the correction of which was Ryland's responsibility pursuant to contract. This included serious defects in the installation of the hardwood floors on the first floor. Ryland took no significant action on any repairs to the Daleys' house.

In July 1995, the Daleys asked a friend who is an attorney to aid them in obtaining repairs to the house pursuant to contract. Negotiations occurred between Ryland and the Daleys' first attorney throughout 1995 and into 1996. During this time, Ryland made small repairs to the residence, but finally in late 1996, Ryland informed the Daleys that "there would be no movement with regard to the other defects and repairs that [the Daleys] noted until [they] resolved the counter top issue."

In February 1997, the Daleys hired a litigation attorney. In early spring 1997, a structural engineer was engaged and, over two separate visits, did a complete inspection and found numerous structural defects, as well as other defects both related and unrelated to the structural problems with the house. An "Engineer's Estimate" was generated, which included the estimated cost to repair the construction defects. The total cost to repair was $40,765. The Daleys filed suit October 1, 1997, alleging breach of contract, negligence, breach of warranty, and requesting attorney fees. Ryland counterclaimed for the $8,000 in escrow, alleging breach of the agreement reached at closing regarding the kitchen countertops.

The jury found for the Daleys on all grounds of their complaint and awarded the Daleys $70,800 in damages and $22,500 in attorney fees. The jury found for Ryland on its counterclaim and awarded Ryland $8,000. Pursuant to election, the trial court entered judgment on the jury's verdict as to the breach of contract claim and the award of $70,800 in damages and $22,500 in attorney fees. The trial court also entered judgment on the jury's verdict as to Ryland's counterclaim and the award of $8,000. Later, on Ryland's motion for j.n.o.v., the trial court affirmed the jury's award of attorney fees to the Daleys but reduced the damage award to $41,000 based on the actual cost to repair estimate as testified to by the Daleys' structural engineer during trial.

In Case No. A00A1656, Ryland appeals the trial court's judgment entered on the jury's verdict for the Daleys on their breach of contract claim and the award of attorney fees. In Case No. A00A1657, the Daleys appeal from the trial court's order on motion for j.n.o.v. reducing the damage award.

Case No. A00A1656

1. (a) Ryland contends that the Daleys failed to offer proof of the proper measure of damages. Ryland argues that "difference in value" is the only proper measure of damages for defective workmanship in a breach of contract action, while the Daleys relied upon cost to repair/correct defects in order to measure damages for breach of contract, negligent construction, and breach of warranty. However, in its brief, Ryland also concedes that "difference in value may be shown by evidence of the reasonable cost of correcting defects." Of course, where the action is for breach of contract only, the difference between the value of the house as finished and the value of the house as it should have been finished, i.e., the benefit of the bargain, is a proper measure of damages, but it is by no means the exclusive measure.² Indeed, "[g]enerally, the proper measure of damages for defective workmanship would be the cost of repair of the defect" when claiming negligent construction, as well as when claiming breach of contract.³ Accordingly, there was no error in the method of measuring damages in this case.

(b) We also find no merit to Ryland's contention that the cost to repair the defects in the Daleys' residence should have been measured at the time of the delivery of the new residence in September 1994, i.e., at closing. The record shows that the cost to the Daleys to repair defects in the home— defects for which Ryland was responsible under the contract—did not become a relevant issue until Ryland flatly refused to repair them. Ryland's refusal occurred long after the 1994 closing on the house; any increase in the cost to repair the defects because of such delay is attributable to Ryland, arises naturally from Ryland's breach of contract, and was in the contemplation of the parties to the contract.⁴

Further, to require the cost to repair method of evaluating damages to be estimated only at the time of "delivery" on a new home would preclude recovery/repair under a contract for defective workmanship that only becomes apparent with time. We will not so reward a careless builder/seller nor so penalize a nonclairvoyant new home buyer, absent express contract language so limiting the damages.

(c) Ryland's contention that the trial court erred in failing to charge the jury that repair costs must be estimated when they are discovered is rendered meritless by our decision in Division 1(b).⁵ There was no error in the trial court's charge on the cost to repair method of evaluating damages.

2. Entry of judgment on the jury's verdict in favor of Ryland on its counterclaim renders moot any claim of error regarding the trial court's failure to direct a verdict thereon.⁶ 3. Ryland claims that the evidence was insufficient to support the award of attorney fees in this case because the jury's return of a verdict in Ryland's favor on its counterclaim demonstrates a bona fide issue in controversy. We disagree.

If there is bad faith in the making or performance under the contract, "attorney fees are authorized regardless of whether a bona fide controversy otherwise existed between the parties. [Cit.]"⁷

Further, whether or not the defendant/appellant acted in bad faith in its contractual relations is an issue for the jury to determine. Bad faith warranting an award of attorney fees must have arisen out of the transaction on which the cause of action is predicated. It may be found in defendant's carrying out the provisions of the contract, that is, in how defendant acted in his dealing with the plaintiff. Bad faith other than mere refusal to pay a just debt is sufficient, provided it is not prompted by an honest mistake as to one's rights or duties but by some interested or sinister motive. So defendants can be held liable for attorney fees if they committed the breach in bad faith.⁸

The standard of review of an award of attorney fees under OCGA § 13-6-11 is whether there is any evidence to support the award.⁹

Construed to support the verdict, the evidence at trial showed that Ryland was obligated under the contract to fix the numerous defects discovered in the construction of the Daleys' house, regardless of the kitchen countertops controversy. Evidence showed that...