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H & M Construction v. Northcutt (1/18/91), 808 P 2d 251
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Notice: This is subject to formal correction
before publication in the Pacific Reporter.
Readers are requested to bring typographical or
other formal errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, in order that corrections may be
made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
HERB and MARGE HANCOCK, )
Individually, and H & M ) Supreme Court Nos.
CONSTRUCTION, ) S-3470/3483
)
Appellants and )
Cross-Appellees, ) Trial Court No.
) 3AN-84-8683 Civil
v. )
)
CAROL A. NORTHCUTT and ) O P I N I O N
MELVIN D. NORTHCUTT, )
)
Appellees and )
Cross-Appellants. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial
District, Anchorage,
Karen Hunt, Judge.
Appearances: Kelly C. Fisher, Pletcher,
Weinig, Lottridge & Moser, Anchorage,
for Appellants and Cross-Appellees
Hancocks. Thomas H. Dahl, Phyllis A.
Hartke, Dahl and Hartke, Anchorage, for
Appellees and Cross-Appellants
Northcutts.
Before: Matthews, Chief Justice,
Rabinowitz, Burke, Compton, and Moore,
Justices.
MATTHEWS, Chief Justice.
STATEMENT OF THE FACTS
This case involves a dispute between the owner-
builders of an earth-sheltered concrete house, Carol and
Melvin Northcutt, and the concrete contractors for the
house, Herb and Marge Hancock. The house consists of seven
joined pods which may be covered with dirt for insulation.
The Northcutts made an oral contract with the Hancocks for
construction of the pods. The terms of the contract are in
dispute. The Northcutts claim that for $65,000 the Hancocks
agreed to complete all structural concrete work. The
Hancocks dispute the original price, and claim that they
performed extra work not contemplated in the original
contract, for which they were to be paid on a time and
material basis. Construction was delayed. Each side blames
the other for the delay. Following delays, all seven pods
were poured. The Northcutts believed some of the work to be
defective. The Hancocks offered to cure the problems but
the Northcutts refused, ordering them off the job.
The Hancocks then filed a lien for $13,100 and
sued to enforce the lien. The suit was dismissed because
the Hancocks had not complied with the registration
requirements for contractors in Alaska.
The Northcutts then sued the Hancocks. The
Northcutts' amended complaint states that the Hancocks
breached the contract by failing to perform in a timely and
professional manner, and by changing the design of the
Northcutts' structure. In addition, the Northcutts allege
that the Hancocks wrongfully liened the property. The
Northcutts also plead a tort claim for misrepresentation and
negligent and intentional infliction of emotional distress.
The Northcutts claim that the house leaks and that it is
structurally unsafe. The Northcutts sought damages
associated with the costs to repair the house, and for
emotional distress. They also asked for punitive damages.
The Hancocks counterclaimed for the amount allegedly due
under the contract plus extra work performed.
The contract was made in May of 1982. The
Hancocks first poured concrete in September of 1982 and made
their last pour on October 30, 1982. The Hancocks were
ordered off the job prior to filing a lien in November of
1982. The Northcutts finished the house and closed on their
$160,000 mortgage about 90 days later. They have lived in
the house since that time. However, they do not occupy pod
seven because they believe it may collapse and they have
installed timber cribbing in certain sections of the house
to prevent a sudden collapse. This action was brought on
September 15, 1984. After lengthy motion practice the case
went to trial in March of 1989. Following a four-week
trial, the jury returned a verdict in favor of the
Northcutts.
The jury, guided by a special verdict form,
awarded the Northcutts $455,984 as the cost of demolishing
and rebuilding the house, $19,600 for moving and storage
costs and temporary housing during reconstruction, $7,200
for past lost use of portions of the house, $28,486 for
costs incurred by construction delays, and $175,000 for
emotional distress. Compensatory damages thus totaled
$686,271.1 This amount plus prejudgment interest, costs and
attorney's fees was entered as a judgment against the
Hancocks.
The Hancocks appeal. They assert that the judge
erred in allowing the Northcutts to pursue their claim for
emotional distress damages and in instructing the jury that
it could award the Northcutts the cost of demolishing and
replacing the house, even if it determined that replacement
would constitute economic waste. The Hancocks also allege
that various aspects of the conduct of the jury require the
decision to be reversed.
The Northcutts have filed a cross-appeal, arguing
that the trial court erroneously dismissed their tort claims
for misrepresentation and intentional infliction of
emotional distress. They also claim that the court erred in
refusing to allow the issue of punitive damages to go to the
jury. In addition, they claim that the court erred in its
award of costs and attorney's fees to them and in
restricting recovery of prejudgment interest.
DISCUSSION
A. HANCOCKS' APPEAL
1. Did the trial court's instruction concerning
demolition and rebuilding costs constitute prejudicial
error?
The trial court instructed the jury on alternative
methods of computing damages. Instruction 40 told the jury
in general that if repair was feasible, the reasonable cost
of putting the house in the condition promised by the
contract should be the measure of damage. If, however,
repair was not feasible, the jurors were told to award the
difference between the value the house would have had if it
had been built as promised and the actual value of the
house. The jury was also instructed that even if repair was
impractical and grossly wasteful, the cost of the repair
method could be used if the jury found any one of the
following: (1) that the house has a special significance to
the Northcutts; (2) that the Northcutts were more likely
than not to demolish and rebuild the house; or (3) that the
house creates a dangerous condition.2
The jury, in answer to the questions posed in the
special verdict form, found that it would be impractical and
grossly wasteful to put the house in the same condition it
would have been in had the Hancocks kept their promise.
However, the jury also found that at least one of the three
conditions existed. It thus awarded the Northcutts $455,894
as the "reasonable cost to put the house in the condition it
would have been in had the defendants kept their promise."
The parties agree that this represents the sum of $68,465
for removing the present house and $387,519 for rebuilding
the house.
The Hancocks contend that the instruction is
erroneous because the jurors should have been told that if
expending funds to construct the house as contracted for
would be impractical and grossly wasteful, damages should be
the difference between what the house would have been worth
if the contract had not been broken and its actual value,
plus consequential damages. The Hancocks note that the most
the house would have been worth if it had been properly
built was $190,0003 as of the time of its completion in
1982. As of the time of trial, because of a depressed real
estate market, the house would have been worth approximately
$142,500.
The Northcutts contend that the instruction was a
correct reflection of the law.4
In our view, the instruction was a misstatement of
the law. In Advanced, Inc. v. Wilks, 711 P.2d 524 (Alaska
1985), a case which involved another earth-sheltered
concrete house, we approved a jury instruction which told
the jury that damages should be the reasonable cost of
remedying construction defects unless such costs were
impractical and grossly wasteful, in which case a difference
in value approach should be used. We stated:
It is well established that the cost of
completion or repair is the preferred
measure for calculating damages when a
building contractor breaches a
construction contract by incomplete or
defective performance. . . . The
diminution in value measure is to be
used only when necessary to avoid
unreasonable waste (as where a house
would have to be torn down to replace
plumbing that deviated only in a minor
way from contract specifications).
Id. at 526 (footnote omitted).
We went on to explain that an owner's recovery
should not necessarily be limited to diminution in value
"whenever that figure is less than the cost of repair." Id.
at 527. In support of this we cited Restatement (Second) of
Contracts 348, comment c (1981). This comment makes it
clear that while a cost of repair figure somewhat in excess
of damages under the comparative value approach may be
tolerated because of proof difficulties, a gross excess will
not be. The comment states, in relevant part:
Sometimes, especially if the
performance is defective as
distinguished from incomplete, it may
not be possible to prove the loss in
value to the injured party with
reasonable certainty. In that case he
can usually recover damages based on the
cost to remedy the defects. Even if
this gives him a recovery somewhat in
excess of the loss in value to him, it
is better that he receive a small
windfall than that he be undercompen
sated by being limited to the resulting
diminution in the market price of his
property.
Sometimes, however, such a large
part of the cost to remedy the defects
consists of the cost to undue what has
been improperly done that the cost to
remedy the defects will be clearly
disproportionate to the probable loss in
value to the injured party. Damages
based on the cost to remedy the defects
would then give the injured party a
recovery greatly in excess of the loss
in value to him and result in a
substantial windfall. Such an award
will not be made. It is sometimes said
that the award would involve "economic
waste," but this is a misleading
expression since an injured party will
not, even if awarded an excessive amount
of damages, usually pay to have the
defects remedied if to do so will cost
him more than the resulting increase in
value to him.
(Emphasis added.)
The three exceptions the trial judge included in
Instruction 40 were based on additional language in Wilks.
We stated:
It is true that in a case where the cost
of repair exceeds the damages under the
value formula, an award under the cost
of repair measure may place the owner in
a better economic position than if the
contract had been fully performed, since
he could pocket the award and then sell
the defective structure. On the other
hand, it is possible that the owner will
use the damage award for its intended
purpose and turn the structure into the
one originally envisioned. He may do
this for a number of reasons, including
personal aesthetics or a hope for
increased value in the future. If he
does this, his economic position will
equal the one he would have been in had
the contractor fully performed. The
fact finder is the one in the best
position to determine whether the owner
will actually complete performance, or
whether he is only interested in
obtaining the best immediate economic
position he can. In some cases, such as
where the property is held solely for
investment, the court may conclude as a
matter of law that the damage award
cannot exceed the diminution in value.
Where, however, the property has special
significance to the owner and repair
seems likely, the cost of repair may be
appropriate even if it exceeds the
diminution in value.6
________________________________________
_____
6 The public interest in avoiding the
creation of eyesores and possibly
dangerous conditions may also work in
favor of the cost role. Of course,
absent a decree of specific performance,
there is no guarantee that the owner
will actually use the award to fix the
structure, but, as just discussed, in
some cases it may be probable that he
will do so.
Id. at 527 (other footnote omitted).
In Wilks, the jury explicitly found that the cost
to cure the house defects would not be grossly wasteful.
Id. at 526. The discussion does not purport to state an
exception to the rule that cure costs cannot be awarded if
there is unreasonable waste.
There is, however, a theoretical basis for
awarding cost to cure damages which greatly exceed the value
differential measure, although cases where this has actually
been done are rare. What is required are assurances that
the injured party will effect a cure for legally sufficient
reasons. A hornbook on contracts states:
It is usually said that this second
measure of recovery [value differential
damages] is appropriate "[i]f it is made
to appear that physical reconstruction
and completion in accordance with the
contract will involve unreasonable
economic waste by destruction of usable
property or otherwise." It seems
apparent however, that the true
rationale is that recovery for the cost
of remedying the defect would involve
unjust enrichment. In all likelihood,
if the owner were to recover this amount
in such circumstances he would pocket
the recovery. Most likely he would not
undertake to remedy the defect . . . .
The end result would be that the owner
would have a structure substantially in
compliance with the contract and a sum
of money far in excess of the pecuniary
harm done to him. Economic waste, then,
is merely a criterion by which one can
determine whether or not the owner
reasonably would remedy the defect or
would utilize the building in its
defective state. Another criterion is
whether the owner's purpose is to
gratify personal taste and fancy. If
so, he may be entitled to damages
measured by the cost of completion even
if this involves economic waste.
J. Calamari and J. Perillo, Treatise on Contracts 14-29,
at 560-61 (1977) (emphasis added) (footnotes omitted). See
also Note, Breach of a Covenant to Restore, 39 So. Cal. L.
Rev. 309, 315 (1966) (restoration costs should only be
awarded if the injured party restores).
Accordingly, if warranted by the evidence, an
instruction like that in question might be proper if it
required a finding that the injured party would probably
rebuild. Thus, if the instruction were to state that cost
of cure damages were appropriate, even if grossly wasteful,
if the house has special significance to the plaintiffs and
the plaintiffs are more likely than not to demolish and
rebuild the house, it would not be erroneous. The same is
true if the instruction were to say that if the house is
dangerous and the plaintiffs are more likely than not to
demolish and rebuild it, cost of cure damages could be
awarded. However, the exceptions in Instruction 40 are
stated in the disjunctive.5 Thus the jury could have found
merely that the house creates a dangerous condition, or that
the house has special significance to the plaintiffs,
without also finding that the plaintiffs are more likely
than not to demolish and rebuild it.
The instruction as given therefore allows the
possibility of unjust enrichment of the plaintiffs.
Assuming their house to have no value, their loss is
$190,000, which is what their house would have been worth in
1982 had it been built properly, plus demolition costs of
$68,465. The jury awarded them $387,519 plus the costs of
demolition. They can now demolish their house, buy another
house comparable in size for $190,000 ($142,500 using values
as of the time of trial) and profit by $197,519. On the
facts of this case, this seems likely. Neither Mrs. nor Mr.
Northcutt testified that they would rebuild an earth-
sheltered concrete house given another chance.
For this reason, the jury's award of $387,519 as
the cost of rebuilding the house must be vacated.6 The
jury's award of storage costs and temporary housing during
reconstruction must also be reversed as these items
necessarily assume that the house will be rebuilt.
2. Did the trial court err in instructing the jury
that it could award damages for emotional distress?
The trial court instructed the jury that if the
Hancocks were negligent in the performance of their duties
under the contract and that this caused the Northcutts
emotional distress, damages for emotional distress could be
awarded.7
In the special verdict, the jury affirmatively
answered Question 9: "Was the negligence of the defendants
a legal cause of harm to the plaintiffs?" The jury was then
asked: "What is the amount of money which will fairly
compensate plaintiffs for the emotional and mental distress
legally caused by defendants' negligence?" and answered,
"$175,000."
The Hancocks argue, in essence, that no recognized
legal theory warrants the award of emotional distress
damages in this case, as the Northcutts were not physically
injured and the distress did not itself have physical
manifestations.
The general rule is that where a tortfeasor's
negligence causes emotional distress without physical
injury, such damages may not be awarded. W. Prossor and W.
Keeton, The Law of Torts 54, at 361 (5th ed. 1984) ("Where
the defendant's negligence causes only mental disturbance,
without accompanying physical injury, illness, or other
physical consequences, and in the absence of some other
independent basis for tort liability, the great majority of
courts still hold that in the ordinary case there can be no
recovery.").
We have recognized the application of this rule in
several cases in which we have discussed the claims of
plaintiffs who have suffered emotional distress upon
observing a loved one who has been physically injured by the
act of a tortfeasor. Mattingly v. Sheldon Jackson College,
743 P.2d 356 (Alaska 1987); Croft v. Wicker, 737 P.2d 789
(Alaska 1987); Tommy's Elbow Room, Inc. v. Kavorkian, 727
P.2d 1038 (Alaska 1986). In those cases we recognized an
exception to the general rule where the plaintiff is shocked
by observing the physically injured victim "more or less
contemporaneously with the plaintiff's learning of the
nature of the victim's injuries." Mattingly, 743 P.2d at
365-66. This exception has no application to the present
case.
We have also implicitly recognized the application
of the general rule in our cases discussing the elements of
a claim for intentional infliction of emotional distress,
King v. Brooks, 788 P.2d 707 (Alaska 1990); Teamsters Local
959 v. Wells, 749 P.2d 349 (Alaska 1988); Croft v. Wicker,
737 P.2d 789 (Alaska 1987); Richardson v. Fairbanks North
Star Borough, 705 P.2d 454 (Alaska 1985). These authorities
limit the recovery of emotional distress damages
unaccompanied by physical injuries to cases (1) where the
emotional distress is "severe,"(2) where the conduct of the
tortfeasor is intentional or reckless, and (3) where such
conduct is capable of being characterized as extreme or
outrageous. King v. Brooks, 788 P.2d at 711; Wells, 749
P.2d at 357. The last two limitations would be meaningless
if negligent infliction of emotional distress without
physical harm was legally redressable.
The Northcutts cite several cases, including one
from Hawaii, Rodrigues v. State, 472 P.2d 509, 518-21 (Haw.
1970), which discarded the general rule that there can be no
recovery for negligent infliction of emotional distress in
the absence of physical injury. However, they make no
argument as to why this court should abandon the general
rule and, on the briefing before us, we decline to consider
this possibility.
The Northcutts also contend that emotional
distress damages are allowable in the absence of bodily
injury under a breach of contract theory. They cite section
353 of the Restatement (Second) of Contracts which states:
Recovery for emotional disturbance will
be excluded unless the breach also
caused bodily harm or the contract or
the breach is of such a kind that
serious emotional disturbance was a
particularly likely result.
The first illustration to section 353 demonstrates
that in the view of the Restatement, contracts to construct
a house are not among those where serious emotional
disturbance is particularly likely. The illustration
states:
A contracts to construct a house for B.
A knows when the contract is made that B
is in delicate health and that proper
completion of the work is of great
importance to him. Because of delays
and departures from specifications, B
suffers nervousness and emotional
distress. In an action by B against A
for breach of contract, the element of
emotional disturbance will not be
included as loss for which damages may
be awarded.
The view that contracts pertaining to one's
dwelling are not among those contracts which, if breached,
are particularly likely to result in serious emotional
disturbance is reflected in numerous cases. E.g., Mack v.
Hugh W. Comstock and Associates, Inc., 37 Cal. Rptr. 466,
469 (Cal. App. 1964); Maere v. Churchill, 452 N.E.2d 694
(Ill. App. 1983); Groh v. Broadland Builders, Inc., 327
N.W.2d 443 (Mich. App. 1983); Caradonna v. Thorious, 169
N.W.2d 179 (Mich. App. 1969); Jankowski v. Mazzotta, 152
N.W.2d 49 (Mich. App. 1967); Young v. Abalene Pest Control
Services, Inc., 444 A.2d 514 (N.H. 1982); Emerman v.
Baldwin, 142 A.2d 440 (Pa. Super. 1958). There is contrary
authority as well, B&M Homes, Inc. v. Hogan, 376 So.2d 667
(Ala. 1979); Jack v. Henry, 128 So.2d 62 (La. App. 1961).
In our view, breach of a house construction
contract is not especially likely to result in serious
emotional disturbance. Such contracts are not so highly
personal and laden with emotion as contracts where emotional
damages have typically been allowed to stand on their own.
Examples of the latter include contracts to marry,8 to
conduct a funeral,9 to sell a sealed casket,10 to conduct a
cesarean birth,11 to surgically rebuild a nose,12 to provide
promised maternity medical coverage,13 to provide medical
services,14 and to keep a daughter informed of her mother's
health.15 Further, the typical damages for breach of house
construction contracts can appropriately be calculated in
terms of monetary loss. By contrast, the damages in
contracts of a more personal nature in which emotional
disturbance damages are allowed are usually intangible.
Thus, there would ordinarily be only a nominal recovery
unless emotional disturbance damages were allowed.
For the above reasons, we conclude that the court
should not have instructed on emotional distress damages in
this case. The $175,000 awarded by the jury for these
damages should be deleted from the judgment.
3. Jury Conduct Claims
The Hancocks' first claim is that the trial judge
should have discharged a juror who thought that he had
spoken to the Northcutts about their case at a party. The
trial judge conducted voir dire of the juror and was
satisfied that the juror had misidentified the people to
whom he spoke as the Northcutts. Following the trial
court's voir dire, the Hancocks did not request any relief
and did not request to conduct further voir dire. Under
these circumstances, this point is waived. See Grimes v.
Haslett, 641 P.2d 813, 816 (Alaska 1982); cf. Alaska State
Housing Auth. v. Riley Pleas, Inc., 586 P.2d 1244, 1248
(Alaska 1978) (a party may not obtain a second hearing by
silently collecting his objections for the contingency of
loss in the first one).
The Hancocks' other point under this heading is
that the trial court should have granted a new trial because
of juror misconduct. They base this point on juror
affidavits gathered by the Northcutts in opposition to post-
trial motions made by the Hancocks. The affidavits,
however, detail the jurors' mental processes and do not
demonstrate that there was any outside influence improperly
brought to bear on any juror or that extraneous prejudicial
information was improperly brought to the jury's attention.
Thus the court did not err in refusing to grant a new trial
on this basis. See West v. State, 409 P.2d 847, 852 (Alaska
1966); Evidence Rule 606.
B. NORTHCUTTS' CROSS-APPEAL
1. Should the trial court have instructed the jury on
misrepresentation, intentional infliction of emotional
distress, and punitive damages?
The trial court found insufficient evidence of
malicious or outrageous conduct on behalf of the Hancocks to
warrant an instruction on either intentional infliction of
emotional harm or punitive damages.16 We agree with the
trial court that although there is ample evidence that the
Hancocks' performance of the contract was deficient, there
is insufficient evidence that they acted maliciously or in
any sense outrageously.
The Northcutts also claim that the trial judge
should have given an instruction on the tort of
misrepresentation. Such an instruction, they claim, would
support an award not only of punitive damages but damages
for emotional distress. In our view this argument does not
benefit the Northcutts. As noted, there is insufficient
evidence of malice or outrageous conduct on the part of the
Hancocks to support a claim for intentional infliction of
emotional distress or punitive damages. This applies also
to the representations which the Hancocks made when the
contract was formed. Thus, instructing the jury on a theory
of misrepresentation would not have warranted an instruction
on punitive damages or emotional distress damages on an
intentional infliction theory. Further, negligent
misrepresentation concerning the qualities of a house to be
built will not support an award of emotional distress
damages in the absence of physical injury for the reasons
set forth in part A-1 above. Finally, any damages which the
jury might properly have awarded based on a misrepresent
ation theory were also equally awardable under the negligent
performance of contract duties theory which was instructed
on. Thus, any error in not instructing on misrepresentation
was harmless.
C. COSTS AND ATTORNEY'S FEES
The Northcutts submitted a cost bill which
totalled $85,821.67. They were awarded $35,409.83 by the
clerk of court. They unsuccessfully appealed this award to
the superior court.
The standard of review on cost awards was
expressed in CTA Architects of Alaska, Inc. v. Active
Erectors & Installers, Inc., 781 P.2d 1364, 1365 (Alaska
1989):
To the extent that an award of costs is
consistent with the legal principles
adopted by this court, the award is
committed to the broad discretion of the
trial court and will not be disturbed on
appeal, absent a clear showing that the
trial court's determination was
arbitrary, capricious or manifestly
unreasonable, or that it stemmed from an
improper motive.
The court's action in denying the appeal of the Northcutts
concerning costs meets this standard and is thus affirmed.
The trial court awarded the Northcutts attorney's
fees of $88,169.66 in accordance with the schedule of fees
set forth in Civil Rule 82. The Northcutts actually
incurred fees of $394,318.75. They argue that the court
should have awarded them a higher attorney's fee because of
the length and complexity of this litigation. Although the
trial judge in the exercise of her discretion could have
awarded a larger fee, adhering to the Civil Rule 82 schedule
was not an abuse of discretion.17 Nonetheless, we must
vacate the award in this case because part of the money
judgment on which the scheduled fee is based has been
vacated.
D. PREJUDGMENT INTEREST
The trial court declined to award prejudgment
interest on the demolition and repair costs and on moving,
storage, and temporary housing costs which would be
necessitated during reconstruction. The Northcutts contend
that this was error.
The argument is moot with respect to the cost of
rebuilding the house, as this will be deleted from the
judgment. The argument is also moot with respect to
temporary housing and storage, because, as noted above in
section A-1, those are items of consequential damages which
are dependent on the erroneous assumption that the house
will be rebuilt. However, the argument is not moot with
respect to demolition and moving costs.
The Hancocks argued that these costs were
calculated in 1989 dollars and thus awarding prejudgment
interest from the date of the breach in 1982 would be, in
essence, granting a double recovery because of the inflation
which occurred between 1982 and 1989. The trial judge gave
no reason for her decision, but apparently accepted this
argument. In Sebring v. Colver, 649 P.2d 932, 936 (Alaska
1982), we reversed the award of prejudgment interest for
repair costs which were calculated in date-of-trial, 1979,
dollars from a 1975 breach. We stated:
Since the financial impact of the
passage of time was thus incorporated
into the jury's damage award, any award
of prejudgment interest on this amount
would therefore constitute a double
recovery.
The Northcutts argue that this rationale is
inapplicable in the present case because the relevant prices
in 1989 are not greater than those which existed in 1982.
The Northcutts offer no factual basis for this argument.
Similarly, the Hancocks have submitted nothing to this court
or the trial court to indicate that demolition and moving
costs in Anchorage were greater in 1989 than they were in
1982.
Prejudgment interest should be denied in only the
most unusual case, American National Watermattress Corp. v.
Manville, 642 P.2d 1330, 1343 (Alaska 1982). Since
prejudgment interest is the norm in our law, the burden of
proving that an unusual situation, such as a resulting
double recovery, exists should be on the party opposing the
award, here the Hancocks. As they have not proven that
there will be a double recovery in this case, an award of
prejudgment interest should have been made.
CONCLUSION
For the above reasons, the judgment is reversed
with respect to the award of rebuilding, storage and
temporary housing costs, and damages for emotional distress.
The court's refusal to award prejudgment interest on
demolition and moving costs is reversed. The court's award
of attorney's fees is vacated. In all other respects the
judgment of the superior court is affirmed. The case is
remanded for a new trial to determine the difference between
the value the house would have had if it had been built as
promised and the value the house actually has.
_______________________________
1 The jury also awarded $1 for lost aesthetic value.
2 Instruction 40 stated:
The second item of claimed loss is
the cost to repair the construction
deficiencies which plaintiffs claim can
only be repaired by demolishing the
present structure and rebuilding the
entire house.
If you find that repair is
feasible, you must compute the
reasonable cost of putting the house in
the condition which was promised by the
contract. If you find that repair is
not feasible, you must compute the
reasonable difference between the value
the house would have had if it had been
built as promised, and the value the
house actually has. In other words,
there are two differen[t] methods which
can be used to decide the amount of
plaintiffs' claimed damages.
The usual way of deciding what
damages to award to the plaintiffs is to
give them the reasonable cost of putting
the house in the same condition it would
have been in had the defendants kept
their promise.
However, if you find that it would
be impractical and grossly wasteful, in
proportion to the benefit to be gained,
to repair the house so that it matches
its promised condition, then you should
not use this first method unless you
find it is more likely than not true:
1) the house has a special
significance to the plaintiffs; or
2) the plaintiffs are more likely
than not to demolish and rebuild the
house; or
3) the house as is creates a
dangerous condition.
If you find one or more of the
above conditions to be more likely true
than not true, you may determine that
cost of repair is the approximate
measure of damages in this case.
Otherwise, for all conditions that
can be repaired at disproportionate and
wasteful expense, you should use the
following method of measuring damages.
You should
award to the plaintiffs a sum which represents the
difference between the value of the performance that the
defendants promised and the value of the performance that
the defendants actually gave.
If you decide that some defects are
repairable, but that others can be
repaired only at a disproportionate and
wasteful expense, then you should use
the cost of repair to measure damages
for the repairable defects and the drop
in value to measure the damages for the
remaining non-repairable defects.
3 The value of the lot is in addition to this amount.
4 The Northcutts also argue that even if the instruction was
erroneous, it could not have caused prejudice because the
value differential approach should not have been instructed
upon as there was no evidence of the present value of the
house. This lacks merit. There was evidence that the
structure is unsafe and must be demolished. The jury could
infer from this that at present the house has a negative
value.
5 In Wilks we spoke of the factors of special significance
and the likelihood of repair in the conjunctive: "Where,
however, the property has special significance to the owner
and repair seems likely, the cost of repair may be
appropriate even if it exceeds the diminution in value."
Wilks, 711 P.2d at 527 (emphasis added).
6 The demolition costs found by the jury, $68,465, may stand
as both parties agree that this is the amount found by the
jury for demolition and that the jury necessarily found that
the house was not structurally sound and "was going to have
to be replaced and had no value." Under such circumstances,
the demolition costs are consequential damages which may be
recovered in addition to the diminution in value measure.
Restatement (Second) of Contracts 347(b) (1981).
7 Instruction 42 states:
The plaintiffs' eighth item of
claimed loss is the emotional and mental
distress caused by the defendants'
negligence. This is the emotional and
mental distress associated with any
pain, fear, anxiety, embarrassment, or
humiliation resulting from the
negligence. You may award a fair amount
to compensate plaintiffs for any loss of
this type experienced from the date of
the contract until the date of trial,
and for any similar loss they may
experience in the future if you decide
there is a reasonable medical
probability that they may experience
such a loss in the future.
The law does not establish a
definite standard for fixing the amount
of compensation for loss of this type.
The law does not require that any
witness testify as to what amount would
be reasonable. You may fix a fair
amount in light of the evidence and your
experience and reasonable judgement.
8 See A. Corbin, Contracts 1076, at 430-31 & n.8 (1964);
e.g., Vanderpool v. Richardson, 17 N.W. 936 (Mich. 1883).
9 Fitzsimmons v. Olinger Mortuary Assoc., 17 P.2d 535 (Colo.
1932); see also Meyer v. Nottger, 241 N.W.2d 911 (Iowa
1976).
10 Lamm v. Shingleton, 55 S.E.2d 810 (N.C. 1949); see also
Hirst v. Elgin Metal Casket Co., 438 F. Supp. 906 (D. Mont.
1977); Chelini v. Nieri, 196 P.2d 915 (Cal. 1948).
11 Stewart v. Rudner, 84 N.W.2d 816 (Mich. 1957).
12 Sullivan v. O'Connor, 296 N.E.2d 183 (Mass. 1973).
13 McCune v. Grimaldi Buick-Opel, Inc., 206 N.W.2d 742 (Mich.
1973).
14 Oswald v. LeGrand, 453 N.W.2d 634 (Iowa 1990); Speck v.
Finegold, 439 A.2d 110 (Pa. 1981).
15 Avery v. Arnold Home, Inc., 169 N.W.2d 135 (Mich. 1969).
16 The trial court stated that "there has been absolutely no
evidence even remotely establishing the degree of willful,
wanton, outrageous conduct necessary to support such a claim
. . . ."
17 See Municipality of Anchorage v. Sisters of Providence in
Washington, Inc., 628 P.2d 22, 35 (Alaska 1981).
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