H. P. Droher & Sons v. Toushin

Supreme Court of Minnesota · 1957 · Contracts

ContractsConstruction contractsDamagesconstruction contractdefective performanceworkmanlike mannergradingwater damage

Facts

Defendants hired plaintiff to build a house under plans and specifications that required first-class workmanlike performance and grading that sloped away from the building. After defendants moved in, heavy rain entered the basement and damaged model railroad equipment; defendants claimed plaintiff had graded the lot improperly so that water drained toward the house. Defendants also claimed the house was defectively constructed, including a sagging floor and roof associated with a basement steel support and missing roof bracing. The trial court found for defendants, awarding $20,000 for defective construction and $2,000 for the railroad equipment, less the unpaid contract balance.

Issue

Whether the evidence supported findings that plaintiff improperly graded the lot and failed to construct the house in a workmanlike manner, and, if so, what measure of damages governs defective construction where the defects would be costly to correct. A further issue was whether the evidence adequately supported the amount awarded under the diminution-in-value measure.

Rule

Where a builder has made a substantial good-faith effort to perform but the structure contains defects, the owner may recover the reasonable cost of making the work conform to the contract if the defects can be remedied without destroying a substantial part of the building and without unreasonable economic waste. If the cost of remedying the defects is grossly disproportionate to the benefit to be obtained, the proper measure is the difference between the value the property would have had if constructed according to the contract and its value as built. Findings on whether the work conformed to the plans and specifications and was done in a workmanlike manner are factual and will not be disturbed if reasonably supported by the evidence.

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In Madison, Wisconsin, Nora Feld hired Lakeview Custom Homes to build a house requiring "first-class workmanlike" finish. The builder substantially completed the house in good faith, but several interior doors were hung out of plumb and custom trim was miscut; both defects can be corrected in a week without disturbing structural elements, at a reasonable cost of $6,000.

If Nora sues for defective construction, what is the proper measure of damages for these defects?

Explanation. Where a builder has made a substantial good-faith effort to perform, the owner ordinarily recovers the reasonable cost of making the work conform to the contract if the defects can be remedied without destroying a substantial part of the building and without unreasonable economic waste. Diminution in value is reserved for cases where repair would be grossly disproportionate to the benefit or require substantial rebuilding.