Case brief: template
| Case name: | Groves v. John Wunder Co. |
| Court: | SUPREME COURT OF MINNESOTA |
| Citation; Date: | 205 Minn. 163 (1939) |
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PROCEDURAL HISTORY |
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| Trial court: | Appeal court (for appeal cases only): | ||
| Plaintiff: | Groves -- lessor | Appellant: | |
| Defendant: | John Wunder -- lessee | Respondent: | |
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| Facts of the case: | |
| In August,
1927, S. J. Groves & Sons Company, a corporation (hereinafter mentioned simply as
Groves), owned a tract of 24 acres of Minneapolis suburban real estate. It was served or
easily could be reached by railroad trackage. It is zoned as heavy industrial property.
But for lack of development of the neighborhood its principal value thus far may have been
in the deposit of sand and gravel which it carried. The Groves company had a plant on the
premises for excavating and screening the gravel. Near by defendant owned and was
operating a similar plant. In August, 1927, Groves and defendant made the involved contract. For the most part it was a lease from Groves, as lessor, to defendant, as lessee; its term seven years. Defendant agreed to remove the sand and gravel and to leave the property "at a uniform grade, substantially the same as the grade now existing at the roadway . . . on said premises, and that in stripping the overburden . . . it will use said overburden for the purpose of maintaining and establishing said grade." Under the contract defendant got the Groves screening plant. The transfer thereof and the right to remove the sand and gravel made the consideration moving from Groves to defendant, except that defendant incidentally got rid of Groves as a competitor. On defendant's part it paid Groves $105,000. So that from the outset, on Groves' part the contract was executed except for defendant's right to continue using the property for the stated term. (Defendant had a right to renewal which it did not exercise.) Defendant breached the contract deliberately. It removed from the premises only "the richest and best of the gravel" and wholly failed, according to the findings, "to perform and comply with the terms, conditions, and provisions of said lease . . . with respect to the condition in which the surface of the demised premises was required to be left." Defendant surrendered the premises, not substantially at the grade required by the contract "nor at any uniform grade." Instead, the ground was "broken, rugged, and uneven." Plaintiff sues as assignee and successor in right of Groves. As the contract was construed below, the finding is that to complete its performance 288,495 cubic yards of overburden would need to be excavated, taken from the premises, and deposited elsewhere. The reasonable cost of doing that was found to be upwards of $60,000. But, if defendant had left the premises at the uniform grade required by the lease, the reasonable value of the property on the determinative date would have been only $12,160. The judgment was for that sum, including interest, thereby nullifying plaintiff's claim that cost of completing the contract rather than difference in value of the land was the measure of damages. The gauge of damage adopted by the decision was the difference between the market value of plaintiff's land in the condition it was when the contract was made and what it would have been if defendant had performed. |
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| Remedy sought: | |
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| Court opinion (including key issues and arguments): | |
| The one
question for us arises upon plaintiff's assertion that he was entitled, not to that
difference in value, but to the reasonable cost to him of doing the work called for by the
contract which defendant left undone. 1. Defendant's breach of contract was wilful. There was nothing of good faith about it. Hence, that the decision below handsomely rewards bad faith and deliberate breach of contract is obvious. That is not allowable. Jacob & Youngs, Inc. v. Kent, . . . is typical. It was a case of substantial performance of a building contract. (This case is distinctly the opposite.) Mr. Justice Cardozo, in the course of his opinion, stressed the distinguishing features. "Nowhere," he said, "will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract." Again, "the willful transgressor must accept the penalty of his transgression." 2. In reckoning damages for breach of a building or construction contract, the law aims to give the disappointed promisee, so far as money will do it, what he was promised. Never before, so far as our decisions show, has it even been suggested that lack of value in the land furnished to the contractor who had bound himself to improve it any escape from the ordinary consequences of a breach of the contract. Even in case of substantial performance in good faith, the resulting defects being remediable, it is error to instruct that the measure of damage is "the difference in value between the house as it was and as it would have been if constructed according to contract." The "correct doctrine" is that the cost of remedying the defect is the "proper" measure of damages. The owner's right to improve his property is not trammeled by its small value. It is his right to erect thereon structures which will reduce its value. If that be the result, it can be of no aid to any contractor who declines performance. As said long ago in Chamberlain v. Parker, 45 N.Y. 569, 572: "A man may do what he will with his own, . . . and if he chooses to erect a monument to his caprice or folly on his premises, and employs and pays another to do it, it does not lie with a defendant who has been so employed and paid for building it, to say that his own performance would not be beneficial to the plaintiff." It is suggested that because of little or no value in his land the owner may be unconscionably enriched by such a reckoning. The answer is that there can be no unconscionable enrichment, no advantage upon which the law will frown, when the result is but to give one party to a contract only what the other has promised; particularly where, as here, the delinquent has had full payment for the promised performance. DISSENT: The essential facts, not questioned, are that "The fair and reasonable value as of the end of the term of said lease, May 1, 1934, of performing the said work necessary to put the premises in the condition in which they were required by the terms of said lease to be left, is the sum of $60,893.28," and that if defendant "had left said premises at a uniform grade as required by said lease, the fair and reasonable value of said premises on May 1, 1934, would have been the sum of $12,160." In that sum, plus interest from May 1, 1934, plaintiff was awarded judgment, $15,053.58. His sole contention before the trial court and here is that upon these findings the court, as a matter of law, should have allowed him the cost of performance, $60,893.28, plus interest since date of the breach, May 1, 1934, amounting to more than $76,000. Since there is no issue of fact, we should limit our inquiry to the single legal problem presented: What amount in money will adequately compensate plaintiff for his loss caused by defendant's failure to render performance? A contract is not a law, nor does it make law. It is the agreement plus the law that makes the ordinary contract an enforceable obligation." . . . Another principle, of universal application, is that a party is entitled to have that for which he contracted, or its equivalent. What that equivalent is depends upon the circumstances of each case.... plaintiff "is entitled to be placed, in so far as this can be done by money, in the same position he would have occupied if the contract had been performed." But "his recovery is limited to the loss he has actually suffered by reason of the breach; he is not entitled to be placed in a better position than he would have been in if the contract had not been broken." . . . The measure of damages "is not affected by the financial condition of the one entitled to the damages"; nor may there be included in the assessment of damages "the motive of the defendant in breaking" his contract, compensatory damages alone being involved. In such a case the measure is "the same whatever the cause of the breach, regardless of whether it was due to mistake, accident, or inability to perform or was wilful and malicious." . . . Liability in damages has for its basis the value of the promised performance to the promisee, not what it would cost the promisor in completing performance. . . . We have here then a situation where, concededly, if the contract had been performed, plaintiff would have had property worth, in round numbers, no more than $12,000. If he is to be awarded damages in an amount exceeding $60,000 he will be receiving at least 500 per cent more than his property, properly leveled to grade by actual performance, was intrinsically worth when the breach occurred. To so conclude is to give him something far beyond what the parties had in mind or contracted for. The theory upon which plaintiff relies for application of the cost of performance rule must have for its basis cases where the property or the improvement to be made is unique or personal instead of being of the kind ordinarily governed by market values. His action is one at law for damages, not for specific performance. As there was no affirmative showing of any peculiar fitness of this property to a unique or personal use, the rule to be applied is, I think, the one applied by the court. . . Obviously, the limit of his recovery could be no more than the then market value of his property. In that sum he has been paid with interest and costs; and he still has the fee title to the premises, something he would not possess if there had been condemnation. In what manner has plaintiff been hurt beyond the damages awarded? The trouble with the prevailing opinion is that here plaintiff's loss is not made the basis for the amount of his recovery but rather what it would cost the defendant. No case has been decided upon that basis until now. . . |
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| Disposition of case: | |
| defendants
here are liable to plaintiff for the reasonable cost of doing what defendants promised to
do and have wilfully declined to do. . .. The judgment must be reversed with a new trial
to follow. So ordered. |
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ECONOMIC ANALYSIS OF THE CASE |
| Efficiency/incentive issues discussed in the court opinion: |
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| Other efficiency/incentive issues relevant to the case: |
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| Assessment of the economic consequences of the court decision: |
Case 20: Effective
Specific Performance Remedy Posner: "What if the reliance loss exceeds the expectation loss? In Groves v. John Wunder Co., 2 the defendant, as part of a larger deal, had agreed to level some land owned by the plaintiff, and willfully failed to carry out his agreement." 205 Minn. 163, 286 N.W. 235 (1939).... The court awarded the plaintiff $60,000, reasoning that he was entitled to get the performance he had contracted for and that it was no business of the defendant whether, or how much, his performance would have made the plaintiff's property more valuable. The result is questionable....The measure of damages was incorrect from an economic standpoint be-cause, had it been known to the defendant from the start, it would have made him indifferent between breaking his promise to level the land and performing it, whereas efficiency dictated breach; the $60,000 worth of labor and materials that would have been consumed in leveling the land would have bought less than a $12,000 increase in value." (P121) |