Case brief: template
| Case name: | Peevyhouse v. Garland Coal and Mining Co. |
| Court: | SUPREME COURT OF OKLAHOMA |
| Citation; Date: | 382 P 2d 109 (1962) |
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PROCEDURAL HISTORY |
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| Trial court: | Appeal court (for appeal cases only): | ||
| Plaintiff: | Peevyhouse | Appellant: | |
| Defendant: | Garland Coal and Mining Co. | Respondent: | |
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| Facts of the case: | |
| plaintiffs
owned a farm containing coal deposits, and in November, 1954, leased the premises to
defendant for a period of five years for coal mining purposes. A 'strip-mining' operation
was contemplated in which the coal would be taken from pits on the surface of the ground,
instead of from underground mine shafts. In addition to the usual covenants found in a
coal mining lease, defendant specifically agreed to perform certain restorative and
remedial work at the end of the lease period. It is unnecessary to set out the details of
the work to be done, other than to say that it would involve the moving of many thousands
of cubic yards of dirt, at a cost estimated by expert witnesses at about $29,000.00.
However, plaintiffs sued for only $25,000.00. During the trial, it was stipulated that all covenants and agreements in the lease contract had been fully carried out by both parties, except the remedial work mentioned above; defendant conceded that this work had not been done. |
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| Remedy sought: | |
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| Court opinion (including key issues and arguments): | |
| Plaintiffs
introduced expert testimony as to the amount and nature of the work to be done, and its
estimated cost. Over plaintiffs' objections, defendant thereafter introduced expert
testimony as to the 'diminution in value' of plaintiffs' farm resulting from the failure
of defendant to render performance as agreed in the contract -- that is, the difference
between the present value of the farm, and what its value would have been if defendant had
done what it agreed to do. the court instructed the jury that it might consider the cost of performance of the work defendant agreed to do, 'together with all of the evidence offered on behalf of either party'. It thus appears that the jury was at liberty to consider the 'diminution in value' of plaintiffs' farm as well as the cost of 'repair work' in determining the amount of damages. It returned a verdict for plaintiffs for $ 5000.00 -- only a fraction of the 'cost of performance', but more than the total value of the farm even after the remedial work is done. Plaintiffs rely on Groves v. John Wunder Co., . . . . In that case, the Minnesota court, in a substantially similar situation, adopted the 'cost of performance' rule as-opposed to the 'value' rule. The result was to authorize a jury to give plaintiff damages in the amount of $ 60,000, where the real estate concerned would have been worth only $ 12,160, even if the work contracted for had been done. It may be observed that Groves v. John Wunder Co., supra, is the only case which has come to our attention in which the cost of performance rule has been followed under circumstances where the cost of performance greatly exceeded the diminution in value resulting from the breach of contract. Incidentally, it appears that this case was decided by a plurality rather than a majority of the members of the court. It is highly unlikely that the ordinary property owner would agree to pay $ 29,000 (or its equivalent) for the construction of 'improvements' upon his property that would increase its value only about ($ 300) three hundred dollars. The result is that we are called upon to apply principles of law theoretically based upon reason and reality to a situation which is basically unreasonable and unrealistic. insofar as they exceed the actual damages suffered, the stipulated damages amount to a penalty or forfeiture which the law does not favor. where the contract provision breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance. We believe the above holding is in conformity with the intention of the Legislature as expressed in the statutes mentioned, and in harmony with the better-reasoned cases from the other jurisdictions where analogous fact situations have been considered. It should be noted that the rule as stated does not interfere with the property owner's right to 'do what he will with his own' . . ., or his right, if he chooses, to contract for 'improvements' which will actually have the effect of reducing his property's value. Where such result is in fact contemplated by the parties, and is a main or principal purpose of those contracting, it would seem that the measure of damages for breach would ordinarily be the cost of performance. DISSENT: Defendant admitted in the trial of the action, that plaintiffs insisted that the above provisions be included in the contract and that they would not agree to the coal mining lease unless the above provisions were included. The cost for performing the contract in question could have been reasonably approximated when the contract was negotiated and executed and there are no conditions now existing which could not have been reasonably anticipated by the parties. Therefore, defendant had knowledge, when it prevailed upon the plaintiffs to execute the lease, that the cost of performance might be disproportionate to the value or benefits received by plaintiff for the performance. Therefore, if the value of the performance of a contract should be considered in determining the measure of damages for breach of a contract, the value of the benefits received under the contract by a party who breaches a contract should also be considered. However, in my judgment, to give consideration to either in the instant action, completely rescinds and holds for naught the solemnity of the contract before us and makes an entirely new contract for the parties. The contract in question is not immoral, is not tainted with fraud, and was not entered into through mistake or accident and is not contrary to public policy. It is clear and unambiguous and the parties understood the terms thereof, and the approximate cost of fulfilling the obligations could have been approximately ascertained. There are no conditions existing now which could not have been reasonably anticipated when the contract was negotiated and executed. The defendant could have performed the contract if it desired. It has accepted and reaped the benefits of its contract and now urges that plaintiffs' benefits under the contract be denied. If plaintiffs' benefits are denied, such benefits would inure to the direct benefit of the defendant. |
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| Disposition of case: | |
| In the
trial court, plaintiffs Willie and Lucille Peevyhouse sued the defendant, Garland Coal and
Mining Company, for damages for breach of contract. Judgment was for plaintiffs in an
amount considerably less than was sued for. Plaintiffs appeal and defendant cross-appeals.
Under the most liberal view of the evidence herein, the diminution in value resulting to the premises because of non-performance of the remedial work was $300.00. After a careful search of the record, we have found no evidence of a higher figure, and plaintiffs do not argue in their briefs that a greater diminution in value was sustained. It thus appears that the judgment was clearly excessive, and that the amount for which judgment should have been rendered is definitely and satisfactorily shown by the record. We are asked by each party to modify the judgment in accordance with the respective theories advanced. . . We are of the opinion that the judgment of the trial court for plaintiffs should be, and it is hereby, modified and reduced to the sum of $300.00, and as so modified it is affirmed. |
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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 21: Effective
Specific Performance Denied |