Real Property Damages Are Generally Repair Costs

In cases involving damages to real property, the general “measure of damages will be the cost of repair[.]” If a defendant wants to argue that diminution in value is a more appropriate measure of damages, he or she has to burden of proving the difference in value from before and after the damage occurred.

In Durkin v. MTown Construction, LLC, No. W2017-01269-COA-R3-CV (Tenn. Ct. App. March 13, 2018), plaintiff had hired defendant to put a new roof on his home. While the roof was exposed, a thunderstorm occurred, and the tarp used by defendant to cover the roof had holes and allowed a significant amount of water to leak into plaintiff’s home. After the damage occurred, defendant initially assured plaintiff that the damage would be promptly fixed, but the repairs were not made. Plaintiff filed this action, and the trial court found defendant liable for both negligence and breach of contract.

On appeal, the only issue was whether the trial court correctly calculated damages. The Court started its analysis with a synopsis on Tennessee case law regarding damages to real property:

The proper measure of damages for injury to real property is the lesser of either (1) the cost of repairing the injury, or (2) the difference in value of the premises immediately prior to and immediately after the injury. Generally, however, the measure of damages will be the cost of repair unless the repairs are not feasible or the cost of repair is disproportionate to the diminution in value. …Notably, however, in a case involving real property damage, the plaintiff does not have the burden of offering alternative measures of damages, and the burden is on the defendant if he or she seeks to argue that the measure of damages advanced by the plaintiff is unreasonable. …For an award of damages other than the cost of repair, it is incumbent on the defendant to offer proof showing diminution in value.

(internal citations and quotations omitted).

At trial, defendant asked plaintiff two limited questions about the value of his home, one being what the fair market value was on the day before the rainstorm, and one being what it was on the night after the rainstorm. Plaintiff answered $144,000 each time, though in response to the second question he stated “I believe it was still roughly $144,000 as of the City.” Defendant argued that, based on these responses, plaintiff was entitled to zero damages, but the Court of Appeals disagreed. The Court noted that the questions asked were very limited, and that much of the damage occurred in the days and weeks following the storm when the water damage was not repaired. The Court found that plaintiff appeared to be basing his valuation only on the tax assessment, and that this was not a sufficient showing by defendant to find that plaintiff had no damages.

The trial court, likewise, had rejected the argument that plaintiff suffered no damages, but instead of awarding plaintiff damages based on the costs of repairs he presented, it decided to attempt to calculate diminution in value itself. The trial judge used $144,000 as the starting value, then asked plaintiff’s attorney to find out what the value of just the land was, which he reported as $25,500. The judge then took judicial notice that no one would buy the house in its present condition, and thus determined that the property was currently only worth the land value. The judge subtracted the land value from the original value, coming up with a diminution in value of $118,500, which was awarded to plaintiff.

On appeal, the Court deemed this method inappropriate. The Court noted that “the defendant must produce sufficient proof of value to provide a basis for comparison” between repair cost and diminution in value, and that if the defendant fails to do so, “the trial court must base its measure of damages on the costs of repairs.” (internal citations omitted). The Court held that “[f]inding no reliable relevant evidence of the value of the property after the damage, the trial court should have found that [defendant] failed to carry its burden of proving an alternative measure of damages and calculated the measure of damages based on the cost of repair rather than seeking out additional valuation evidence.” (internal citation omitted).

Because the trial court had not made findings of fact regarding the reasonableness of the repair costs presented, the case was remanded.

This case is a good read for anyone litigating a real property damage case. It contains an extensive analysis of the damages available, as well as the burden for proving such damages.