Peevyhouse v. Garland Coal – (remedial goals of contract damages)
- Plaintiffs (Peevyhouse) owned a farm.
- Plaintiff’s (Peevyhouse) farm contained coal deposits.
- In November 1954 Plaintiffs (Pevyhouse) leased the farm to Defendant (Garland) for 5-years for coal mining.
- Defendants (Garland) were planning on a “strip-mining” operation.
- Strip-Mining entails the removal of coal from large holes dug in the surface of the land rather than underground mine shafts.
- Defendant (Garland) agreed to perform restorative and remedial work at the end of the lease in addition to the usual covenants found in a coal mining lease.
- The restorative and remedial work involved moving many thousands of cubic yards of dirt.
- The cost of the work was estimated at around $29,000.00 by experts.
- Planintiffs (Peevyhouse) only sued for $25,000.00.
- Plaintiffs (Peevyhouse) sued Defendant (Garland) for damages for breach of contract.
- During trial it was stipulated that all covenants and agreements of the lease had been executed and discharged other than the remedial and restorative work. Defendant (Garland) conceded to this point.
- Plaintiffs (Peevyhouse) introduced expert testimony as to the cost of the remedial and restorative work not completed by the Defendants (Garland).
- Defendants (Garland) then introduced expert testimony as to the “diminution in value” of the Plaintiff’s (Peevyhouse) farm caused by the Defendant’s (Garland) failure to perform remedial and restorative work. ie. 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.
- Court instructed the Jury to determine the amount of damages to be awarded to the Plaintiff’s (Peevyhouse).
- Court instructed the Jury that it could consider the cost of performance of the work the Defendant (Garland) had agreed to do, “together with all of the evidence offered on behalf of either party”. It appeard that the Jury was allowed to consider the “diminution in value” of the farm along with the “cost of repair” to determine damages.
- Judgment was for Plaintiffs (Peevyhouse) in amount considerably less than what was sued for. $5000.00 was awarded in damages, which was more than the total value of the farm even if the remedial work had been done.
- Plaintiffs (Peevyhouse) appealed.
- Defendant (Garland) cross-appealed.
Initial Appeals Court:
- Both Parties present several arguments.
- All arguments based on question of whether the Trial Court gave the Jury proper instructions on the measure of damages.
- “On appeal, the issue is sharply drawn. Plaintiffs contend that the true measure of damages in this case is what it will cost plaintiffs to obtain performance of the work that was not done because of defendant’s default. Defendant argues that the measure of damages is the cost of performance “limited, however, to the total difference in the market value before and after the work was performed” (direct quote from case).
- Case Cited: Ardizonne v. Archer, 72 Okl. 70, 178 P. 263.
- court held that damages for having not drilled an oil well was reasonable cost of drilling the well.
- The situation with drilling an oil well is that it adds value to the property whether or not it yields oil in the form of geological information. It adds substantial value to the property if it DOES yield oil.
- The situation with a dug out coal strip mine is that it does not add much value at all in any way to the property to fill back in the hole. It DOES HOWEVER COST $29,000.00
- The Defendants (Garland) in the case at hand argued that the damages should be limited to the amount of value that remedial and restorative act of filling the strip mine back in would create. The amount of value the work would produce would have been a FEW HUNDRED DOLLARS AT MOST.
- Case Cited: Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235, 123 A.L.R. 502.
- Plaintiffs base their argument on the Court’s application of the “Cost of Performance” Rule from this Case. It was a substantially similar case where the work would have cost $60,000.00 and the property would have only been worth $12,160 with the work complete.
- Groves v. John Wunder Co. is the only case found at the time where the cost of performance greatly outweighed the the diminution in value resulting from the breach of contract and where the cost of performance rule was still applied.
- Groves v. John Wunder Co. was decided by a plurality rather than a majority of the members of the court.
- left off on para. 13. multiple more points left to summarize.
- Defendant relies principally upon Sandy Valley & E.R. Co., v. Hughes, 175 Ky. 320, 194 S.W. 344; Bigham v. Wabash-Pittsburg Terminal Ry. Co., 223 Pa. 106, 72 A. 318; and Sweeney v. Lewis Const. Co., 66 Wash. 490, 119 P. 1108.
- Opinion: (JACKSON, Justice) Judgment of Trial Court for Plaintiffs modified and reduced to the sum of $300. As so modified it is affirmed.
- WELCH, DAVISON, HALLEY, and JOHNSON, JJ., concur
- WILLIAMS, C.J., BLACKBIRD, V.C.J., and IRWIN and BERRY, JJ., Dissent: (IRWIN, Justice) Plaintiffs entitled to Specific Performance and since Defendant’s failed to perform, Cost of Performance. Any other measure of damage makes the express provisions of the contract into nothing as well as taking the benefits of the contract from the Plaintiff while concurrently granting benefits to the Defendant without a resulting obligation. The majority decision of the court therefore is viewed by the Dissenting Judge as “completely rescinding the solemn obligation of the contract for the benefit of the Defendant to the detriment of the Plaintiffs by making an entirely new contract for the parties“. (direct quote from the dissent).
- Supplemental Opinion on Hearing: (Jackson, Justice)
- In a Petition for Rehearing, plaintiffs Peevyhouse have raised certain questions not presented in the original briefs on appeal. (multiple points brought up including the fact that the mine was only a small part of the land).