2011 WI App 8
court of appeals of
published opinion
Case No.: |
2009AP2891 |
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Complete Title of Case: |
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Opinion Filed: |
December 22, 2010 |
Submitted on Briefs: |
September 16, 2010 |
Oral Argument: |
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JUDGES: |
Brown, C.J., Anderson and Reilly, JJ. |
Concurred: |
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Dissented: |
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Appellant |
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ATTORNEYS: |
On behalf of the defendants-third-party-plaintiffs-appellants,
the cause was submitted on the briefs of Timothy S. Knurr of Schoone, Leuck, Kelley, |
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Respondent |
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ATTORNEYS: |
On behalf of the plaintiff-respondent, the cause was
submitted on the brief of George W. Love of Love Law Offices, On behalf of the third-party-defendant-respondent, the
cause was submitted on the brief of Geoffrey
Dowse of |
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2011 WI App 8
COURT OF APPEALS DECISION DATED AND FILED December 22, 2010 A.
John Voelker Acting Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF |
IN COURT OF APPEALS |
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Champion Companies of Wisconsin, Inc., A Corporation,
Plaintiff-Respondent, v. Stafford Development, LLC, A Company and Ricky Zanow,
Defendants-Third-Party
Plaintiffs-Appellants, v. Glen-Gery Corporation, Third-Party
Defendant-Respondent. |
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APPEAL
from a judgment of the circuit court for
Before Brown, C.J., Anderson and Reilly, JJ.
¶1 REILLY, J. Ricky Zanow built a home with bricks purchased from Glen-Gery Corporation. It became evident after completion of the home that the bricks had a defect. Zanow sued Glen-Gery seeking $344,000 in damages to remove and replace the bricks on his home. Glen-Gery responded that the proper remedy was to repair the bricks, and that it would cost less than $7500 to remedy the defect by re-staining the bricks. Neither party offered credible evidence as to the diminished value of the Zanow home. Following a bench trial, the circuit court found that the defect did not affect the durability or structural integrity of the home and that the replacement of the bricks would constitute unreasonable economic waste. The court awarded $11,000 for the cost of re-staining the bricks.
¶2 Zanow appeals arguing that the circuit court erred in its application of the economic waste rule. Zanow argues that because Glen-Gery did not offer proof as to the diminished value of the residence, the circuit court should have awarded $344,000 in damages for the cost of replacing the bricks. As we hold that a fact finder may—but is not required to—consider evidence of the diminished value of property, we affirm the circuit court’s judgment.
BACKGROUND
¶3 Champion Companies of Wisconsin, Inc., sold the bricks that
were installed in a home built by Zanow’s company, Stafford Development,
LLC. While the home was originally built
as a spec home by
¶4 The manufacturer of the bricks, Glen-Gery, attempted to
resolve the problem by hiring a company to stain the pops. Zanow was not satisfied with the staining and
refused to pay Champion the final invoice of $3,703.81.
¶5 Champion sued
¶6 Zanow testified that the bricks were “worthless,” and that the only acceptable solution was to take the bricks down and replace them at a cost of $344,000. Glen-Gery argued that it should only have to pay the cost of repairing the defective bricks, not replacing them. An employee of the company that originally stained the bricks testified that it would cost less than $7500 to re-stain Zanow’s house.
¶7 Neither party offered credible evidence as to the diminished
value of the residence.[1] Evidence of a property’s diminished value is
one way to measure damages in a lawsuit over injury to property. See Laska v. Steinpreis, 69
¶8 The circuit court found that Champion breached the implied
warranty of merchantability when it sold the defective bricks to Zanow. The court, as noted above, refused to award
Zanow $344,000 in replacement costs as it found that the damage to the bricks
was “cosmetic” and not structural, and to take down and replace every brick in
the house would “constitute unreasonable economic waste.” The court accepted the evidence presented by
Glen-Gery and entered judgment against Glen-Gery for $11,000.[2]
¶9 On appeal,
STANDARD OF REVIEW
¶10 An award of damages for a breach of contract should compensate
the injured party for the losses that stem from the breach. Thorp Sales Corp. v. Gyuro Grading Co.,
111
DISCUSSION
¶11 The
general principle regarding the measure of damages for defects and omissions in
the performance of a building contract is that a party is entitled to have what
he contracts for or its equivalent. Jacob
v.
¶12 There are multiple ways to calculate damages in a lawsuit over
injury to property. One is the cost to
repair the property (i.e., replace the bricks).
A second is the cost to restore the property (i.e., re-stain the
bricks). A third way to measure damages
is the diminished value calculation—“the difference between the value the
building would have had if properly constructed and the value that the building
does have as constructed.” W. G.
Slugg Seed & Fertilizer, Inc. v. Paulsen Lumber, Inc., 62
¶13 The economic waste rule provides that when faced with multiple
measures of damages, a fact finder may determine whether a proposed repair or
restoration would result in unreasonable destruction of the property and thus
constitute economic waste. See Jacob, 203
¶14 The rationale for the economic waste rule is that if the cost
to repair or restore a defect is so high as to exceed the diminished value of
the property based on the defect, a party is unlikely to use the extra money to
fix the defect. Instead, the party will
keep the money and receive a windfall. See
Nischke, 187
¶15 The application of the economic waste rule is not limited solely to a comparison of the diminished value measure of damages versus a cost to repair measure of damages. A fact finder presented with estimates for both a cost of repair and a cost to restore may determine whether the repair or restore option would result in unreasonable destruction to the property.
¶16 In
Jacob, the economic waste rule was used to
support cost of repair as opposed to cost of replacement as the more reasonable
measurement of damages. Like Zanow, the Jacobs
contracted for the construction of a home with a brick veneer exterior. Jacob, 203
¶17 The
jury awarded the Jacobs $110,500 for the cost of repair, and $135,000 for
the diminution in the property value.
¶18 The
circuit court here, like the court in Jacob, used economic reasoning to
conclude that because repairing the bricks by re-staining them and replacing
the bricks would lead to substantially similar results at different costs,
damages should be awarded for the less expensive option. The circuit court was not wrong to say that
awarding $344,000 in damages (replacing the bricks) to correct something that
could be corrected for $11,000 (re-staining the bricks) would constitute
unreasonable economic waste.
CONCLUSION
¶19 The circuit court, in finding that the defect in the bricks was
cosmetic, properly concluded that re-staining the bricks placed Zanow in as
good a position as if the contract had been fully performed. As the economic waste rule does not require
an estimate of the diminished value of the property, we affirm the circuit
court’s judgment.
By the Court.—Judgment affirmed.
[1] The only evidence offered as to the loss in property value was the testimony of a realtor called by Glen-Gery who stated that the loss in value was “minimal, if anything.” The circuit court rejected this testimony as it found that it was “not based on sufficient grounds to be given any evidentiary weight.”
[2] $7500 to re-stain the home and $3500 for future re-staining costs.
[3] All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.