Bellizzi v. Huntley Estates, Inc.
3 N.Y.2d 112, 164 N.Y.S.2d 395, 143 N.E.2d 802 (1957)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a contractor's breach of a construction contract results in a substantial defect that renders the property partially unusable and unsafe, the proper measure of damages is the market cost to correct the defective performance, not the diminution in the property's value.
Facts:
- A real estate developer (defendant) contracted to sell a lot and build a house for a buyer (plaintiff) based on a model known as 'The 1951 Kent'.
- The model house featured an attached garage with an access driveway substantially at street level.
- During construction, the defendant encountered rock close to the surface where the house was to be sited.
- Instead of excavating the rock, the defendant built the house on top of it, creating a driveway with a 22% grade over a distance of 43 feet.
- This grade far exceeded the permissive maximum of 12% and rendered the driveway unsafe and unusable.
- When the plaintiff complained during construction, the defendant's president assured him the final grade would not exceed 10%.
Procedural Posture:
- The plaintiff sued the defendant developer in the County Court (trial court) for breach of the construction contract.
- The trial court found for the plaintiff and awarded damages based on the 'cost to remedy' the defective driveway.
- The defendant (as appellant) appealed to the Appellate Division (an intermediate appellate court).
- The Appellate Division reversed the trial court's judgment, holding that the 'difference in value' rule was the proper measure of damages, and ordered a new trial.
- The plaintiff (as appellant) appealed the Appellate Division's decision to the Court of Appeals (the highest court in New York).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
In a construction contract, is the measure of damages for a substantial defect that renders part of the property unsafe and unusable the cost to correct the defect, or is it the lesser of the cost of repairs and the diminution in the property's value?
Opinions:
Majority - Dye, J.
Yes, the measure of damages for a substantial defect that renders part of the property unsafe and unusable is the cost to correct the defect. The court held that the 'difference in value' rule, as articulated in Jacob & Youngs v. Kent, is an exception applied only to avoid economic waste when a defect is trivial and the cost to repair is grossly disproportionate to the loss in value. In this case, the defect is substantial, rendering the driveway unsafe and unusable, which is a significant variance from the contract. The general rule for such a breach is the 'market price of completing or correcting the performance.' Applying this rule gives the plaintiff exactly what he bargained for and places the financial burden of correction on the defendant, who chose to deviate from the proper construction method to save costs.
Analysis:
This decision clarifies the distinction between the two primary measures of damages for defective performance in construction contracts. It firmly establishes the 'cost to complete or correct' as the default and proper measure for substantial, functional defects that impair the property's intended use. The case confines the 'diminution in value' rule from Jacob & Youngs v. Kent to its specific facts—insubstantial breaches where repair would constitute economic waste. This reinforces the principle that contract law aims to give the non-breaching party the benefit of their bargain, which in construction cases often means a functional, usable structure, not just its monetary equivalent.
