Landis v. William Fannin Builders, Inc.
951 NE 2d 1078 (2011)
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Rule of Law:
In a breach of construction contract case, the measure of damages is what is reasonable to make the injured party whole. This may be the cost to repair an aesthetic defect even if it exceeds the diminution in market value, particularly when aesthetic value was a key purpose of the contract.
Facts:
- In May 2004, Steve Landis and Nancy Weidman contracted with William Fannin Builders, Inc. to construct a custom home with T1-11 exterior siding and a semitransparent stain to achieve a specific 'natural, rustic look.'
- Fannin Builders' subcontractor, 84 Lumber, procured the siding in two separate batches.
- A staining company, PACE, stained the two batches of siding separately, resulting in one batch having a noticeably darker hue than the other.
- 84 Lumber then installed the siding by mixing the two differently shaded batches randomly across the house and garage, creating a 'striped or patchwork appearance.'
- A second coat of stain applied after the homeowners moved in failed to correct the non-uniform appearance.
- An agreement was made to provide new siding, but the replacement siding delivered to the property was yellow, not the specified green color.
- Fannin Builders' subcontractor attempted another fix on the garage siding, which 'looked horrible,' after which Fannin Builders had the replacement siding removed from the property without the homeowners' consent.
- For a year and a half, the parties discussed solutions but failed to reach an agreement to fix the patchwork siding.
Procedural Posture:
- Steve Landis and Nancy Weidman sued William Fannin Builders, Inc. in the Franklin County Court of Common Pleas (a trial court) for breach of contract and other claims.
- Fannin Builders filed a third-party complaint against its supplier, 84 Lumber Company.
- Fannin Builders also filed a counterclaim against Landis and Weidman for money it alleged was still owed.
- Following a bench trial, the trial court found in favor of Landis and Weidman on their breach of contract claim and awarded them $66,906.24 in damages.
- The trial court offset this award by $3,908.98 that the homeowners owed Fannin Builders, resulting in a net judgment of $62,997.26.
- The trial court also ruled against Fannin Builders on its claims against 84 Lumber.
- Fannin Builders (as appellant) appealed the trial court's judgment to this court, the Ohio Court of Appeals.
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Issue:
Is the proper measure of damages for a breach of a construction contract that results in a significant aesthetic defect the cost to repair the defect, even if that cost substantially exceeds the diminution in the property's market value?
Opinions:
Majority - Klatt, Judge.
Yes. The proper measure of damages for an aesthetic defect in a construction contract can be the cost of repair, even if it exceeds the property's loss in market value, so long as that award is reasonable to make the injured party whole. The court rejected a strict application of the 'economic waste' rule, which limits damages to the diminution in value. Instead, it applied a reasonableness test, extending the logic from the tort case Martin v. Design Constr. Servs., Inc. The fundamental goal of damages is to compensate the injured party for their actual loss. Here, the homeowners contracted for a custom home with a specific, bargained-for aesthetic. Awarding only the diminution in market value ($8,500) would not give them the 'natural, rustic look' they paid for and would fail to make them whole. Therefore, awarding the cost to replace the siding ($66,906.24) was reasonable to allow them to achieve the purpose of their contract.
Analysis:
This decision significantly clarifies the measure of damages for aesthetic defects in Ohio construction contract law. It moves away from the rigid 'economic waste' doctrine, which can leave homeowners with a finished product they dislike and insufficient funds to fix it. By adopting a flexible 'reasonableness' test, the court empowers fact-finders to consider the homeowners' subjective intent and the specific aesthetic purposes of a contract, especially in the context of custom-built homes. This precedent will likely make it easier for homeowners to recover the full cost to repair defects that undermine the specific look they bargained for, rather than being limited to the smaller impact on the home's objective market value.
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