Wilenchik and Bartness represents a home builder that was sued for alleged construction defects. The plaintiff asked the homebuilder to pay for the costs to repair the home, which at this point is substantially more than the home is worth. The firm filed a motion for summary judgment arguing that under the “doctrine of economic waste,” where the cost of repair would be unreasonable and excessive–for example, where it exceeds the value of the home itself–the proper measure of damages is instead the “diminution in value” of the home, if any, caused by the alleged defect. The Court agreed and ruled in the homebuilder’s favor.
The home builder was sued by a couple who bought the home from the original owners. The Plaintiffs claimed the home is defective and sought damages in the amount of what they alleged to be the cost to repair the home, which is substantially more than the home is worth. The firm filed a motion for summary judgment on this issue, arguing that under one of the variants of the “economic waste” doctrine, any damages to the plaintiffs must be measured not by the “cost of repair” but by the “diminution in value” of the home caused by the defect, if any.
The Court recently granted this motion, stating: “The Court finds that the appropriate method for calculating damages in this case is diminution in value. An award based on cost of repair constitutes economic waste as a matter of law where the costs of repair are imprudent and unreasonable, exceeding the fair market value of the home after repairs are made….The burden of proof rests with the Defendant to show the measure of damages in this case should be diminution in value. They have done so.” The Court also found, as we had urged in our motion, that the collateral source rule is inapplicable in a contract case, thus permitting defendants to introduce evidence at trial of a substantial payment plaintiffs had received from a third-party relative to the alleged defect.
Since no trial date has been set, the Court ruled that each side may supplement their discovery with a diminution in value expert. The case will eventually proceed to trial with plaintiffs having the burden to show damages under the “diminution in value” measure, and plaintiffs will not be able to recover unless that amount exceeds the amount they have already received from the third-party.