Peevyhouse v. Garland Coal & Mining Co. – Case Brief
Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962).
Facts: Garland Coal (D) contracted for the right to strip mine coal on Peevyhouse’s (P) property for five years. The contract provided that Garland would perform restoration work on the property at the end of the lease period. Peevyhouse sued for $25,000 when Garland refused to perform the restoration. The judge instructed the jury that it could consider the diminution of value of the land as well as the cost of restoration in awarding damages.
The jury awarded Peevyhouse $5,000, which was much less than the cost of restoring the property, but greater than the reduction in value of the land if not restored. Peevyhouse appealed, arguing that it should be entitled to the cost of obtaining performance of the restoration. Garland Coal argued that damages should be limited to the difference in market value between the land as it was at the time, and the land as it would be if the restoration were performed.
Issue: If breach pertains to a matter only incidental to the main purpose of the contract, and performance would be disproportionately costly, what is the proper measure of damages?
Holding and Rule (Jackson): If breach pertains to a matter only incidental to the main purpose of the contract, and performance would be disproportionately costly, the proper measure of damages is the diminution in value measure.
Garland Coal argued that the work would add only a few hundred dollars to the value of Peevyhouse’s land and that damages should be limited to that amount because that was all Peevyhouse had lost. The court noted that the majority followed the diminution in value rule when the cost of performance greatly exceeded the diminution in value.
The court looked to the purpose of the contract and concluded that it was for the mining of coal and the restoration was incidental. Even in building and construction contracts there is consideration of unreasonable economic waste when determining damages. The Restatement and other authorities consider waste and relative economic benefit when assessing damages. The measure of damages in a contract involving land is: the cost of performance limited to the total difference in the market value of the land before and after the work was performed, if that contract provision is merely incidental to the main purpose of the contract, and the cost of full performance is grossly disproportionate to the increase in value.
Where such a result is in fact contemplated by the parties and is a main or principal purpose of the contract, however, the measure of the breach would be the cost of performance.
Disposition: Award reduced to $300.
Dissent (Irwin): Garland Coal has received all of the benefits of the contract. The element of remedial work was an essential part of this agreement and it was a condition to the right for Garland to use Peevyhouse’s land. If the value of the performance should be considered in determining damages, the value of the benefits received should also be considered. The law cannot make a better contract for the parties than they have made for themselves and should not alter it for the benefit of one party and to the detriment of the others. The judicial function of a court of law is to enforce a contract as it is written.
American Standard, Inc. v. Schectman