219 Conn. 151 | Conn. | 1991
The dispositive issue in this appeal is whether a builder’s breach of a construction contract by failure of substantial performance permits the non-breaching owner to collect damages unreduced by the outstanding balance of the contract price that the owner avoids paying by virtue of the breach. We conclude that the failure so to reduce an owner’s damages affords the owner an unconscionable recovery in excess of his actual loss suffered by reason of the breach. Accordingly, we reverse the contrary judgment of the Appellate Court only as to the amount of the judgment.
The facts are as follows. In November, 1980, the builders, Paul L. Gould and Paul L. Gould, Inc. (Gould), contracted to build a house for the owners, P. A. Takis Argentinis and his wife, Ourania Argentinis (Argentinis). Under the terms of the contract, Argentinis agreed to pay Gould a total of $344,000: $294,000 in
On the date of the transfer of title in April, 1981, Argentinis was unable to move into the house because Gould had not completed various items of construction. The parties then executed a supplemental agreement adjusting the original contract price to reflect “certain legal offsets” asserted by Argentinis against the amount of the mortgage and note “by virtue of deficiencies and incompletion of construction leading to delayed occupancy.” Pursuant to the supplemental agreement, the parties reduced the total contract price by $4000 to $340,000. The parties also “annulled” the original note and Argentinis agreed to execute a substitute note and purchase money mortgage in the amount of $43,000, to be held in escrow along with a $3000 cash payment by Argentinis pending Gould's completion of certain specified items of construction. Furthermore, the parties acknowledged that the release to Gould of the $3000 payment and the substitute note and mortgage “shall constitute the full balance of monies due [to Gould] for all work, services and materials previously furnished and to be furnished
In July, 1981, Argentinis moved into the house. The escrowed cash and documents were released to Gould, leaving an unpaid balance of $43,000 under the contract, as represented by the mortgage securing the note. Some of the items of construction specified in the supplemental agreement, however, remained incomplete. Thereafter, Argentinis discovered numerous defects in the structure and substructure of the house. Argentinis demanded that Gould repair the defects. Gould refused to make repairs unless Argentinis agreed to certain terms found unacceptable by Argentinis, who
The actions were consolidated and tried before an attorney trial referee. In the breach of contract action, the referee found that Gould had breached the contract by failing to render substantial performance. The referee awarded Argentinis $73,068.75 in damages measured by the cost of repairing the construction defects.
Thereafter, we granted Gould’s petition for certification to appeal limited to the following questions: (1) “Did the Appellate Court correctly enter judgment
Gould claims that the Appellate Court misapplied Edens v. Kole Construction Co., supra, thereby reaching a result that afforded Argentinis a “double recovery” and imposed an unwarranted penalty upon Gould for his conceded breach of the contract by failure of substantial performance. According to Gould, the damages awarded to Argentinis in the breach of contract action sufficiently compensated him for his injury resulting from the breach. Gould asserts that the additional forgiveness of Argentinis’ mortgage debt in the foreclosure action, notwithstanding Gould’s failure of substantial performance, impermissibly overcompensated Argentinis for that injury. To the extent that Gould claims that the sum of Argentinis’ damages in the breach of contract action should have been reduced by $43,000, the amount of the unpaid balance of the contract price as represented by the mortgage note, we agree.
In rejecting Gould’s contention that the referee should have reduced Argentinis’ damages for breach
It is axiomatic that the sum of damages awarded as compensation in a breach of contract action “should place the injured party in the same position as he would have been in had the contract been performed.” Rametta v. Stella, 214 Conn. 484, 492, 572 A.2d 978 (1990). The injured party, however, “is entitled to retain nothing in excess of that sum which compensates him for the loss of his bargain.” Vines v. Orchard Hills, Inc., 181 Conn. 501, 507, 435 A.2d 1022 (1980). Guarding against excessive compensation, the law of contract damages limits the injured party “to damages based
In accordance with the foregoing principles, the sum of Argentinis’ damages in the breach of contract action
The judgment in the case of Argentinis v. Gould is reversed only as to the amount of the judgment, and the case is remanded to the Appellate Court with direction to remand the case to the trial court with direction to reduce the damages awarded to Argentinis by $43,000, and to award interest to Argentinis on the reduced judgment from the date of the first judgment of the trial court. The judgment in the case of Gould v. Argentinis is affirmed.
In this opinion the other justices concurred.
In the first action, the plaintiff (P. A.) Takis Argentinis named Paul L. Gould and Paul L. Gould, Inc., as defendants. In the second action, the plaintiff Paul L. Gould named P. A. (Takis) Argentinis and Ourania Argentinis as defendants.
Neither party contests the $73,068.85 amount found by the referee to represent Argentinis’ cost of repairing the defects in construction. We therefore accept that amount as “ ‘the reasonable cost of construction and completion in accordance with the contract . . . .’ ” Levesque v. D & M Builders, Inc., 170 Conn. 177, 181, 365 A.2d 1216 (1976).
In Edens v. Kole Construction Co., 188 Conn. 489, 450 A.2d 1161 (1982), the owner filed a complaint alleging that the builder had breached the disputed construction contract by failing to render substantial performance, and seeking damages for the cost of repairing certain construction defects. The builder counterclaimed for foreclosure of a mechanic’s lien securing all or. part of the $25,000 unpaid balance of the $103,000 contract price. Finding that the builder had not substantially performed the contract, the trial court rendered judgment for the owner on the complaint and the counterclaim and awarded the owner $17,152.65 in damages for the cost of repairs. The builder appealed, alleging error in the trial court’s failure to render judgment in its favor on the counterclaim and to award the builder damages in the amount of the difference between the unpaid balance of the contract price and the owner’s cost of repairs. It is unclear from the opinion in Edens whether the builder claimed that, in any event, the owner was not entitled to collect damages on the complaint because the unpaid balance of the contract price exceeded the cost of repairing the construction defects. The Edens court stated: “We understand [the builder’s] claim of error to refer only to the trial court’s refusal to find that it was entitled to the $25,000 balance allegedly due on the contract and in the court’s failure to deduct the damage award from this balance.” Id., 493. If the builder had claimed that the owner was not entitled to collect damages on the complaint, he should have prevailed under the principles applied in our opinion today.
The amount saved “is subtracted only if the saving results from the injured party not having to perform rather than from some unrelated event.” 3 Restatement (Second), Contracts § 347, comment (d).
The drafters of the Restatement (Second) of Contracts aptly illustrate the operation of the “actual loss” concept in the context of construction contracts as follows: “A contracts to build a house for B for $100,000, but repudiates the contract after doing part of the work and having been paid $40,000. Other builders will charge B $80,000 to finish the house. B’s damages include the $80,000 cost to complete the work less the $60,000 cost avoided or $20,000, together with damages for any loss caused by the delay. . . .” 3 Restatement (Second), Contracts § 348, comment (c), illustration 2; see id., § 347, comment (e), illustration 12.
Contrary to Gould’s assertions, Argentinis’ damage award should not also have been reduced by the sum of the interest that has accrued on the mortgage to date. The interest on the mortgage was not part of the balance of the contract price that Argentinis would have had to pay if Gould had completed performance of the contract. Indeed, it is undisputed, as Gould conceded in oral argument in this court, that the mortgage was intended solely to secure the balance that the parties then believed to be due to Gould. Since it was conclusively determined in the foreclosure action that Gould was not due that balance, Gould is not entitled to any rights under the mortgage.