From the Desk of Gordon C. Klug:
Construction defect claims have their roots in both contract and tort law. When evaluating a breach of contract case, it is important to view the case from the Plaintiff’s perspective and not just the Defendant’s. Failure to do so may result in additional financial exposure to the client and insurance carrier.
In this case, the Washington Appellate Court evaluated whether Defendant’s breach of a construction contract caused the damages claimed by Plaintiff. The Court held that “substantial evidence” supported the trial court’s conclusion that the damages Plaintiff sustained flowed from Defendant’s breach of the contract.
Bondy v. Kuchan, Wn App. 2d No. 54616-7-II (Nov. 9, 2021).
Greg Bondy (“Plaintiff”) was a general contractor who was hired to work on a remodel to a home in Washington state. The prior contractor on the project obtained a building permit that included using a garage’s existing foundation. Reusing the existing foundation meant any additional construction to that garage would only have to comply with building codes in existence at the time of the garage’s original construction. The Plaintiff then hired Dana Kuchan (“Defendant”) to remove the garage roof and walls, and specifically asked that he leave the existing garage slab and stem wall in place. Instead, Defendant tore out the stem wall and the slab extinguishing the possibility of reusing the existing garage foundation. As a result of the unusable building foundation, Bondy was forced to secure a new building permit to include the construction of a new foundation. Bondy then filed a lawsuit against Defendant for breach of contract and claimed damages and costs for the replacement of the garage foundation. Plaintiff contended that he incurred these expenses because the removal of the foundation required him to secure a new building permit. This new building permit could no longer be grandfathered into earlier building codes as a new foundation would be put in place. As a result, the new construction triggered a responsibility for building a new garage that complied with current building codes.
Defendant argued that Plaintiff would have had to get a new building permit regardless of his work destroying the stem wall and slab because the original permit only addressed removing the garage’s roof. At trial, however, the Defendant did not present any credible evidence that had there been no breach, the Plaintiff would have been required to secure a new building permit. Defendant argued its breach of contract (removing the slab and stem wall) was not the proximate cause of the damage Plaintiff incurred in this case. The trial court held that Defendant was liable for breach of contract and that Plaintiff was entitled to $20,609.72 in damages. As this case had earlier gone through mandatory arbitration and the Defendant filed a de novo appeal and did not improve its position at trial, the Plaintiff was also awarded his attorneys fees. Defendant appealed to the Division 2 Washington Court of Appeals.
In a breach of contract claim, the plaintiff has the burden of proving that the breach caused the economic damages and the amount of the damages.Columbia Park Golf Course, Inc. v. City of Kennewick, 160 Wn. App. 66, 83 (2011). The objective of awarding damages in a breach of contract case is to place the injured party in the same position he would be in if the breaching party had properly performed on the contract. Floor Express, Inc. v. Daly, 138 Wn. App. 750, 754 (2007). Therefore, the injured party can recover all damages flowing from the breach, including consequential damages caused by the breach. Id. Consequential damages are damages that result naturally, but are not necessarily, from the breach.
Defendant argued that his breach of contract did not cause the damages the trial court awarded to Plaintiff because Plaintiff would have incurred those expenses even if the slab and stem wall had not been removed. The Court considered whether “substantial evidence” supported the trial court’s finding that the removal of the stem wall and slab caused Plaintiff $20,609.72 in consequential damages. Defendant argued that the original permit prohibited the reconstruction of the garage anyway, as the terms of the permit only allowed for the removal of the garage’s roof and not the walls which was part of Plaintiff’s original plan. Therefore, Defendant argued, Plaintiff would have had to obtain a new building permit anyway to complete the project.
The Court identified three deficiencies with Defendant’s reasoning. First, Defendant’s argument rested on the assertion that the trial court should not have believed Plaintiff’s testimony that he would not have incurred the additional expenses if Defendant had not removed the stem wall and slab. The Court held that, on appeal, there was “substantial evidence” to support the trial court’s finding that the Plaintiff’s testimony was credible. Appellate courts generally do not second guess a trial court’s assessment of a witness’ credibility. Therefore, Defendant’s first argument failed.
Second, it was a disputed fact at trial whether Plaintiff would have needed to obtain a new permit even if Defendant had not removed the stem wall and slab. Plaintiff and Defendant presented evidence supporting their positions, and the trial court found Plaintiff’s testimony was credible. Again, the Court of Appeals didn’t second guess the trial court’s assessment of a witness’ credibility and only looked at whether there was “substantial evidence” to support the trial court’s finding. The Appellate Court concluded there was substantial evidence supporting the trial court’s finding that the Plaintiff’s original plan to construct new walls, in addition to a new roof, was within the scope of the earlier building permit. Plaintiff would NOT have been required to obtain a new permit and comply with current building codes if Defendant had not destroyed the foundation. Consequently, Defendant’s second argument failed.
Third, Defendant argued that Plaintiff’s earlier building permit limited work to removing and replacing the garage’s roof and not the construction of new walls. As it was the Plaintiff’s intent to go beyond work that was outlined in the earlier building permit, the Plaintiff would have needed to secure a new permit anyway, and this new permit would have triggered a responsibility for complying with current building codes. The Court of Appeals disagreed and found that because the Defendant had destroyed the original foundation to the garage, any new construction would have to comply with current building codes. The scope of work was expanded thus a new building permit that complied with current building codes was required. The rebuilding of the garage could no longer be grandfathered in under earlier building codes. The new building code requirements added significant additional costs that would not have been incurred had Defendant not destroyed the stem wall and garage slab. Because the trial court found Plaintiff’s testimony credible, this argument also failed.
The Big Picture:
When contesting a breach of contract claim, it is essential to consider all the damages that flow from the action that constituted the breach. In addition, it is essential to play devil’s advocate and review the case from the Plaintiff’s perspective and not just the Defendant’s. Appellate Courts review an appeal from a trial court’s findings of fact to determine if there was “substantial evidence” to support the trial court’s conclusion. This is not the same as pressing the “reset button” and getting a new trial with a new judge. If, on Appeal, the Court finds there was “substantial evidence” to support a trial court’s finding of fact, then the Court will refuse to second guess the trial court’s assessment of witness credibility.