McKINNEY v. CHRISTIANA COMMUNITY BUILDERS

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Court of Appeal, Fourth District, Division 1, California.

 Floyd A. McKINNEY et al., Plaintiffs and Respondents, v. CHRISTIANA COMMUNITY BUILDERS et al., Defendants and Appellants.

No. D009912.

Decided: April 22, 1991

 Bacalski, Holdway and Prindle, and Patrick L. Prindle, San Diego, for defendants and appellants. Duke, Gerstel, Shearer and Bregante, Richard D. Bregante and Ann M. McMenomy, San Diego, for plaintiffs and respondents.

Before commencement of jury trial for injury to plaintiffs' real property and before receiving any evidence, the trial court granted plaintiffs' in limine motion ruling the proper measure of damages would be costs of repairs.   Thereafter, the court instructed the jury that if it found defendants liable and awarded damages, the “award shall include:  the cost of repairing the defect, the loss due to stigma, the cost of moving expenses, the cost of reasonable investigation, and the reasonable cost of rental during the time of repair.”   There was no evidence plaintiffs had personal reasons for making the extensive repairs to their residence for damages which the jury found were reasonably certain to occur in the future.

 Finding defendants liable, the jury awarded plaintiffs damages pursuant to the trial court's instructions, a total of $164,553.76.   The jury also found:  “The diminution in value, if any caused by the defect is:  $none.”   Judgment was entered consistent with the jury's verdict.   Defendants filed a timely notice of appeal.   After notice of appeal was filed, plaintiffs moved the trial court to modify or vacate the judgment.   The trial court granted plaintiffs' motion vacating the judgment and changing the verdict form placing an amount of $80,000 in the jury's verdict for diminution in value.   Judgment was thereafter entered on the modified verdict.   Defendants amended their notice of appeal to include the modified judgment.

Defendants contend the proper measure of damages should be diminution in value because the evidence does not support a “personal reason” exception to the general rule for damages, i.e., lesser of the diminution in value of property harmed or costs of repair.   We agree.   Moreover, the trial court lacked the power to modify the jury's verdict, and it lacked jurisdiction to act on the judgment after defendants filed their notice of appeal.   Accordingly, we vacate the modified judgment, reverse the initial judgment1 and remand for a new trial.

FACTS AND PROCEDURE

In 1977 plaintiffs Floyd and Glenda McKinney (McKinneys) purchased a home from defendants Christiana Community Builders and Ponderosa Homes (collectively, Christiana).   The purchase price was $101,999.   The McKinneys previously owned a home in the same development about one-half block away.   The McKinneys' residence is one of 795 mass produced homes within this one subdivision.   The McKinneys moved to the new home, which is larger than their old home, because Mrs. McKinney believed she could make more money “by value increasing” than she could working at her employment.

Shortly after moving into the home, the McKinneys noticed slight noises and cracks in the walls.   By 1984 the garage doors stuck, and there was a bulge in the upstairs causing the doors to stick.   On June 30, 1987, the McKinneys filed a complaint for damages against Christiana alleging strict liability, breach of warranty and negligence.

Mrs. McKinney testified she had been aware of the problems with the cracks sometime in early 1980 when she called a broker to sell the home during a period of time in which the McKinneys were considering moving  out of the state.   Further, Mrs. McKinney testified that although she loved the house when they bought it, she no longer had the same feelings.   Mrs. McKinney no longer likes the neighborhood because the homes are now so expensive it requires the paychecks from two families to meet the payments on one house.   She also blames Christiana for the change in the neighborhood and this increased value which has resulted in younger people moving in.   At the time of trial, the McKinneys had made no repairs to the home other than shaving the doors.   Mr. McKinney testified he never lost the use or enjoyment of any portion of the home because of any defects.

Likening the existing problems to a “cancer,” the McKinneys' counsel argued the defects were presently minor, but the residence might be uninhabitable within a few years unless extensive repairs are made.   The McKinneys had to file suit when they did, because of the 10–year statute of limitations.   The costs of repair were premised on replacing the existing slab, strengthening footings and placing moisture barriers next to the home.   There was no testimony by the McKinneys that they wished to remain in the home and make the extensive repairs they argued were reasonably certain to occur in the future.

At the conclusion of the trial, the court instructed the jury on diminution in value;  however, it did not advise the jury that diminution in value might serve as the basis of any damages awarded the McKinneys.   Instead, the court instructed the jury that if it found Christiana liable for damages, it had to award costs of repair and other related damages.

After finding Christiana liable the jury complied with the court's instructions.   Under diminution in value the jury wrote, “none.”   The court discharged the jury and then urged the McKinneys to bring a motion to modify the jury's verdict, stating the jury misunderstood the instructions by entering zero.   Before the McKinneys complied with the court's suggestion Christiana filed their notice of appeal.   Nevertheless, the trial court granted the McKinneys' motion modifying the judgment by adding $80,000 for diminution in value.   This was based on testimony by Christiana's expert;  the amount was disputed by the McKinneys' expert who testified the diminution in value was $95,000, plus an additional $50,000 for “stigma” diminution in value even after repairs.   Christiana then filed an amended notice of appeal including the modified judgment.

DISCUSSION

MODIFICATION OF JUDGMENT

Neither party to this appeal briefed the trial court's power to modify the jury's verdict or the jurisdiction of the trial court to take any substantive  action on a judgment after a notice of appeal has been filed although at the hearing to vacate/modify the judgment Christiana argued the court lacked jurisdiction to entertain the McKinneys' motion in light of the pending appeal from the judgment.2  Nevertheless the court granted the motion, and the modification as well as the initial judgment is part of this record.

 First, the trial court lacked the power to modify the jury's verdict once it discharged the jury.   If the trial court found the jury's verdict defective, then it should have advised the jury to correct it or sent the jury out again for further deliberations.   Having failed to do so, there is no authority for the trial court to correct a jury's verdict by adding an amount for damages chosen by the trial court after it has discharged the jury.  (Code of Civ.Proc., § 619;  Clark Equipment Co. v. Mastelotto, Inc. (1978) 87 Cal.App.3d 88, 150 Cal.Rptr. 797.)   Second, after Christiana filed their notice of appeal from the judgment, the trial court lacked jurisdiction to entertain the McKinneys' motion.  “The trial court has no power thereafter to amend or correct its judgment or order, or to vacate or to set it aside.   Such power cannot be reinvested in the trial court even by the consent of the parties.”  (Takahashi v. Fish & Game Com. (1947) 30 Cal.2d 719, 725, 185 P.2d 805.)   Accordingly, we vacate the court's attempted modification of the jury's verdict and the modified judgment for lack of power and jurisdiction.

MEASURE OF DAMAGES

California Civil Code section 3333 provides:

“For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.”

 Thus the general measure of damages for tortious injury to property is the difference between the value of the property before and after the injury, i.e., diminution in value.   One recognized exception to the general rule is that the measure of damages can be the cost of restoring property to its original condition prior to the injury, commonly referred to as costs of repairs.  (See, e.g., Linforth v. S.F. Gas and Electric Co. (1909) 156 Cal. 58, 103 P. 320;  Rest.2d Torts, § 929.)   Courts normally will not award costs of repair which exceed diminution in value because the basic objective of compensatory damages is to make an injured party whole, but no more than  that.  (Mozzetti v. City of Brisbane (1977) 67 Cal.App.3d 565, 136 Cal.Rptr. 751.)   Therefore, the traditional rule in California for the measure of damages for tortious injury to real property has long been held to be diminution in value or costs of repair, whichever is less.

In Heninger v. Dunn (1980) 101 Cal.App.3d 858, 162 Cal.Rptr. 104,3 the court reviewed numerous cases and reaffirmed the general rule “that a plaintiff who seeks restoration damages cannot recover more than the amount of diminution in value of the land, i.e., that a recovery for diminution in value can never exceed the value of the land prior to the injury.”  (Id. at p. 863, 162 Cal.Rptr. 104.)  Heninger then recognized the rule is not invariable, and concluded an injured party may recover costs of repair exceeding diminution in value where the injured party presents substantial evidence to a trier of fact it has “personal reasons for restoring the property to its previous condition and would in fact make the repairs.”  (Id. at p. 864, 162 Cal.Rptr. 104.)  Heninger carefully limited approval of this “personal reason” exception to recovery of reasonable costs of replacement, that is, costs which are not disproportionate to value before and after the injury.  (Id. at p. 866, 162 Cal.Rptr. 104.)

We agreed with Heninger 's “personal reason” exception in Orndorff v. Christiana Community Builders (1990) 217 Cal.App.3d 683, 266 Cal.Rptr. 193.   We rejected the argument the measure of damages had to be limited to the lesser of the diminution in value or the costs of repair in that construction defect case, where defendants stipulated the home was built on defectively compacted soils, resulting in substantial damages.   Before the trial court ruled which measure of damages would apply, the Orndorffs presented substantial evidence (1) they had a personal reason to repair the damages caused to their residence;  (2) they intended to make those repairs;  and (3) costs of repair bore a reasonable relationship to both the value of their home before harm and to the level of damages actually suffered due to the defendants' tortious acts.   We stated unequivocally costs of repair are not appropriate even under the “personal reason” exception to the general “lesser of” rule “where only slight damage has occurred and the cost of repair is far in excess of the loss in value.”  (Id. at page 690, 266 Cal.Rptr. 193.)

The Orndorff/Heninger criteria are not met by the facts of this case.   Here, the trial court disregarded the general common law “lesser of” rule, and ruled the measure of damages would be costs of repair before any evidence was submitted to it.   The court instructed the jury it had to award costs of repair if it found Christiana liable despite the absence of testimony:  (1) that the McKinneys had a personal reason for making extensive repairs;   2) that they intended to make those extensive repairs, and (3) that the costs of those repairs were reasonably related to the value of the McKinneys' residence before harm and to the level of damages actually suffered.

The McKinneys rely on Raven's Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 171 Cal.Rptr. 334,4 an action by an association of townhouse owners against the developer for damages caused by defects in landscaping and siding of the project as well as undercapitalization of the association.   In Orndorff, we cited Raven's Cove in the context of the “personal reason” exception to the rule that the measure of damages is the lesser of diminution in value or costs of repair.   We did not discuss Raven's Cove further because the trial court in Orndorff recognized the applicability of the general rule.   Only after substantial evidence was presented did the trial court find the Orndorffs met the “personal reason” exception to that general rule's application stating detailed findings for such exception.   Thus, we affirmed.

Here, the McKinneys fail to address the pre-trial ruling arguing one of the issues on appeal is “[w]hether the trial court abused its discretion in concluding that there is no ‘one’ and ‘only’ per se applicable rule for the measure of damages for injury to real property.”   The McKinneys cite Orndorff in support of their argument.   However, this argument lacks merit, because the trial court's pre-trial ruling reflected the trial court applied a ‘one’ and ‘only’ per se rule of damages for injury to real property—the costs of repair.   Further, the trial court then instructed the jury that the McKinneys were entitled to costs of repair and related damages without any evidence of the factors set forth in Heninger.   We recognize Raven's Cove made the broad assertion “that regardless of the theory of liability relied upon by a plaintiff, if judgment is rendered against the contractor for construction defects, the proper measure of damages is the cost of repair to the plaintiff's property.”  (Raven's Cove Townhomes, Inc. v. Knuppe Development Co., supra, 114 Cal.App.3d at p. 802, 171 Cal.Rptr. 334.)   While it is correct to note cost of repairs may be “a” proper measure of damages, they cannot be “the” proper measure or the exception will have swallowed the general rule whole.

 The Raven's Cove broad assertion misstates established precedent cited above, is unsupported by the authorities and commentators on which it is premised and disregards the body of law on tortious injury to real property.   Insofar as Raven's Cove holds costs of repair is the single proper measure of  damages for construction defect cases, we respectfully disagree with Raven's Cove.   We reaffirm the general rule that the measure of damages for tortious injury to real property, even under the principle of strict liability, is diminution in value or costs of repair, whichever is less.   Before a trier of fact applies an exception to that general rule there must be substantial evidence supporting the use of the exception to the rule.

 Here, the McKinneys failed to present evidence supporting the trial court's application of any recognized exception to the general rule.   They did not show a “personal reason” for making the extensive repairs which the jury found were reasonably certain to occur in the future, never testified they intended to make those extensive repairs, and even if there had been a “personal reason” for making these extensive repairs, the costs of repair and the related damages awarded by the jury are manifestly disproportionate to the value of the McKinneys property before and after injury under Heninger v. Dunn, supra, 101 Cal.App.3d at page 866, 162 Cal.Rptr. 104.

The McKinneys purchased their residence for $102,000.   The approximate value “as is” at the date of trial was $187,000.   The McKinneys had made no significant improvements or repairs, there had been only slight damage to this 12–year–old residence at the time of trial, and it is disputed whether further damage will in fact occur.   The value of the McKinneys' property after repair would be in the range of $210,000 to $267,000.

On these facts, we are unpersuaded by the McKinneys' argument that public policy dictates costs of repair as the appropriate measure of damages.   We reiterate the fundamental objective of compensatory damages:  to make an injured party whole, but no more than that.   An award for diminution in value meets that objective in these circumstances, and the trial court erred in applying the costs of repair measure of damages.

DISPOSITION

The trial court's modification of the jury's verdict is vacated.   The modified judgment is vacated.   The initial judgment is reversed.   The case is remanded to the superior court for a new trial on the issue of damages.   In light of our decision the McKinneys' request for sanctions for a frivolous appeal is denied.   Christiana is awarded costs on appeal.

I respectfully disagree with the reasoning and the result of the majority opinion.   Reviewing, as we must, the original judgment entered on the special verdict in this case (see Copley v. Copley  1981) 126 Cal.App.3d 248, 298, 178 Cal.Rptr. 842), we find that the jury concluded the defendants Christiana Community Builders, Inc. (Christiana) and Ponderosa Homes were negligent and caused damage to the McKinneys' residence in the amount of $164,553.76, of which $120,836.92 was attributed to the cost of repair.   Additional damages items awarded were $3,000 for emotional distress, $7,504.20 for reasonable moving expenses required to repair the defect, $8,700 reasonable rental for the time period necessary for repairs to be made, and stigma damages of $12,500.   The state of the evidence presented to the jury was that Christiana's expert put the diminution in value of the property at $80,000, while the McKinneys' expert testified the diminution in value was $95,000, plus $50,000 for “stigma” damages.   However, the jury found no diminution in value had been demonstrated.

It is to these figures that the rules set out in Orndorff v. Christiana Community Builders (1990) 217 Cal.App.3d 683, 266 Cal.Rptr. 193, and predecessor cases such as Heninger v. Dunn (1980) 101 Cal.App.3d 858, 162 Cal.Rptr. 104, must be applied.   I believe the majority opinion is based upon a crabbed reading of both Heninger and Orndorff, depriving these homeowners of the benefit of the personal use rule articulated in those cases and unfairly requiring the McKinneys to undergo retrial of their construction defect case because they failed to anticipate the specific language of Orndorff (which opinion was not published until after this trial had been completed).   We should not backtrack on our holding in Orndorff by here making a hypertechnical reading of the record for the particular criteria we listed in Orndorff.   My reading of this record convinces me the McKinneys have satisfied all the requirements set out in this controlling authority.

To explain:  in Orndorff, this court enunciated a three-prong test for the application of the “personal reason exception” (Orndorff v. Christiana Community Builders, supra, 217 Cal.App.3d at p. 689, 266 Cal.Rptr. 193) to depart from the usual rule of tort damages in construction defect cases which would normally “ ‘preclud[e] recovery of restoration costs in excess of diminution of value.’ ”  (Id. at p. 687, 266 Cal.Rptr. 193, citing Heninger v. Dunn, supra, 101 Cal.App.3d at p. 863, 162 Cal.Rptr. 104.) 1  The three requirements which must be shown, as summarized in the majority opinion, are that the homeowners must have had a personal  reason for repairing the damage to their residence, they intended to make those repairs, and the cost of repair was reasonably related to the value of the residence before harm and to the level of damages actually suffered.   (See maj. opn., p. 245.)   Contrary to the majority's conclusion, I find substantial evidence in the record supporting each of the above elements.

First, on the issues of the McKinneys' personal reason to repair their home and their intent to repair it, there was ample testimony in the record on their affection for their home and desire to keep it.   Although the home was one of a 795–unit subdivision, it was unique to them.   Mr. McKinney testified the couple was seeking money to repair the home and for rent for the use of other facilities during repair.   Further, he testified on cross-examination that he had at one point considered relocating with his employment to another state.   He rejected the idea of moving, explaining:

“Q. But you decided to keep your house because you decided you wanted to stay and that's where you would like to be?

“A. Yes, sir.   That was our beautiful home, that's correct.”

I would find the McKinneys have adequately demonstrated on this record this is their personal residence, they enjoy it and they intend to repair it.   I would not require more of them in order to bring themselves within the “personal reason” tests of Heninger and Orndorff.

In evaluating this record one must further be aware the McKinneys sought damages not only for the defects in the residence, but for their alleged emotional distress.   Thus, their testimony focused in large part on their keen frustration caused by the discovered defects in their home and their inability to get them remedied.   I do not believe they were called upon to articulate greater “personal reasons” than those which, in my view, are recognized by the Restatement commentators.  (See fn. 1, ante.)

Turning to the issue of the Orndorff requirement that the cost of repair be reasonably related to “the value of the real property before the injury and the actual damage sustained,” (Orndorff v. Christiana Community Builders, supra, 217 Cal.App.3d at p. 690, 266 Cal.Rptr. 193), this record shows the cost of repair was set at $120,836.92.   The home was purchased in 1977 for $101,999.   According to the various expert witnesses, the value of the home after repair was estimated to be between $210,000 and $267,000;  the diminution in value due to the construction defects was estimated to be between $80,000 and $95,000, with the McKinneys' expert adding $50,000 for stigma damages.   Despite the testimony, the jury placed the diminution in value at zero.   It is apparent that this record does not neatly fit the requirement articulated in  Orndorff that the “value before harm” and the “level of harm actually suffered” (ibid.) be demonstrated.

Nevertheless, I believe the McKinneys made an adequate showing of reasonable relation of the $120,836.92 cost of repair to the 1977 purchase price of $101,999 for the home, the current $210,000 (or $267,000) estimated resale value of the home as repaired, and the testimony on diminution in value.   I reach this conclusion because, in my view, the standards of Orndorff must be applied consistent with certain realities of modern life:  Ownership of a home, however humble it may be, is becoming increasingly difficult for the average person to achieve.   All that is available for most citizens in this society are mass-produced dwellings.   The cost and the sacrifice a family must endure today to achieve even that form of ownership is staggering and often well beyond the reach of an increasing percentage of our society.   Moreover, a homeowner in a construction defects lawsuit faces horrendous personal and financial costs raised by the possibility of being required to sell and move if repair costs exceed the diminution in value.   The idea that a homeowner must recite something more personal than his or her basic desire to continue to live in a particular private dwelling in order to be able to obtain the funds necessary to repair damage caused by the negligent conduct of contractors is in my view simply out of touch with the reality of today's society.

Finally, I disagree with the majority opinion's rejection of the measure of damages in construction defect cases that was determined appropriate by the court in Raven's Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 171 Cal.Rptr. 334 (and which the trial court appears to have applied here).   In Raven's Cove, the court (after reviewing numerous authorities on the issue of damages, including the work by Miller & Starr, Current Law of California Real Estate, § 9:20, p. 475) ruled the correct measure of damages in a construction defect case involving condominium units was the cost of repair.   The court stated, “[T]he proper measure of damages here is the cost of remedying the defects in the landscaping and repairing of the homeowners' individual properties, together with the value of the lost use (if any) during the period of injury.”  (Raven's Cove Townhomes, Inc. v. Knuppe Development Co., supra, 114 Cal.App.3d at p. 802, 171 Cal.Rptr. 334.)

In my judgment, the rule announced by Raven's Cove is correct.   As interpreted by later case law, it recognizes that adherence to a common law rule preferring the lesser measure of damages between diminution of value and repairs, with a restrictively applied “personal reasons” exception, is no longer realistic or fair as applied to personal dwellings.   A record involving a home that is mass-produced and unattractively labeled a “tract house” may as properly support the application of the “personal reasons” exception as  may a case dealing with a splendid estate crafted by artisans.   I therefore respectfully dissent.

FOOTNOTES

1.   Our reversal is limited to the issue of damages because there is no appeal from the jury's finding of liability.

2.   At oral argument, this court questioned the parties on this issue.   This complies with Government Code section 68081, because the parties were afforded an opportunity to present their views on the matter through supplemental briefing (which they declined).

3.   Heninger was recently cited with approval by our Supreme Court in AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 274 Cal.Rptr. 820, 799 P.2d 1253.

4.   Orndorff v. Christiana Community Builders, supra, 217 Cal.App.3d 683, 266 Cal.Rptr. 193 was decided after the McKinneys' trial, and we assume Raven's Cove Townhomes, Inc. v. Knuppe Development Co., supra, 114 Cal.App.3d 783, 171 Cal.Rptr. 334 was the authority cited by the McKinneys in their in limine motion.

1.   We made clear in Orndorff that we adopted the Heninger reasoning and cited with approval the comment in Restatement Second of Torts in our opinion.   We said, “․ According to the commentators to the Restatement, ‘if a building such as a homestead is used for a purpose personal to the owner, the damages ordinarily include an amount for repairs, even though this might be greater than the entire value of the building.   So, when a garden has been maintained in a city in connection with a dwelling house, the owner is entitled to recover the expense of putting the garden in its original condition even though the market value of the premises has not been decreased by the defendant's invasion.’   [Citation.]”  (Orndorff v. Christiana Community Builders, supra, 217 Cal.App.3d 683, 688–689, 266 Cal.Rptr. 193, original italics.)

NARES, Associate Justice.

FROEHLICH, J., concurs.