Print Friendly, PDF & Email

Although construction defects caused water leaks that resulted in mold growth that required major remediation of a newly constructed house, the homeowner was denied damages by a court because it failed to prove that the remediation costs it paid were reasonable, and it failed to prove the difference in value of the house as constructed and its value if it had been constructed according to the contract.  The Texas Supreme Court therefore threw out a $651,000 jury verdict because it found the evidence was not sufficient to support the jury’s finding.  McGinty v. Hennen, 372 SW 2d 625 (2012).

Shortly after moving into his new home, the owner noticed water leaks and a few months later mold began to grow.  A contractor inspected the house and provided a $651,000.00  estimate to rid the house of mold and rebuild areas of the house that were affected by the mold remediation.  The owner then sued the homebuilder for negligence, breach of express and implied warranties, and breach of contract.

On each claim, the jury was asked to find two damage awards; “(1) the difference, as of the date of closing, in the value of the home as it was received and the value it would have had if it had been as represented, and (2) the reasonable and necessary cost to repair the home.”  The jury found the difference in value to be $262,885.83 and the reasonable and necessary repair costs to be $651,230.72.

The jury also awarded $750,000 in exemplary damages and $200,000 in attorney’s fees.  The trial court denied contractor’s motion for judgment notwithstanding the verdict, based on lack of evidence supporting the verdict.

On appeal, the contractor argued that the homeowner presented no evidence that the repair costs were reasonable and necessary and, indeed, that those costs were so high as to constitute “economic waste.” The Contractor argued that the only recoverable measure of damages would be the difference in market value of the house, and that because the owner failed to produce evidence to prove the difference in market value, a jury could award no damages.

The Supreme Court agreed with the contractor and found that the only evidence was questionable expert testimony and an estimate by a remediation contractor.

The court stated “Estimated out-of-pocket expense, like paid out-of-pocket expenses, do not establish that the cost of repair was reasonable.  Some other evidence is necessary.  Neither the [owner’s] damage expert nor any other witness testified to the reasonableness of the estimated cost.”   The court rejected the argument that because the expert testified extensively about how he derived his pricing estimate, that was good enough as proof.  “That explanation may explain how the figure was derived, but it does not in itself make the figure reasonable.”

As for the difference-in-value damages, “the jury was required to determine an award based on the value of the house at the time of closing, and [owner] offered no evidence of the house’s value at that time.”  He had only testified on his own behalf without expert or fact witness on that issue, stating, “In my layman’s ability to do so, I have an idea of what I think it is worth today.”  He then testified that his house was worth between $450,000 and $475,000 and that “without all these problems it would be worth $875,000.”  The owner offered no evidence as to what the house was worth at the time of closing.  It is that evidence that was required for a jury to render a decision.

Due to the lack of evidence to prove the extent of his damages, the Supreme Court held the Owner was entitled to no relief at all.

 

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 15, No. 1 (Jan 2013).

Copyright 2013, ConstructionRisk, LLC