Peevyhouse v. Garland Coal Mining Co.

Brief Fact Summary.

Willy and Lucille Peevyhouse (plaintiffs) owned a farm containing coal deposits which they leaded Garland (defendant) for 5 years. According to the lease, Garland agreed to perform restorative actions to the farm with estimated cost of $29,000 but failed to do so. The Peevyhouses sued for $25,000 in damaged. The judge held for the Peevyhouses. The jury awarded the Peevyhouses $5,000 in damages. Both parties appealed.

Synopsis of Rule of Law.

Despite any agreement of the parties, damages granted for breach of a contract to perform remedial work on property ought to be measured by the reasonable cost of execution of the work; but, when the agreement clause broke is just incidental to the principal reason in view and where the financial benefit which would result to the owner from full execution is grossly disproportionate to the cost of execution, damages should instead be limited to the diminution in value coming about to the premises due to the non-execution.

Facts.

Willy and Lucille Peevyhouse (plaintiffs) possessed a farm containing coal deposits. In November 1954, the Peevyhouses rented their farm to Garland Coal Mining Co. (Laurel) (defendant) for coal digging purposes for 5 years. As a major aspect of the terms of their lease, Garland consented to perform certain restorative and remedial actions to the farm property toward the end of their lease. The cost of the work to Garland was evaluated at roughly $29,000. Garland initiated strip mining of the property, however, failed to perform the remedial work after the lease. The Peevyhouses sued looking for damages of $25,000. At trial, the judge held for the Peevyhouses and guided the jury to grant damages by considering the cost of performance of the work consented to by Garland, and additionally the aggregate “diminution in value” of the Peevyhouses' property because of Garland's inability to play out the restorative work. The jury granted the Peevyhouses $5,000 in damages; a sum more than the value of the farm even if remedial work has been done.  The parties appealed.

Issue.

For the breach of a contract to perform remedial work on the property, the damages ought to be measured by the decrease in value of the premises resulting in non-execution if the financial benefit which would result to the property owner from full execution is grossly disproportionate to the cost of performance?

Held.

Yes. Despite any agreement of the parties, damages granted for breach of a contract to perform remedial work on property ought to be measured by the reasonable cost of execution of the work; but, when the agreement clause broke is just incidental to the principal reason in view and where the financial benefit which would result to the owner from full execution is grossly disproportionate to the cost of execution, damages should instead be limited to the diminution in value coming about to the premises due to the non-execution.

Dissent.

(Irwin, J.):The agreement between the parties particularly requires Garland to play out certain remedial activities stemming specifically from its coal mining activities. Nothing in the record demonstrates that Garland couldn't play out its commitments, and in this manner, Garland's breach is intentional and not in compliance with good faith. Also, nothing demonstrates that the parties were not able to ascertain the total cost of execution at the time of agreement formation. Garland ought not to be allowed to benefit by its breach, and the Peevyhouses are entitled to specific performance of the agreement as written and negotiated.

Concurrence.

N/A

Discussion.

The actual diminution in value of the Peevyhouse's property caused by Garland's non-execution is just $300, and in this manner, the Peevyhouses' recuperation ought to be restricted to this amount. Despite any understanding of the parties, damages granted for breach of an agreement to perform remedial work on property ought to be measured by the reasonable cost of execution of the work. However, when the agreement clause breached is simply coincidental to the principle reason in view, and where the financial benefit which would result to the owner from full execution is grossly disproportionate to the cost of execution, damages ought to rather be restricted to the diminution in value coming about to the premises due to the non-execution. This reflects a damage rule drawn from tort law that is additionally appropriate to contract law. In tort law, damages granted should be reasonable. Moreover, the non-breaching party may not recuperate damages for a breach more than the value he would have gotten from full execution. If Garland had completed execution of the remedial measures consented to by the parties in their agreement, the Peevyhouses would have just encountered a $300 increment in the value of their property. Interestingly, Garland would have brought about $29,000 in expenses of execution. The cost to Garland is grossly disproportionate to the economic benefit to the Peevyhouses. Moreover, the agreement between Garland and the Peevyhouses was for coal mining purposes, and the remedial work was simply coincidental to this primary reason. Hence, the best possible measure of damages is the decrease in value of the Peevyhouses' property caused by Garland's non-execution, or $300. The judgment of the trial court is changed to reflect this damages amount, and is affirmed.