Iowa Court of Appeals holds contractor’s argument, “Like the pond it built does not hold water”

Mollie Pawlosky, Iowa Real Estate & Land Use, Iowa Construction Law, Iowa Commercial Litigation Law, Dickinson Law Firm, Des Moines Iowa

Posted on 05/10/2016 at 12:00 AM by Mollie Pawlosky

Bachelder, Inc. contracted with Reilly Construction Co., Inc. to build a pond.  Bachelder paid Reilly $116,962.13 for the work performed. However, the pond did not hold water. Reilly billed Bachelder an additional $93,600 for parts and labor that Reilly spent in trying to remedy the defect, but problems persisted. Bachelder refused to pay the additional expenses, and Reilly filed a mechanic’s lien and petitioned to foreclose the lien.  Bachelder counterclaimed for damages.

After a bench trial, the court determined Bachelder’s damages to be the $116,962.13 paid to build the pond, plus the $4028.33 Bachelder incurred for incidental expenses related to the pond’s construction, for a total damage award of $120,990.46. Reilly appealed.

The Court of Appeals, in Reilly Construction Co., Inc. v. Bachelder Inc., No. 15-1192 (April 27, 2016), began by recognizing that the purpose of a damage suit is compensation, and the goal is to place the injured party in as favorable position as though no wrong had occurred. The Court of Appeals identified several damages approaches, finding, “A combination of the various damage elements may be employed in certain circumstances in order to render the injured party whole.”

Reilly argued that Bachelder failed to produce evidence of the cost of repairing the pond or loss of rentals. Reilly further argued that because the evidence showed there was no diminution in the value of the property, it would be economic waste to award Bachelder damages for the cost of removing the pond structure from the property.

The Court of Appeals held, “Like the pond it built, Reilly’s argument does not hold water.”  The evidence from trial showed that the site of the pond was not suitable for a pond structure, because the underlying soils in the pond area were permeable and ineffective in holding water. As a result, the pond could not maintain a permanent pool of water without a supplemental water source. The Court found it irrelevant that the pond could not be adequately repaired without economic waste; Reilly was not relieved of its duty to compensate Bachelder. Bachelder was damaged by spending $116,962.13 for the pond’s construction, plus the $4028.33 in additional costs. The pond was of no value; although the land’s value was not diminished by the pond’s construction, the land was also not benefited. Bachelder’s position was not improved in exchange for the $120,990.46 spent. This cost, for which Bachelder received no benefit, was the amount of damages. Accordingly, the Court of Appeals affirmed the district court’s judgment.

Reilly Construction Co., Inc. v. Bachelder Inc. reminds property owners to think broadly about the underlying concepts of damages when analyzing defective construction claims.  For questions regarding Reilly Construction Co., Inc. v. Bachelder Inc. or commercial litigation, contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

 

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