It seems that lemons are front page news these days. Beyonce just released a chart-topping album all about what to do when life hands you lemons. In today’s vernacular, we use the term “Lemon” to describe a person or thing that is unsatisfactory, disappointing, or feeble. In Florida, there is a “Lemon Law” that provides a way for consumers to receive a replacement or full refund for vehicles found to have defects which may affect the vehicle’s safety, value or use. While there is no “Lemon Law” for construction projects, in Gray v. Mark Hall Homes, Inc., Florida’s Second District Court of Appeal cited to Florida Supreme Court precedent in holding that a home builder was on the hook for the entire contract value of a home he contracted to build for the Plaintiff, when it was revealed the home was a “Lemon”, or as the evidence at trial showed, “valueless.”
In 2005, Angela Gray (“Gray”) contracted with Mark Hall Homes, Inc. (MHH) to construct a single-family home on her property. Gray agreed to pay $168,144.00 in a series of installation payments for construction of the home. Soon after moving in, Gray discovered a number of defects which she brought to MHH’s attention. MHH attempted to remedy the defects, and Gray paid a general contractor $16,000.00 to replace the balcony, but eventually Gray filed suit for breach of contract.
Many witnesses testified at trial on Gray’s behalf, detailing the home’s condition. The jury was told that among the defects was a lack of flashing which resulted in moisture penetration and led to significant wood rot throughout the home. The general contractor hired by Gray testified that when he first evaluated the home, he suggested that Gray “get a bulldozer” and start over. A real estate agent testified that he contracted with Gray to sell the house, and that when he first saw it, he advised Gray that the house was worthless and should be torn down. He described it as the worst house he’d seen in thirty-eight years in the real estate business and that given the home’s condition, a bank would not finance it. Further, the home had received no offers after being listed for a year. Lastly, the structural engineer/home inspector who reviewed and approved the construction plans for the home, and inspected it prior to trial, testified that there was water damage, mold, and wood rot so bad that some of the doors would not open properly. He was of the opinion that the home was not a suitable rental, uninsurable, and while it could be salvageable, such a process would be cost-prohibitive.
MHH moved the trial court for a directed verdict, arguing that the only concrete evidence of damages was the $16,000 paid to the contractor to replace the balcony. The jury returned a verdict for $168,000, but the trial court reduced the award to $16,000.
In its opinion, the Second District cited Grossman Holdings Ltd. v. Hourihan, in which the Florida Supreme Court adopted the Restatement (First) of Contracts’ Position on the measure of damages for a construction defect. That measure of damages is described as “all unavoidable harm that the builder had reason to foresee when the contract was made, less such part of the contract price as has not been paid and is still not payable, determined as follows”: For defective or unfinished construction, the plaintiff can get judgment for either, 1) the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or 2) the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.
Finding that the jury could have concluded that the house as constructed had absolutely no value, in other words, a “Lemon”, and applying the formula announced in Grossman, the court held that the amount awarded by the jury’s verdict was a sustainable measure of damages, and reversed the trial court’s limitation on the amount of damages awarded to the Plaintiff.
One takeaway is, if you find yourself having to defend a claim that your construction project was a “Lemon,” make sure the law firm you hire, isn’t.