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Florida Construction Law News

23FEB 2017

The Burden of Betterment

by Ryan M. Charlson, Esq.

The concept of betterment has long been used by defendants in cases involving defective design or construction to limit the damages awarded to a plaintiff.[1] The theory behind betterment is that: “if in [the] course of making repairs [an] owner adopts a more expensive design, recovery should be limited to what would have been the reasonable cost of repair according to original design.”[2] Betterment is often raised as an affirmative defense, requiring a defendant to prove that the plaintiff has received a good or service that is superior to that for which the plaintiff originally contracted. A recent South Florida case seems, at first blush, to suggest the burden of establishing the value of betterments may fall to the plaintiff, although a closer reading indicates the decision is likely to have limited applicability.

In Magnum Construction Management Corp. v. The City of Miami Beach, the Third District Court of Appeal was asked to review the damages award to the City for construction defects associated with the redesign and improvement of a park.[3] The completed project contained landscaping deficiencies, along with other “minor defects” in the playground’s construction.[4] After a unilateral audit, and without providing the contractor its contractually required opportunity to cure the defects, the City “removed, redesigned, and replaced the playground in its entirety.”[5] It did so despite no recommendation by the City’s own expert to perform such work.[6] During the bench trial, the “only measure of damages provided by the City was the costs associated with the planning, permitting, and construction of a park that is fundamentally different from the one it contracted with [the contractor] to build.”[7]

Thereafter, the trial court found the City’s complete removal and replacement of the playground to be excessive, and the court awarded the City approximately $1.3 million of its claimed $3 million in damages.[8] The trial court deemed the difference between the two “a ‘betterment,’ which the trial court defined as aspects of the City’s remediation plan which improved upon and differed significantly from the original designs and specifications in the contract documents.”[9] On review, the appellate court held not only that the City’s failure to provide the contractor with an opportunity to take corrective action per the contract precluded liability, but found the trial court’s determination of damages based on the exclusion of betterment costs “speculative,” because “the City ha[d] not cited to any evidence and [there was] no evidence in the record as to the value of the betterments . . . .”[10]

Defendants in construction defect cases could argue that the Third District Court of Appeal in Magnum viewed the valuation of betterment as a burden for the plaintiff to satisfy as part of its proof of damages. However, a closer reading reveals that the case does not expressly speak to the comparative burdens of proof, and the court was not attempting to articulate this as part of any fundamental re-alignment of the burden to prove the existence and value of betterment in construction defect cases, generally.

In most cases, the issue of whether the remediation undertaken by a plaintiff is a betterment is hotly disputed. Both parties are likely to present at least some evidence regarding whether the repairs undertaken were reasonable and appropriate. Such was not the case in Magnum. The City undertook a complete removal and replacement using a fundamentally different design without any testimony that it was required.  The defendants, in turn, proffered testimony that all of the defects in the playground could have been repaired.[11] Thus, the trial court concluded that the City’s costs did not represent “the reasonable cost of construction and completion in accordance with the contract” and that the difference between the City’s costs and the correct measure of damages was a “betterment.”[12]

What the appellate court appears to take issue with is not the trial court’s finding as to the existence of a betterment, but its attempt to calculate the value of that betterment to determine the City’s damages in the absence of any evidence of that value. It found a complete absence of evidence to support the trial court’s valuation of the betterment.  Thus, defendants in construction defect cases may attempt to use the Magnum court’s decision to require a plaintiff to present evidence that its alleged damages are reasonable and appropriate in view of the original contract, and that this is all the more critical when the repair is fundamentally different from the original design.  That being said, the decision in Magnum does not suggest any broader shifting of the burden for proving the value of a betterment to the plaintiff in all cases.

[1] See, e.g., Edgar v. Hosea, 210 So. 2d 233 (Fla. 3d DCA 1968); Grossman v. Sea Towers, Ltd. 513 So. 2d 686 (Fla. 3d DCA 1987).

[2] Temple Beth Sholom & Jewish Ctr., Inc. v. Thyne Constr. Corp., 399 So. 2d 525, 526 (Fla. 2d DCA 1981).

[3] No. 3D15-2239, 2016 LEXIS 18359 (Fla 3d DCA Dec. 14, 2016).

[4] Id. at *3.

[5] Id. at *4.

[6] Id.

[7] Id. at *10.

[8] Id. at *9.

[9] Id.

[10] Id. at *10 (emphasis in original).

[11] Id. at *4, n.1.

[12] Id. at *10 (emphasis in original) (citing Grossman Holdings Ltd. v. Hourihan, 414 So. 2d 1037, 1039 (Fla. 1982)).

Posted By Ryan M. Charlson, Esq.

Ryan M. Charlson is an Associate in CSK’s Construction Group and practices in the Miami office. Mr. Charlson focuses his practice on construction, products liability, real estate, and insurance coverage disputes. Prior to joining CSK, Mr. Charlson practiced at a national firm that specializes in construction litigation, and more recently, he worked as in-house counsel for one of the nation’s largest real estate developers.