205 Minn. 163 (1939).

One-Sentence Takeaway: Where contractor breached contract for removal of sand and gravel by willfully and in bad faith failing to leave the realty at a uniform grade as required by contract, damages for the breach are to be measured not in respect to the value of the land but by the reasonable cost of doing that which the contractor promised to do but failed to fulfill the promise.

Summary: Plaintiff entered into a contract with Defendant under which Defendant leased Plaintiff’s land and agreed to remove the sand and gravel from the land.  Defendant willfully breached the contract by removing only the best gravel and leaving the rest on the land.

During trial, it was established that it would cost Plaintiff $60,000 to complete the project that Defendant had promised to complete, but failed to do so.  However, the evidence also established that even if the project were completed, the increased value of the property of Plaintiff will only be $12,160.

The trial court entered a judgment in favor of Plaintiff for a little over $15,000 (increased value of the property + interest).  The Minnesota Supreme Court reversed the judgment and held that Plaintiff was entitled to recover the reasonable cost of doing that which Defendant promised to do, but left undone.

The Court reasoned that Defendant’s willful breach of the contract cannot be awarded.  According to the Court, the increased value of the property should not be a consideration in the current case.  “Suppose a contractor were suing the owner for breach of a grading contract such as this.  Would any element of value, or lack of it, in the land have any relevance in reckoning damages?  Of course not.”

The Court further reasoned that awarding Plaintiff the higher amount will not unjustly enrich him.  There is no unconscionable enrichment when the court gives to one party what the other party had already promised to give under the contract.

Reversed and remanded.

REFERENCE DESK

H.P. Droher and Sons v. Toushin, 250 Minn. 490 (1957):

In Groves v. John Wunder Co. 205 Minn. 163286 N.W. 235123 A.L.R. 502, we held that, in a case where there was a complete failure of any attempt to perform a contract, the correct measure of damages was the cost of performing the contract and not the difference in value. This decision was by a divided court, three members of the court concurring in the opinion, two dissenting, and two took no part. The majority opinion is based, at least in part, on the fact that the breach of the contract was wilful and in bad faith.

American Standard, Inc. v. Schectman, 80 A.D.2d 318 (N.Y. App. 1981):

In Groves v Wunder Co. (205 Minn 163), plaintiff had leased property and conveyed a gravel plant to defendant in exchange for a sum of money and for defendant’s commitment to return the property to plaintiff at the end of the term at a specified grade — a promise defendant failed to perform. Although the cost of the fill to complete the grading was $60,000 and the total value of the property, graded as specified in the contract, only $12,160 the court rejected the “diminution in value” rule, stating: “The owner’s right to improve his property is not trammeled by its small value. It is his right to erect thereon structures which will reduce its value. If that be the result, it can be of no aid to any contractor who declines performance. As said long ago in Chamberlain v. Parker, 45 N.Y. 569, 572: `A man may do what he will with his own, * * * and if he chooses to erect a monument to his caprice or folly on his premises, and employs and pays another to do it, it does not lie with a defendant who has been so employed and paid for building it, to say that his own performance would not be beneficial to the plaintiff.'”

Youngs v. Old Ben Coal Co., 243 F.3d 387 (7th Cir. 2001):

The objection can be illustrated with the facts of the well-known case of Groves v. John Wunder Co., 205 Minn. 163286 N.W. 235 (1939). The defendant as part of a larger deal with the plaintiff promised to level land owned by the latter, and broke his promise. But because the Great Depression had intervened between the making of the agreement and the defendant’s refusal to carry it out, the cost of leveling the land — $60,000 — would have greatly exceeded the value of the land after it was leveled — $12,000. Nevertheless the plaintiff sued for, and won, the expense of leveling, on the theory that he had bargained for leveling come what may.

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