Measure of damages an issue in home construction dispute – $185,000 Verdict

This case was tried on damages only following a motion to set aside a prior jury verdict rendered on June 26, 2008, in favor the plaintiffs, Rick and Susan Garmon, against the defendant, Mike Garcia Construction Inc., t/a Mike Garcia Homes, in the amount of $310,000 for constructive fraud. On Aug. 4, 2008, the court granted defendant’s motion for a new trial on the issue of damages only.

The constructive fraud centered on the builder’s innocent or negligent misrepresentation that the exterior siding of their new home would be a drainable synthetic stucco system when in fact at the time the misrepresentation was made the defendant intended to use a non-drainable system known as exterior insulation and finish system (“EIFS”). The contract was entered into on May 15, 1996, and the house was built shortly thereafter. The fraud was not discovered until Aug. 8, 2003.

At the first trial, the defendant objected to the use of any evidence concerning the cost of repairs, approximately $220,000, which the plaintiffs paid in 2006. Instead, the court applied the measure of damages defined as the difference between the actual value of the house at the time the contract was made and the value that the house would have possessed had the misrepresentation been true.

Shortly after the first trial, Rick Garmon passed away. At the second trial (as in the first), Mrs. Garmon testified that the actual value of the house with non-drainable EIFS as of May 15, 1996, was nothing and that she and her husband would not have entered into the contract had they known the truth. At that time, the Garmons already owned the lot and were looking for a builder to construct their home.

Mrs. Garmon testified that the value of the house had the misrepresentation been true would have been $318,000, the amount paid for the house. Plaintiffs claimed the entire $318,000 in diminution in value damages as of May 15, 1996, and requested prejudgment interest from the same date.

Defendant’s experts placed the value of the house had the misrepresentation been true at a range of $290,000 to $315,000, but further opined that there was little or no diminution in value, testifying that the actual value of the house with non-drainable EIFS was essentially the same. The defendant argued that only nominal damages should be awarded.

After three days, the jury returned a verdict in favor of the Garmons in the amount of $185,000, plus prejudgment interest from August 8, 2003.

Including pre-judgment interest, the value of the second jury verdict is currently approximately $280,000, as compared to the original $310,000 jury verdict rendered last summer.

[09-T-036]

Type of Action: Constructive fraud
Injuries Alleged: Damage to house – diminution in value
Name of Case: Garmon v. Mike Garcia Construction, Inc., t/a Mike Garcia Homes
Court: Prince William Circuit Court
Case No.: CL 69476
Date: Feb. 19, 2009
Tried Before: Jury
Name of Judge: William D. Hablen
Demand: $180,000
Offer: $50,000
Verdict/Settlement: Verdict
Amount: $185,000 plus prejudgment interest from Aug. 8, 2003
Insurer: Erie Insurance Company
Plaintiff’s Attorneys: David Hilton Wise and James P. Lukes, Fairfax