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Compensatory Damages In Property Cases

A general principle regarding damages is that a claimant can recover compensation by an action for tort for all injuries that result from a defendant’s wrongful act or omission.  The rule of damages for an injury that is caused to a property is the same as that applied for damages in tort cases.  An injured party is entitled for damages that will compensate his/her loss caused by the defendant’s wrongful act or omission.  However, there is no established rule for determining the amount of damages that is caused by a destruction of the property.  Thus the amount of damages is calculated by considering the character of a property and the nature and injury to the property.[i]

The ultimate goal behind giving compensation is to put an injured party back to his/her former position.  Hence, in most cases an injured party is given an amount equivalent to the actual loss suffered[ii].  The compensation will be given only for those damages that arose naturally or from the wrongful act of the defendant.  An injury cannot be the result of an injured’s act[iii].

The amount of compensation is calculated at the discretion of a court.  The amount so calculated by the court will not be set aside unless the court exercises the discretion unlawfully[iv].  However, the calculation of compensatory damages is a question of fact than discretion[v].

Compensation is given to a property owner for the following reasons:

  • discomfort, frustration, and personal inconvenience caused by intrusion into the owner’s property right’s;[vi]; and
  • consequential damages that arose from the defendant’s wrongful act[vii].

A compensation will be denied for the following reasons:

  • remote injuries;
  • purely sentimental matters ; and
  • an injury to the property’s reputation.

Generally, a “before and after rule” is applied for calculating the damages.  According to the rule of before and after, damages for the destruction of property are measured by taking the difference in the property’s market value immediately before and after the injury.  If the property is totally destroyed, then the decrease in market value is the market value of the property at the time of destruction.  The value of a property is not the controlling factor for determining compensatory damages.

While calculating the market value of a property for the purpose of damages, the following points are taken into consideration:

  • the quality of the real property;
  • the claimant’s interest in the real property;
  • the injury to a claimant’s interest in property; and
  • the entire area of a property is taken into consideration if the wrongful act done to a portion of property affects the entire property.

There are other alternative measures for calculating the compensatory damages.  The alternative measure is the reasonable cost of repairing a property.  However, mental suffering cannot be taken as a ground for calculating damages unless an unwarranted motive is proven.

A claimant will be allowed to recover the cost of restoration only if it is less than the value of property.  However, some courts have allowed the cost of repairs that exceeded the value of property if an owner has some personal reason for restoring the land to its original condition and the cost of restoration is not unreasonable.

The proper measure for calculating the damages for a partially damaged property is the reasonable cost of repairs.  This measure is usually adopted when the injury can be cured by a reasonable cost of repair and when such reasonable cost of repair is less than the difference in the market value that is obtained by applying the before and after rule.  However, if the market value is not a fair compensation for the injury to personal property then a claimant is entitled to recover the value of the property.

Any interference with the right of inheritance will be compensated with an amount that is equivalent to the benefit that s/he would have received in the absence of such interference[viii].  In the case of misappropriation of privacy claims, an injured will be compensated with an amount that is equivalent to the economic value of the individual’s public exposure[ix].  In a case of an injury of lost profits that resulted from interference with a claimant’s property rights, the injury is compensated with an award of lost business profits[x].  In a case of misappropriation of manufacturer’s trade secrets, the reasonable royalty theory is used for calculating the damages.

The courts apply the reasonable royalty theory under the following circumstances:

  • when other theories, such as lost profits or unjust enrichment, cannot successfully recover the damages[xi];
  • when the parties have already created a royalty arrangement; and
  • when the court finds that neither actual damages incurred by the holder of the trade secret nor unjust enrichment by the user cannot be proven.

However, a claimant who is injured with the intentional interference in his/her prospective business relationship will not be granted emotional distress damages unless s/he demonstrates the actual economic damages[xii].  While in some other states emotional distress damages award are made on evidence of a tortious interference with contract claim.

Damages for the injury caused to real property depend upon the nature of a claimant’s right.  But when real property is subjected to an injury of a permanent nature, the injury can be remedied only by an amount equivalent to the market value of a property that existed at the time of the injury.

The general rule on calculating damages for the destruction of a fixture in property is to take the value of the fixture prior to its destruction.  However a detailed analysis of the cases involving destruction or damages in the fixtures shows that the court follows three different rules for calculating the value of a fixture.  They are:

  • in some cases courts consider the condition of a fixture that existed prior to the destruction;
  • in some cases courts consider the cost of the repair required to bring a fixture to its prior condition that existed before the destruction; and
  • in some cases courts consider the reduction in value of a fixture immediately before and after the injury of a fixture (before and after rule).

Courts may follow any of these rules to arrive at a just and reasonable decision.

When an injury is caused to real property, structure or fixture attached to real property, or personal property in a structure, an owner can recover damages for all three injuries.

Depreciation in rental value will be a proper tool for calculating damages incurred by a property that is used for business purpose on rent.  If the injury is permanent, then the depreciation in the value of a property will be calculated.

In a case of contamination of land, a landowner will get stigma property damage.  To be eligible for stigma property damage, a landowner must prove that even after repair of the physical injury the stigma over the property will remain.

Generally, injury to shade and ornamental trees are compensated with damages.  There is no fixed rule for calculating the damages for the injury to shade and ornamental trees.  The before and after rule are applied by the courts for calculating the damages in a case of injury to trees and shrubs.  The before and after rule takes into consideration the difference between the market value of a land before and after the destruction of the trees.  In some cases, in addition to the damages calculated under the before and after rule, courts have allowed claimants to recover reasonable costs incurred for replacing the damaged trees.  If there is any confusion as to the question that whether the severance affected the value of a land, the court will calculate the value of the tree separately from the value of a land.  Some courts have even gone to the extent of awarding compensation for the deprivation of comfort and convenience of the tree.

While calculating damages for the injury that is caused to a land by the removal of sand or gravel from a property, courts mainly adopt two approaches.  Courts may apply the before and after rule or consider the value of the material removed for calculating the damages. However, if the damage is caused to a productive tree or crops in a property, generally the measure of damages for destruction is calculated by applying the before and after rule and sometime a claimant can also recover the value of the crop.

If a parcel of a property is destructed, a claimant is entitled for restitutional damages.  However, if the restitutional damages result in double compensation then it will not be granted.

An owner of a chattel can recover compensation for the time that he had lost while waiting for the repair of the property, if it is shown that a claimant was unable to perform his/her work without the use of the chattel.

There are situations where no market value can be assigned to a personal property.  For example, a family photograph and lecture notes has got no market value.  In such cases the measure adopted to compensate for the loss is to award the full value of the personal property to its owner.  While in the case of those personal property to which a second hand value can be attached like clothing and household articles, the injury is compensated with the actual value of the item.  However, emotional injury attached with the loss of the clothing and household articles will not be compensated.  An exception to this general rule is jewelry. Jewelry is not considered a household good or wearing apparel.  Therefore, damage to jewelry will be compensated with fair market value.

The original cost of an item will be calculated by taking into account the following:

  • the time period for which an item is used;
  • the depreciation caused to an item by the use;
  • the condition of an item just before the injury; and
  • the costs that is incurred for replacement of an item.

Generally, recovery in cases of damages incurred to a personal property by the use of that property by a defendant and recovery in cases of damage caused by the tortuous act of a defendant are given different treatment.  Normally, recovery of damages to personal property is treated as a separate category of damages.

If the property damaged by a defendant can be repaired then a claimant will be entitled to recover the following:

  • the difference between the market value of a property before injury and market value of a property after injury; and
  • the value of the loss that is caused by the use of a property by a defendant during the time period taken by a defendant to repair a property.

In some cases a claimant is allowed to recover the cost of the repair as well[xiii].  However the value that is calculated for recovery should not be more than the prior value that existed for the chattel before injury[xiv].  The rule of limitation on value of recovery will not be applied in cases where the amount required for repair is not clear.

Compensatory damages granted to an owner of a damaged building include:

  • an allowance for loss of rent or for the failure to use the building;
  • an allowance for the expense that is incurred for removing the stock from the building;
  • an allowance for the loss resulting from shifting the stock; and
  • an allowance for the loss incurred by the interruption of the business.

However, if the property cannot be remedied from an injury then courts will grant permanent damages.  Any claim for permanent injury damages will not bar a claimant’s right for consequential injury damages.  In a consequential damage case, a claimant must prove that the injury was the result of the wrongful act of the defendant.  Also, the claimant must prove the value of a property that is injured.

[i] Pa. Power & Light Co. v. Decker, 1966 Pa. Dist. & Cnty. Dec. LEXIS 1 (Pa. C.P. 1966)

[ii]Givens v. Markall, 51 Cal. App. 2d 374 (Cal. App. 1942)

[iii] Givens v. Markall, 51 Cal. App. 2d 374 (Cal. App. 1942)

[iv] Gatewood v. Sampson, 812 So. 2d 212 (Miss. 2002)

[v] Kersten v. H.C. Prange Co., 186 Wis. 2d 49 (Wis. Ct. App. 1994)

[vi] Axtmann v. Chillemi, 2007 ND 179 (N.D. 2007)

[vii] Johnson v. Atlantic C. L. R. Co., 184 N.C. 101 (N.C. 1922)

[viii] Whalen v. Prosser, 719 So. 2d 2 (Fla. Dist. Ct. App. 2d Dist. 1998)

[ix] Duncan v. Record Pub. Co., 145 S.C. 196 (S.C. 1927)

[x] Fifth Third Bank v. United States, 71 Fed. Cl. 56 (Fed. Cl. 2006)

[xi] Linkco, Inc. v. Fujitsu Ltd., 232 F. Supp. 2d 182 (S.D.N.Y. 2002)

[xii] Lynch v. City of Boston, 180 F.3d 1 (1st Cir. Mass. 1999)

[xiii] Fairchild v. Keene, 93 Ill. App. 3d 23 (Ill. App. Ct. 4th Dist. 1981)

[xiv] Lucas v. Andress, 17 La. App. 329 (La.App. 1931)

Inside Compensatory Damages In Property Cases