Groves v. John Wunder Co.
Citation: Supreme Court of Minnesota, 205 Minn. 163 (1939)
Facts
Groves leased land and equipment to John Wunder Co. for the purpose of extracting gravel. The contract required Wunder to leave the land at a uniform grade upon completion. Wunder intentionally breached this obligation, leaving the property in worse condition than required. The cost to restore the land to the contracted-for grade would have been approximately 12,160.
Issue
Whether contract damages for breach of a construction or grading obligation should be measured by the cost of completion or by the diminution in market value of the property caused by the breach.
Holding
The Minnesota Supreme Court held that damages should be measured by the cost of completion ($60,000), not the diminution in market value. A willful breach should not allow the breaching party to benefit from their own wrong by limiting damages to the lesser diminution figure.
Rule
When a contractor willfully breaches a construction contract, the non-breaching party is entitled to the cost of completion as damages, even if that amount exceeds the diminution in the property’s market value.
Significance
Groves is typically paired with Peevyhouse v. Garland Coal to illustrate the tension between cost-of-completion and diminution-in-value measures of contract damages. It raises questions about economic waste, the role of willfulness in selecting the damages measure, and the extent to which courts should honor a landowner’s subjective valuation of their property.