Roman Catholic Church v. La. Gas Serv. Co. - 618 So. 2d 874 (La. 1993)

Rule:

As a general rule of thumb, when a person sustains property damage due to the fault of another, he is entitled to recover damages including the cost of restoration that has been or may be reasonably incurred, or, at his election, the difference between the value of the property before and after the harm. If, however, the cost of restoring the property in its original condition is disproportionate to the value of the property or economically wasteful, unless there is a reason personal to the owner for restoring the original condition or there is a reason to believe that the plaintiff will, in fact, make the repairs, damages are measured only by the difference between the value of the property before and after the harm. Consequently, if a building such as a homestead is used for a purpose personal to the owner, the damages ordinarily include an amount for repairs, even though this might be greater than the entire value of the building.

Facts:

Louisiana Gas Service Company supplied natural gas to an apartment complex owned by appellant property owners. Due to a hard freeze that caused a malfunction of the natural gas regulating equipment utilized by Louisiana Gas to supply gas to the apartments, dangerous amounts of gas surged into the apartments, causing a fire and resulting damages. Appellants, property owners and insurer, brought an action against appellees, Louisiana Gas and insurer, to recover the damages. Louisiana Gas acknowledged liability, but the action went to trial for a determination of the quantum of damages. The trial court limited appellants' recovery against Louisiana Gas to the amount expended to restore the building to its pre-fire condition reduced by depreciation, in an action to determine the quantum of damages suffered from a fire. 

Issue:

Did the lower courts err in limiting plaintiffs' damages to replacement cost, less depreciation, rather than awarding the plaintiffs the full cost of restoration that had been reasonably incurred?

Answer:

Yes.

Conclusion:

The court decided that plaintiffs are entitled to recover from the defendants the full $232,677.00 cost of restoration that had been reasonably incurred. First, the cost of restoring the property in its original condition is not economically wasteful or disproportionate to the value of the property. The value of the apartment complex far exceeds the restoration cost. The complex was acquired by HUD at a cost of $3.3 million, renovated at a cost of $3.0 million, and sold to the Archdiocese for $1.7 million upon the condition that it maintain the complex for 200 poor families for 15 years. Despite the fact that the building destroyed by fire was separate from the other twelve buildings, it contained 16 family units and was a necessary and integral part of the 200 family low income rental project. Under such circumstances, the defendant is not entitled to a credit merely because the Archdiocese has acquired a substantially new unit, presumably with a longer life expectancy than the old. Plaintiff should not be required to finance in part the premature replacement of the housing unit when there is no assurance that this will add to the realizable value of the whole property to which it appertains. An award of full restoration costs might be inequitable in a case where the damaged part was scheduled for early replacement, long before the expiration of the useful life of the whole. Here, however, the damaged building evidently had the same useful life expectancy as the other units in the low rental housing complex. Second, even if the foregoing reason did not exist, there is a reason personal to the owner for restoring the property to its original condition. The interest of the Archdiocese harmed by the fault of the defendant was not purely financial. The Archdiocese did not purchase the complex as a business investment with an eye towards speculation and does not hold the property solely for the production of income. Its object in acquiring and maintaining the facility was to provide housing for its low income parishioners. Moreover, the continuance of the Archdiocese's ownership and housing mission is conditioned upon its removal of the property from commerce and providing housing for 200 poor families during a fifteen year period. In choosing between the cost of repair measure and some other measure of damages, it is important to know how the property is used and what interest in it is asserted, so that the measure can be adopted that will afford compensation for any legitimate use that the owner makes of his property. Finally, even in the absence of either of the foregoing reasons, the plaintiff in the present case is clearly entitled to recover the full cost of restoration because it has, in fact, made the repairs by replacing the building in its original condition.