ALUE AS THE
EASURE OF THE
Value of Property as a Measure
In the case of destroyed property, replacement value will only sometimes restore P to the RP
Lesser of Two Rule
: a P whose property has been injured may recover the lesser of thediminution of the property's market value (MV) or replacement cost (money you would need to getback as close as possible to the thing lost)
P is entitled to be made whole but the D is generally entitled to make the P whole in theleast expensive way. Court will pick the cheapest way to the D every time
In the case of total destruction, the diminution of property's value and replacement cost arenot always the same
The diminution in MV in the case of replacement is the MV because the thing gotcompletely destroyed (diminution is total)
Rightful Position looked at from a societal perspective (won’t take into accoun
t sentimental value)In Re September 11
Property = leases
P bought the right to 99 years of leases to the WTC (he didn’t purchase the
building, he purchased the right to lease the buildings)i.
Present value of leases $2.5 mil (how much money he was buying the leases for)ii.
Buildings were destroyed. How do you compensate? Court articulates the lesser of two ruleiii.
P says he should get the replacement value = $16.2 billion. Argues that the lesser of 2 rules
doesn’t apply because due to his K, he's on the hook for damages to the property. Basis of
specialty property exception
: property was unique and thus doesn’t have a
can’t apply the lesser of 2 Rule because you can’t determine the F
MV) No robustmarket place that would allow us to set a MV (church, school, etc).1.
Court says there's a market
he was a participant in the very market that wascreated for the WTC after privatization2.
Illustrates that there can be something with special
characteristics, but doesn’t meet
Key is whether there's a market for it
. If it has a value in the businesscontext, we stop.b.
Diminution of MV is 2.5mil (total diminution = value reduced to 0 because of destruction)c.
Loss of Use
: Court doesn’t
look at loss of use to compensate (like Hatahley case)i.
Many courts find that if property is completely destroyed, the cost of use is included in the
FMV (Goodman says this doesn’t make sense & they are not reconcilable). What judges now
do to compensate for loss of use for items that have been destroyed is prejudgment intereston the compensatory amount.ii.
: If damaged, you compensate for loss of use. If its destroyed, you don’t
(controversial)Consumer Items (that are functional and replaceable): Measure value by awarding [replacement
depreciation (at instant before destruction)] This is a way of combating the
driven down because buyer wonders what’s wrong with the good, since p
erson is selling
consumersgenerally value their goods more than the market)
Item that doesn’t have a FMV
Trinity Church v. John Hancock Mutual Life Insurance Co. (VERY IMPORTANT, FOUNDATIONAL CASE)i.
Trinity Church's building was damaged during the construction of the nearby John Hancockbuilding, and it sought damages for the structural harm to the church.
: Since FMV cannot
be ascertained (as the church is landmarked and can’t be torn down, not going to be sold), the
Court examined the condition of the church before and after the damage, then apportioned compensatory relief proportional to the amount of damage actually caused by D.
Thing hasn’t been destroyed
Property was damaged
(cost of repair v. cost of replacement). Trinity church doesn’t
fit into thelesser of 2 rules