Can a coal mining lessee who breaches a contract by failing to perform agreed-upon remedial work be held liable for damages beyond the direct cost of performing that work?

Willie and Lucille Peevyhouse leased their farm, which contained coal deposits, to Garland Coal and Mining Company for a five-year period beginning in November 1954. The lease agreement included specific provisions requiring Garland Coal to perform restorative and remedial work at the end of the lease term. This work, estimated to cost approximately $29,000, involved moving thousands of cubic yards of dirt. Upon the lease's conclusion, Garland Coal failed to carry out the agreed-upon remedial work.

The Peevyhouses subsequently filed a lawsuit against Garland Coal, seeking $25,000 in damages for breach of contract. During the trial, expert testimony corroborated the $29,000 cost estimate for the remedial work. Garland Coal presented evidence suggesting that the actual diminution in the farm's value due to their failure to perform the work was only about $300. The jury ultimately returned a verdict in favor of the Peevyhouses, awarding them $5,000 in damages.

The plaintiffs initially brought suit in a lower court, where a jury trial was held. The jury rendered a verdict in favor of the plaintiffs, awarding them $5,000 in damages. Following this decision, both the plaintiffs and the defendant filed appeals, challenging aspects of the lower court's ruling. As a result of these appeals, the case was elevated to the Supreme Court of Oklahoma for review of the lower court's decision.

(Jackson, J.)

Yes. A coal mining lessee who breaches a contract by failing to perform agreed-upon remedial work can be held liable for damages, but those damages are limited based on the specific circumstances of the breach.

The measure of damages for breach of contract is ordinarily the reasonable cost of performance. However, this general rule is subject to important limitations. When the breached provision is merely incidental to the main purpose of the contract, and the economic benefit to the lessor from full performance would be grossly disproportionate to the cost of performance, damages are limited to the diminution in value resulting from non-performance. This principle stems from statutory provisions limiting damages to reasonable amounts and preventing recovery of damages greater than what would have been gained by full performance. The concept of avoiding "economic waste" is a key consideration, as is the relationship between the expense involved and the "end to be attained." In applying these principles, the economic benefit to be derived from full performance must be weighed against the cost of remedying the breach. Where the cost of performance is grossly disproportionate to the benefit, it would be unreasonable and unjust to apply the general rule. Instead, the diminution in value resulting from the breach becomes the proper measure of damages. This approach balances the rights of the injured party with the principle of reasonable compensation, preventing windfalls and ensuring that damages serve their proper compensatory function rather than acting as a punitive measure.

Dissent (Irwin, J.) The proper measure of damages should be the cost of performance. Considering the economic value of performance to the plaintiffs rather than the cost of performance effectively rescinds the contract and creates a new one, ignoring the solemnity of the original agreement. This approach undermines the fundamental principles of contract law and the parties' freedom to negotiate their own terms.

Concurrence (Welch, J.) Concurred with the majority opinion without providing a separate written opinion.

Concurrence (Davison, J.) Concurred with the majority opinion without providing a separate written opinion.

Concurrence (Halley, J.) Concurred with the majority opinion without providing a separate written opinion.

Concurrence (Johnson, J.) Concurred with the majority opinion without providing a separate written opinion.

Dissent (Williams, J.) Dissented with the majority opinion without providing a separate written opinion.

Dissent (Blackbird, J.) Dissented with the majority opinion without providing a separate written opinion.

Dissent (Berry, J.) Dissented with the majority opinion without providing a separate written opinion.