Reference no: EM133684894

Question

A case that has engendered substantial academic and judicial controversy is that of Peevyhouse v. Garland Coal and Mining Co., 382 P.2d 109 (Okla. 1962).10 Willie and Lucille Peevyhouse leased farmland to the Garland Coal Company. The Peevyhouses agreed to let Garland strip-mine for coal as long as it performed remedial work at the end of the five-year lease term. Garland mined the coal, but it didn't do the remedial work. The Peevyhouses sued, claiming damages in the amount of $25,000. This was the approximate p. 807amount necessary to restore the land to the condition promised by Garland. At trial, Garland did not dispute liability but argued that its damages should be limited to the diminution in the value of the farm due to its breach. It introduced evidence that the failure to restore the land had only reduced the market value of the farm by $300. The jury found damages in the amount of $5,000, although there was evidence in the record that this amount would exceed the value of the farm even had the remedial work been done. The Oklahoma Supreme Court affirmed judgment in favor of the Peevyhouses but reduced the amount of damages to $300 (all of which, apparently, went to pay for the costs of litigation). In so holding, the court stated:

We therefore hold that where, in a coal mining lease, lessee agrees to perform certain remedial work on the premises concerned at the end of the lease period, and thereafter the contract is fully performed by both parties except that the remedial work is not done, the measure of damages in an action by lessor against lessee for damages for breach of contract is ordinarily the reasonable cost of performance of the work; however, where the contract provision breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the nonperformance. . . . Under the most liberal view of the evidence herein, the diminution in value resulting to the premises because of nonperformance of the remedial work was $300.00.

Based on this sketch, is Peevyhouse consistent with Jacob and Youngs, Inc. v. Kent? With Landis v. William Fannin Builders, Inc.? As a matter of policy, do you think Peevyhouse represents good or bad law, and why?