Last year, Ashley Harris blogged that Nothing is Fair about Fair Market Value in Missouri. Unfortunately, that is still the case but just like all good principles of law, there are exceptions to the rule, and this one is heaven sent.1
The Leonard Missionary Baptist Church (hereinafter “LMBC”) occupied a building in the City of St. Louis. It was erected in 1900 and the pastor described it as “majestic” and “awesome.” It was in good condition, well maintained, and had 600 members. One winter, a church member plugged a Sears space heater in the library and it started a fire, destroying the building. LMBC erected a new building at a location a few blocks away for 1.8 million dollars. LMBC brought suit against Sears for the design and sale of the defective space heater. The jury returned a awarded LMBC two million dollars plus pre-judgment interest and the court entered judgment in the amount of $2,347,670.75. Sears appealed the verdict.
Sears argued that it was improper for the jury to decide whether cost of replacement or fair market value was the proper measure of damages for the loss of the church. The general rule is that the measure of damages is the difference in the fair market value of the property before and after the injury or the cost of restoring the property, whichever is the lesser amount.2 Sears argued that fair market value was the only measure of damages applicable because the diminution in the value of the church was “far less than the cost of repairs.” LMBC argued that since the church was unique, there was no real market value so it was entitled to recover the replacement cost.
Where expenditures to restore or replace to pre-damage condition are used as the measure of damages, a test of reasonableness is imposed.3 Not only must the cost of replacement or reconstruction be reasonable, but the replacement or reconstruction itself must be reasonably necessary in light of the damage inflicted by the defendant.4
“For certain categories of property, termed ‘special purpose property’ (such as the property of nonprofit, charitable, or religious organizations), there will not generally be an active market from which the diminution in market value may be determined.”5 This is true of such properties as “school yards, church yards, college campuses, buildings under construction, and cemeteries.”6
Missouri courts have adopted the reasoning that fair market value is not always used to ascertain damages because certain categories of property are not bought and sold on the open market.7 In the case at hand, there was evidence that the church was a special purpose property and that there was not an active market from which the fair market value of the church could be determined. Under these circumstances, the proper measure of damages was not determined by reference to the fair market value of the church before and after the fire. The appropriate measure of damages, one that would put LMBC in the same position it was in before the fire, was cost of replacement.
Determining fair market value in Missouri is often tricky, especially with unique properties like churches and schools. So in the midst of this cold winter, please enjoy this video of a warm beach and Keyshia Cole’s, Heaven Sent.
1 Leonard Missionary Baptist Church v. Sears, Roebuck and Company, 42 S.W.3d 833 (Mo.App. E.D. 2001).
2 Culver–Stockton College v. Missouri Power and Light Co., 690 S.W.2d 168, 172 (Mo.App.1985).
3 Trinity Church in City of Boston v. John Hancock Mut. Life Ins. Co., 399 Mass. 43, 502 N.E.2d 532, 536 (1987).
5 Id. at 535-536.
6 Graceland Park Cemetery Co. v. City of Omaha, 173 Neb. 608, 114 N.W.2d 29, 32 (1962).
7 See, e.g., State ex rel. State Highway Comm’n v. Mount Moriah Cemetery Ass’n, 434 S.W.2d 470 (Mo.1968) (fair market value not proper measure of damages for cemetery land); Culver–Stockton College, 690 S.W.2d at 168 (fair market value not appropriate measure of damages for college campus); Reorganized School Dist. No. 2 v. Missouri Pac. R. Co., 503 S.W.2d 153 (Mo.App.1973) (fair market value not appropriate measure of damages for school grounds and school campuses).