CACI 3903F: Damage to Real Property

CACI 3903F reads almost like its personal property counterpart, and the resemblance is misleading. Both start with the same comparison. Only one of them lets the plaintiff recover more than the property lost in value — and that exception is what most real property damage cases are actually about.

The default measure

CACI 3903F — Damage to Real Property (Economic Damage) — asks the jury to find either the reduction in the property’s fair market value or the reasonable cost of repairing the harm. Where the evidence supports both, the plaintiff recovers the lesser of the two.

Both figures are measured against the moment of the harm. The reduction in value is the fair market value immediately before minus the fair market value immediately after; the repair cost is what it reasonably takes to put the property back.

The exception that decides most cases

The rule does not stop there, and this is where 3903F parts company with the personal property instruction. Repair cost may be awarded even when it exceeds the diminution in value, where the plaintiff has a genuine personal reason for restoring the property and the cost of doing so is reasonable in relation to the harm and to the value of the property after repair.

Two points follow that are easy to get wrong:

• The personal reason does not require a unique or irreplaceable home. Orndorff v. Christiana Community Builders frames it as personal use of the property together with a bona fide desire to repair or restore — an owner-occupant, not a connoisseur.
• Whether a stated reason legally qualifies is for the judge, not the jury. The jury decides whether the cost is reasonable in relation to the harm; the court decides whether the reason is one the law recognizes at all.

“Reasonable in relation” is not a ratio. Courts look at the expense, the time restoration will take, and the value of the property — which means the economist’s job is to put all three in front of the trier of fact, not to defend a percentage.

Fair market value under 3903F

The instruction defines it as the highest price a willing buyer would have paid a willing seller, with neither under pressure to transact and both aware of all the uses to which the property could reasonably be put.

That last clause matters more on real property than it does anywhere else in the 3903 series. Highest and best use is not necessarily current use. A damaged parcel’s before-value has to reflect what the market would actually pay for it, which can turn on entitlements, zoning or development potential that the current owner never exercised.

Who has to prove what

A plaintiff who proves damages through repair cost has made a prima facie case. Under Armitage v. Decker, it then falls to the defendant to put on evidence that the repair cost exceeds the property’s value — the plaintiff does not have to prove a negative.

Practically, that shapes who needs an appraisal. A defendant contesting a repair-cost claim without a before-and-after valuation has left the comparison uncontradicted.

What 3903F does not cover

3903F is an economic damage instruction. Losses that sit next to it belong under their own headings:

• CACI 3903G — loss of use of real property. A separate element, separately proven.
• CACI 3903H and 3903I — damage to an annual crop and to a perennial crop. Different measures again, and the distinction between the two is real money in agricultural matters.
• CACI 3903J — damage to personal property. Contents are not the building.
• CACI 3903N — lost profits, where the damaged property was in commercial use.

Annoyance, discomfort and emotional distress can be recoverable in California on the right facts — in nuisance, for instance — but they are noneconomic damages pleaded and instructed on their own footing. They are not a line in a 3903F calculation, and an economist should not be the one putting a number on them.

A worked example

• Fair market value of the house immediately before the harm: $900,000
• Fair market value immediately after: $640,000
• Reduction in fair market value: $260,000
• Reasonable cost of repair: $310,000

On the default measure the award is $260,000 — the lesser figure. But if the plaintiff lives in the house and genuinely intends to restore it, and $310,000 is reasonable against a $900,000 property, the repair cost is available instead. The whole case can turn on evidence about the owner’s intention that has nothing to do with either appraisal.

Where these analyses come apart

1. An after-value that is really a distressed value. What a fire-damaged parcel fetches from an investor buying on speculation is not fair market value as the instruction defines it.
2. Repair scopes that improve the property. Betterment inflates the repair figure and invites the whole estimate to be discounted.
3. Valuing at the wrong date. In a moving real estate market, an appraisal done at the time of trial answers a different question than the one the instruction asks.
4. Silence on the personal reason. Where repair cost is the theory and it exceeds diminution, the record has to establish the owner’s use and intention. That is testimony, not arithmetic, and it is often the missing piece.

What an economist contributes

Establishing both values on defensible transaction evidence, testing the repair scope for betterment, laying out the expense-time-value comparison the reasonableness question actually turns on, and keeping loss of use, contents and lost profits in their own columns rather than folded into a single number. Where the damaged property is income-producing, the real property measure and the lost profits analysis run in parallel and have to be reconciled so the same loss is not counted twice.

Related: commercial litigation support · calculating damages to real property · California economic damages. Source: the Judicial Council’s California Civil Jury Instructions.