2010.06.17

2009 (Ju) 1742

Minshu Vol. 64, No. 4

Judgment concerning, in the case where a new building, which is the subject matter of sale, must be pulled down and rebuilt due to serious defects contained therein, whether or not the benefit that the purchaser of the building has enjoyed from having lived in it can be set off or similarly adjusted with the purchaser’s losses and therefore can be deducted from the amount of compensation for damage based on a tort as claimed by the purchaser against the constructor, etc., equivalent to the expenses to be required for rebuilding

Case to seek damages

Judgment of the First Petty Bench, dismissed

Nagoya High Court, Judgment of June 4, 2009

Where a new building, which is the subject matter of sale, must be pulled down and rebuilt due to serious defects contained therein, if, according to the socially accepted standards, the building itself is judged to have no social or economic value on the grounds that, for example, there is the concrete danger of the collapse of the building because those defects would affect its safety in terms of structural strength, the benefit that the purchaser of the building has enjoyed from having lived in it should not be set off or similarly adjusted with the purchaser’s losses and therefore should not be deducted from the amount of compensation for damage based on a tort as claimed by the purchaser against the constructor, etc., equivalent to the expenses to be required for rebuilding.
(There is a concurring opinion.)

Article 709 of the Civil Code
A person who has intentionally or negligently infringed any right of others, or legally protected interest of others, shall be liable to compensate any damages resulting in consequence.

The final appeal is dismissed.
The appellants of final appeal shall bear the cost of the final appeal.

Concerning the reasons for petition for acceptance of final appeal argued by the appeal counsel, NISHINO Yasuo (except for those excluded)
1. In this case, the appellees of final appeal who purchased a new building, alleging that the building has defects including its inadequate safety in terms of structural strength, seeks damages, etc. based on a tort from the appellants of final appeal who performed the designing, construction, etc. of the building.

2. The outline of the facts legally determined by the court of prior instance is as follows.
(1) Appellant Y1 concluded a contract for work with Appellant Y2, for the purpose of building the building, which is a steel-framed and slate-roofed three-story residential building, indicated in 2 of the list of articles attached to the judgment in first instance (hereinafter referred to as the “Building”). Appellant Y2 took charge of its construction, while Appellant Y3 and Appellant Y4 took charge of its designing and supervision of the construction work. The construction of the Building was completed no later than May 14, 2003.
(2) On March 28, 2003, the appellees purchased the Building with its site from Appellant Y1 at the price of 37 million yen, equally sharing the interest in these properties. On May 31, 2003, the appellees received the delivery of the Building, and have been living there since then.
(3) The Building has, in its beam-column connections, parts that are not welded and parts that should have been butt-welded (by full joint penetration welding) but are welded by fillet welding or partial joint penetration welding, and in addition, it also has the following serious defects that would affect its safety in terms of structural strength. Due to these defects, the Building must be pulled down and rebuilt.
(a) As the members of the columns on the first and second floors are too small, the beam-column strength ratio of these columns fails to meet the minimum required level; as for the columns on the first floor, their stress intensity exceeds the allowable stress limit.
(b) As the members of the girders on the second floor are too small, their stress intensities exceed the allowable stress limit.
(c) The joints of the high-strength bolts of the girders on the second and third floors are not strong enough.
(d) As the furring strips of the exterior wall are made of light gauge steel frames, which should usually be used for the furring strips of partition walls that are not exposed to wind blasts, there is the risk that when the exterior wall is exposed to wind in the event of a windstorm, this would cause a significant deflection to the furring strips and the exterior wall itself would collapse.
(e) As the mat-slab foundations are not thick enough, most of their stress intensities exceed the allowable stress limit.

3. The court of prior instance recognized the appellants’ tort liability, and determined their liability to compensate for damage in an amount equivalent to the expenses to be required for pulling down the Building and rebuilding, upholding the appellees’ claims to the extent that they seek payment of 15,644,715 yen per person, with delay damages accrued thereon.

4. The appeal counsel argues that the benefit that the appellees have enjoyed from having lived in the Building until now, and the benefit that they will enjoy from pulling down the Building and rebuilding, thereby acquiring a new building with a longer life, should be set off with their losses, and should therefore be deducted from the amount of compensation, equivalent to the expenses to be required for rebuilding.

5(1) In cases where a new building, which is the subject matter of sale, must be pulled down and rebuilt due to serious defects contained therein, if, according to the socially accepted standards, the building itself is judged to have no social or economic value on the grounds that, for example, there is the concrete danger of the collapse of the building because those defects would affect its safety in terms of structural strength, it is appropriate to construe that the benefit that the purchaser of the building has enjoyed from having lived in it should not be set off or similarly adjusted with the purchaser’s losses and should therefore not be deducted from the amount of compensation for damage as claimed by the purchaser against the constructor, etc., equivalent to the expenses to be required for rebuilding.
According to the facts mentioned above, as the Building has serious defects that would affect its safety in terms of structural strength, as mentioned in 2(3) above, there is the concrete danger of the collapse of the Building, and it is evident that according to the socially accepted standards, the Building should be judged to have no social or economic value. Consequently, the benefit that the appellees have enjoyed from having lived in the Building until now should not be set off or similarly adjusted with their losses and should therefore not be deducted from the amount of compensation that they claim.
(2) Even where the appellees, by pulling down the Building, which has no social or economic value, and rebuilding, will eventually acquire a new building with a longer life as compared to the case where they received the delivery of a building with no defect from the beginning, this consequence cannot be regarded as a benefit and should not be set off or similarly adjusted with their losses.

6. We can affirm the holdings of the court of prior instance as they go along with this reasoning. We cannot accept the appeal counsel’s arguments.

Therefore, the judgment has been rendered in the form of the main text by the unanimous consent of the Justices. There is a concurring opinion by Justice MIYAKAWA Koji.

In most cases, defects contained in buildings are not easily discovered, and it takes time to identify the details of such defects. It is often the case that the seller, etc. of a defective building contests the purchaser’s claim for compensation and refuses to pay damages. While litigation is ongoing, the purchaser usually has no choice but to continue to live in such less safe building for economic reasons or other reasons. In such case, if it is assumed that the purchaser has benefited from living in the building or will benefit from rebuilding with the compensation money from the seller, etc. thereby acquiring a new building with a longer life, and such assumed benefits can be set off or similarly adjusted with the purchaser’s losses, the amount of compensation would become smaller as the payment of compensation delays. This is unfair because it would benefit the seller, etc. who does not act with sincerity. It may be inappropriate to regard living in a building which has serious defects and involves the danger of collapse as a legal benefit and to consider that rebuilding brings about a longer life even when such seriously defective building has no exchange value at all.

Justice MIYAKAWA Koji
Justice SAKURAI Ryuko
Justice KANETSUKI Seishi
Justice YOKOTA Tomoyuki
Justice SHIRAKI Yu