376 N.C. 54
N.C.2020Background
- Crescent University City Venture (commercial developer) contracted with general contractor AP Atlantic to build student apartment buildings; AP Atlantic subcontracted framing to Madison, which ordered premanufactured wood trusses from Trussway under a purchase order with specifications and an express warranty.
- Students occupied the buildings in 2014–15; beginning January–May 2015, ceilings/floor trusses sagged or cracked; engineering investigation (SGH) found systemic defects—about 13.6% of metal connector plates failed in sampled trusses.
- Crescent incurred extensive repair costs and relocation/stipend expenses and hired a contractor to perform repairs after disagreements with AP Atlantic on remediation.
- Crescent sued AP Atlantic (contract claims) and later filed a separate negligence claim against Trussway (manufacturer/seller of the trusses) seeking nearly $8 million in economic losses; Crescent and the related matters were consolidated in Business Court.
- Trussway moved for summary judgment arguing the economic loss rule barred Crescent’s negligence claim because Crescent’s alleged injuries were purely economic and arose from the contractual allocation of risk; the Business Court granted summary judgment for Trussway.
- The Supreme Court of North Carolina affirmed, holding the economic loss rule bars Crescent’s tort claim against Trussway absent an extra-contractual duty, and that the residential-homeowner negligence exception does not apply to a sophisticated commercial developer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a commercial developer may recover purely economic losses in tort from a subcontractor/manufacturer when the losses concern the contracted-for subject matter | Crescent: economic loss rule depends on privity; Lord and Oates allow negligence claims by non-privity plaintiffs | Trussway: economic loss rule bars tort recovery for purely economic losses tied to the contract’s subject matter, regardless of privity | Held: Economic loss rule applies; negligence claim barred because no separate extra-contractual duty was alleged or shown |
| Whether Oates (homeowner negligence exception) allows Crescent to sue in tort despite commercial context | Crescent: Oates permits recovery by non-privity plaintiffs for negligent construction causing economic loss | Trussway: Oates is limited to consumer/residential contexts and public-policy grounds for lay homeowners, not sophisticated commercial developers | Held: Oates limited to residential/homebuyer context; does not displace economic loss rule for commercial developers |
Key Cases Cited
- N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73 (establishes application of economic loss rule in construction/subcontractor context)
- East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (adopts economic loss rule in commercial product context; manufacturer has no tort duty to prevent product from injuring itself)
- Oates v. JAG, Inc., 314 N.C. 276 (recognizes negligence remedy for subsequent residential homebuyers absent privity based on public policy)
- Beaufort Builders, Inc. v. White Plains Church Ministries, Inc., 246 N.C. App. 27 (applies economic loss rule to bar negligence claim for purely economic injury tied to a building)
- Chicopee, Inc. v. Sims Metal Works, Inc., 98 N.C. App. 423 (discusses limits on tort recovery for economic losses)
- Moore v. Coachmen Indus., Inc., 129 N.C. App. 389 (applies economic loss rule to component suppliers in construction/product settings)
- Lord v. Customized Consulting Specialty, Inc., 182 N.C. App. 635 (addressed privity issues but does not preclude Ports Authority’s application in commercial development)
- Trs. of Rowan Technical Coll. v. J. Hyatt Hammond Assocs., Inc., 313 N.C. 230 (cited regarding limits and distinctions in contract/tort interplay)