Long Trail House Condominium Assoc. v. Engelberth Construction, Inc. v. Morgan's Roofing & Construction
192 Vt. 322
| Vt. | 2012Background
- In January 1997, Stratton Corporation and Engelberth entered into a preconstruction agreement outlining feasibility, materials, permits, design-team cooperation, with Engelberth disclaiming duty to ascertain compliance with laws.
- March 1998, Stratton and Engelberth entered into a standard owner-contractor form contract stating the agreement was the entire agreement and the contract documents did not create any contractual relationship beyond owner and contractor.
- Long Trail House Condominium Association was formed in March 1999 and later notified Stratton of alleged construction defects after initial minor leaks and discovered significant damage.
- Between 1999 and 2007, engineers found defects including water intrusion, improperly supported trusses, balcony water damage, load-bearing or braced walls issues, risking collapse.
- May 2007 settlement: Stratton, Intrawest, and the Association settled design/construction defect claims for $7,025,000, with Intrawest pursuing a claim against Engelberth to recover funds paid.
- October 2008, the Association sued Engelberth alleging negligence and breach of warranties; remediation costs exceeded the settlement amount by about $1.5 million.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the negligence claim is barred by the economic loss rule | Association urges duty independent of contract, argues exception for professional services/special relationship | Engelberth maintains purely economic damages fall under contract; no independent duty exists | Negligence claim barred by economic loss rule; no independent duty or professional-services exception applies |
| Whether implied warranties pass to a subsequent purchaser despite lack of privity | Meadowbrook and Rothberg support passing implied warranties to subsequent purchasers | Privity required; no sale occurred between Engelberth and the Association; no implied warranty breach lies | Implied warranties do not extend to the Association absent privity; warranty claim affirmed dismissal |
Key Cases Cited
- EBWS, LLC v. Britly Corp., 2007 VT 37 (Vt. 2007) (economic loss rule bars purely economic tort damages in construction defects)
- Heath v. Palmer, 2006 VT 125 (Vt. 2006) (economic losses from construction defects sound in contract)
- Springfield Hydroelectric Co. v. Copp, 172 Vt. 311 (Vt. 2001) (duty analysis independent of privity in economic-loss context)
- Hamill v. Pawtucket Mut. Ins. Co., 2005 VT 133 (Vt. 2005) (duty prerequisite; foreseeability alone not enough for tort of economic loss)
- Rothberg v. Olenik, 128 Vt. 295 (Vt. 1970) (implied warranty of habitability for new homes; privity not strictly required in rationale)
- Meadowbrook Condominium Ass’n v. South Burlington Realty Corp., 152 Vt. 16 (Vt. 1989) (implied warranties to latent defects; privity considerations discussed)
- Paquette v. Deere & Co., 168 Vt. 258 (Vt. 1998) (economic loss vs. physical harm; product-liability context relevant to economic losses)
- Crowell Corp. v. Topkis Constr. Co., 280 A.2d 730 (Del. Super. Ct. 1971) (limits on tort recovery absent physical injury or dramatic incidents)
- Zukatis v. Perry, 165 Vt. 298 (Vt. 1996) (elements of common-law negligence; injury required)
- Speight v. Walters Dev. Co., 744 N.W.2d 108 (Iowa 2008) (subsequent purchasers' liability for latent defects cited as trend)
- Lempke v. Dagenais, 547 A.2d 290 (N.H. 1988) (extension of implied warranty to subsequent owners within reasonable time)
- Redarowicz v. Ohlendorf, 441 N.E.2d 324 (Ill. 1982) (implied warranty of workmanlike construction extends to subsequent purchasers)
- Meadowbrook Condominium Ass’n v. South Burlington Realty Corp., 152 Vt. 16 (Vt. 1989) (see above for implied warranty extension rationale)