Alan O. AAS et al., Petitioners,
v.
The SUPERIOR COURT of San Diego County, Respondent;
William Lyon Company et al., Real Parties in Interest.
Provencal Community Association, Petitioner,
v.
The Superior Court of San Diego County, Respondent;
William Lyon Company et al., Real Parties in Interest.
Supreme Court of California.
*719 Procopio, Cory, Hargreaves & Sаvitch, Steven M. Strauss, Edward I. Silverman and Victor M. Felix, San Diego, for Petitioners Alan O. Aas et al.
Epstein & Grinnell, Douglas W. Grinnell, San Diego, Luis E. Ventura, El Centro; The Law Offices of Duane E. Shinnick, Silldorf, Shinnick & Duignan and Duane E. Shinnick, San Diego, for Petitioner Provencal Community Association and for Consumer Attorneys of California as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
Ian Herzog, Santa Monica; Douglas Devries, Sacramento; Roland Wrinkle, Woodland Hills; Harvey R. Levine, San Diego; Robert Steinberg, Los Angeles; Thomas G. Stolpman, Long Beach; William D. Turley, San Diego; Mary E. Alexander, Menlo Park; Joseph Harbison III, Sacramento; Bruce Broilett; Wayne McClean, Woodland Hills; Leonard Sacks, Granada Hills; Tony Tanke, Redwood City; Lea-Ann Tratten; Steven J. Kleifield, Los Angeles; David Rosen; Moses Lebovits, Los Angeles; Christine Spagnoli; James Sturdevant, San Francisco; Daniel Smith; Deborah David, Los Angeles; Lawrence Drivon; Thor Emblem, Escondido; Rick Simons; David Casey, Jr., San Diego, Kasdan, Simonds, McIntyre, Epstein & Martin and Kenneth S. Kasdan, Irvine, for Consumer Attorneys of California as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
*720 Verboon, Whitaker & Peter, Mark A. Milstein and Michael T. Whitaker, Los Angeles, for Southern California Apartment Owners Association as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
Wolf, Rifkin & Shapiro, Leslie S. Marks, Los Angeles, and Douglas A. Lusson, San Diego, for League of California Homeowners as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
Berding & Weil and James O. Devereaux, Alamo, for the Executive Council of Homeowners as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
Berger & Hopkins, Jane Francis Hopkins and A. Alan Berger, San Jose, for the Structural Engineers Association of California as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.
Orbach & Huff, David M. Huff and Eric P. Weiss, Los Angeles, for Coalition of American Structural Engineers, Park Purdue Homeowners Association, Angelina Heights Homeowners Association and Silverado Oaks Homeowners Association as Amici Curiae on behalf of Petitioners Alan O. Aas et al.
Williams, Wester, Hall & Nadler and Scott A. Williams, Greenbrae, as Amici Curiae on behalf of Petitioners Alan 0. Aas et al.
Burdman & Benson and Linda Angle-Keny, San Diego, as Amici Curiae on behalf of Petitioners Alan 0. Aas et al.
No appearance for Respondent.
Newmeyer & Dillion, Gregory L. Dillion, Timothy S. Menter, Gene M. Witkin, Newport Beach; Lincoln, Gustafson & Cercos, Thomas J. Lincoln and Charles K. Egan, San Diego, for Real Parties in Interest the William Lyon Company and Lyon Communities, Inc.
Dale, Braden & Hinchcliffe and Suzanne M. Martin, for Real Parties in Interest Ben F. Smith, Inc., and B & L Plastering.
Wilson, Elser, Moskowitz, Edelman & Dicker, Andrew J. Blackburn, Long Beach, and William S. Roberts, San Diego, for Real Parties in Interest Wеst Coast Sheet Metal, Inc., and Ben F. Smith, Inc.
Kring & Brown, Jeffrey A. Lake, San Diego, and Jon H. Van de Grift, for Real Parties in Interest Ben F. Smith, Inc., and New Continental Tile & Marble Co., Inc.
Maxie Rheinheimer Stephens & Vrevich, Barry M. Vrevich, Darin L. Wessel, San Diego, Kelegian & Thomas and Michael Paul Thomas, Newport Beach, for Real Party in Interest Branco Corporation.
Bullard & Olin, Robert M. Granafei and Lee H. Graham, Orange, for Real Party in Interest Cal West Nurseries, Inc.
Brownwood, Rice & Zurawski and Michael F. Saydah, San Diego, for Real Parties in Interest C.R.E. Electric and Ghianni Corporation.
Acker, Kowalick & Whipple, Anthony H. Whipple, W. Frederck Kowalick, Linwood Warren, Jr., Catherine L. Rhodes and Tawnya L. Southern, for Real Party in Interest Premier Window Products, Inc.
Farmer, Weber & Case, David Weber; The Law Office of Mark Siegel and Mark Siegel, for Real Party in Interest Sun Plumbing Company, Inc.
Kolod, Wager & Gordon, Scott M. Kolod, Jerome A. Wager, San Diego, Vekeno Kennedy; Law Offices of Elisa J. Nemeth and Elisa J. Nemeth, for Real Party in Interest Allstate Plumbing.
Cozad & Krutcik and Ronald J. Cozad, Mission Viejo, for Real Party in Interest Schmid Insulation Contractors, Inc.
Berger, Kahn, Safton, Moss, Figler, Simon & Gladstone, Timothy A. Nicholson and Stephen L. Weber, Irvine, for Real Party in Interest Surecraft Supply, Inc.
Perkins & Miltner, San Diego, and Timothy E. Salter, for Real Party in Interest Bowers Construction Co.
Callahan, McCune & Willis and Norma Marshal, San Diego, for Real Party in Interest Frank Bowers Construction.
*721 Balestreri, Pendleton & Potocki, Thomas A. Balestreri, Jr., Mary B. Pendleton, Michael M. Freeland, San Diego, Maurine P. Brand; Kring and Brown, Irvine, and Jeffrey A. Lake, San Diego, for South Coast Framers, Inc., Alta Drywall, Inc., West Coast Sheet Metal and D.J. Drywall, Inc., as Amici Curiae on behalf of Real Parties in Interest.
Lewis, D'Amato, Brisbois & Bisgaard, Costa Mesa, Robert V. Closson, San Diego, Terrell A. Quealy and Judith A. Lewis for United National Insurance Company as Amicus Curiae on behalf of Real Parties in Interest.
John H. Findley, Sharon L. Browne, Sacramento, and Stephen R. McCutcheon, Jr., for Pacific Legal Foundation as Amicus Curiae on behalf of Real Parties in Interest.
Dale, Braden & Hinchcliffe, George D. Dale, Suzanne M. Martin; Perkins & Miltner, San Diego, Timothy E. Salter; and Kathryn Turner-Arsenault, Escondido, for the Construction Defect Defense Action Coalition as Amicus Curiae on behalf of Real Parties in Interest.
Fred J. Hiestand, Sacramento, for the Association for California Tort Reform as Amicus Curiae on behalf of Real Parties in Interest.
COX, Castle & Nicholson, Sandra C. Stewart, Jeffrey D. Masters, Debbie L. Freedman, Los Angeles; Gray, Cary, Ware & Freidenrich, San Diego, and Jonathan B. Sokol, Los Angeles, for the Building Industry Legal Defense Foundation and the California Building Industry Association as Amici Curiae on behalf of Real Parties in Interest.
White, Gentes & Garcia, Timothy S. Noon and Charles R. Bongard, San Diego, for the Associated General Contractors of America, San Diego Chapter, Inc., as Amicus Curiae on behalf of Real Parties in Interest.
Thelen Reid & Priest, Gary L. Fontana, Hilary N. Rowen, James A. Riddle, San Francisco; Craig A. Berrington and Laura L. Kersey, Washington, D.C., for American Insurance Association as Amicus Curiae on behalf of Real Parties in Interest.
Parker & Stanbury, Jenna L. Price and Mary-Tyler Crenshaw, for West Coast Sheet Metal and H & D Construction as Amici Curiae on behalf of Real Parties in Interest.
Morris, Polich & Purdy, Randy Koenig and Gary L. Jacobsen, San Diego, as Amici Curiae on behalf of Real Parties in Interest.
Gibbs, Giden, Locher & Turner, Barry C. Vaughan and Michael I. Giden, Los Angeles, for CalMat Co. as Amicus Curiae.
WERDEGAR, J.
In this case we are asked to decide whether homeowners and a homeowners association may recover damages in negligence from the developer, contractor and subcontractors who built their dwellings for construction defects that have not caused property damage. Plaintiffs would find an affirmative answer in the tort of "negligent interference with prospective economic advantage" described in J'Aire Corp. v. Gregory (1979)
I. Background
This matter comes to us on review of consolidated writ proceedings affecting two cases in the superior court. Plaintiffs in Aas et al. v. William Lyon Company et al. (Super.Ct. San Diego County, 1996, No. 695611) (Aas own the single-family homes in the Belle Fleur subdivision. Plaintiff in Provencal Community Association v. William Lyon Company et al. (Super.Ct. San Diego County, 1996, No. 694688) (Provencal) is the homeowners association *722 responsible for managing and maintaining the Provencal condominium project. Defendants (as relevant here) include the William Lyon Company and Lyon Communities, Inc. (collectively Lyon), which served as developer and general contractor of Belle Fleur and Provencal, and the many subcontractors who participated in those projects.
Plaintiffs in each case allege their dwellings suffer from a variety of construction defects affecting virtually all components and aspects of construction. Based on these defects, plaintiffs assert causes of action for negligence, strict liability, breach of implied warranty and, in the Aas case alone, breach of contract and express warranty. Plaintiffs in both cases seek, among other things, the cost of repairing the alleged defects. Additionally, plaintiffs in Aas expressly seek damages representing the diminution in Value of their residences.
Trial has not yet commenced. In pretrial proceedings, defendants in both сases moved for orders in limine excluding evidence of those alleged construction defects that have not caused property damage. (There is no claim of personal injury.) Plaintiff in Provencal responded with an offer of proof asserting that some of the alleged defects violate provisions of the applicable building codes intended to prevent harm to life, health and property.[1] Plaintiff acknowledged, however, that many of the defects enumerated in defendants' motions have not actually caused property damage. The same is true in Aas. After extensive oral argument in each case, the trial court granted defendants' motions as to plaintiffs' tort claims only.[2] With the court's encouragement, plaintiffs sought review of the rulings in limine by petition for writ of mandate. The Court of Appeal, after issuing an alternative writ, denied the petitions. We granted review of that decision.
In granting defendants' motions, the trial court did not create or adopt a definitive list of construction defects to be excluded at trial. Instead, the court simply excluded "evidence of [defects] ... that have not resulted in bodily injury or physical property damage, i.e., [defects causing only] `economic loss'...." The trial court illustrated the possible effect of its ruling with the example of "a home with no resultant damages at all, but everybody agrees that the flashing's not lapped properly under the industry standards, the [Uniform Building Code], whatever, but it hasn't resulted in any leaks; everybody agrees that the tile is overextended, that is, it doesn't have the overlap of three inches that's called for by the manufacturer; that *723 you have a nailing pattern on the shear walls which does not comply with the applicable provision in the [Uniform Building Code], but the house is still standing and hasn't started swaying...." The court and the parties seemed to recognize that further hearings (see generally Evid.Code, § 402 [procedure for determining preliminary facts]) would be necessary to determine which alleged defects would, and would not, be submitted to the trier of fact in connection with plaintiffs' tort claims.[3]
The absence of a definitive list of excluded defects is of no consequence because the issue before us is one of law. While a ruling excluding evidence is not ordinarily subject to review by writ (People v. Municipal Court (Ahnemann) (1974)
II. Discussion
We turn, then, to the question at hand: May plaintiffs recover in negligence from the entities that built their homes a money judgment representing the cost to repair, or the diminished value attributable to, construction defects that have not caused property damage? Plaintiffs define construction defects as deviations from the applicable building codes or industry standards. Strict liability is not here at issue. While plaintiffs have asserted strict liability claims, they no longer argue that strict liability provides a remedy for defects that have not caused property damage. We need not address liability for construction defects that have caused property damage, if any have, because the trial court's ruling does not prevent plaintiffs from introducing evidence of such defects. Nor, finally, does the ruling prevent plaintiffs from introducing any evidence relevant to their claims for breach of contract or warranty, assuming those claims survive to trial, even if that evidence has been excluded for the purposes of plaintiffs' tort claims.
This procedural posture makes the question we address fairly narrow. The question, *724 however, is not simple, because it arises from the nebulous and troublesome margin between tort and contract law. (See generally Erlich v. Menezes (1999)
Plaintiffs contend the decision in J'Aire Corp. v. Gregory, supra,
Formerly, after a builder had completed a structure and the purchaser had accepted it, the builder was not liable to a third party for damages suffered because of the work's condition, even though the builder was negligent. (E.g., Fanjoy v. Seales (1865)
We first recognized a remedy in the law of negligence for construction defects causing property damage, as opposed to personal injury, in Stewart v. Cox, supra,
Two years later, we again applied Biakanja, supra,
In the years following Sabella, supra,
We first embraced the doctrine of strict products liability in Greenman v. Yuba Power Products, Inc. (1963)
While these decisions applied the doctrine of strict liability to mass-produced homes,[9] they did not create a remedy for *727 defects that have not caused property damage or personal injury. Whatever the product, whether homes or automobiles, strict liability affords a remedy only when the defective product causes property damage or personal injury. The tort does not support recovery of damages representing the lost benefit of a bargain, such as the cost of repairing a defective product or compensation for its diminished value. We explained this principle in Seely v. White Motor Co., supra,
Applying these principles, we concluded in Seely, supra,
In Zamora v. Shell Oil Co. (1997)
Over time, the concept of recoverable physical injury or property damage expanded to include damage to one part of a product caused by another, defective part. Examples include cases in which poorly prepared lots subsided, damaging the houses built thereon (Stearman v. Centex Homes, supra,
Plaintiffs argue no requirement of property damage exists, at least in the context of residential construction. The cases discussed above do not support the argument. They go only so far as to hold that property damage compensable in tort can exist when a defective component damages other parts of the same product. Plaintiffs attempt to find a more favorable rule in the two older cases noted above, Stewart, supra,
Plaintiffs also contend the court in Seely, supra,
An uncertain number of plaintiffs purchased their houses directly from defendant Lyon. As to these plaintiffs, it is argued, privity of contract offers an additional reason for rejecting any requirement of property damage in an action for negligence based on construction defects. It has been said that "[a] contract to perform services gives rise to а duty of care which requires that such services be performed in a competent and reasonable manner" and that "[a] negligent failure to do so may be both a breach of contract and a tort." (North American Chemical Co. v. Superior Court (1997)
The argument is not persuasive. A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, "`[c]ourts will generally enforce the breach of a contractual promise through contract *730 law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.'" (Erlich v. Menezes, supra,
We noted earlier that the law of construction defects after Sabella, supra,
J'Aire, supra,
Twenty-one years later, the court in J'Aire, supra,
The lower courts have applied the theory of liability articulated in J'Aire, supra,
The lower courts have also expanded upon J'Aire, supra,
Plaintiffs contend that J'Aire, supra,
To apply the multifactored balancing test set out in J'Aire, supra,
Plaintiffs argue that the cost of repairs is an acceptеd measure of damage for construction defects and that plaintiffs could make the cost of repairs certain within the meaning of J'Aire, supra,
Turning to the other factors, we find no adequate justification. We may assume for argument's sake that the conduct of a person engaged in construction is "intended to affect" all foreseeable purchasers of the property. (J'Aire, supra,
Plaintiffs contend precedent requires a different result. "[E]very reported decision applying the J'Aire[, supra,
Plaintiffs place particular emphasis on Huang v. Garner, supra,
Whether viewed as part of the test set out in J'Aire, supra,
The Chief Justice, in his concurring and dissenting opinion, proposes to resolve these conflicting policy considerations with a complex new rule of tort liability (1) barring recovery for minor defects and building code violations that have not caused personal injury or property damage; (2) permitting recovery for serious defects and code violations posing a significant risk of death, personal injury, or considerable property damage; and (3) requiring court-supervised disbursement of all damages awarded to ensure that repairs are actually made. (Cone. & dis. opn. of George, C.J., post, 101 Cal.Rptr.2d at pp. 738, 751, 752, 12 P.3d at pp. 1143, 1154, 1155.)
The proposal entails serious difficulties. First among these is that the Chief Justice, while asserting that our holding "offends ... established common law" (cone. & dis. opn. of George, C.J., post,
The Legislature, whose lawmaking power is not encumbered by precedent, is free to adopt a rule like that proposed in the Chief Justice's concurring and dissenting opinion. Yet even if the proposed rule could plausibly be defended as a logical development of the common law, and thus appropriate for judicial rather than legislative promulgation, the rule's shortcomings would counsel its rejection. The distinction between serious and minor defects has a superficial theoretical appeal that evaporates in practice. Amicus curiae Structural Engineers Association of California, which supports plaintiffs' position in this court, aptly demonstrates that almost any building code violation can, under the right set of assumptions and circumstances, be considered serious.[13]*736 "[T]here is no mechanism at this level to separate life safety defects from cosmetic defects," amicus curiae argues; such questions, in its view, are "better left to the trier of fact after a complete presentation of expert testimony on both sides." If experts claim to be unable before trial to rule out any building code violations as trivial, then a rule looking to the potential seriousness of possible property damage, rather than the existence of actual damage, is very likely to frustrate the pretrial disposition of claims based on trivial defects. Such a rule, by forcing judges to attempt to predict the likelihood that any given defect will cause property damage and, if so, its likely seriousness, will make it difficult for them to screen out trivial claims as a matter of law. Because, moreover, the rule invites a speculative inquiry, any pretrial dispositions based thereon are likely to be inconsistent[14] and challenged on appeal. In short, the practical effect of a rule permitting recovery for "serious" defects only, however well intentioned, would likely be to insulate from demurrer and summary judgment virtually all complaints containing allegations of building code violations.
The Chief Justice's suggestion that courts should supervise the disbursement of tort damages (cone. & dis. opn. of George, C.J., post, 101 Cal.Rptr.2d at pp. 745, 753, 12 P.3d at pp. 1149, 1156) highlights a final difficulty with the rule he proposes. Ordinarily, nothing compels a successful plaintiff to spend money recovered in construction defect litigation on repairs. Indeed, plaintiffs in Aas expressly seek in their complaint, in addition to the cost of repairs, damages representing the "diminution in value" of their residences.[15] The possibility that tort dam *737 ages will not actually be spent on repairs, defendants contend, weakens the argument that imposing liability for construction defects without resulting damage will serve the policy goal of improving the state's housing stock. The rule the Chief Justice proposes would address this concern by requiring court-supervised disbursement of all damages awarded to ensure that repairs are actually made. (Cone. & dis. opn. of George, C.J.,
In our view, the many considerations of social policy this case implicates, rather than justifying the imposition of liability for construction defects that have not caused harm of the sort traditionally compensable in tort (Seely, supra,
Home buyers in California already enjoy protection under contract and warranty law for enforcement of builders' and sellers' obligations; under the law of negligence and strict liability for acts and omissions that cause property damage or personal injury; under the law of fraud for misrepresentations about the property's condition; and an exceptionally long 10-year statute of limitations for latent construction defects (Code Civ.Proc, § 337.15). While the Legislature may add *738 whatever additional protections it deems appropriate, the facts of this case do not present a sufficiently compelling reason to preempt the legislative process with a judicially created rule of tort liability.
III. Disposition
The judgment of the Court of Appeal is affirmed.
KENNARD, J., BAXTER, J., CHIN, J., and BROWN, J., concur.
Concurring and Dissenting Opinion by GEORGE C.J.
Other courts faced with the question we address today have asked: Why should a homeowner have to wait for a personal tragedy to occur in order to recover damages to repair known serious building code safety defects caused by negligent construction? (E.g., Council of Co-Owners v. Whiting Turner (Md.1986)
In this case, we must decide whether, under California law, when a building contractor has breached its duty of care by constructing a home that violates significant building safety code provisions that are designed to protect health and safety, and the homeowner has discovered these safety code violations before a personal injury has occurred or before the home has suffered any physical property damage, the homeowner, in a negligence action, may recover those costs of repair that a reasonably prudent homeowner would incur under the circumstances, or whether the "economic loss" rule of Seely v. White Motor Co. (1965)
I agree with the majority that many if not most of the defects listed in the underlying complaintsitems such as "discolored drain stoppers, and inoperable garbage disposals" (maj. opn., ante,
I.
A.
In Connor v. Great Western Sav. & Loan Assn. (1968)
As implied in the above italicized observation, tort law offers the most effective, and often the only realistic, nonstatutory remedy for consumers in this area. Although technically available to at least some of the plaintiffs in this and similar litigation, contract or warranty claims in this setting are difficult to prove and to enforce, and our decisions have recognized that problems with privity, disclaimers inserted into contracts by developers or contractors, and notice requirements, often frustrate the ability to recover on contract or warranty theories. (See, e.g., Greenman v. Yuba Power Products, Inc. (1963)
B.
As the majority observes, the author of Connor's rousing confirmation of the right of homeowners to sue in negligence in *740 order to remedy negligent construction also authored the majority opinion in Seely, supra,
In Seely, supra,
In Seely, supra,
*741 Clearly, this dictum in Seely, supra,
Recognition of a homeowner's ability to recover repair costs necessary to remedy serious safety defects in residential housing would not substantially implicate Seely's concerns about "unknown and unlimited" liability for "commercial losses." (Seely, supra,
In short, Seely's cautions against allowing recovery of commercial expectation damages for lost profits do not justify barring recovery of the cost of repairing serious construction defects involving dwelling code violations that pose a threat to life and property. Accordingly, I find the majority unpersuasive to the extent that it relies on a broad interpretation of the Seely dictum.
C.
The understanding of the limited reach of Seely, supra,
Eleven years after Seely, the Court of Appeal in Cooper v. Jevne (1976)
In Sumitomo Bank v. Taurus Developers, Inc. (1986)
D.
Finally, the above reading of Seely, supra,
Almost all of the out-of-state decisions in this area cite and discuss Seely and adopt in general a version of the rule set out in that case, restricting recovery for commercial expectation damages. These sisterstate decisions recognize that Seely was concerned primarily with precluding potentially limitless damages for lost profits and/or lost commercial expectations in the context of suits for product liability, and these out-of-state cases also recognize, explicitly or implicitly, that suits for costs to repair and correct dwelling safety defects that pose a serious risk to life and limb are *743 clearly distinguishable from Seely and do not similarly implicate concerns of limitless damages.
The majority, ante,
The Whiting-Turner case is especially well reasoned and particularly apt here. In that case the Maryland high court permitted the plaintiff in a negligence action to recover the costs necessary to correct the construction of 10 vertical utility shafts in a 22-story condominium complex. The shafts presented a fire hazard because of the absence of required insulationa serious violation of applicable building codes. (Whiting-Turner, supra, 517 A.2d at pp. 338-339.) Although the defective shafts all posed a clear danger of death or personal injury, none of them yet had produced any personal injury or physical property damage.
The Whiting-Turner decision held: "`We reject the contention by appellant that there can be no recovery in negligence absent proof of personal injury or property damage. We hold that there can be recovery for economic loss. Why should a buyer have to wait for a personal tragedy to occur in order to recover damages to remedy or repair defects? In the final analysis, the cost to the developer for a resulting tragedy could be far greater than the cost of remedying the condition.' [¶] We conclude that the determination of whether a duty will be imposed in this type of case should depend upon the risk generated by the negligent conduct, rather than upon the fortuitous circumstance of the nature of the resultant damage. Where the risk is of death or personal injury the action will lie for recovery of the reasonable cost of correcting the dangerous condition." (Whiting-Turner, supra,
In addition to these authorities, it is instructive to consider another out-of-state decision relied upon by defendants to support their assertion that all repair and correction costs in the present case should be barred under Seely's rule restriсting recovery of commercial expectation damages. As defendants observe, the Florida Supreme Court's closely divided decision in Casa Clara v. Charley Toppino and Sons, Inc. (Fla.1993)
Defendants, however, overlook the subsequent history of Casa Clara. More than a year ago, the Florida Supreme Court, by a six-to-one vote, "effectively overruled" that case. (Moransais v. Heathman (Fla. 1999)
Moransais, supra,
Consistent with Cooper, supra,
Underscoring its retreat from its prior applications of Seely's economic loss rule, the court explained in Moransais: "Today, we again emphasize that by recognizing that the economic loss rule may have some genuine, but limited, value in our damages law, we never intended to bar well-established common law causes of action, such as those for neglect in providing professional services. Rather, the rule was primarily intended to limit actions in the product liability context, and its application should generally be limited to those contexts or situations where the policy considerations are substantially identical *745 to those underlying the product liability type analysis.... The rule, in any case, should not be invoked to bar well-established causes of actions in tort...." (Moransais, supra,
Instead of expanding the reach of Seely's rule barring recovery of commercial expectation damages beyond its proper original and intended scope, and instead of reaching to distinguish and disapprove established California Court of Appeal decisions that appropriately have limited the scope of Seely's dictum in the context of serious building code violations, we should, like the Florida Supreme Court, recognize the appropriate limited reach of the Seely doctrine so that it does not preclude application of traditional rules of negligence permitting limited and rational recovery of correction costs in the circumstances here presented.
II.
Even outside the construction defect context, past California decisions do not support the majority's conclusion that the dictum in Seely, supra,
For example, in Potter v. Firestone Tire & Rubber Co. (1993)
First, Potter, supra,
Second, Potter, supra,
Third, as plaintiffs observe in their briefs, and as Potter, supra,
Fourth, just as we acknowledged in Potter, supra,
Finally, as was true with regard to the medical monitoring costs at issue in Potter, supra,
III.
As the majority implicitly concedes, the scope of Seely's dictum, supra,
By reformulating the question in this manner, the majority skews the inquiry and fails adequately to consider that even if a negligence action cannot be maintained for the costs of remedying every minor building code violation, general common law negligence principles support a cause of action for the costs of correcting serious building code safety violations that pose a significant risk of death, serious personal injury, or considerable property damage if left unremedied.[5]
In applying the traditional six-factor test, the majority determines with very little discussion that four of the six relevant factors set out in Biakanja, supra,
A.
Factor (1): The extent to which the transaction was intended to affect plaintiffs. The majority, in a single sentence, "assume[s] for argument's sake that the conduct of a person engaged in construction is `intended to affect' foreseeable purchasers of the property." (Maj. opn., ante,
B.
Factor (4): The closeness of the connection between defendants' conduct and the injury suffered. The majority also "assume[s] that a sufficiently `close[ ] connection [exists] between ... defendant's conduct' and the alleged defects." (Maj. opn., ante,
C.
Factor (5): The moral blame attached to defendants' conduct. The majority concedes that "some `moral blame' arguably `attach[es]' to many deviations from the building codes," but asserts that "the degree of blame would appear to depend upon the nature of the deviation." (Maj. opn., ante,
"Chief Justice Traynor's observations are relevant here in light of [plaintiffs'] allegations and offers of proof that the construction of their homes fell below the standard of care and failed to comply with the minimum requirements for shear walls and fire walls as set forth in the Uniform Building Code, and the minimum requirements set forth in the National Electrical Code. In Huang, supra,
"[Plaintiffs] assert that assessing moral blame for violating building codes reflects California's strong policy in favor of quality construction of homes. We agree.... `[N]egligent construction principles rest on a policy determination that purchasers of homes should not be harmed by defective housing caused by a breach of the duty to construct properly...."'
Once again, I submit that the majority ought to acknowledge, and not minimize, plaintiffs' strong showing with regard to this factor.[6]
D.
Factor (6): The policy of preventing future harm. The majority concedes that this is "probably plaintiffs' strongest argument." (Maj. opn., ante,
After conceding these points, the majority proceeds, however, to diminish the weight of this factor by the majority's depiction of the present suit, asserting that plaintiffs seek to make the "builders, in effect, the insurers of building code compliance, even as to defects that have not caused property damage or personal injury." (Maj., opn., ante,
Contrary to the majority's mischaracterization, plaintiffs' action in this case clearly does not attempt to make defendants "insurers." The suit simply seeks to have defendants pay limited repair costs necessitated by defendants' concededly negligent conduct in constructing plaintiffs' homes. Moreover, the majority fails to acknowledge that any liability on the part of defendants plainly is limited in durationit expires, by statute, 10 years after the completion of construction (Code Civ. Proc., § 337.15)which period may have already elapsed in this litigation.[7]
The majority also asserts that allowing the limited form of recovery sought here "should also be unnecessary to the extent buyers timely enforce their contract, warranty and inspection rights, and to the extent building authorities vigorously enforce the applicable codes for new construction." (Maj., opn., ante,
Again, the Court of Appeal had no trouble with this factor. It wrote:
"The policy of preventing future harm is fundamental to the tort system, and California case law demonstrates this policy applies to safeguarding against preventable construction defects which result in physical injuries to people and property.... [As] our high court [has] stated: `[T]he prevention of future negligent construction of buildings upon insufficiently supportive material would not be furthered by exempting [the builder] from liability for his negligence. [Citations.]'
"... [I]n Connor, supra, 69 Cal.2d at pages 867-868,
Here, [plaintiffs] have alleged causes of action in negligence against a home developer, a general contractor, and various housing subcontractors for recovery of damages resulting, from numerous alleged construction defects, including but not limited to serious violations of minimum standards set forth in the, Uniform Building Code and other governing codes. The policy concern for ensuring proper construction of vital. structural housing components, such as shear walls, is meant to protect not only the physical structure, but also the personal safety of all homeowners." (Italics added.)
In an immediately following footnote, the Court of Appeal observed: "In this regard, we take judicial notice of one of the recommendations of the California State Seismic Commission, which investigated the Northridge earthquake under our Governor's Earthquake Executive Order: `The greatest оpportunity to ensure seismic safety is during a building's design and construction.... The Northridge earthquake and other past earthquakes have clearly and repeatedly demonstrated the remarkable effectiveness of paying attention to quality in reducing earthquake losses. Quality assurance is the single most important policy improvement needed to manage California's earthquake risk.' (California Seismic Safety Commission, `Northridge Earthquake: Turning Loss To Gain,' Dec. 1, 1994, at p. 22, italics added.)"[8]
In my view, the policy of preventing future harm operates here as a factor that very strongly militates in favor of recognizing a right of action in negligence to recover costs to remedy safety code violations that pose a serious threat of injury to the residents of and visitors to the dwellings here at issue. Once again, I submit that the majority should frankly concede, rather than attempt to minimize, plaintiffs' strong showing with regard to this factor.
E.
Factor (2): The foreseeability of harm to plaintiffs. The majority's entire treatment of this factor is as follows: "[T]o ask . . . whether the harm to plaintiffs was `foreseeab[le]' [citation] simply begs the question: What harm?" (Maj. opn., ante, 101, Cal.Rptr.2d at p. 732,
In contrast to the majority's approach, the Court of Appeal stated: "[T]he Supreme Court cases that have addressed the second Biakanja factor ... in the construction defect context have held that harm to homeowners caused by negligent construction is foreseeable. [Citations.] [¶] ... [Here,] as to the alleged violations of governing building codes, it is foreseeable that such code violations may result in otherwise preventable injury to persons or other property. For example, it is foreseeable that an insufficient fire wall in a condominium may fail in the event there is a fire in an adjoining unit, resulting in a conflagration that could have been prevented had the fire wall been constructed in compliance with the minimum building code safety standards." (Italics added.)
It is foreseeable that a reasonably prudent person, made aware of seriously deficient shear walls and fire walls in his or her home, would suffer appreciable present harm by virtue of being exposed to, and thereby having the legal duty to address (see post, 101 Cal.Rptr.2d at pp. 751-752, 12 P.3d at pp. 1155-1156), a *751 known unreasonable risk to personal safety and to property.
F.
Factor (3): The degree of certainty that plaintiff's suffered injury. This is the factor that the majority finds is both (i) the most important in this case, and (ii) the one that presents a "relatively objective obstacle to plaintiffs' claim" to recover the cost of remedying the serious building code safety violatiоns conceded on this record. (Maj. opn., ante,
Davies, supra,
The majority nevertheless relies upon Davies, supra,
As the majority asserts, "the question is whether, disregarding conflicting evidence, indulging in every legitimate inference that may be drawn from the evidence, and viewing the record in the light most favorable to plaintiffs," there is substantial evidence to support a judgment in plaintiffs' favor. (Maj. opn., ante,
The Court of Appeal below expressly found that the crucial "degree of certainty that plaintiffs suffered injury" factor was met on these facts. The Court of Appeal stated: "[W]e agree with the Huang court's conclusion that evidence of a negligent failure by a developer or contractor to comply with the minimum standards set forth in governing building codes, supported by evidence of the cost to repair the building code violations, is sufficient to *752 satisfy the Biakanja `degree of certainty of harm' factor." The Court of Appeal quoted extensively from offers of proof by experts retained by both plaintiffs and defendants, to the effect that the dwellings contained inadequate shear walls and fire walls, and that repairs to correct these problems would cost "several hundreds of thousands of dollars;" and then concluded: "[Plaintiffs'] offer of proof, and the construction defect allegations in [the] complaint in connection with the negligence cause of action, are sufficient to show the requisite certainty ... that [plaintiffs] have suffered latent harm."
As suggested above, I agree with the majority to the extent it declines to allow recovery in negligence for the cost of repairing construction defects that pose no significant risk of serious personal injury or property damage. Accordingly, I would not recognize a negligence action to recover the costs of repairing matters such as "discolored drain stoppers, and inoperable garbage disposals." (Maj. opn., ante,
Most of the plaintiffs in these consolidated cases (those who live in condominiums) are under legal compulsion, through their condominium association, to repair common areasand this would certainly include, a duty to remedy known major safety violations in shear walls and fire walls located in common areas that had not yet caused actual physical damage or injury. (Civ.Code §§ 1364, subd. (a) [duty to repair common areas], 1351, subd. (b) [common area defined].)
Similarly, all single-family-structure homeowner plaintiffs in this proceeding are under a duty to disclose known defects to potential purchasers, and perhaps more importantly, like any possessor of real property, they also are under a legal obligation to take reasonable steps to remedy known safety defects in or on their own property. A reasonably prudent homeowner, learning of, for example, the serious shear wall or fire wall defects in his or her home, would act to correct or repair those defects, in order to avoid unreasonable risk of collapse of the structure during a windstorm or earthquake, or in order to avoid rapid spread of a fire from one room to others.
Plaintiffs' showing here is no less than that found to be adequate in similar circumstances in Cooper, supra,
I submit that on these facts compensable present injury to plaintiffs is reasonably certain, because a reasonably prudent person, having become aware of the unreasonable risk posed by known building code safety defects such as inadequate shear walls and fire walls, would act to repair or correct those defects. I would recognize a limited negligence action as described above, and, in light of the public interest in ensuring that such repairs actually are undertaken, I would require court-supervised disbursement of damages awarded in such cases. (See Potter, supra,
IV.
California is prone to earthquakes and, tragically, the negligent construction of residential housing almost surely will result in the deaths and injury of numerous current and future residents of this state, as it has in the past. In the context of a case such as the one now before us, the goal of tort law is to minimize, in an appropriate and balanced manner, the number of those deaths and injuries. In light of today's majority opinionwhich misapplies and improperly disapproves California's established case law and, in failing to recognize an appropriate and limited right to recover costs to remedy serious safety code violations, rejects the reasoning of well-considered decisions of our sisterstate courtsthe obligation falls upon the Legislature to correct this court's unfortunate misstep in the development of the law, and to provide the protection that California residents deserve.
Concurring and Dissenting Opinion by MOSK, J.
Because I believe it is economically efficient to provide plaintiffs with a remedy to repair conditions that allegedly pose a serious safety hazard, I respectfully dissent from the majority's contrary conclusion. I believe the Supreme Court of Indiana pointed out quite well the inefficiency inherent in the economic loss rule as applied to such conditions: "If there is a defect in a stairway and the purchaser repairs the defect and suffers an economic loss, should he fail to recover because he did not wait until he or some member of his family fell down the stairs and broke his neck?" (Barnes et ux. v. Mac Brown & Co., Inc. et al, (1976)
It is evident that many Californians live in modern mass-market housing. It appears, moreover, that cutting corners is a prevailing problem in the development industry. The descriptions of construction defects in the numerous letter briefs we have received from the construction law bar suggest as much. The briefs describe the willingness of some developers to evade or stint the Uniform Building Code's safety requirements, among other elements. In this context, the majority's result *754 is likely, as one litigant put it, to create "an invitation for developers, general contractors and subcontractors to ignore [construction] Code requirements when building and developing homes."
The majority tacitly acknowledge the risks of inefficiency their rule generates: "[T]o require builders to pay to correct defects as soon as they are detected rather than after property damage or personal injury has occurred might be less expensive. On the other hand, such a rule would likely increase the cost of housing by an unforeseeable amount as builders raised prices to cover the increased risk of liability." (Maj. opn., ante,
I would adopt a view similar to that of Judge Richard Posner in Eljer Mfg., Inc. v. Liberty Mut. Ins. Co. (7th Cir.1992)
The Eljer approach obviates the need to consider the Biakanja factors (Biakanja v. Irving (1958) .
We here consider alleged latent defects, capable of causing serious injury or major property damage, that may only be found years or decades after the developer caused them, yet require repair to avoid *755 later injury or major property loss. (In this regard, Code Civ.Proc, § 337.15 permits recovery for property damage caused by latent defects in construction only for 10 years after the work is substantially completed. The statute of limitations is already a substantial bar to any threat of limitless liability.) I believe a narrow rule could be drawn to provide a tort remedy for such defects. It seems that a finely crafted rule would not need to apply to such items as negligent heating, air conditioning, and ventilation work, or, to refer to the majority's rather dismissive examples, "doors that are out of plumb, discolored drain stoppers, and inoperable garbage disposals" (maj. opn, ante,
NOTES
[1] The following is a representative excerpt from plaintiff's offer of proof:
"5. During the investigation at Provencal in this case, engineers ... observed violations of the Uniform Building Code, including failures to properly construct shear walls and failures to properly connect shear walls to other building components. Such shear walls and connections are required under the Uniform Building Code to prevent or minimize property damage and personal injury in the event of seismic and wind forces....
"6. During the investigation at Provencal in this case, architects . . . observed violations of the Uniform Building Code, including failures to properly construct one-hour and two-hour fire protection in party walls. Such fire protection measures are required under the Uniform Building Code to prevent or minimize property damage and personal injury in the event of a fire....[¶] ... [¶]
"8. During the investigation of Provencal in this case, [an] electrical engineer ... observed numerous violations of the National Electrical Code, including failures to support electrical cables, improperly supported light fixtures, and improperly labeled electrical circuits.... [¶] ... [¶]
"10. For many of the Uniform Building Code and National Electrical Code violations described in paragraphs 5, 6, and 8, there has not yet been any physical property damage or personal injury...."
[2] Plaintiff in Provencal subsequently moved to amend its complaint to allege a cause of action for breach of implied warranty. Plaintiff's request for judicial notice of defendant Lyon's memorandum in opposition to the motion, filed after the Court of Appeal affirmed the trial court's ruling, is denied.
[3] The trial court explained: "I would address [at trial] any issues that are over and above my ruling that you felt were close calls and listen to what your proffer might be at the appropriate time." There is, thus, no basis for assuming that every item on the exhaustive lists of construction defects attached to defendants' motions in limine is deemed excluded, even if plaintiffs are able to prove that a particular defect has actually caused property damage.
[4] Sabella v. Wisler (1963)
[5] Stearman v. Centex Homes (2000)
[6] Stearman v. Centex Homes, supra,
[7] Courts in other jurisdictions have reached various conclusions on this subject. South Carolina broadly holds builders liable in tort for all deviations from applicable building code and industry standards that diminish the value of a house. (Kennedy v. Columbia Lumber & Mfg. Co. (1989)
In contrast, the Supreme Court of Nevada, after tentatively rejecting the economic loss rule in construction defect cases (Calloway v. City of Reno (1997)
[8] The six factors were: "the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm." (Biakanja, supra,
[9] See generally Stearman v. Centex Homes, supra,
[10] The concurring and dissenting justices would hold that property damage occurs when a defective component is incorporated into a house. (Cone. & dis. opn. of Mosk, J., 101 Cal.Rptr.2d at pp. 754-755, 12 P.3d at pp. 1157-1158; see also cone. & dis. opn. of George, C.J., at p. 753, fn. 11,
[11] Plaintiffs also argue that Seely, supra,
Notes
[12] In addition to these cases cited by plaintiffs, the Chief Justice relies on Connor v. Great Western Sav. & Loan Assn. (1968)
In Connor v. Great Western Sav. & Loan Assn., supra,
The courts in Krusi v. S.J. Amoroso Construction Co., supra,
[13] Amicus curiae explains in detail how alleged defects that might on "[i]nitial impression[]" seem "trivial, nitpickey and even ridiculous," might cause or indicate serious problems. "Closet shelving, interior doors not fitting properly, sagging roof rafters, spalling plaster, [and] GFI [ground fault interrupt] receptacles missing" are cited as examples. Expert testimony at trial, amicus curiae speculates, might show that "the location of the closet shelving in conjunction with the lighting poses a fire hazard and violates the National Electrical Code. The interior doors may not fit properly because the buildings/homes have moved due to structural problems or soil issues. The roof rafters may be sagging because they were not attached properly, and their installation violates the Uniform Building Code. The plaster could be spalling due to missing structural components, and by the way, maybe the plaster is supposed to serve as some shear. The missing GFI receptacles pose a fire hazard and a life safety threat to adults and children and the fact that they are missing violates the National Electrical Code."
[14] This case illustrates the problem. The Chief Justice apparently concludes that the defects alleged in this case put plaintiffs' homes at risk of collapse or fire. (Cone. & dis. opn. of George, C.J., post,
[15] Plaintiffs may be surprised to read in the Chief Justice's concurring and dissenting opinion that he believes they have abandoned this claim. Plaintiffs did abandon a claim for so-called stigma damages, representing the residual loss of market value after repairs have been made, after losing on this issue in the Court of Appeal. As that court explained, no reported decision in this state appears to authorize such recovery; we intimate no view on the matter.
In contrast, diminished value is simply one of the standard alternative measures of damage for injury to property. The successful plaintiff in such cases ordinarily recovers either the diminution in market value attributable to the injury or the cost of repairs, whichever is less (Mozzetti v. City of Brisbane (1977)
This case is being remanded for further proceedings, possibly including a trial on any alleged defects that have caused property damage. (See ante, 101 Cal.Rptr.2d at pp. 722, 723, 12 P.3d at pp. 1129, 1130.) Because plaintiffs have not expressly abandoned the right to recover the diminished value of their homes, should that turn out to be the appropriate measure of damages, we see no basis on which to preclude the court from applying the ordinary law of remedies.
[16] Arguing that courts should do so, the Chief Justice cites Potter v. Firestone Tire & Rubber Co. (1993)
[17] In fact, the Legislature in this term has considered and rejected proposals to make persons engaged in residential construction liable for the cost of bringing homes into compliance with the building codes, without regard to the existence of property damage (Assem. Bill. No. 1669 (1999-2000 Reg. Sess.), as introduced Mar. 15, 1999) and to create a state-sanctioned home warranty program (Assem. Bill No. 1221 (1999-2000 Reg. Sess.)). We note the Legislature is also considering a bill that would recognize a lack of "empirical data on the incidence of construction defects, the amount of construction defects litigation, and whether there is any causal relationship between shoddy construction, construction defect litigation, and the construction of new condominium and affordable housing," and commission a comprehensive study to collect such data. (Sen. Bill No. 1882 (1999-2000 Reg. Sess.).) Defendants' motion for judicial notice of these bills is granted.
[1] In the omitted footnote, the court wrote in Whiting-Tumer: "It is the serious nature of the risk that persuades us to recognize the cause of action in the absence of actual injury. Accordingly, conditions that present a risk to general health, welfare, or comfort but fall short of presenting a clear danger of death or personal injury will not suffice. A claim that defective design or construction has produced a drafty condition that may lead to a cold or pneumonia would not be sufficient." (Whiting-Turner, supra,
[2] The opinion in Moransais was filed after briefing in the present case was completed. On August 28, 2000, however, codefendant William Lyon Company filed a "Supplemental Brief of Additional Authorities," citing and discussing the recent subsequent history of a Nevada case cited in earlier briefs, and citing three other recent (and distinguishable) cases from other jurisdictions. Nonetheless, the supplemental brief failed to note that, more than one year earlier, the Florida Supreme Court effectively had overruled Casa Clara, supra,
[3] That statute provides: "For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not." (Civ.Code, § 3333.)
[4] Our opinion in Potter stated in this regard: "Various commentators and courts have suggested that creation of court-supervised funds to pay medical monitoring claims as they accrue, rather than the award of a lump-sum verdict, may be a more appropriate mechanism for compensating plaintiffs in a toxic expоsure case. [Citation.] [¶] In Ayers [v. Jackson Tp. (1987)]
[5] Although plaintiffs' complaint sought, among other things, damages for the diminution in value of their homes, plaintiffs' briefing and argument before this court make it quite clear that they have abandoned any such claim and that they now limit their negligence claim regarding code violations that have not manifested themselves in physical injury or property damage to recovery of repair costs. Plaintiffs' joint opening brief states the issue as follows: "Can homeowners and a homeowners association . . . recover in negligence for the cost to repair violations of governing building codes . . . even though the violations have not yet caused physical property damage?" (Italics added.) This phrasing of the issue and this singular focus of recovery sought at this stage in the litigation is repeated throughout the briefing. Indeed, plaintiffs specifically assert, "the measure of damages for negligent construction is limited to the cost of repair. Imaginative consequential damages are not applicable." (Italics added.) And plaintiffs also argue that defendants in this case should be responsible "only . . . for compliance with governing building codes" and "will not be exposed to monetary damages beyond the cost of repair." Similarly, at oral argument, counsel for plaintiffs asserted that at this stage plaintiffs do not seek lost profits or any other such difficult-to-define form of damages, but instead, and only, funds necessary to address "very specific code violations for which specific repairs are designed and for which there is a known measure of damages"namely, the specific "costs to repair code violations."
Thus, the matter in contention, at this point, is simply whether, with respect to code violations that have not manifested themselves in physical injury or property damage, we should recognize a limited negligence action for recovery of specific and definable repair costs. In my view it does not advance this inquiry for the majority to invoke repeatedly plaintiffs' now abandoned claim for damages relating to the diminished value of their homes.
[6] At the same time, I completely agree with the majority's additional assertion that "we may ... reasonably assign reduced moral blame to less serious defects ... such ... as ... discolored drain stoppers, and inoperable garbage disposals." (Maj. opn., ante,
[7] The record indicates that defendants may yet challenge plaintiffs' claims based upon the statute of limitations.
[8] In this regard, codefendant Lyon conceded at oral argument that "it is reasonable to assume that the percentage [of Northridge earthquake homeowners] that did suffer damage probably included a lot of ... homes that did not have Compliance with the [prevailing] safety code[s]."
[9] In the process, the majority rejects plaintiffs' assertion that the cost of repairs is an "accepted measure of damage for construction defects and that plaintiffs could make the cost of repairs certain . . . by voluntarily repairing defects and obtaining a receipt for money spent." (Maj. opn., ante,
[10] In this regard, I find helpful Morris v. Osmose Wood Preserving (1995)
The majority hypothesizes that distinguishing between "serious" and "minor" defects would "in practice" prove to be difficult and would "likely ... insulate from demurrer and summary judgment virtually all complaints containing allegations of building code violations." (Maj. opn., ante, 101 Cal.Rptr.2d at pp. 735-736, 12 P.3d at pp. 1140-1141.) As noted above, such a distinction has been recognized for more than 14 years (Whiting-Turner, supra,
[11] As Justice Mosk explains in his separate dissent, and as codefendant Lyon argued in the alternative in the Court of Appeal, the theory advanced in Judge Posner's opinion in Eljer Mfg., Inc. v. Liberty Mut. Ins. Co. (7th Cir.1992)
[1] I italicize must because the word prefigures cautionary language in the Eljer opinion. The risk of harm-in Eljer, the "expected failure rate" (Eljer, supra,
[2] Eljer relied on Illinois law in interpreting the insurance policies. The Appellate Court of Illinois later rejected its interpretation. (Travelers Ins. Co. v. Eljer Mfg., Inc. (1999)
[3] Like the Chief Justice, I concur in the majority's conclusion regarding trivial and nonhazardous alleged defects of the type to which the majority refer.