Weekly Law Resume - January 31, 2013: Construction Defects Premised on Negligent Design Theory

by Low, Ball & Lynch
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Beacon Residential Community Association v. Skidmore, Owings & Merrill, LLP
Court of Appeal, First District (December 13, 2012)

The First Appellate District reversed a judgment in favor of design professionals and against a homeowners association based on a theory of negligent design. The court held that, as matter of both common law and statutory law, liability for construction defects can be premised on theories of negligent design.

Skidmore, Owings & Merrill LLP (“SOM”) and HKS, Inc., (“HKS”) were architectural firms ("Defendants") who provided architectural and engineering services to the Beacon Residential Condominiums (the “Project"), a residential community in San Francisco.

The Beacon Residential Community Association (“BRCA”) sued SOM and HKS. BRCA alleged numerous construction defects as a result of negligent architectural and engineering design and observation. BRCA also complained of "solar heat gain," excessively high temperatures resulting from the defendants' approval of inexpensive and nonfunctional windows, and a design lacking adequate ventilation within the residential units.

The defendants were named in three causes of action: "Civil Code Title 7 - Violation of Statutory Building Standards for Original Construction"; "Negligence Per Se in Violation of Statute"; and "Negligence of Design Professionals and Contractors."

The defendants demurred to the complaint, arguing that, under Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 (“Bily”) and Weseloh Family Ltd. Partnership v. K.L. Wessell Construction Co., Inc. (2004) 125 Cal.App.4th 152 (“Weseloh”), they owed no duty of care to BRCA or its members. The trial court sustained the demurrers and dismissed the case. The trial court reasoned that liability could not be premised on negligent design because without privity of contract, BRCA was required to show that the design professionals had "control" in the construction process and assumed a role beyond that of providing design recommendations to the owner. The trial court believed that BRCA failed to meet its burden.

The court of appeal reversed the trial court's order sustaining the demurrers and the judgment of dismissal, holding that BRCA could state a claim based on design liability that was recognized both under common law and statutory law. It concluded that the trial court misconstrued the scope of the duty owed by a design professional to a homeowner/buyer.

The court distinguished Weseloh, in which judgment was affirmed in favor of design engineers who were sued after a retaining wall failed. The court of appeal in that case held that there was insufficient evidence to show that the design engineers owed a duty of care to the property owner or general contractor. There, the outcome was premised on the evidentiary record before the court and was of limited guidance. The court noted that no California court has yet extended Weseloh to categorically eliminate negligence liability of design professionals to foreseeable purchasers of residential construction. In the court’s view, the issue was not whether a design professional owed a duty of care to such purchasers, but rather the scope of that duty. The court also observed that in Cooper v. Jevne (1976) 56 Cal.App.3d 860, an architect’s duty of reasonable care was logically owed to those who purchased an allegedly defectively-designed and built condominium.

The court then turned to the policy factors for assessing the scope of duty owed by design professionals to third parties. The court held that, regarding the extent to which the transaction was intended to affect the plaintiff, a contractual limitation of liability in the contract with the developer emphasized that the defendants were well-aware that future homeowners would be affected by their work. It also concluded that the failure to exercise reasonable professional care in the design of residential construction presents readily apparent risks to the health and safety of the ultimate occupants. Thus, there was sufficient foreseeability of harm to plaintiff.

The court accepted BRCA's allegations of problems with the project, so that there was certainty of injury. Likewise, there was sufficient connection between the defendants' conduct and the injury suffered, on the face of the allegations. Finally, the court felt that the moral blame attached to the defendants' conduct was met because BRCA alleged significant failures in Project components and deficiencies in design, resulting in actual property damage and health safety risks. The court leaned toward a finding of greater, rather than less, moral blame. The policy of preventing future harm also weighed heavily in favor of recognizing liability.

The court also noted that in Senate Bill No. 800, the Legislature expressed its social policy choices on issues pertinent to construction defect legislation. In doing so, the Legislature clearly assumed that existing law already imposed third party liability upon design professionals. According to the Court, the plain language of Senate Bill No. 800 provides that a design professional, who as a result of a negligent act or omission causes a violation of statutory residential housing standards, may be liable to the ultimate purchasers for damages.

COMMENT

The Court’s ruling clarifies that negligent design liability for architects and other design professionals extends to the intended purchasers. A potentially more impactful result of this ruling is the Court’s use of general factors from Biakanja to analyze the extent of a legal duty owed by design professionals to third parties in the absence of a privity of contract. A future court could use this analysis to extend design negligence liability to other third parties that are arguably affected by negligent design, such as contractors and subcontractors that rely upon the work of architects and other design professionals as a basis for their work.

For a copy of the complete decision see:

http://www.courts.ca.gov/opinions/documents/A134542.PDF

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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