Houses Can Still Make Cents: Illinois’ Implied Warranty of Habitability
March 1, 2011 — Original Story by
Marisa L. Saber Cozen O’Connor Subrogation & Recovery Law BlogIn a report published earlier this week Marisa L. Saber writes about the implied warranty of habitability in the context of construction defect litigation. The piece speaks of the difficulties in alleging tort theories against builders and vendors in light of Illinois’ expansion of the economic loss doctrine, and how the implied warranty of habitability may provide another avenue for recovery.
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Construction Defect Case Not Over, Despite Summary Judgment
November 7, 2012 — CDJ Staff
The Supreme Court of Oregon has concluded in an en banc decision that a motion to reconsider a summary judgment is not a motion for a new trial. In coming to their conclusion the court overturned an earlier Oregon Supreme Court case, Carter v. U.S. National Bank. Although the decision does not bear on construction defects, the underlying case did. Due to the decision, these claims can now be evaluated in a trial.
The case, Association of Unit Owners of Timbercrest Condominiums v. Warren, came about after an apartment complex was converted into condominium units. The developers hired Big Al’s Construction for some of the remodeling work. The condominium association later sued the developer and the contractor over claims of construction defects. The defendants filed a motion for summary judgment, which the court granted.
But that wasn’t the end of things. The plaintiff soon filed a “motion to reconsider,” noting that the summary judgment seemed to be in conflict with both law and other recent rulings, and additionally, the grounds for the decision were not in the order. The judge then notified the parties that the court had “pulled the trigger too quickly” and had seven questions for the parties to answer.
The court dismissed all claims against the defendants. The defendants filed their responses, objecting that that “‘there is no such thing’ as a motion for reconsideration.” Further, while “the rules do allow for post-judgment review of pre-judgment rulings through a motion for a new trial,” the plaintiffs had not filed for a new trial. But did they need one? They did file an appeal.
The judge in the case admitted that there was no such thing as a motion to reconsider, and felt bad about prematurely signing the judgment. The case was sent to the Court of Appeals to determine if the motion to reconsider was a request for a new trial. The Court of Appeals concurred.
In reviewing the decision, the Oregon Supreme Court concluded that there were a maximum of three questions to address. Was the motion for reconsideration a motion for a new trial? If so, was the later notice of appeal premature? And if so, was the plaintiff required to file a new appeal? The court determined that the answer to the first question was no.
Prior decisions pointed to the conclusion “that a motion for reconsideration of a summary judgment amounts to a motion for a new trial,” but here the court concluded that “our prior cases erred,” and turned to the summary judgment rule for clarification. The court noted that “the rule contemplates that summary judgment and trial are separate and distinct events.” With this conclusion, the Oregon Supreme Court remanded the case to the Court of Appeals for further proceedings.
Read the court’s decision…
Construction Defect Claim Did Not Harm Homeowner, Court Rules
September 30, 2011 — CDJ Staff
The Minnesota Court of Appeals has ruled in Creswell v. Estate of Howe, a case in which a woman bought a home and then sued the seller’s estate, both sets of real estate agents, and the homeowner’s association over construction defects. A district court ruled against her, granting summary judgment to the other parties.
After buying a townhome “as is,” Catherine Creswell claims to have shared a thought with her agent that the homeowners association was, in the words of her agent, “trying to hide something.” Later, Creswell found that a few days before her closing, the board had discussed problems with “roofs, siding and soundproofing of the townhomes.” The court noted that “it was clear from the documents that appellant [Creswell] received that the association had known about various construction defects for many years, some of which affected [her] unit.”
Creswell initially sued the estate, the man who negotiated the sale for his mother’s estate, the real estate companies and the agents involved, the homeowners association, and four board members. Later she sued for punitive damages, dropped a claim for interference with contractual relations, and dismissed her claims against the individual board members. The court dismissed all of Creswell’s claims awarding costs to those she sued.
The appeals court has affirmed the decision of lower court, noting that Creswell “did not provide us with any argument why the district court erred in dismissing her unjust-enrichment, breach of contract, or rescission claims against the various respondents.” Nor did she provide evidence to support her claims of “breach of duty, fraud, and violation of consumer protection statutes.”
The court noted that Creswell could not sue the homeowners association over the construction defects because she “failed to prove that she was damaged by the association’s nondisclosure.” The court noted that “there are no damages in this case,” as Creswell “was never assessed for any repairs, she had not paid anything out-of-pocket for repairs, and she has presented no evidence that the value of her individual unit has declined because of the alleged undisclosed construction defects.”
The court granted the other parties motion to dismiss and denied Creswell’s motion to supplement the record. Costs were awarded to the respondents.
Read the court’s decision…
Environment Decision May Expand Construction Defect Claims
August 16, 2012 — CDJ Staff
Could a California Supreme Court decision on environmental claims have an effect on construction defect cases? Jonathan B. Sokol, a lawyer at Greenberg Glusker argues just that in a post on his firm’s blog. He notes that the California Supreme Court has held that “the ‘all sums” method of allocation applies in California” and that “an insurer cannot limit its liability to just the amount of loss that occurred in its particular policy period.” While his focus is on environmental cases, he says that “the decision could also potentially expand the scope of coverage for construction defect claims and other claims involving continuous and progressive property damage and bodily injury.
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Product Exclusion: The Big Reason Behind The Delay of LEED 2012
July 10, 2012 — Douglas Reiser, Builders Counsel
By now, you have probably heard that the USGBC has decided to delay implementation of its previously named “LEED 2012” rating system. What you might not know is exactly why this is happening. Rest assured that the decision was not made willy nilly ?Äì LEED 2012 had many industrial groups running for the hills.
I have spent the past few weeks reading a number of articles on the backlash. LEED 2012 was intended to create a seismic shift; it was not a mere update. A strict focus on reduction of chemicals, created mass panic that a large number of material providers’ products would essentially be banned from green projects ?Äì meaning most local, state and federal projects.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
The Hidden Dangers of Construction Defect Litigation
March 28, 2012 — David M. McLain, Colorado Construction Litigation
David M. McLain, writing at Colorado Construction Litigation, has an interesting blog post republishing his article in Common Interests magazine, the monthly periodical of the Rocky Mountain Chapter of the Community Associations Institute. In his article, he touches on a number of pitfalls in construction defect litigation, including the potential conflicts of interests facing HOAs. He also considers the problems homeowners can face, including both “strong-arm tactics” taken by attorneys to compel homeowners to join the lawsuit, or situations in which the interests of the HOA do not match those of the homeowners. He writes:
There is also a conflict of interest with individual owners who attempt to opt out of the case. This can lead to shocking strong-arm tactics on the part of plaintiffs’ attorneys. In one instance, a plaintiffs’ attorney sent a letter to an individual homeowner that stated that as a 1/58th owner of the common elements, if he refused to go along with the suit, and there was ultimately a finding in favor of the HOA which was in any way limited by his refusal to participate, he would be personally liable for 1/58th of the HOA’s total damages. In another instance, a different plaintiffs’ attorney sent a letter to a homeowner who wanted the builder to perform warranty repairs, informing the owner that if he let the builder perform any repairs, the attorney would bill the HOA according to the fee agreement entered by the HOA board (without knowledge or consent of non-board members) and that the HOA would assess the homeowner for that expense. These are just two examples of conflicts which may arise between the HOA board and individual homeowners when the HOA pursues CD cases.
Another example of a conflict which will arise as a result of CD litigation occurs post-settlement. When an HOA settles for less than 100% of the amount necessary to fund all repairs outlined by its experts, plus attorneys’ fees and litigation costs, there will obviously be a shortfall in the amount necessary to fix the development. The HOA board must then choose to impose a special assessment to cover the shortfall or to make some, but not all, of the repairs outlined by its experts. In choosing the latter, the conflict arises with respect to which homes get fixed and which do not. In this situation, the HOA board has acted as the attorney-in-fact for the individual owners by bringing claims on their behalf, and has compromised those claims without their knowledge or consent.
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Reprinted courtesy of David M. McLain of Higgins, Hopkins, McClain & Roswell, LLC. Mr. McClain can be contacted at mclain@hhmrlaw.com.
Homeowner Loses Suit against Architect and Contractor of Resold Home
June 14, 2011 — CDJ Staff
The California Court of Appeals in the case of Kizor v. Architects ruled that Mr. Kizor could not make construction defect claims against the architect and contractor of his home, as the defects had caused significant damage to the former owners, and it was they, not Kizor, who could have asserted those claims.
The background of the case was that John and Miranda Redig hired BRU Architects to design a home. During construction in 2000, they wrote to the roofing supplier complaining about leaks. The leaks were caulked, but the roof continued leaking during rains. The Redigs sold their house to Kizor in 2002, with an addendum to the sale contract protecting themselves from liability for further problems with the roof. “Seller has no responsibility for the condition of the roof and stucco and buyer absolves seller of any liability in connection therewith.”
In 2006, Kizor sued the architects, contractor, and subcontractor. The defendants moved for summary judgment which was granted. Kizor appealed, and in this current court case, appeal was denied.
Read the court’s decision
Nevada Court Adopts Efficient Proximate Cause Doctrine
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
Although the Nevada Supreme Court adopted the efficient proximate cause doctrine, it determined it did not apply to salvage coverage under an all-risk policy for a rain-damaged building. Fourth Street Place, LLC v. The Travelers Indemn. Co., 2011 Nev LEXIS 114 (Nev. Dec. 29, 2011).
Fourth Street owned an office building which was insured by an all-risk policy issued by Travelers. Fourth Street hired Above It All Roofing to repair the roof of the office building. Above It All removed the waterproof membrane on the roof and prepared to replace the membrane the following week. Over the weekend, however, substantial rain hit. On Sunday, Above It All returned to cover the exposed portions of the roof with tarps, but wind later blew the tarps away. The building suffered significant interior damage as it continued to be exposed to the rain.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Condominium Exclusion Bars Coverage for Construction Defect
August 17, 2011 — Tred Eyerley, Insurance Law Hawaii
Coverage was denied under the policy’s condominium exclusion in California Traditions, Inc. v. Claremont Liability Ins. Co.,2011 Cal. App.LEXIS912 (Cal. Ct. App., ordered published July 11, 2011).
California Traditions was the developer and general contractor for a housing development. California Traditions subcontracted with Ja-Con to perform the rough framing work for 30 residential units. The project had 146 separate residences that were freestanding with no shared walls, roof, halls, or plumbing or electrical lines. To allow a higher density development, the project was developed, marketed and sold as condominiums.
The purchaser of one of the units filed a complaint against California Traditions alleging property damage from the defective construction. California Traditions cross-complained against Ja-Con.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
No Resulting Loss From Deck Collapsing Due to Rot
July 10, 2012 — Tred Eyerly, Insurance Law Hawwaii
The Washington Supreme Court reversed the Court of Appeals’ decision that the ensuing loss provision provided coverage for a deck that collapsed due to rot and decay. Sprague v. Safeco Ins. Co. of Am., 2012 Wash. LEXIS 375 (Wash. May 17, 2012). Our prior post on the Court of Appeals’ decision is here.
The Sprague’s home had a deck supported by six "fin walls." The fin walls were encased in a foam and stucco coating. Twenty years after they purchased the home, it was discovered that the fin walls were in an advanced state of decay. Engineers discovered that construction defects caused the supports to rot. The deck was in danger of imminent collapse.
Safeco denied coverage. The all-risk policy did not exclude collapse, but did exclude coverage for losses causes by mold, wet or dry rot.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Ohio Court of Appeals Affirms Judgment in Landis v. Fannin Builders
April 20, 2011 — April 20, 2011 Beverley BevenFlorez - Construction Defect Journal
The Ohio Court of Appeals affirmed the judgment in Landis v. William Fannin Builders. Landis contracted Fannin Builders to build their home. The case involved staining problems on the T1-11 siding chosen by the plaintiffs.
After a year and a half of discussion on how to resolve the problem of uneven staining on the siding, Landis filed suit “against Fannin Builders, alleging claims for breach of contract, breach of the express limited warranty, and violation of the Ohio Consumer Sales Practices Act (“OCSPA”). Fannin Builders, in turn, filed a third-party complaint against 84 Lumber, alleging claims for breach of contract and indemnification. With the trial court’s leave, Fannin Builders also later amended its answer to add a counterclaim against appellees for breach of contract and unjust enrichment. In the counterclaim, Fannin Builders alleged that appellees still owed it $3,908.98 for the construction of appellees’ home.”
“In its decision, the trial court found in appellees’ favor on their breach of contract claim and against appellees on their claims for breach of the express limited warranty and violation of the OCSPA. Additionally, the trial court found in Fannin Builders’ favor on its counterclaim for breach of contract and against Fannin Builders on its third-party claims for breach of contract and indemnity. The trial court determined that appellees’ damages amounted to $66,906.24, and after setting off the $3,908.98 that appellees owed Fannin Builders under the construction contract, the trial court awarded appellees $62,997.26. The trial court reduced its decision to judgment on May 18, 2010.”
Fannin Builders appealed this judgment and assigned the following errors:
[1.] The Trial Court Erred as a Matter of Law by Concluding that Appellant Breached its Contract with Appellees when it provided a Semi-Transparent Oil-Based Stain that Simply did not Meet their Approval.
[a.] The Contract does not Contain a Satisfaction Clause.
[b.] Even if the Court Implies a Satisfaction Clause, the Court Should Apply an Objective Standard.
[2.] The Trial Court Erred as a Matter of Law by Failing to Consider Appellant’s Right to Cure.
[3.] The Trial Court committed Reversible Error by not Assessing Damages Using “Diminished Value Standard,” and by Creating a Remedy that Constitutes Economic Waste.
[4.] The Trial Court Erred as a Matter of Law by Concluding that Appellant is Barred from Seeking Indemnification When 84 [Lumber] Never Fulfilled its Obligations Pursuant to the Settlement Agreement Entered on August 2, 2005.
In response to the first assigned error, the Court of Appeals stated: “Because the failure to provide siding of a uniform color, not appellees’ displeasure, breached the contract, we reject Fannin Builders’ contention that the trial court implied a satisfaction clause into the contract and found a breach of that clause. Accordingly, we overrule Fannin Builders’ first assignment of error.”
The Court of Appeals overruled the second assignment of error and provided the following reasoning: “Although Fannin Builders depends upon a term of the limited warranty for its right to cure, the trial court concluded that no breach of the limited warranty occurred. Fannin Builders breached the duty of workmanlike conduct implicit in the construction contract, not the limited warranty requiring it to satisfy the BIA’s Quality Standards. Consequently, the limited warranty does not apply to this case, and thus, it does not prevent appellees’ recovery of damages.”
The Appeals Court found “the trial court’s award of damages” was “both reasonable and supported by competent, credible evidence,” and therefore concluded “that the trial court did not err in setting appellees’ damages at $62,997.26.” The Fannin Builders third assignment of error was overruled.
The fourth and final assignment of error was also overruled by the Court of Appeals. “While Fannin Builders correctly asserts that 84 Lumber never installed the replacement siding, it ignores the fact that it ordered 84 Lumber to remove the replacement siding from appellees’ property. Thus, Fannin Builders precluded 84 Lumber from completely performing under the August 2, 2005 letter agreement. […] Consequently, Fannin Builders cannot now claim that the letter agreement is unenforceable or that it is entitled to indemnification from 84 Lumber. Because Fannin Builders assumed all liability for the defective siding in the letter agreement, it is responsible for appellees’ damages.”
James A. Zitesman, Columbus, Ohio Business Attorney, compared the case to Jones v. Centex (Ohio App. 2010), which had a different verdict:
“The common thread is the implied warranty of good workmanship. In the Jones case, the Court found that the buyers had in fact waived all implied warranties, including the implied warranty of good workmanship. In the contract between Jones and Centex, the builder stated that it “…would not sell the property to Purchasers without this waiver.” Probably should have been a sign to the buyers.
In the Landis case, the Court stated, “Contracts for the future construction of a residence include a duty, implied by law, that the builder must perform its work in a workmanlike manner.” The Court gave significant weight to the concept of the implied warranty of good workmanship. The builder relied upon the BIA Warranty which limits builders’ liability and exposure to legal issues. The trial court concluded there was no breach of the limited warranty, rather the builder “breached the duty of workmanlike conduct implicit in the construction contract, not the limited warranty requiring it to satisfy the BIAs Quality Standards.”
The Supreme Court of Ohio has accepted the Jones v. Centex Homes case for review.
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West Hollywood Building: Historic Building May Be Defective
August 16, 2012 — CDJ Staff
The Sunset Lanai apartment building in West Hollywood, California has its fans, it also has its detractors. Designed by Edward H. Flickett and built in 1952 by George Alexander, the building isn’t wearing its years lightly. Its owner has opposed a move by the West Hollywood Preservation Commission that the building is a “local cultural resource.” Instead, Edwin Silver, the building’s owner says the group has overstated the building’s significance. His lawyer points to “design and construction flaws,” and says the building is prone to flooding and leaks. Repairs to the building have an estimated cost of $2.3 million, according to the L.A. Times.
The West Hollywood City Council decided to table the question of a historical designation as that might impede repairs. However, they did decide that if Silver seeks to demolish the building, they will grant the protection.
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New Jersey Court Rules on Statue of Repose Case
May 26, 2011 — CDJ Staff
A three-judge panel issued a per curium ruling on May 23 in Fairview Heights Condo. v. Investors (N.J. Super., 2011), a case which the members of a condominium board argued: “that the judge erred by: 1) dismissing plaintiff’s claims against RLI based upon the statute of repose; 2) dismissing the breach of fiduciary duty claims against the Luppinos based upon a lack of expert opinion; 3) barring the testimony of Gonzalez; and 4) barring the May 23, 1989 job site report.” The court rejected all claims from the condominium board.
The court found that the building must be unsafe for the statute of repose to apply. They noted, “the judge made no findings on whether the water seepage, or the property damage caused by such seepage, in any way rendered the building, or any of the units, unsafe.” Further, “without a specific finding on the question of whether the defects had rendered the building ‘unsafe,’ defendants were not entitled to the benefit of the ten-year statute of repose.“
On the second point, the court also upheld the lower court’s findings regarding the management company:
“The report submitted by Berman establishes that the EIFS product was defective in its design and would therefore have failed from the outset. The defects in that product were, according to Berman, not prone to repair or other mitigation. Therefore, even if defendants did not appropriately inspect or repair the EIFS, their failure to do so would have had no impact on the long-term performance of the EIFS exterior cladding. As plaintiff failed to raise a genuine issue of material fact on these questions, the judge properly granted summary judgment to the Luppinos on plaintiff’s breach of fiduciary duty claim.”
On the final two points, the judges noted “plaintiff maintains that the judge committed reversible error when he excluded the Gonzalez certification and the 1989 job site report prepared by Raymond Brzuchalski.” They saw “no abuse of discretion related to the exclusion of the Gonzalez certification, and reject plaintiff’s arguments to the contrary.” Of the job site report, they found, “no abuse of discretion in the judge's finding that the Brzuchalski 1989 job site report did not satisfy the requirements of N.J.R.E.803(c)(6).”
Read the court’s decision
Homeowners Not Compelled to Arbitration in Construction Defect Lawsuit
January 6, 2012 — CDJ Staff
A California appeals court has ruled that developers cannot enforce CC&Rs in a case where a developer cited an arbitration clause it had inserted into the CC&R. The homeowners are alleging construction defect and wished to sue the developer who claimed a right to this under the CC&Rs.
The Marina del Rey Argonaut reports that particular appeal dealt only with whether the developer could compel arbitration. The underlying construction defect issues will subsequently have to be determined at trial.
The attorney for the homeowners’ association, Dan Clifford, noted that “arbitration has to be agreed to by both parties.” The covenant was drafted by the developer and in addition to requiring arbitration, it had a clause that it could not be amended without the consent of the developers. The court ruled that CC&Rs “can be enforced only by the homeowners association, the owner of a condominium or both.”
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Driver’s Death May Be Due to Construction Defect
August 16, 2012 — CDJ Staff
A man driving a rental truck collided with a parking ramp at the Mall of America in Bloomington, Minnesota, leading to his death when the ramp broke and crushed the cab of the truck. One expert said that the ramp should have been built to withstand the impact. Tim Galarnyk told Fox News that the building feature didn’t’ even bear weight, describing it as “a cosmetic facial panel.” Nevertheless, in a contest with a truck he said the ramp portion should “peel it like a tin can before it takes the concrete element down.”
The Mall of American is not commenting on the accident.
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Housing Market on Way to Recovery
October 23, 2012 — CDJ Staff
Bloomberg News reports that new home purchases neared a two-year high, with July sales being the strongest since April 2010. Economists polled by Bloomberg expected an annual pace of 380,000 sales, the current levels are at 373,000. Strongest sales gains were in the Northeast, with a 20 percent jump. The Midwest and Western regions had small gains, and the South saw a drop of 4.9 percent. As the Northeast’s home prices are highest and the South’s the lowest, the pattern of sales lead to a sharp increase in median sales price.
Meanwhile, existing stocks of homes continued to deplete, reaching a record low of 38,000 completed homes on the market. In response, builders are constructing new homes at a pace not seen since April 2010, accord to the Commerce Department.
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Ninety-Day Extension Denied to KB Home in Construction Defect Insurance Claim
July 10, 2012 — CDJ Staff
A magistrate judge has denied a request by KB Home Nevada to extend the time for service an additional ninety days. KB claims that St. Paul Fire & Marine Insurance Company has failed to defend them in a construction defect claim. However, the judge did grant KB an additional twenty days to effectuate service, noting that the request for additional time may be renewed.
Read the court’s decision…
Construction Defects Lead to Demolition
May 26, 2011 — CDJ Staff
Ten years after it was built, demolition of Seattle’s McGuire Building has begun, as Jeanne Lang Jones reports in the Puget Sound Business Journal. Construction defects had rendered the 25-story apartment building uninhabitable. The major problem was corroded steel cabling. According to the report, “the building’s owners reached an undisclosed settlement last year with St. Louis-based contractor McCarthy Building Companies.”
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