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December 20, 2012

On December 13, 2012, the California Court of Appeal, First District, Division 5, filed its opinion in the matter of Beacon Residential Community Association v. Skidmore, Owings & Merrill, LLP.  The case involves whether a design professional owes a duty to a homeowners’ association and its future residents in the design of a residential project.  The lower court initially sustained a demurrer by design professional Skidmore, Owings & Merrill, LLP, to the homeowner’s association’s Third Amended Complaint on the basis that a design professional owes no duty of care to the homeowner’s association or its members under common law or Senate Bill 800.  The trial court found that a homeowner’s association may not base a claim against a design professional on negligent design but rather must show the design professional had “control” in the construction process.  The Court of Appeal disagreed and reversed, holding that a design professional does owe a duty of care to the third party purchasers of condos.

Facts of the Case

Homeowner’s association Beacon Residential Community Association brought this action against Skidmore, Owings & Merrill, LLP (Skidmore) and others for alleged defects in the design and construction of the Beacon Residential Condominiums.  Skidmore provided architectural, landscape architecture, and engineering services as well as construction administration and construction contract management for the 595 unit condominium project.  The company sought to limit its liability for its services by including a clause in its contract with the developer providing that the architect shall have no liability to third parties, including the homeowner’s association and any future purchasers. 

The homeowner’s association alleged causes of action against Skidmore for (1) Civil Code Title 7 – Violation of Statutory Building Standards for Original Construction, (2) Negligence Per Se in Violation of Statute, and (3) Negligence of  Design Professionals and Contractors.  In reviewing the matter, the Court of Appeal engaged in a multi-step analysis of both the common law and the Title 7 (SB 800) based claims.  (The Court did not address whether SB 800 would apply to the project, a condominium conversion.  Although Civil Code §896 states that SB 800 does not apply to condominium conversions, the Court elected to assume that SB 800 applied for purposes of its analysis.)  

Design Professionals Face Tort Liability to

Purchasers:  The Court first concluded that design professionals owe purchasers a duty of care under the common law.  In reaching that conclusion, the Court analyzed the legal and policy considerations regarding whether a defendant owes a duty of care to a plaintiff without a contractual relationship. 

The Supreme Court first recognized subcontractors owe a duty of care to purchasers for construction defects causing property damage in Stewart v. Cox (1961) 55 Cal.2d 857.  The Supreme Court relied on the factors outlined in Biakanja v. Irving (1958) 49 Cal.2d 647 for determination of whether a duty of care exists in the absence of privity of contract.  The Biakanjafactors included (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant’s conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing future harm.  The Second District Court of Appeal used these same factors to conclude architects owe a duty of care to purchasers for negligence in rendering professional services.  See Cooper v. Jevne(1976) 56 Cal.App.3d 860.  Later, in Aas v. Superior Court (2000) 24 Cal.4th 627, the Supreme Court declined to create a rule of tort liability for construction defects not causing property damage and stated such determinations were best left to the Legislature. 

Here, the Court noted that, not only do the Biakanja factors support imposition of liability on design professionals to purchasers for defects in their work, but also, more importantly, the Legislature has now spoken.  SB 800 clearly expresses an intent that design professionals may be liable to purchasers for construction defects.

SB 800 Exposes Design Professionals To Liability: 

 Evaluating both the legislative history and the provision of SB 800, the Court of Appeal concluded that the statute clearly states that design professionals who cause a violation of the standards set forth in Section 896 of the Bill due to their negligence may be liable to ultimate purchasers for damages. 

Accordingly, the Court concluded that a design professional may bear liability to an ultimate purchaser for negligence based on both common law theories and SB 800.  The purchaser need not have a contractual relationship with the design professional to bring such a claim.

Why This Case is Important

This case underscores that design professionals do not get to sit on the sidelines in the SB 800 process and avoid litigation for alleged defects in their work.  A purchaser may bring claims for negligence against design professionals based on both common law tort theories and violation of the construction standards in SB 800.  For design professionals, this serves as an important reminder that they may bear liability to third parties for their work in residential construction despite efforts to ward off such claims.    For builders, the case highlights the need to notify potentially liable design professionals as well subcontractors, manufacturers, and suppliers of SB 800 claims implicating their work so they have the opportunity to participate in inspections and the repair process. 

 

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