Oregon Supreme Court affirms negligence claim against builder for property damage

The Oregon Supreme Court on Thursday held that a builder may be liable to a subsequent purchaser for repair costs resulting from negligent construction.  The defendant in Harris v. Suniga unsuccessfully urged the court to bar damages under the 'economic loss' doctrine, which provides that a defendant is ordinarily not liable for negligently causing a stranger's purely economic loss without injuring his person or property.

Defendants argued that plaintiffs' losses amounted to nothing more than a decrease in the value of their investment, and did not constitute injury to property.  The court, affirming the Court of Appeals, rejected that characterization: "plaintiffs here seek recovery for physical damage to their real property, and this court's cases generally permit a property owner to recover in negligence for damages of that kind."

See our coverage from December 2006 of the economic loss doctrine and the Court of Appeals opinion in Harris v. Suniga.

Washington's LLCA time-bars general contractor from pursuing claims

Overturning a trial court ruling, the Washington Court of Appeals, Division One, yesterday ruled that the “effective date of dissolution” of an administratively dissolved limited liability company under the Washington Limited Liability Company Act (LLCA), RCW 25.15 et seq., is three years from the date of administrative dissolution, not the date the limited liability company’s certificate of formation is canceled. The LLCA provides that the affairs of a limited liability company that is administratively dissolved are “wound up” under RCW 25.15.270 and its certificate of formation is canceled under RCW 25.15.290(4) two years after the administrative dissolution date.  The LLCA, at RCW 25.15.270, sets forth several different methods of dissolution of a limited liability company.  The Court’s ruling in Belltown Waterproofing, Inc., v. Clear Brook Construction meant that general contractor Clear Brook Construction Limited’s construction defect claims against subcontractor Belltown Waterproofing, LLC were barred by the statute of limitations.

The case aptly demonstrates that a general contractor’s potential risk does not end at project completion.  Clear Bank is not the first and will certainly not be the last general contractor to get caught in the middle between an owner’s claim brought within, but near the end of, the applicable statute of limitations, and the applicable statute of limitations and/or statute of repose the general contractor must meet in order to timely bring its claims against its subcontractors. 

Evidence of immigration status allowed on claim for future wage loss under Washington law

In a case of first impression, Washington Court of Appeals, Division I, held yesterday that a plaintiff's immigration status may be admissible where plaintiff claims damages for future wage loss.

The case, Salas v. Hi-Tech Erectors, involved an injured worker's claims against a scaffold supplier for damages caused when the worker slipped from a scaffold ladder at a construction site.  Plaintiff entered the United States on a valid visa, which had since expired, and he had applied for citizenship.  Plaintiff sought to exclude evidence of his immigration status at trial.  The trial court found that if he chose to pursue his claim for impairment of future income, his status as a non-legal resident would be allowed as probative as to the extent of the future impairment.  The Court of Appeals affirmed, stating "we conclude that evidence of a party's illegal immigration status should generally be allowed only when the defendant is prepared to show relevant evidence that the plaintiff, because of that status, is unlikely to remain in this country throughout the period of claimed lost future income."

In the opinion the court discussed differing holdings from several other states.  Look for this and related immigration status issues in other appellate court cases across the country.

Washington business, labor and Legislature react to the Brink's drive-time ruling

Blog contributor Brenda Molner has published an article addressing the responses of business, labor, and the Washington legislature to the Washington Supreme Court's October 2007 ruling in Stevens v. Brink's Home Security, Inc.  The article is in the February 2008 edition of the Puget Sound Chapter of the National Association of Women in Construction's newsletter.  The Brink's case deals with payment of drive-time to employees who use company vehicles to commute to and from work.  The article is a follow-up to a previous article in the same publication.

You may access Washington HB 3294 and SB 6867, referenced in the article, by clicking on the links provided.

Washington lien claimant wins the battle but loses the war

When an owner of property subject to a lien records a lien bond, the bond becomes security for the lien and guarantees payment of a judgment upon the lien.  In an opinion issued yesterday by the Washington Court of Appeals, Division I in DBM Consulting Engineers v. United States Fidelity and Guaranty Co., plaintiff won a hollow victory and learned the hard way that in order to collect a judgment from a lien bond a judgment for foreclosure of the lien, not just breach of contract against the principal, must be obtained.

DBM recorded a mechanics lien against a client to secure a debt DBM asserted it was owned under a contract for professional services. The client obtained a lien bond to allow it to sell the property while the claim was pending.  DBM sued the client for breach of contract, unjust enrichment and foreclosure of the lien and prevailed at trial.  While DBM requested foreclosure of the lien in its complaint, it never pursued the foreclosure claim or obtained a ruling on the claim.  When the client failed to pay the judgment, DBM then sued the surety to compel it to pay DBM and the trial court found for DBM.  The Court of Appeals reversed the trial court and dismissed the suit finding that because DBM failed to obtain a judgment upon the lien the surety was not obligated to pay under the lien bond statute, RCW 60.04.161.

To add insult to injury, the Court stated in a footnote that because DBM brought a lien foreclosure claim in the original action, but in effect abandoned the claim by not obtaining a judgment on the lien, DBM would be barred by res judicata from pursuing the claim in another suit.

When is a delivery not a delivery?: Risk of loss and the UCC

Consider these facts:  A seller of manufactured homes delivers a home to the buyer's lot, but a month later, before the seller completes the finishing work inside the home and before it's ready for occupancy, a storm causes extensive damage.  Who is responsible to pay for repairs - the seller or the buyer?

In Lucas v. Berry, the Oregon Court of Appeals decided last week that the seller had to pay to repair the manufactured home because the risk of loss had not yet passed to the buyer at the time of the storm.  The parties' contract required the seller to deliver and set up the home, but didn't address when the buyer would become responsible for damage to it.  The court turned to Article 2 of the Uniform Commercial Code, governing sale of goods, for the answer.  ORS 72.5090(1)(b) states that the risk of loss passes to the buyer when the goods are duly tendered so as to enable the buyer to take delivery.  Even though the home had been delivered to the buyer's lot, it had not yet been "delivered" as that term is used in the UCC.  The seller had contracted to provide a home fully ready for occupancy, and until that happened there was no delivery to the buyer and the risk of loss remained with the seller.

Oregon Court of Appeals puts limits on the "economic loss" doctrine

The Oregon Court of Appeals this week clarified the scope of the "economic loss" doctrine, an important limitation on the type of damages recoverable for negligence.  Under Oregon's economic loss doctrine, a plaintiff cannot recover damages for purely economic losses resulting from defendant's negligence, unless the defendant owes some special duty to plaintiff beyond the common law duty to exercise reasonable care.   So, for example, an employer cannot sue a party for the loss of the services of its employee based on that party's negligent injury of the employee; in such a case, the employer suffered no injury to its person or property, so its losses are purely economic and cannot be recovered from the tortfeasor.

The issue the Court of Appeals addressed in Harris v. Suniga was how to define "economic losses."  In that case, the plaintiffs were subsequent purchasers of an apartment building, and the defendant was the builder whose negligent construction allegedly resulted in extensive dry rot.  Because plaintiffs had no contractual relationship with the builder, they could not sue for breach of contract.  Instead, they made a claim for negligence.  The defendant sought to dismiss based on the economic loss doctrine, arguing that plaintiff's loss was simply a decrease in the value of their investment and therefore was not recoverable in a negligence claim.  Judge Landau, writing for the court, disagreed.  He concluded that plaintiffs' claim was based on injury to their property and was not purely economic.  On that basis, the economic loss did not bar a negligence claim and plaintiffs are entitled to proceed against the builder.