Case Title: Wyman v. Ayer Props., LLC

Citation: 

Docket Number: 

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2014-07-10T00:00:00Z

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SJC-11474 
 
BRYAN WYMAN & others,1 trustees,2  vs.  AYER PROPERTIES, LLC. 
 
 
 
Middlesex.     March 4, 2014. - July 10, 2014. 
 
Present:  Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, 
& Lenk, JJ. 
 
 
Real Property, Condominium.  Condominiums, Common area.  
Negligence, Construction work, Economic loss.  Damages, 
Replacement or reconstruction of building, Repairs. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
December 8, 2005. 
 
 
The case was heard by Paul A. Chernoff, J. 
 
 
After review by the Appeals Court, the Supreme Judicial 
Court granted leave to obtain further appellate review. 
 
 
 
Thomas O. Moriarty (David M. Rogers with him) for the 
plaintiffs. 
 
Thomas H. Hayman (Patrick T. Uiterwyk with him) for the 
defendant. 
 
Henry A. Goodman, for Community Associations Institute, 
amicus curiae, submitted a brief. 
 
 
1 Frank Thoms and Vincent Cascio. 
 
2 Of the Market Gallery Condominium Trust. 
                                                          
 
2 
 
 
CORDY, J.  On December 8, 2005, Brian Wyman, Frank Thoms, 
and Vincent Cascio, as trustees of the Market Gallery 
Condominium Trust (trustees), filed a civil action against Ayer 
Properties, LLC (Ayer), seeking damages stemming from the 
negligent construction of elements of a condominium building by 
Ayer.  The trustees alleged that Ayer -- which had purchased and 
converted the building in question into condominiums -- had 
negligently constructed the window frames, the exterior brick 
masonry, and the roof of the building, resulting in damage to 
both the common areas of the building and individual residential 
units.3 
 
After a jury-waived trial, a Superior Court judge found 
that Ayer was negligent in its construction of the window 
frames, masonry, and roof.  He awarded damages for Ayer's 
negligence as to the window frames and the roof, because their 
improper installation had resulted in damage to both the common 
areas and several individual units.  However, because he found 
that the damage resulting from the defective masonry work was 
limited to the masonry itself and did not cause or include 
damage to any individual units, the judge concluded that the 
3 The trustees of the Market Gallery Condominium Trust 
(trustee) sought damages only for the damage to the common areas 
and facilities of the building. 
                                                          
 
3 
 
economic loss rule precluded the trustees from recovering for 
Ayer's negligence as to that portion of the building.4 
 
In determining the appropriate measure of damages, the 
judge first calculated the cost to repair and replace the 
damaged portions of the building,5 and then reduced that amount 
by twenty per cent to reflect what the costs would have been at 
the time of the negligent construction rather than at the time 
of the actual expenditures for repair and replacement.  As a 
result, the judge awarded compensatory damages of $140,000 to 
the trustees.  To this amount, the judge noted, would be added 
simple annual interest of twelve per cent, in accordance with 
G. L. c. 231, § 6B.6  The parties filed cross appeals.  In its 
appeal, Ayer claimed, among other things, that the condominium 
structure constituted an integrated product, and that where no 
4 The "economic loss rule" is also referred to as the 
"economic loss doctrine." 
 
5 These costs included costs actually incurred to replace 
the roof, and those estimated to be necessary for the removal 
and replacement of the windows and frames. 
 
6 General Laws c. 231, § 6B, provides: 
 
"In any action in which a verdict is rendered or a 
finding made or an order for judgment made for pecuniary 
damages for personal injuries to the plaintiff or for 
consequential damages, or for damage to property, there 
shall be added by the clerk of court to the amount of 
damages interest thereon at the rate of twelve per cent per 
annum from the date of commencement of the action even 
though such interest brings the amount of the verdict or 
finding beyond the maximum liability imposed by law." 
                                                          
 
4 
 
damage extended beyond that product, the economic loss rule 
precluded any damages. 
 
The Appeals Court affirmed the judgment in favor of the 
trustees on the claims for compensatory damages for harm to the 
common area window frames and to the roof areas, determining 
that application of the economic loss rule was not appropriate 
in this context.  Wyman v. Ayer Props., LLC, 83 Mass. App. Ct. 
21, 29, 31 (2012).  It went on to note that the "closest dicta" 
of this court "lean against the unqualified application of the 
rule to defectively designed or constructed condominium common 
areas," id. at 27, citing Aldrich v. ADD Inc., 437 Mass. 213, 
222-223 (2002).  Based on this reasoning, the Appeals Court 
reversed the order of dismissal of the trustees' claim for 
damages for harm to the masonry, and awarded damages totaling 
$64,000 plus interest pursuant to G. L. c. 231, § 6B.  Wyman, 
supra at 31.7  It also determined that the judge's decision to 
reduce the damages by twenty per cent to reflect the earlier 
replacement costs "fell well within the range of reasonable 
alternative calculations."  Id. 
7 In his findings, the Superior Court judge presciently 
computed the value of the damage to the masonry to avoid the 
necessity of a retrial "in the event that an appellate authority 
subsequently ruled that the [e]conomic [l]oss [d]octrine does 
not preclude an assessment of damages to the masonry."  He 
assessed the cost to repair and replace the damaged masonry as 
$80,000, which, after a twenty per cent reduction, amounts to 
$64,000. 
                                                          
 
5 
 
 
On further appellate review in this court, the trustees 
contend that the Appeals Court was correct and that the Superior 
Court judge misapplied the economic loss rule so as to exclude 
damages resulting from the defective masonry.  They also argue 
that the judge erred in reducing the measure of the established 
damages by twenty per cent.  Ayer, on cross appeal, continues to 
contend that the economic loss rule should preclude all claimed 
damages. 
 
We are largely in agreement with the Appeals Court, and 
conclude that the economic loss rule is not applicable to the 
damage caused to the common areas of a condominium building as a 
result of the builder's negligence, and that recovery for 
damages resulting from the defective masonry should have been 
awarded to the trustees.  Consequently, we affirm the judge's 
decision as to the window frames and roof, and remand to the 
Superior Court for entry of an order awarding additional damages 
for the negligently constructed masonry.  We also reverse the 
judge's decision to reduce the repair and replacement damages by 
twenty per cent, and remand the case to the Superior Court for 
entry of judgment in the full amount of the damages established 
at trial. 
6 
 
 
1.  Background.  a.  The construction.  In 2002, Ayer8 
purchased a 150 year old vacant, four-story mill building 
located on Market Street in Lowell.  Ayer intended to serve as a 
general contractor for the renovation of the building, during 
which Ayer would convert the building into five commercial units 
and twenty-two luxury condominiums.  To that end, Ayer, as 
trustee, established the Market Gallery Condominium on December 
16, 2003, and recorded the master deed on December 17, 2003, 
simultaneously with the sale of the first unit. 
 
The renovation began in January, 2003, and the sale and 
occupancy of the twenty-two residential units proceeded as each 
unit was completed during the three-year construction period.  
On August 2, 2004, Ayer ceded control as trustee to the newly 
appointed board of trustees.9  The sale and occupancy of the 
residential units was completed in 2005.10 
 
Shortly after the transfer of control, the trustees became 
concerned with the condition of the building, specifically the 
8 Ayer Properties, LLC (Ayer), is a single-purpose entity 
existing solely to acquire buildings, convert them into 
condominiums, and convey finished units.  It is a limited 
liability company managed by John J. DeAngelis. 
 
9 At the time of the judge's decision, the board of trustees 
consisted of Philippe Jeanjean, Stephen Greene, Alyssa Faulkner, 
Clint Baptiste, and Phillip Thompson. 
 
10 The residential units are located on the second, third, 
and fourth floors of the building.  The first level contains 
five commercial units, all of which are owned by Ayer. 
                                                          
 
7 
 
windows, exterior masonry, and roof.  Out of that concern, they 
hired a professional engineer to perform a condition survey.  
The survey revealed damage to the window frames, exterior 
masonry, and roof.11  As a result of the damage, the trustees 
brought suit against Ayer in December, 2005, alleging, in 
relevant part, negligent design and construction of the common 
areas of the building.12 
 
b.  The trial judge's findings and decision.  The judge 
first found that Ayer's negligent design and construction of the 
common-area window frames was responsible for severe weather-
related deterioration to twenty-two frames, which in turn caused 
damage to both the common areas and several individual units.  
He calculated the cost to "remove a storm window, remove and 
replace the frame elements, remove and replace a window, and 
11 The initial survey was performed by Timothy Little, a 
professional engineer, who found damage to the windows and 
masonry but did not inspect the roof.  Little returned to the 
site for a more detailed inspection in 2008, which is presumably 
when he discovered the damage to the roof, although the record 
is not clear on this point. 
 
12 The trustees initially alleged five causes of action:  
(1) negligent design and construction of common areas; (2) 
breach of fiduciary duty by Ayer to deliver a common area free 
of defects; (3) breach of an implied warranty to deliver 
competent workmanship and material; (4) breach of fiduciary duty 
by Ayer to exercise good faith, loyalty, and due diligence; and 
(5) unfair or deceptive conduct in violation of G. L. c. 93A, 
§ 2, for failing to comply with statutes and regulations 
intended to protect public health, safety, or welfare.  At the 
conclusion of trial, the judge ruled for Ayer on counts two, 
three, and five, and dismissed count four on the request of the 
trustees.  The trustees do not appeal those decisions. 
                                                          
 
8 
 
dispose of the refuse at $1,500 per window," and the cost to 
replace the sills, a process which includes the "removal of 
storm windows and disposal of refuse," at $500 per window, 
amounting to a total cost of repair of $44,000.  He opted to 
reduce the costs by twenty per cent, "to reflect costs at the 
time the damage was incurred."  He added that the "[twenty per 
cent] reduction in replacement costs seems especially 
appropriate where the [twelve per cent] interest on the judgment 
will amount to approximately [sixty per cent]."  Thus, the 
assessable damages awarded for the windows were set at $34,000. 
 
The judge also found that the common-area roof was badly 
damaged as a result of the incomplete attachment of a protective 
subsurface membrane.  As a result of the damage, the roof 
allowed water to leak into common areas, as well as several 
residential units, during heavy rainstorms, causing stains on 
several walls and ceilings.  The judge noted that, in September, 
2009, the trustees contracted with L.E. Morgan Construction 
Company to completely replace the building's roof for $132,240.  
Finding that cost attributable to Ayer, the judge again reduced 
those damages by approximately twenty per cent, and awarded 
$106,000 to the trustees for damage to the roof. 
 
Regarding the exterior masonry, the judge found that the 
brick facade to the common area had significantly deteriorated 
due a lack of diligence that was "chargeable to Ayer."  He 
9 
 
assessed the cost to repair at $80,000.  However, the judge held 
that where the defects to the exterior masonry did not cause any 
harm beyond the masonry itself, the economic loss rule barred 
the trustees' recovery in negligence, and he thus awarded no 
damages for the negligently constructed masonry.13 
 
2.  Discussion.  a.  Economic loss rule.  This court has 
long stood with the majority of jurisdictions in embracing the 
economic loss rule.  See, e.g., Bay-State Spray & Provincetown 
S.S., Inc. v. Caterpillar Tractor Co., 404 Mass. 103, 107 (1989) 
(Bay-State Spray).  The rule establishes limitations on damages 
a plaintiff may plead and recover in a negligence action.  It 
ensures that, "[i]n the absence of personal injury or physical 
damage to property [beyond the defective product itself], the 
negligent supplier of a defective product is not ordinarily 
liable in tort for simple economic loss."  Berish v. Bornstein, 
437 Mass. 252, 267 (2002).  See FMR Corp. v. Boston Edison Co., 
415 Mass. 393, 395 (1993) ("purely economic losses are 
unrecoverable in tort and strict liability actions in the 
absence of personal injury or property damage").  "Economic loss 
13 Ayer did not plead the economic loss rule as an 
affirmative defense, and instead raised the issue in a motion 
for directed verdict at the close of evidence, after which the 
judge reopened the evidence to take evidence on the 
applicability of the rule.  While the trustees argued in their 
initial appeal that Ayer waived its argument that the economic 
loss rule should apply, the Appeals Court rejected its 
contention, and the trustees do not argue waiver here.  See 
Wyman v. Ayer Props., LLC, 83 Mass. App. Ct. 21, 24-25 (2012). 
                                                          
 
10 
 
includes 'damages for inadequate value, costs of repair and 
replacement of the defective product or consequent loss of 
profits without any claim of personal injury or damage to other 
property.'"  Berish, supra, quoting Marcil v. John Deere Indus. 
Equip. Co., 9 Mass. App. Ct. 625, 630 n.3 (1980).  Essentially, 
where the negligent design or construction of a product leads to 
damage only to the product itself, the recovery for economic 
loss is in contract, and the economic loss rule bars recovery in 
tort. 
 
We have said that "[t]he economic loss doctrine applies not 
only to the purchase and sale of products but also to claims of 
negligent design and installation in a newly constructed home."  
Berish, 437 Mass. at 267.  See McDonough v. Whalen, 365 Mass. 
506, 514 (1974) (doctrine did not apply where negligently 
designed septic system overflowed causing damage to other 
property).  We have not, however, had occasion to consider 
whether the economic loss rule applies to damage caused by 
negligent design and construction of the common areas of a 
condominium building, whether or not such negligence caused 
damage to other property.  As the issue is now squarely before 
us, we hold that the economic loss rule does not ordinarily 
apply in such circumstances. 
 
An examination of the purpose of the economic loss rule 
guides our decision.  The rule was developed in part to prevent 
11 
 
the progression of tort concepts from undermining contract 
expectations.  See East River S.S. Corp. v. Transamerica 
Delaval, Inc., 476 U.S. 858, 866 (1986).  The rationale for 
excluding tort recovery for economic loss is that, "[w]hen a 
product injures only itself," a party should be left to its 
contractual remedies.  Bay-State Spray, 404 Mass. at 109, 
quoting East River S.S. Corp., supra at 871.  "The commercial 
user can protect himself by seeking express contractual 
assurances concerning the product (and thereby perhaps paying 
more for the product) or by obtaining insurance against losses."  
Bay-State Spray, supra at 109-110.  See Sebago, Inc. v. Beazer 
E., Inc., 18 F. Supp. 2d 70, 89 (D. Mass. 1998), quoting East 
River S.S. Corp., supra at 872 ("The rationale underlying the 
economic loss doctrine is that damage to a product itself 'means 
simply that the product has not met the customer's expectations, 
or, in other words, that the customer has received 'insufficient 
product value.'  The maintenance of product value and quality is 
precisely the purpose of express and implied warranties").  As a 
result, "[w]hen a product injures only itself the reasons for 
imposing a tort duty are weak and those for leaving the party to 
its contractual remedies are strong."  Bay-State Spray, supra at 
109, quoting East River S.S. Corp., supra at 871. 
 
The nature of condominium unit ownership supports our 
conclusion that claims such as those raised here do not fit into 
12 
 
the rubric of claims intended to be covered by the rule.  
"Ownership of a condominium unit is a hybrid form of interest in 
real estate, entitling the owner to both 'exclusive ownership 
and possession of his unit, G. L. c. 183A, § 4, and . . . an 
undivided interest . . . in the common areas."  Berish, 437 
Mass. at 262, quoting Noble v. Murphy, 34 Mass. App. Ct. 452, 
455-456 (1993).  As part of the statutory structure of 
condominium ownership, "condominium unit owners cede the 
management and control of the common areas to the organization 
of unit owners, which is the only party that may bring 
litigation relating to the common areas of the condominium 
development on their behalf."  Berish, supra at 263, citing 
G. L. c. 183A, § 10 (b) (4).  See Cigal v. Leader Dev. Corp., 
408 Mass. 212, 217 (1990) (G. L. c. 183A, § 10, "plainly 
contemplates that the association is to act as the exclusive 
representative of the unit owners in litigation for negligent 
construction"). 
 
The problem arises where the party exclusively responsible 
for bringing litigation on behalf of the unit owners for the 
negligent construction of the common areas (here, the trustees) 
has no contract with the builder under which it can recover its 
costs of repair and replacement, that is, its economic losses 
caused by defective construction.  We agree with the Appeals 
Court that "the rule does not require a court to leave a wronged 
13 
 
claimant with no remedy," Wyman v. Ayer Props., LLC, 83 Mass. 
App. Ct. at 28, and that "[t]he fundamental purpose of the rule 
is to confine the indeterminacy of damages, not to nullify a 
right and remedy for a demonstrated wrong and its harm."14  Id. 
 
The rationale for applying the rule is made even weaker 
where the trustees seek damages that are finite and foreseeable.  
The rule is intended to preclude recovery for intangible and 
unknown damages for lost contract or economic opportunity.  See 
FMR Corp., 415 Mass. at 394-395 (economic loss doctrine 
precluded recovery for lost income and increased costs of doing 
14 While the trustees do not have a contract with Ayer, the 
individual unit owners who purchased their units from Ayer do, 
and, as such, depending on the terms of each contract, they 
might each bring an action for breach of contract against Ayer 
for damage to their units and to their interest in the common 
areas stemming from negligent construction.  See Cigal v. Leader 
Dev. Corp., 408 Mass. 212, 215 (1990) ("Nothing in G. L. c. 183A 
divests the purchaser of a condominium of the right to sue in 
breach of contract").  See also Gordon v. State Bldg. Code 
Appeals Bd., 70 Mass. App. Ct. 12, 20 (2007) (although 
association has exclusive right to protect owners' common 
rights, individual owners may assert claims "relating to their 
individual rights even though such claims may arise from 
something that takes place in a common area").  Were we to 
determine that the economic loss rule precluded the trustees' 
suit, we would force each individual unit owner to sue Ayer for 
breach of contract, even though the harm complained of stemmed 
from common structural problems.  Such a result is precisely the 
sort of "[p]iecemeal litigation by individual unit owners [that] 
would frustrate the statutory scheme, in which the association 
acts as the representative of all owners in common."  Cigal, 
supra at 218.  Simply put, where contractual remedies for the 
individual unit owners are not easily enforceable, and actions 
brought by such individuals would be inconsistent with judicial 
economy and with the role delegated to the condominium 
association by statute with regard to common areas, the 
rationale for applying the economic loss rule is weak. 
                                                          
 
14 
 
business due to three-day power outage resulting from 
defendant's negligence).  See also Garweth Corp. v. Boston 
Edison Co., 415 Mass. 303, 304-305 (1993) (plaintiff's claim 
"thwarted by the economic damage rule" where malfunctioning 
measuring device installed by defendant resulted in oil spill at 
plaintiff's station, and alleged damages resulted in part from 
157-day delay in plaintiff's ability to complete contracted work 
with third party); Marcil, 9 Mass. App. Ct. at 630 (plaintiff 
suffered unrecoverable economic losses where he alleged that 
defendant's negligently manufactured tractor caused him "severe 
losses in his business and good will").  Here, there is no such 
danger.  An eleven-day trial established Ayer's fault, the harm 
suffered by the trustees as representative of the unit owners' 
rights in the common areas, and the exact amount of the damages.  
There is no allegation of consequential damages, but simply a 
reliably proven amount needed to repair or replace the 
negligently constructed window frames, masonry, and roof.  Thus, 
the purposes of the economic loss rule have little applicability 
in these circumstances. 
 
b.  Damages calculation.  The trustees argue that the judge 
incorrectly reduced the damages by twenty per cent in an attempt 
to reflect the costs of repair and replacement at the time of 
the negligent construction.  They contend that the proper award 
of damages is the actual and projected repair and replacement 
15 
 
costs as found by the trial judge, without any reductions.  We 
agree. 
 
A basic premise of tort law is that "[t]he plaintiff is 
entitled to that sum of money which will place him in the 
position in which he was immediately before the defendant's 
negligent act or omission."  J.R. Nolan & L.J. Sartorio, Tort 
Law § 13.1 (3d ed. 2005).  The general rule for determining 
property damage is diminution in market value.  See Hopkins v. 
American Pneumatic Serv. Co., 194 Mass. 582, 583 (1907).  
However, "[r]eplacement or restoration costs have also been 
allowed as a measure of damages in other contexts where 
diminution in market value is unavailable or unsatisfactory as a 
measure of damages."  Trinity Church in the City of Boston v. 
John Hancock Mut. Life Ins. Co., 399 Mass. 43, 49 (1987).  
"Where expenditures to restore or to replace to predamage 
condition are used as the measure of damages, a test of 
reasonableness is imposed."  Id. at 50.  Both the cost of repair 
or replacement and the repair or replacement itself must be 
reasonably necessary in light of the damage inflicted by Ayer's 
negligence.  Id.  "[A]n award of damages must stand unless to 
make it or permit it to stand was an abuse of discretion on the 
part of the court below, amounting to an error of law."  
Mirageas v. Massachusetts Bay Transp. Auth., 391 Mass. 815, 822 
(1984), quoting Bartley v. Phillips, 317 Mass. 35, 43 (1944). 
16 
 
 
While we have held that repair and replacement costs are an 
appropriate measure of damages, we have not explicitly addressed 
whether or when it is proper for those damages to be reduced to 
account for the lower costs of repair and replacement that would 
have been incurred had they been done closer in time to the 
negligent construction.  The cases cited by the Appeals Court in 
affirming the trial judge's reduced award stand only for the 
proposition that repair and replacement damages are appropriate.  
See, e.g., Commonwealth v. Johnson Insulation, 425 Mass. 650, 
665-666 (1997); Belkus v. Brockton, 282 Mass. 285, 288 (1933).  
We need not now decide whether such a reduction is ever 
appropriate, where the judge's decision to reduce the damages by 
twenty per cent here was not reasonable. 
 
It is not clear from the record why the judge concluded 
that the actual costs of repair and replacement that he found 
had already been incurred or were likely to be incurred were an 
unreasonable remedy.  At the time the damages were awarded, the 
trustees had already contracted for the roof repair at a cost of 
$132,240.  Absent any finding that this cost was excessive, we 
discern no basis to conclude that the trustees should not be 
entitled to the costs they had already incurred.  Similarly, 
while work apparently remains to be done on the window frames 
and masonry, there is no finding that the costs of their repair 
and replacement, as determined by the judge, were unreasonable. 
17 
 
 
While the judge was in the best position to determine the 
proper amount of actual damages, and wrote a meticulously 
detailed, fifty-five page memorandum of decision in which he 
carefully explained his method of determining damages, his 
subsequent twenty per cent reduction is largely unexplained and 
unsupported by any evidence. 
 
The only explanation of the reduction is alluded to in the 
judge's statements that the reduction with regard to the windows 
seemed "especially appropriate" given the addition of interest, 
and that the reduction with regard to the roof was reasonable 
"based on the evidence and the fact that damages will be 
enhanced by interest on the near [sixty per cent] interest on 
the judgment."  Thus, it appears that the judge's decision to 
reduce the amount of damages was motivated, in significant part, 
by a desire to prevent the trustees from receiving the full 
benefit of the statutorily mandated interest.  We agree with the 
trustees that the awarding of interest "is not within the 
purview of the fact finder," and conclude that reducing damages 
for the purpose of preventing aggrieved plaintiffs from 
receiving interest that the Legislature intended they receive is 
unreasonable (citation omitted).  Lawrence Sav. Bank v. 
Levenson, 59 Mass. App. Ct. 699, 711 (2003) ("Prejudgment 
interest, awarded pursuant to G. L. c. 231, § 6B, is designed to 
18 
 
compensate a damaged party for the loss of use or the unlawful 
detention of money" [citation omitted]). 
 
3.  Conclusion.  We affirm the trial judge's decision 
awarding damages for negligent construction of the roof and 
window frames, and reverse his decision with regard to the 
damaged masonry.  We also vacate the award of damages and remand 
to the Superior Court for entry of an award of the full amount 
of damages found by the trial judge, amounting to $256,240, plus 
interest pursuant to G. L. c. 231, § 6B. 
 
 
 
 
 
 
 
So ordered.