Opinion ID: 1203744
Heading Depth: 2
Heading Rank: 2

Heading: liability in tort

Text: The Court of Appeals in Carolina Winds denied the plaintiff's tort claim by applying the economic loss rule. This rule exists to assist in determining whether contract or tort theories are applicable to a given case. Where a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses. Conversely, where a purchaser buys a product which is defective and physically harms him, his remedy is in either tort or contract. This is so, the analysis provides, because his losses are more than merely economic. We find that this legal framework generates difficulties. This is so because the framework's focus is on consequence, not action. Builder A and Builder B can be equally blameworthy, and build equally shoddy housing, but because Builder A's negligence happened to be discovered early enough, no one was harmed. It hardly seems fair that Builder A should profit from a diligent buyer's discovery, or because he was fortunate. The framework we adopt focuses on activity, not consequence. If a builder performs construction in such a way that he violates a contractual duty only , then his liability is only contractual. If he acts in a way as to violate a legal duty, however, his liability is both in contract and in tort. Where the builder's actions are grossly negligent, of course, punitive damages may be sought. We disagree with Carolina Winds insofar as it implies that no legal duties are owed a purchaser by a builder to protect against diminution in the expected value of the building. The Court of Appeals itself correctly recognized in Kincaid v. Landing Dev. Corp. , 289 S.C. 89, 344 S.E. (2d) 869 (Ct. App. 1986) that a violation of a building code violates a legal duty for which a builder can be held liable in tort for proximately caused losses. Terlinde , 275 S.C. at 399, 271 S.E. (2d) at 770, imposes a legal duty on builders to undertake construction commensurate with industry standards. Where a building code or industry standard does not apply, public policy further demands the imposition of a legal duty on a builder to refrain from constructing housing that he knows or should know will pose serious risks of physical harm. We recognized such a duty, which should extend to foreseeable parties, in Rogers , 251 S.C. at 134, 161 S.E. (2d) at 84. We are persuaded that building a house which one knows or should know will later be sold by a party to an innocent buyer is an act adequate to constitute placing that house into the stream of commerce. Any builder who violates such a duty should justly be held accountable for the losses that his breach caused, whether they be physical harm or the dimunition in the value of the house. A builder is no less blameworthy in such a case where lady luck has smiled upon him and no physical harm has yet occurred. We discounted the necessity of showing physical harm in Terlinde , 275 S.C. 395, 271 S.E. (2d) 768 (1980), in which we considered and declined to adopt arguments asserting the economic loss rule contained in the Terlinde briefs. In so ruling, we once again join those states which strive to protect the modern new home buyer. See Barnes v. Mac Brown & Co. , 264 Ind. 227, 342 N.E. (2d) 619 (1976); Oates v. JAG, Inc. , 314 N.C. 276, 333 S.E. (2d) 222 (1985); Sewell v. Gregory , 371 S.E. (2d) 82 (W. Va. 1988); Village Cross Keys Inc. v. The United States Gypsum Co. , 315 Md. 741, 556 A. (2d) 1126 (1989); New Mea Construction Corp. v. Harper , 203 N.J. Super. 486, 497 A. (2d) 534 (1985); Huang v. Garner , 157 Cal. App. (3d) 404, 203 Cal. Rptr. 800 (1984). Thus, a cause of action in negligence will be available where a builder has violated a legal duty, no matter the type of resulting damage. The economic loss rule will still apply where duties are created solely by contract. [3] In that situation, no cause of action in negligence will lie.