Opinion ID: 810464
Heading Depth: 2
Heading Rank: 2

Heading: The Actual Physical Damage Requirement

Text: “Unless the parties otherwise agree in writing,” section 9:3144(B)(13) of the NHWA excludes from coverage under its warranties “[a]ny condition which does not result in actual physical damage to the home.” La. Rev. Stat. Ann. § 9:3144(B)(13). We are asked to determine whether Gines was required to allege in his NHWA claims that the construction defect—the undersized air conditioning system—resulted in actual physical damage to his home. Gines makes two arguments as to why his NHWA claims survive the motion to dismiss. First, Gines argues that section 9:3144(A)(2) of the NHWA carves out an exception to the actual physical damage requirement in section 9:3144(B)(13). Second, he argues that the actual physical damage requirement in section 9:3144(B)(13) is a default rule, and that the parties contracted around this requirement in paragraph 6 of the contract. We disagree.
Gines argues that the district court erred in ruling that NHWA claims require a showing of actual physical damage because section 9:3144(A)(2) is not subject to this requirement. Section 9:3144(A)(2) provides that every builder warrants to the new homeowner that the “heating, cooling, and ventilating systems . . . will be free from any defect due to noncompliance with the building standards or due to other defects in materials or workmanship not regulated by building standards.” Gines argues that this warranty exclusively covers heating and cooling defects, and that the district court incorrectly found that the actual physical damage requirement under section 9:3144(B)(13) reaches such defects. In support of his conclusion, Gines advances a four-part argument that turns on several rules of statutory interpretation. First, Gines notes that the specific controls the general in matters of statutory interpretation. Oubre v. La. Citizens Fair Plan, 79 So. 3d 987, 997 (La. 2011). Accordingly, he argues that section 9:3144(A)(2) is not subject to the 7 Case: 12-30183 Document: 00512023188 Page: 8 Date Filed: 10/17/2012 No. 12-30183 actual physical damage requirement in section 9:3144(B)(13) because the former section is more specific than the latter. This is incorrect. Section 9:3144(A) begins: “[s]ubject to the exclusions provided in Subsection B of this Section, every builder warrants the following to the owner.” The first line of subsection A indicates that its warranties are limited by the exclusions in subsection B. Section 9:3144(A)(2) thus merely provides the general conditions warranted under the NHWA, including the type and extent of defects for which a builder may be held responsible. In light of the opening clause, section 9:3144(B)(13) is correctly interpreted as a specific limitation on the conditions for which a builder may be held responsible. In other words, the warranties set forth under section 9:3144(A)(2), a general provision, are not available if the alleged defect does not cause actual physical damage under the specific limitation set forth under section 9:3144(B)(13). Second, Gines notes that “the latest expression of the legislative will is considered controlling under Louisiana law.” Pumphrey v. City of New Orleans, 925 So. 2d 1202, 1210 (La. 2006). Accordingly, Gines argues, the 1999 and 2003 amendments to the NHWA extended its warranties to cover any defect irrespective of building standards. This broad coverage, according to Gines, undercuts the district court’s interpretation of the NHWA as requiring a showing of actual physical damage. This argument lacks merit. The 1999 amendment provided that the NHWA would control defect claims regardless of whether there is a building standard, and the 2003 amendment replaced the phrase “major structural defect” with “defect.” La. Rev. Stat. Ann. §§ 9:3141, 9:3144(A)(2). Neither of these amendments concerns the physical damage exclusion, so neither should be understood to eliminate it. Third, Gines argues that the NHWA must be strictly construed because it is penal. Oubre, 79 So. 3d at 997. Gines contends that the NHWA is a penal statute because it precludes him from enforcing a remedy to have his air 8 Case: 12-30183 Document: 00512023188 Page: 9 Date Filed: 10/17/2012 No. 12-30183 conditioning installed in a workmanlike manner in accordance with section 9:3144(A)(2). This argument is meritless. As we have discussed, section 9:3144(A)(2) is limited by the actual physical damage requirement in section 9:3144(B)(13). The fact that the district court dismissed Gines’s claims because they did not satisfy the requirements of section 9:3144(B)(13) does not make the Act penal. Because the NHWA imposes no penalties on homeowners, it is not penal in nature, and therefore we do not strictly construe it. Fourth, Gines argues that this court should not interpret the NHWA as requiring a claimant to allege actual physical damage because this would lead to absurd consequences. See McLane S., Inc. v. Bridges, 84 So. 3d 479, 483 (La. 2012). “[I]nterpretation of a law involves primarily a search for the legislature’s intent.” Conerly v. State, 714 So. 2d 709, 710 (La. 1998); Ruiz v. Oniate, 713 So. 2d 442, 444 (La. 1998); see La. Rev. Stat. Ann. § 1:4; La. Civ. Code art. 2. Because the language of the NHWA is unambiguous, we are compelled to enforce the legislature’s intent by applying the statute as written, provided that this application does not lead to absurd consequences. La. Civ. Code. art. 9; Conerly, 714 So. 2d at 710-11; Ruiz, 713 So. 2d at 444. Enforcing the actual physical damage requirement does not lead to absurd consequences. In requiring a builder to provide mandatory warranties, the NHWA also requires a new homeowner to show actual physical damage before permitting those warranties to provide a viable claim. Given that builders could otherwise contract around the warranties that the NHWA establishes as mandatory, this is a reasonable requirement. As Horton correctly argues, the district court’s ruling squares with a plain reading of the statute as creating a quid pro quo between builders and owners. Because new homeowners and builders alike stand to benefit from the district court’s interpretation of the NHWA, Gines’s argument that this reading leads to absurd consequences fails. 9 Case: 12-30183 Document: 00512023188 Page: 10 Date Filed: 10/17/2012 No. 12-30183
Gines argues that he may assert a claim in contract against Horton because the actual physical damage requirement in section 9:3144(B)(13) is a default rule that the parties can contract around. He claims that the parties did so in paragraph 6 of the contract of sale, which provides: Seller agrees to build the house in accordance with industry standard building practices substantially in compliance with plans and specifications agreed to by Seller and Buyer as evidenced by customer selection sheet and customer change orders, if any. Gines argues that the language in paragraph 6 creates an exception to the NHWA language requiring actual physical damage. Therefore, he concludes, the terms of this provision would allow for damages if Horton breaches the contract. We need not reach this claim because Gines did not attach a copy of the contract to the original or amended complaint.9 It is well-established that, in deciding whether to grant a motion to dismiss, a district court may not “go outside the complaint.” Scanlan v. Tex. A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). There is one recognized exception to that rule: a district court may consider documents attached to the motion to dismiss if they are referred to in the plaintiff’s complaint and are central to the plaintiff’s claim. Id. This exception does not apply here because the only attachment to the motion to dismiss was Gines’s affidavit. Thus, in granting the motion to dismiss, the district court did not need to address Gines’s claims based on paragraph 6. Had Gines attached a copy of the contract to the complaint, his argument regarding paragraph 6 still would be unavailing. The cited language does not indicate a waiver of the physical damage requirement—it merely sets forth Horton’s agreement to build the house in accordance with agreed upon plans and 9 The contract is in the record of this case, having been attached to Reliant’s notice of removal, which Horton joined. 10 Case: 12-30183 Document: 00512023188 Page: 11 Date Filed: 10/17/2012 No. 12-30183 specifications. Moreover, paragraph 13 of the contract shows that Gines was aware of the absence of any such waiver in the contract. Paragraph 13 states: BUYER HAS BEEN PROVIDED A COPY OF THE LOUISIANA NEW HOME WARRANTY ACT (LA. REV. STAT. 9:3141, ET SEQ) AND HAS READ AND UNDERSTANDS THE PROVISIONS THEREOF. BUYER ACKNOWLEDGES THAT THE LOUISIANA NEW HOME WARRANTY ACT IS PROVIDED IN LIEU OF ALL OTHER WARRANTIES, ORAL AGREEMENTS, OR REPRESENTATIONS, AND SELLER [D.R. HORTON] MAKES NO WARRANTY, EXPRESSED OR IMPLIED, AS TO QUALITY, FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, ABILITY OR OTHERWISE, EXCEPT AS IS EXPRESSLY SET FORTH IN THE LOUISIANA NEW HOME WARRANTY ACT. This paragraph immediately precedes Gines’s signature on the contract, and effectively refutes Gines’s argument that he did not know of or understand the limitations set forth under the NHWA. It is well settled that a party who signs a written instrument is presumed to know its contents and cannot avoid its obligations by contending that he did not read or understand it, or that the other contracting party failed to explain it to him. Tweedel v. Brasseaux, 433 So. 2d 133, 137 (La. 1983). On this point, Horton rightly concludes that Gines is bound by paragraph 13, which declares that the only warranties Horton made were those set forth in the NHWA. The moral of this story is that in order to avoid the harsh result that has obtained here, the buyer of a newly constructed home in Louisiana should seek to obtain in the contract of sale an express waiver of the actual damage requirement of the NHWA.