Opinion ID: 2640748
Heading Depth: 2
Heading Rank: 5

Heading: The AOAO's Negligence Claims

Text: The AOAO contends that the circuit court erred in granting summary judgment in favor of the Appellees [33] on its negligence claims on the basis of the two-year statute of limitations contained in HRS § 657-7 because there were genuine issues of material fact as to (1) whether and when [the AOAO] reasonably should have discovered Defendants' breaches of duty; (2) whether Defendants lulled [the AOAO] into inaction; and (3) whether Defendants concealed material information of their own fault and misrepresented the true cause of [the AOAO's] injury. (Numbering altered.) Specifically, the AOAO asserts that its collective evidence raised genuine issues of material fact as to whether: (1) [the AOAO] acted with reasonable diligence by seeking professional assistance from those responsible for the design and construction of the project[ ] and from independent engineers when Defendants' recommendations failed to work; (2) Defendants withheld from [the AOAO] important incriminating information such as the . . . Grouting Report, which identified inadequate soil compaction as having caused ground settlement and resulting building distress damage; and (3) Defendants lulled [the AOAO] by misrepresenting the severity and cause of the problem, i.e. [,] by assuring the problem was not serious and was caused by excess water and inadequate drainage rather than improper soil compaction. The AOAO argues that it undertook a reasonable and timely investigation, (capitalization in original altered), explaining that: Once [the AOAO] became aware of building damage, . . . Kobashigawa sought assistance from the defendants involved in the design and supervision of the project. At Kobashigawa's request, a site inspection was held on May 13, 1992. . . . Following the inspection, separate letter reports were furnished by Lau and Bob Wong (then president of Geolabs). Both stated the problem was due to poor drainage. Neither mentioned: (1) the earlier . . . Grouting Report; or (2) Honma's 1988 letter [to Asher] acknowledging inadequate soil compaction as the root cause. Ignorant of the undisclosed information, [the AOAO] followed Lau's and Wong's recommendations and hired a contractor . . . to re-grade to drain water away from the foundations. Less than a year later, Kobashigawa learned of continued cracking despite the remedial efforts. . . . Kobashigawa wrote to Lau informing him that[,] despite implementation of his recommendation to divert the water, problems continued at Building 8, including cracking and jammed doors. The letter also reported complaints from owners in Buildings 5, 6, and 7, and reiterated the [AOAO's] request for a site inspection of these additional buildings. Honma responded to Kobashigawa[,] stating that, according to Lau, the owners needed to wait for about a year for the ground under the building to dry and resettle. Based on this response, [the AOAO] waited until September of 1994 to reassess the problem. Despite the re-grading and yearlong wait, the building damage continued unabated. In early 1995, Kobashigawa wrote to Honma of the continuing problem. Kobashigawa asked the developer[, i.e., Venture 15,] to again look into the problem and render assistance as soon as possible. Simultaneously, the [b]oard [of directors] began looking into hiring an independent engineer. Despite mounting concerns, the [b]oard [of directors] looked to the developer [(Venture 15)] and soils engineer [(Geolabs)] for guidance for a second time. A site inspection was held on March 21, 1995, [34] to inspect the cracking problem at Building 6. Lau again opined the problem was due to infiltration of water into the subgrade soil over an extended period. Lau recommended the soils engineer, Geolabs, be further consulted to confirm that the settlement is the probable cause of the cracking problem, also as to whether the settlement movements have subsided or is still subsiding. Based on test drilling conducted by Geolabs at the site, shallow water with a strong septic odor was discovered at Building 6, and Geolabs suggested that a sewer leak might be the problem. . . . [The AOAO] hired a contractor to check the sewer lines. No leaks were found. Continuing to blame excess water for the problem, Geolabs recommended installing subdrains to intercept water before it infiltrated the soil beneath the building areas. Based on recommendations and details provided by Geolabs, [the AOAO] solicited an estimate for the proposed subdrain installation. . . . The installation was postponed when a leak was discovered at Building 5. Further leak testing was conducted. Meanwhile, the [b]oard [of directors, through Kobashigawa,] solicited proposals from independent soils engineers for a second opinion on the problem and on Geolabs' subdrain recommendation. Weidig responded with an opinion that the defendants' recommendations were a quick fix and that a more thorough subsoil investigation should be undertaken. Weidig's proposal was accepted and [its] investigation revealed to [the AOAO] for the first time that inadequate soil compaction was the true cause of the problem. The [AOAO's c]omplaint herein was filed on February 18, 1997. (Citations to the record and emphasis omitted.) (Emphases added.) The AOAO also contends that the the lulling and concealment exceptions tolled the statute of limitations. (Capitalization altered.) Specifically, the AOAO asserts that the Defendants lulled the AOAO by misrepresenting the severity and cause of the problem, i.e. [,] by assuring the problem was not serious and was caused by excess water and inadequate drainage rather than improper soil compaction. The AOAO argues that the evidence reveals that: (1) [the AOAO] engaged Defendants to investigate the building distress problem; (2) Defendants falsely attributed the cause to a ground water condition that did not implicate fault on their part; (3) [the AOAO] relied on Defendants' misdiagnoses and recommendations, including lengthy wait-and-see recommendations following misdirected initial repair attempts; and (4) Defendants withheld known and documented information of their own negligence as the cause. (Citation to the record omitted.) Consequently, the AOAO claims that: A jury could reasonably have inferred that Defendants' repair proposals, which focused on a localized ground water condition as the problem, were intended to: (1) conceal incriminating information of the Defendants' liability; (2) divert [the AOAO's] attention away from the serious and costly-to-correct problem of inadequate soil compaction throughout [Newtown Meadows]; and (3) lull [the AOAO] into the false belief that: (a) the problem was a minor one; and (b) following the Defendants' recommendations would make it go away. Lastly, the AOAO directs this court to the policy in favor of adjudication of claims on the merits[.] (Citation omitted.) Venture 15, Royal, Lee, and Liu essentially maintain that the AOAO's negligence claims accrued no later than April/May 1992, when (1) individual unit owners first became aware of the cracks in their units and reported such knowledge to the AOAO (through Kobashigawa), (2) the first site inspection was conducted on May 13, 1992, and (3) the AOAO received the May 1992 reports prepared by Lau and Geolabs. [35] Royal also asserts that the AOAO knew by the latest [in] January[ ] 1995[ ] that it had sustained an injury, i.e., cracks in the slabs and drywall, and that someone was responsible. Consequently, because the AOAO's original complaint was filed on February 18, 1997, more than two years from when the AOAO's negligence claims allegedly accrued, Venture 15, Royal, Lee, and Liu maintain that the AOAO's negligence claims are barred by HRS § 657-7. Moreover, Royal and Liu contend that the AOAO's lulling and concealment arguments do not apply to them. Specifically, Royal argues that: In this case, a distinction must be made between the various defendants as to what representations were made to the AOAO regarding the cause of the cracks. It is significant to note that the AOAO does not set forth any facts that Royal had any involvement in the post-1988 investigation; concealed any facts during the investigation; made misrepresentations that lulled the AOAO into inaction; or had any input into the expert's recommendations. Instead, the AOAO glosses over these facts and, as it does throughout its [o]pening [b]rief, the AOAO lumps all of the defendants together and alleges that it was lulled into inaction. However, the facts are clear that Royal (1) did not have any contact with the AOAO until it was served [with the complaint]; (2) was not involved in the AOAO's decision to hire their experts; (3) did not provide the AOAO with any input as to the probable cause of the cracking; and (4) did not make any recommendations as to possible solutions. (Emphases added.) Similarly, Liu asserts that: [The AOAO's] [o]pening [b]rief groups Liu within the general category of Defendants which allegedly lulled [the AOAO] into inaction and concealed the improper soil compaction problems. However, none of the investigations and alleged facts involve Liu. . . . . . . . Where all of [the AOAO's] allegations of concealment and lulling refer to other defendants, there are no disputed issues of material fact related to the tolling of the applicable statute of limitations as to Liu. (Citation to the record omitted.) (Emphases added.) HRS § 657-7 provides in relevant part that [a]ctions for the recovery of compensation for damage or injury to persons or property shall be instituted within two years after the cause of action accrued, and not after[.] Under HRS § 657-7, a tort claim accrues when the plaintiff discovers, or through the use of reasonable diligence should have discovered, the negligent act, the damage, and the causal connection between the two. Yamaguchi v. Queen's Med. Ctr., 65 Haw. 84, 90, 648 P.2d 689, 693-94 (1982). In the context of property damage, this court has previously stated that, under Revised Laws of Hawai`i (RLH) § 241-7 (1955), [36] a predecessor to HRS § 657-7, the statute of limitations begins to run when the plaintiff knew or in the exercise of reasonable care should have discovered that an actionable wrong has been committed against his property. Basque v. Yuk Lin Liau, 50 Haw. 397, 399, 441 P.2d 636, 637-38 (1968); see also Bd. of Dirs. of Ass'n of Apartment Owners of Regency Tower Condo. Project v. Regency Tower Venture, 2 Haw.App. 506, 511, 635 P.2d 244, 248 (1981). A plaintiff need only have factual knowledge of the elements necessary for an actionable claim; legal knowledge of a defendant's negligence is not required. Buck v. Miles, 89 Hawai`i 244, 249-50, 971 P.2d 717, 722-23 (1999) (citation omitted). Concerning the [issue whether the plaintiff,] through the use of reasonable diligence, should have discovered [the negligent act, the damage, and the causal connection between the two], that issue is . . . for the trier of fact. It bears repeating, however, that even when there is no dispute as to the facts, it usually is for the jury to decide whether the conduct in question meets the reasonable man standard[.] [10A Wright, Miller & Kane, Federal Practice & Procedure: Civil] § 2729. When there has been a belated discovery of the cause of action, the issue whether the plaintiff exercised reasonable diligence is a question of fact for the court or jury to decide. The drastic remedy of summary judgment may not be granted unless reasonable minds can draw only one conclusion from the evidence. Enfield v. Hunt, 154 Cal.Rptr. 146, 147, 91 Cal.App.3d 417, 419 (1979). Jacoby v. Kaiser Found. Hosp., 1 Haw.App. 519, 527-28, 622 P.2d 613, 618 (1981). Nevertheless, an essential part of an injured plaintiff's duty of diligence regarding the timely prosecution of his or her claim imposed by a statute of limitations is to seek legal advice regarding the presence and/or viability of a potential claim; a plaintiff's failure to seek legal advice from an attorney will not alone entitle the plaintiff to respite from a statute of limitations. Hays v. City & County of Honolulu, 81 Hawai`i 391, 399, 917 P.2d 718, 726 (1996). Indeed, [t]he exercise of reasonable diligence means simply that an injured party must act with some promptness where the facts and circumstances of an injury would put a person of common knowledge and experience on notice that some right of his has been invaded or that some claim against another party might exist. Moriarty v. Garden Sanctuary Church of God, 341 S.C. 320, 534 S.E.2d 672, 676 (2000) (internal quotation marks and citation omitted). As the discovery rule has developed, the salient point giving rise to its application is the inability of the injured, despite the exercise of reasonable diligence, to know that he is injured and by what cause. We have clarified that[,] in this context, reasonable diligence is not an absolute standard, but is what is expected from a party who has been given reason to inform himself of the fact upon which his right to recovery is premised. As we have stated: `[T]here are [very] few facts which diligence cannot discover, but there must be some reason to awaken inquiry and direct diligence in the channel in which it would be successful. This is what is meant by reasonable diligence.' Put another way, [t]he question in any given case is not, what did the plaintiff know of the injury done him? [B]ut, what might he have known by the use of the means of information within his reach, with the vigilance the law requires of him? While reasonable diligence is an objective test, [i]t is sufficiently flexible . . . to take into account the difference[s] between persons and their capacity to meet certain situations and the circumstances confronting them at the time in question. Under this test, a party's actions are evaluated to determine whether he exhibited those qualities of attention, knowledge, intelligence and judgment which society requires of its members for the protection of their own interest and the interest of others. Vidinha v. Miyaki, 112 Hawai`i 336, 341, 145 P.3d 879, 884 (App.2006) (quoting Fine v. Checcio, 582 Pa. 253, 870 A.2d 850, 858 (2005)) (format altered) (brackets and ellipsis in original), aff'd, No. 26188, Vidinha v. Miyaki (Haw. June 26, 2007)(sdo), 2007 WL 1957196. Moreover, [t]here is a difference between asking whether a reasonable inquiry would have produced knowledge, and whether a plaintiff's particular inquiry  which was unproductive  was reasonable. Putting the question in the abstract tends to place the focus on an ideal inquiry, whereas in reality there may have been several possible reasonable courses of inquiry, some of which would be productive and some of which would not be productive. Where the plaintiff actually attempts an inquiry, the fairer question in our view, is to ask whether his inquiry was reasonable. Where there is no attempt, however, there is no choice but to put the question in the abstract. Pedersen v. Zielski, 822 P.2d 903, 908 (Alaska 1991) (footnote omitted). In Ehrenhaft v. Malcolm Price, Inc., 483 A.2d 1192 (D.C.1984), the District of Columbia Court of Appeals (the court) advanced several public policy rationales that support the application of the discovery rule in an action based upon tort claims arising out of an allegedly deficient design and construction of an addition to a house. First, the court explained that a lay person who has arranged for the design and construction of a new room to his house[ ] must undoubtedly rely upon the professional skills of those hired to perform the work. As a lay person, he is most likely without the requisite knowledge to determine whether the room has been properly designed or constructed. Moreover, it is unreasonable to expect the client to engage yet another professional to oversee the work as it is performed. Id. at 1202 (citation omitted). Second, the court observed that the difficulty in recognizing a deficiency in either design or construction is even more problematical when the deficiency is latent in nature. Id. Comparing cases involving latent defects such as asbestos and certain pharmaceutical drugs, the court stated that a design or construction defect may also not manifest itself until after the statute of limitations has run under traditional principles. Surely it is inconsistent with our notions of justice to interpret the `accrual' of a cause of action to occur prior to a point in time at which a person would reasonably have knowledge of any wrongdoing. Id. (citation omitted). Third, the court stated that [a]pplication of the discovery rule in suits based upon deficient design and construction does not frustrate the policies underlying the statute of limitations where the injured party does not, and in the exercise of reasonable diligence, could not have known of his claim prior to its discovery. A plaintiff who will benefit by invocation of the discovery rule will not be one who has `sat' on his rights to gain legal advantage. Id. at 1203 (internal quotation marks and citation omitted). Fourth and finally, the court pointed out that the interests of judicial economy militate in favor of application of the discovery rule. In cases like the one at bar, where the professional returns upon request to remedy damages resulting from defective work, to preclude application of the [discovery] rule would likely serve to encourage litigation in the first instance, rather than as a last resort.  Id. (citation omitted) (emphasis added). In Leaf v. City of San Mateo, 104 Cal. App.3d 398, 163 Cal.Rptr. 711 (1980), the plaintiffs purchased a duplex in the City of San Mateo (the city) in January 1972. Id. at 713. Shortly after occupying their duplex in June 1972, the plaintiffs discovered that some of the floors were not level[ ] and that there were some cracks in the exterior of the building. Id. Subsequently, the plaintiffs consulted with two different engineering firms, the first in August 1972 and the second in July 1973, the consensus being that the structural problems were being caused by differential settlement and subsidence due to movement of the fill on [the] plaintiffs' lot caused by water absorption. The problem was symptomatic on the south side of [the] plaintiffs' duplex, and the only test borings were made on that side of [the] plaintiffs' property. It was recommended that a subsurface drainage system be installed to stop the subsidence and that the structure be restored to a level condition approximately one year after drainage installation. Id. In January 1974, the plaintiffs sued the developer/builder, the seller of the duplex, and various engineers and contractors, essentially seeking recovery on the ground of defective engineering and manufacture of [the] plaintiffs' lot pad [hereinafter, Suit 1]. Id. The parties in Suit 1 ultimately reached a settlement in June 1976 and, with the proceeds of the settlement, the plaintiffs began construction of the recommended drainage system in August 1976. Id. During the course of excavation in the vicinity of the city's sewers, a cave-in occurred, exposing a previously excavated sewer trench. Id. Subsequent investigation revealed that back-fill in the [city's] storm and sanitary sewer trenches on and near [the] plaintiffs' property had not been compacted[ ] and that the trenches were acting as subterranean water channels which were funneling water onto [the] plaintiffs' property. Investigation also showed that the section of the sanitary sewer main extending in an easement along the north side of [the] plaintiffs' home was located too close to the foundation, and that its close proximity, combined with lack of compaction of the material in that portion of the trench, was resulting in the north side of the building being deprived of lateral and subjacent support. Id. at 713-14. When the city refused to take action to correct the alleged defective condition, the plaintiffs filed an action against the city on January 28, 1977 [hereinafter, Suit 2]. Id. at 714. The city successfully moved for summary judgment on the ground that Suit 2 was time-barred, and the plaintiffs appealed. Id. On appeal, the California Court of Appeals (the court) first noted that the applicable statute of limitations for injury to real property was three years. [37] Id. at 715 n. 2. The court then observed that [w]hether or not [the] plaintiffs' claim is barred by [the] statute of limitations is dependent upon a determination of when the cause of action accrued. Id. at 715 (footnote omitted). The court summarized the parties' positions, stating that, [the city] . . . takes the position that [the] plaintiffs' cause of action accrued when [the] plaintiffs became aware of the damage to their property, i.e., when they noticed the unlevel floors and cracks in the building exterior. [The p]laintiffs, on the other hand, urge the `rule of discovery,' which would start a statute running only when [the] plaintiffs not only were aware of the damage, but became aware of its negligent cause, i.e., at the time of the cave-in. Id. The court ultimately agreed with the plaintiffs, stating that: The discovery rule operates to protect the plaintiff who is blamelessly ignorant of his cause of action. Accordingly, we do not think that [the] plaintiffs' cause of action in this case should accrue from the occurrence of the last essential fact, nor from discovery of the damage to their property, as [the city] contends, but rather from the point in time when [the plaintiffs] became aware of [the city's] negligence as a cause, or could have become so aware through the exercise of reasonable diligence. The ultimate question therefore is whether [the] plaintiffs exercised reasonable diligence in discovering the negligent cause of their injuries. We see no reason to commence the running of the statute of limitations when [the] plaintiffs, at the outset, made reasonable, but unsuccessful, efforts to identify the negligent cause of damage. Where, as in this case, [the] plaintiffs consulted with professional engineers as to the source of their injury, they were entitled to rely upon that advice. It would be contrary to public policy to require that [the] plaintiffs file a lawsuit against [the city] at a time when the evidence available to them failed to indicate a cause of action against this defendant. Thus, under the facts alleged by [the] plaintiffs, their cause of action against the [city] would have accrued at the time of the cave-in of the sewer trench. Id. at 716-17 (citations omitted) (emphasis added). In the instant case, we cannot conclude, as the circuit court did, that, as a matter of law, the AOAO discovered, or through the use of reasonable diligence should have discovered, the negligent act, the damage, and the causal connection between the two more than two years prior to the initiation of the present action on February 18, 1997. Although a reasonable fact finder could determine that the AOAO discovered or should have discovered that the damage, i.e., the cracks in the walls and floors of the various units at Newtown Meadows, was caused at least in part by a construction or design defect more than two years prior to February 18, 1997, such question should be resolved by the trier of fact. See Di Biase v. A & D, Inc., 351 A.2d 865, 868 (Del.Super.Ct.1976) (observing that [i]t may be that individuals such as the plaintiffs, untrained in the home construction industry, should recognize that cracks in the walls of a structure can indicate an unsound foundation. This question, however, should be resolved by the trier of fact.) Moreover, a reasonable fact finder could determine that the AOAO exercised reasonable diligence in pursuing any possible claims against the Appellees. Cf. Hays, 81 Hawai`i at 398, 917 P.2d at 725 (stating that [a] party must exercise reasonable diligence in pursuing a claim. If a plaintiff fails to exercise such diligence in a timely manner, the cause of action should be barred by the statute of limitations. (Emphasis added.)). It is undisputed that the AOAO sought assistance from Newtown Meadows' developer, Venture 15, which ultimately led to Geolabs' and Shigemura Inc.'s involvement in investigating the cracks in the various units at Newtown Meadows, within one month after the AOAO was made aware of such cracks sometime in April 1992. Subsequent to the May 13, 1992 site inspection attended by, inter alia, Fraim (a Geolabs representative) and Lau (a Shigemura Inc. representative), Geolabs and Lau both reported their findings and recommendations to the AOAO. Essentially, both reports attributed the cracks to settlement of the foundations due to water infiltration. Lau's report re-assure[d] [the AOAO] that the[ ] cracks do not appear to indicate any catastrophic structural failures or any impending collapse problems. Geolabs' report indicated that the interior cracks appeared to be the result of minor amounts of foundation settlements. Based on the reports prepared by Lau and Geolabs, the AOAO undertook the remedial and diagnostic measures recommended by these experts as well as their `wait-and-see' recommendation to see if the recommended remedial measures took care of the problem. A reasonable fact finder could determine that the AOAO was entitled to rely on the recommendations made by Geolabs and Shigemura Inc. in order to determine the source of the damage. See Leaf, 163 Cal.Rptr. at 716-17; Ehrenhaft, 483 A.2d at 1203; see also Di Biase, 351 A.2d at 868 (In permitting defendants to patch with plaster the first cracks in the garage, and believing assurances allegedly made by defendants that the structure itself was sound, did plaintiffs exercise `reasonable diligence' in attempting to discover the structural defect, or should they have consulted an independent expert at this point?. . . . These questions and others should be resolved by the trier of fact before the applicability of the statute of limitations . . . can be ascertained.). Nonetheless, we also believe that a reasonable fact finder could conclude that the AOAO should have had a suspicion of wrongdoing, and therefore an incentive to sue, when the recommendations made by Geolabs and Shigemura Inc. and implemented by the AOAO were not resolving the damage, during approximately late 1993 until approximately January 1995. [38] Jolly v. Eli Lilly & Co., 44 Cal.3d 1103, 245 Cal.Rptr. 658, 751 P.2d 923, 928 (1988) (en banc), superseded by rule as state in Hernandez v. Whitman Corp., No. A108245, 2006 WL 331205 (Cal.Ct.App. Feb.14, 2006) (unreported); see also Hays, 81 Hawai`i at 398, 917 P.2d at 725 (stating that [a] discovery rule which conditions accrual of an action on a plaintiff's specific knowledge of another's negligence means, in many cases, that an action will not accrue until a party walk's [sic] into a lawyer's office and is advised that he [or she] has an actionable claim. This should not be the law. (Quoting In re Hawai`i Fed. Asbestos Cases, 854 F.Supp. 702, 708 (D.Haw.1994).) (some brackets added and some in original.) (Emphasis added.)). We believe, however, that, despite the AOAO's apparent inclusion of all the Appellees via its utilization of the term the Defendants, it appears that the AOAO's assertions of the lulling and concealment exceptions pertain only to Venture 15 and Geolabs. Indeed, the AOAO does not point to anywhere in the record to indicate that Royal, Lee, and Liu (1) were engaged to investigate the building distress problem, (2) attributed the cause to a ground water condition, (3) made alleged misdiagnoses and recommendations, and (4) withheld known and documented information of their own negligence as the cause. [39] Furthermore, it appears that the AOAO's assertions of the lulling and concealment exceptions were raised for the first time in its unsuccessful motion for reconsideration. Indeed, the AOAO's memoranda in opposition to the Appellees' motions for summary judgment makes no mention of any lulling and concealment exceptions. However, [r]econsideration is not a device to relitigate old matters or to raise arguments or evidence that could and should have been brought during the earlier proceeding. Sousaris v. Miller, 92 Hawai`i 505, 513, 993 P.2d 539, 547 (2000) (footnote and citations omitted). Here, the AOAO's arguments based on the lulling and concealment exceptions could and should have been brought in its memoranda in opposition. Nonetheless, based on the state of the record and viewing the inferences drawn therefrom in a light most favorable to the AOAO, we conclude that genuine issues of material fact exist as to whether the AOAO, through the use of reasonable diligence, should have discovered the negligent act, the damage, and the causal connection between the two more than two years prior to the initiation of the present action on February 18, 1997 and whether the AOAO exercised reasonable diligence in pursuing its claims. [40] Such a conclusion comports with the principle that [t]he drastic remedy of summary judgment may not be granted unless reasonable minds can draw only one conclusion from the evidence. Jacoby, 1 Haw.App. at 528, 622 P.2d at 618 (citation omitted). Thus, we hold that the circuit court erred when it concluded that the AOAO's negligence claims were barred by HRS § 657-7 as a matter of law. Accordingly, we hold that the circuit court erred in granting summary judgment in favor of Venture 15, Geolabs, Royal, Lee, and Liu on the AOAO's negligence claims based on HRS § 657-7. The inquiry whether the circuit court erred in entering judgment in favor of Liu on the AOAO's negligence claims does not end here, however, because Liu raises in its cross-appeal that the circuit court erred in denying its motions for partial summary judgment on the bases that the statute of repose, laches, and the economic loss rule did not bar the AOAO's negligence claims. [41]
Liu contends that the circuit court erred in denying its motion for summary judgment on the ground that the ten-year statute of repose contained in HRS § 657-8 did not bar the AOAO's claims, asserting that neither [the AOAO] nor any party in this case filed suit against Liu within ten (10) years after Liu completed its work on the . . . Project. HRS § 657-8 provides in relevant part: (a) No action to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of any deficiency or neglect in the planning, design, construction, supervision and administering of construction, and observation of construction relating to an improvement to real property shall be commenced more than two years after the cause of action has accrued, but in any event not more than ten years after the date of completion of the improvement. (Emphasis added.) Relying on HRS § 657-7.5 (1993), quoted infra, and HRCP Rule 14 (2007), quoted infra, the AOAO contends that, because the claims alleged in the AOAO's complaint over against Liu filed on January 23, 2002 related back to the claims alleged in the AOAO's original complaint filed on February 18, 1997 and the Project was substantially completed in May 1988[,] its negligence claims were not barred by the statute of repose. HRS § 657-7.5 provides: When a defendant, against whom action has been timely brought, brings in a third-party defendant who is or may be liable to the defendant or to the plaintiff for all or part of the plaintiff's claim against the defendant, plaintiff within thirty days after the date of filing of the third-party defendant's answer, may assert against the third-party defendant any claim, arising out of the original transaction or occurrence that is also the subject matter of the third-party plaintiff's claim against the third-party defendant, which would have been timely if the third-party defendant had been joined originally as a defendant, notwithstanding any statutory period of limitations otherwise applicable to plaintiff's claim. Nothing herein shall preclude the plaintiff from asserting any claim which the plaintiff might have asserted without the benefit of this section. (Emphasis added.) And, HRCP Rule 14(a) provides in relevant part that [t]he plaintiff may assert any claim against the third-party defendant arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff[.] In this case, the circuit court apparently agreed with the AOAO that the AOAO's claims against Liu relate[d] back to the AOAO's claims alleged in its original complaint filed on February 18, 1997, pursuant to HRS § 657-7.5 or HRCP Rule 14. Specifically, the circuit court orally stated: . . . Yesterday it was argued [by Liu] that the claims against Liu do not arise out of the original transaction as they must to relate back, either under [HRCP] Rule 14 or under [HRS §] 657-7.5. This morning[,] the [AOAO] argued, and I believe correctly so, that the applicable case law is found in Kest [v. Hana Ranch, Inc., 7 Haw.App. 565, 785 P.2d 1325 (1990)]. It's a two-part test. The [c]ourt must look at the [AOAO's] original complaint, which I did, that was filed February 18, 1997. The first amended complaint was filed October 20, 1998. In any event, the two-part test is whether the claim against Liu arises out of the same transaction that was alleged and whether the facts alleged give notice of a reasonable likelihood that Liu would or could later be included. The original complaint was very broad, it basically alleged construction defects. Liu is the subcontractor that created the slabs. I think the two-part test has been met, and[,] therefore[,] the [c]ourt denies the motion [for summary judgment] as to [HRS §] 657-8[. [42] ] Although not entirely clear, it appears that the circuit court and the parties assumed that Kest provides a two-part test for HRCP Rule 14. Indeed, the AOAO refers to Kest's two-part test as the HRCP Rule 14 two-part test, and Liu does not dispute otherwise in its reply brief. Kest, however, sets forth a two-part test for HRCP Rule 15(c) (2007), entitled Relation back of amendments. See Kest, 7 Haw.App. at 571, 785 P.2d at 1329 (stating that, when confronted with amendments that add plaintiffs with new claims, courts can protect defendants from the perils statute of limitations are enacted to prevent while effectuating the policies of [HRCP R]ule 15(c) by applying a two-step analysis) (citation omitted). Inasmuch as Liu does not present any argument to this court as to why Kest's HRCP Rule 15(c) two-part test should apply to this case and, as the AOAO points out, nothing in . . . Liu's [opening] brief supports the supposition that Kest . . . governs the application of HRS § 657-7.5, we decline to reach the issue whether Kest should apply under the circumstances of this case. Moreover, Liu does not provide this court with what it believes is the date of completion of the improvement[,] HRS § 657-8, that would commence the running of the statute of repose. Consequently, this court would be left to speculate as to such date, which we decline to do. Accordingly, we decline to consider whether the circuit court erred in denying Liu's motion for summary judgment on the basis that the statute of repose did not bar the AOAO's negligence claims.
Liu next contends that the AOAO's negligence claims are barred by laches, arguing that the AOAO waited more than fourteen years after Liu completed its work at Newtown Meadows to bring a claim against Liu. As early as February of 1988, [the AOAO] had knowledge of ground settlement and structural distress problems related to Building 3. And[,] by May of 1992, [the AOAO's] resident manager and managing agent both participated in an inspection involving cracks in the walls and slabs of Buildings 6 and 8. In 1988, or at least in 1992, [the AOAO] could have started its own investigation and/or filed a lawsuit related to these alleged damages. Instead, [the AOAO] purposefully chose to disregard any potential claims and unreasonably delayed in bringing this lawsuit. (Citations to the record omitted.) Liu also asserts that it has been severely prejudiced by the AOAO's failure to press its claims in a timely fashion. Thus, Liu claims that the circuit court erred in denying summary judgment on the basis that laches did not bar the AOAO's negligence claims. The AOAO maintains that, because its action is exclusively in law, not in equity[,] . . . the timeliness of suit is governed by law, as set forth in the applicable statute of limitations, not by equity and laches. (Citation omitted.) Nevertheless, the AOAO argues that, even if laches governed, Liu does not explain . . . how . . . unavailable documents or witnesses could conceivably excuse Liu's admitted violation of minimum Building Code requirements. The doctrine of laches reflects the equitable maxim that equity aids the vigilant, not those who slumber on their rights. Adair v. Hustace, 64 Haw. 314, 320, 640 P.2d 294, 300 (1982) (internal quotation marks and citation omitted). There are two components to laches, both of which must exist before the doctrine will apply. First, there must have been a delay by the plaintiff in bringing his claim[ ] and that delay must have been unreasonable under the circumstances. Delay is reasonable if the claim was brought without undue delay after plaintiff knew of the wrong or knew of facts and circumstances sufficient to impute such knowledge to him. Second, that delay must have resulted in prejudice to defendant. Common but by no means exclusive examples of such prejudice are loss of evidence with which to contest plaintiff's claims, including the fading memories or deaths of material witnesses, changes in the value of the subject matter, changes in defendant's position, and intervening rights of third parties. Id. at 321, 640 P.2d at 300 (citations omitted). Here, even assuming arguendo that laches governs the timeliness of the AOAO's assertion of its negligence claims against Liu, see Wellman v. Wellman, 205 Mont. 504, 668 P.2d 1060, 1062 (1983) (stating that laches is considered as a bar independent of the statute of limitations); but see DOIT, Inc. v. Touche, Ross & Co., 926 P.2d 835, 845 (Utah 1996) (where the plaintiff's claims are based in law, the statute of limitations, not the doctrine of laches, governs the timing surrounding a plaintiff's filing of a complaint) (citation omitted), Liu has failed to present to this court any evidence of prejudice caused by the claimed unreasonable delay. Instead, as previously stated, Liu merely asserts in conclusory fashion that it has been severely prejudiced[.] Thus, we decline to reverse the circuit court's ruling. See Vincent v. Longwater, 245 Ga.App. 516, 538 S.E.2d 164, 166 & n. 4 (2000) (holding that trial court did not err in declining to dismiss complaint or to grant summary judgment in favor of defendant on the applicability of laches because defendant merely asserted that the delay in bringing suit was inherently prejudicial and defendant did not present any evidence of prejudice caused by the delay). Accordingly, we hold that the circuit court did not err in denying Liu's motion for summary judgment on the AOAO's negligence claims based on laches.
Finally, Liu contends that the AOAO's purely economic losses are barred by the economic loss rule. Liu argues that, contrary to the AOAO's position, privity of contract is not required for the economic loss [rule] to apply. (Citations omitted.) Moreover, Liu asserts that the allegedly defective concrete slabs provided by Liu did not result in any damage other than to the slabs themselves. Liu claims that [t]he point of the [economic loss rule] is not to guarantee and/or ensure some contractual recovery to the plaintiff (which could be barred on some other basis besides privity, such as timeliness, lack of proof, etc.) before applying the [rule] as it was intended in cases such as this, where [the AOAO] cannot point to any credible admissible evidence of personal injury or damage to other property arising out of Liu's allegedly defective work at Newtown Meadows. Consequently, Liu maintains that the circuit court erred in denying summary judgment on the basis that the economic loss rule did not bar the AOAO's negligence claims. The AOAO contends that the circuit court correctly denied summary judgment inasmuch as a contract between the parties is a prerequisite to application of the [economic loss rule]. Moreover, the AOAO asserts that, although the economic loss rule bars damages constituting purely economic losses, the AOAO also suffered damage to other property, the recovery of which under a negligence theory is not barred by the economic loss rule. In State ex rel. Bronster v. United States Steel Corp., 82 Hawai`i 32, 919 P.2d 294 (1996), we observed that the economic loss rule, i.e., that a cause of action in products liability will not lie where a plaintiff alleges a purely economic loss stemming from injury only to the product itself[,] id. at 39, 919 P.2d at 301, was accepted by a majority of jurisdictions that have had occasion to consider it. Id. at 40, 919 P.2d at 302 (citations omitted). We, therefore, adopted such rule insofar as it applies to claims for relief based on a product liability or negligent design and/or manufacture theory. Id. In so doing, we extensively discussed East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), wherein the United States Supreme Court acknowledged the `economic loss' rule, effectively adopted the rationale of the California Supreme Court in Seely v. White Motor Co., . . . [63 Cal.2d 9, 45 Cal.Rptr.17] 403 P.2d 145 ([Cal.] 1965), and held that no products liability claim lies in admiralty when a commercial purchaser alleges injury only to the product itself, resulting in purely economic loss. United States Steel, 82 Hawai`i at 39, 919 P.2d at 301. We observed that the Supreme Court held that a manufacturer in a commercial relationship has no duty under either a negligence or strict products liability theory to prevent a product from injuring itself. Id. We also recognized the Supreme Court's rationale for such a holding, stating: The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the luck of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his [or her] products. Seely [, 403 P.2d at 151]. When 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. . . . . Damage to a product itself is most naturally understood as a warranty claim. Such damage means simply that the product has not met the customer's expectations, or, in other words, that the customer has received insufficient product value. Id. at 40, 919 P.2d at 302 (quoting East River S.S. Corp., 476 U.S. at 871-72, 106 S.Ct. 2295) (citation omitted) (format altered). Nonetheless, we held that the economic loss rule did not bar a claim for negligent misrepresentation based on Restatement (Second) of Torts § 552 (entitled Information Negligently Supplied for the Guidance of Others) because such claim did not sound in products liability. Id. Specifically, we based our holding on three principal reasons: (1) the tort of negligent misrepresentation is founded on the breach of a duty separate and distinct from the duty abolished by the economic loss, id.; (2) we had previously recognized that pecuniary losses are recoverable in a claim for negligent misrepresentation, id. at 42, 919 P.2d at 304; and, (3) although one of the principal considerations enunciated by courts adopting the economic loss rule is that permitting recovery of economic losses in a claim based on products liability would undermine provisions of the Uniform Commercial Code (UCC)[,] . such consideration is not applicable to actions based on negligent misrepresentation because the UCC itself contemplates actions based on misrepresentation, id. at 43, 919 P.2d at 305. Consequently, we held that the circuit court had erred in relying on the economic loss rule to dismiss the State of Hawaii's (the State) negligent misrepresentation claim against a steel manufacturer that had allegedly made misrepresentations to the State that its product was appropriate for the construction of a sports stadium. Id. at 45, 919 P.2d at 307. Two years later, this court revisited the economic loss rule in City Express, Inc. v. Express Partners, 87 Hawai`i 466, 959 P.2d 836 (1998). In that case, we held that, in the context of construction litigation, where a party is in privity of contract with a design professional, economic loss damages are limited to contractual remedies, and a negligence action may not be maintained. Id. at 469, 959 P.2d at 839. Specifically, this court stated: The economic loss rule bars recovery in tort for purely economic loss. Where, as in this case, negligent design of a building is claimed, economic loss damages are those that pertain solely to the costs related to the operation and value of the building itself. Excluded are costs for personal injuries caused by the defective design or damage to property other than the building itself. The damages claimed by [the development corporation that owned the building] . . . are purely economic  additional costs, lost rent, the cost of remedying the alleged building defects, and the difference between the value of the building as designed and the value it would have had if it had been properly designed. . . . . In the context of construction litigation involving design professionals, sound policy reasons counsel against providing open-ended tort recovery to parties who have negotiated a contractual relationship. If tort and contract remedies were allowed to overlap, certainty and predictability in allocating risk would decrease and impede future business activity. The construction industry in particular would suffer, for it is in this industry that we see most clearly the importance of the precise allocation of risk as secured by contract. The fees charged by architects, engineers, contractors, developers, vendors, and so on are founded on their expected liability exposure as bargained and provided for in the contract. Berschauer/Phillips [Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wash.2d 816, 881 P.2d 986, 992 (1994)]. Academic commentary recognizes that there is a growing trend of cases which bar recovery in negligence between parties to a contract, where the damages constitute what is known as `economic loss.' Steven Stein, Construction Law § 11.04[2] (1997). Parties have the freedom to contract. Construction projects are characterized by detailed and comprehensive contracts that form the foundation of the industry's operations. Contracting parties are free to adjust their respective obligations to satisfy their mutual expectations. American Towers [, 930 P.2d at 1190]. Id. at 469-70, 959 P.2d at 839-40 (footnote and some emphases omitted) (some emphases added). This court distinguished United States Steel, stating that: In United States Steel, the issue of whether contractual privity would prevent the application of [Restatement (Second) of Torts] section 552 was not presented. No contract existed between the steel manufacturer and the State[.] The injury to the State was arguably foreseeable and the manufacturer had made direct representations to the State regarding its product. We agreed with the State that the circuit court erred in dismissing its tort claims on the basis that the economic loss rule barred the negligent misrepresentation claim. . . . . We recognize that section 552 contemplates a tort action for negligent misrepresentation by the party who contracts directly with the supplier of information. However, several other jurisdictions that have considered the issue presented by this appeal have concluded that, in the context of construction litigation regarding the alleged negligence of design professionals, a tort action for negligent misrepresentation alleging damages based purely on economic loss is not available to a party in privity of contract with a design professional. We agree. In this case, involving a design professional who acts under contract with the owner, we hold that recovery is properly limited to contract remedies and that a tort action under section 552 is not available. . . . . . . . When the plaintiff has contracted to protect against economic liability caused by the negligence of the defendant, there is no claim under [section] 552 for purely economic loss. We believe that this ruling not only encourages the parties to negotiate the limits of liability in a contractual situation, but it holds the parties to the terms of their agreement. Our holding preserves the right of design professionals to limit their exposure to liability through contract. Id. (footnote, citation, and original brackets omitted) (format altered). In Plourde Sand & Gravel Co. v. JGI Eastern, Inc., 154 N.H. 791, 917 A.2d 1250 (2007), the New Hampshire Supreme Court (the court) observed that the application of the economic loss rule becomes more complicated in claims between a plaintiff and a defendant who have no contractual relationship and hence no privity between them. Id. at 1254. Specifically, the court stated: A few courts hold that[,] since the principle behind the economic loss [rule] is to prevent tort law's unreasonable interference with principles of contract law, the economic loss [rule] does not apply where there is no contractual relationship, and[,] thus, no privity between the parties. Many courts, however, have expanded the economic loss [rule] to bar economic recovery in tort cases where there is no contract and[,] thus[,] no privity. The policy behind this principle is to prevent potentially limitless liability for economic losses: While the physical consequences of negligence usually have been limited, the indirect economic repercussions of negligence may be far wider, indeed[,] virtually open-ended. 4 F. Harper et al., The Law of Torts § 25.18A at 623 (2d ed.1986). Other courts recognize exceptions to this rule[ ] and permit economic loss recovery in tort despite the lack of privity where there is: (1) a special relationship between the plaintiff and the defendant that creates a duty owed by the defendant; or (2) a negligent misrepresentation made by a defendant who is in the business of supplying information. Restatement (Second) of Torts § 552[.] Id. (some citations, brackets, and ellipsis omitted) (emphasis added); see also Carstens v. City of Phoenix, 206 Ariz. 123, 75 P.3d 1081, 1085 (Ariz.Ct.App.2003) (concluding that application of the economic loss rule does not depend upon the plaintiff also having a viable contract claim against the defendant; rather, irrespective of a plaintiff's contractual claims against a defendant, the rule bars recovery of economic damages in tort because such damages are not cognizable in tort absent actual injury.); Anderson Elec., Inc. v. Ledbetter Erection Corp., 115 Ill.2d 146, 104 Ill.Dec. 689, 503 N.E.2d 246, 249 (1986) (stating that [a] plaintiff seeking to recover purely economic losses due to defeated expectations of a commercial bargain cannot recover in tort, regardless of the plaintiff's inability to recover under an action in contract). In Plourde Sand, Hiltz Construction, Inc. (Hiltz), a subcontractor for a private construction project, hired the plaintiff to supply gravel for purposes of constructing the base for a roadway. 917 A.2d at 1252. After the plaintiff supplied the gravel, engineers hired by the Town of Pembroke, the apparent owner of the roadway, hired the defendant to test the gravel to determine whether it met town specifications. Id. Subsequent to testing the gravel, the defendant reported to the town engineers that it contained insufficient stone content and excessive fines. Id. (internal quotation marks omitted). Consequently, Hiltz required the plaintiff to remove and replace the gravel at its own expense with material that met town specifications. Id. Subsequently, the plaintiff tested the gravel and discovered that it did in fact meet town specifications. Id. Thereafter, the plaintiff brought a negligence claim against the defendant. Id. The defendant moved to dismiss, claiming that the damages sought were purely economic losses which are not recoverable in tort. Id. Determining that it was undisputed that the plaintiff[] . . . alleged only economic loss damages and that there was no contractual privity between the plaintiff and the defendant, the [trial] court granted the defendant's motion to dismiss. Id. at 1252-53. On appeal, the court agreed with the many courts that had expanded the economic loss rule to bar economic recovery in tort cases where there was no privity of contract between the plaintiff and the defendant. Id. at 1254. The court, however, also agreed with the courts that recognized exceptions to such a rule, permitting recovery in tort despite the lack of privity where there is a special relationship or a negligent misrepresentation claim asserted by the plaintiff. Id. Nonetheless, the court determined that there was no special relationship in the case before it, stating: [P]ermitting economic loss recovery in tort here would blur the distinction between contract and tort law. The plaintiff is essentially alleging that the defendant negligently performed its duties under its contract with another party and that[,] as a result, the plaintiff has lost the benefit of its bargain with Hiltz. Where the defendant and its partner have allocated the risks and benefits of performance in their contract, the court upsets that allocation when it imposes tort liability on the defendant. . . . . . . . . . . The economic loss the plaintiff suffered in removing and replacing the gravel arose solely from disappointed commercial expectations in that the plaintiff lost the anticipated profits of its contract with Hiltz. Imposing a tort duty upon the defendant in this case would disrupt the contractual relationships between and among the various parties. This we are unwilling to do. Accordingly, we find no special relationship between the plaintiff and the defendant such that the defendant owed to the plaintiff an independent duty in tort to prevent economic loss. Id. at 1256-57 (internal quotation marks, citations, brackets, parenthesis, and ellipsis omitted) (emphases added); cf. Francis v. Lee Enters., Inc., 89 Hawai`i 234, 241, 971 P.2d 707, 714 (1999) (Predictability in contractual relations enables parties to estimate the financial risks and rewards of doing business and thereby encourages commercial activity. (Citation omitted.)). The court also determined that the plaintiff's negligent misrepresentation claim failed in light of the fact that the plaintiff could not establish reliance, a necessary element for such a claim. 917 A.2d at 1258. Consequently, the court affirmed the trial court. Id. In Redarowicz v. Ohlendorf, 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982), a homeowner (the plaintiff), who purchased his house from the original owner, brought an action to recover against the builder on the theories of contract, negligence, fraud, and implied warranty of habitability. Id. at 325. Sometime after the plaintiff purchased his house, he discovered that the chimney and adjoining brick wall were beginning to pull away from the rest of the house. Upon further inspection[,] the plaintiff found that the wall and chimney were set in loose soil[.] Id. at 326. [T]he basement wall was cracked and there was water leakage in the basement as well as leakage in the roof area around the chimney. Id. The plaintiff sought recovery for, inter alia, damages in tort for the faulty construction of his residence, seeking recovery for the cost of repair or replacement of the defectively constructed chimney and wall. Id. Apparently, the plaintiff and the builder were not in privity of contract because the builder concede[d] that privity is not a necessary element of a tort action brought in negligence. Id. (citation omitted). The Illinois Supreme Court (the court) ultimately held that the plaintiff's economic losses were not recoverable under a negligence theory, explaining that: While it is foreseeable that a house will be sold more than once[] and that substandard construction that results in structural defects could harm a subsequent purchaser, we need not discuss in detail the scope of the duty owed to this plaintiff. For it is now clear in view of our decision in Moorman Manufacturing Co. v. National Tank Co., . . . [91 Ill.2d 69, 61 Ill. Dec.746] 435 N.E.2d 443 ([Ill.] 1982), that a plaintiff cannot recover solely economic losses in tort. In Moorman [,] the plaintiff had purchased a bolted-steel grain-storage tank from the defendant. The tank had developed a crack in one of its steel plates. The plaintiff brought an action alleging in count I that the tank was not reasonably safe due to defects in its design and manufacturing and in count III that the defendant had negligently designed the tank. We affirmed the trial court's dismissal of both the strict liability and negligence counts in Moorman. We concluded that a complaint alleging qualitative defects in a product does not belong in tort. A disappointed consumer of a storage tank or a disgruntled purchaser of a certain house cannot assert that, due to inferior workmanship that led to eventual deterioration, he can recover under a negligence theory in tort. We find no sound reason to treat either of the aforementioned purchasers differently from one another. . . . . To recover in negligence[,] there must be a showing of harm above and beyond disappointed expectations. A buyer's desire to enjoy the benefit of his bargain is not an interest that tort law traditionally protects. ( See Prosser, Torts [§ ] 92, at 613 (4th ed.1971).) . . . This is not a case where defective construction created a hazard that resulted in a member of the plaintiff's family being struck by a falling brick from the chimney. The adjoining wall has not collapsed on and destroyed the plaintiff's living room furniture. The plaintiff is seeking damages for the costs of replacement and repair of the defective chimney [and] adjoining wall[.] While the commercial expectations of this buyer have not been met by the builder, the only danger to the plaintiff is that he would be forced to incur additional expenses for living conditions that were less than what was bargained for. The complained-of economic losses are not recoverable under a negligence theory. Id. at 326-27 (emphases added). The court, however, held that the plaintiff could assert an implied warranty of habitability claim based on the damages incurred by the plaintiff. Id. at 331. Similarly, in Crowder v. Vandendeale, 564 S.W.2d 879 (Mo.1978) (en banc), overruled on other grounds by Sharp Bros. Contracting Co. v. Am. Hoist & Derrick Co., 703 S.W.2d 901 (Mo.1986) (en banc), a subsequent home-owner (the plaintiff) brought an action against the contractor who built the house and sold it to the plaintiff's sellers, who were the previous occupants of the house. 564 S.W.2d at 880. The plaintiff alleged that, shortly after purchasing the house, [she] discovered that the front porch and steps were settling and separating from the house foundation, causing cracks in the brickwork and the foundation wall. [She] further alleged that it later developed that the foundation wall all along the south side of the house was also settling, resulting in cracks in the brickwork and foundation wall as well as a crack in the ground floor slab. In addition, the concrete driveway adjacent to the house settled and cracked. Id. The plaintiff claimed that the damages to the house resulted from the contractor's negligence in failing to conduct a proper analysis of existing soil conditions, improperly preparing and pouring footings for the foundation and, in general, failing to construct the house in a good, workmanlike manner. Id. The plaintiff sought to recover expenses incurred in repairing the house and the driveway. Id. Although the Missouri Supreme Court recognized an implied warranty of habitability in the new house, it concluded that recovery for deterioration alone, caused by latent structural defects, was not actionable in negligence, stating that: In negligence, the focus is on both conduct and result. Generally, the standard of negligence is the requirement that the actor use ordinary care and skill. Yet this is particularly difficult to determine in the case of a completed home. The quality of new homes varies considerably. This is no particular evil standing alone because the variance in quality is substantially reflected in the price, thereby providing a broader market and enabling many to own their own homes. Purchasers are not ignorant of the more obvious variations in quality. Indeed, this largely accounts for the variation in price. Thus, there is little need to protect consumers from discoverable shortcuts in construction. However, as to latent structural defects in a completed home, where protection is needed, it may be difficult to pinpoint the exact cause of the defect. Often[,] the only proof will be by inference from the result [] a difficult problem where, as will often be the case, many parties may be involved in design, providing materials[,] and construction. A duty to use ordinary care and skill is not imposed in the abstract. It results from a conclusion that an interest entitled to protection will be damaged if such care is not exercised. Traditionally, interests which have been deemed entitled to protection in negligence have been related to safety or freedom from physical harm. Thus, where personal injury is threatened, a duty in negligence has been readily found. Property interests also have generally been found to merit protection from physical harm. However, where mere deterioration or loss of bargain is claimed, the concern is with a failure to meet some standard of quality. This standard of quality must be defined by reference to that which the parties have agreed upon. Id. at 882. In Washington Courte Condominium Ass'n-Four v. Washington-Golf Corp., 150 Ill.App.3d 681, 103 Ill.Dec. 752, 501 N.E.2d 1290 (1986), a condominium association and certain unit owners [hereinafter, collectively, the plaintiffs] brought an action against Washington-Golf Corp., the developer/general contractor of the condominium, and numerous subcontractors, including Corra Plumbing Company (Corra) and Weather Shield Manufacturing, Inc. (Weather Shield). Id. at 1291. The plaintiffs sought recovery of damages from the subcontractors under the theories of negligence and breach of the implied warranty of habitability. Id. at 1292. The plaintiffs alleged that, as a result of Corra's negligent installation of plumbing and plumbing fixtures, the sinks and shower units emitted strong, unpleasant odors and the toilets leaked at the base and did not flush properly. Id. Consequently, the plaintiffs alleged that they have paid or will have to pay to repair or replace sink and shower drains, garbage disposals, and toilets. Id. Furthermore, the plaintiffs alleged that Weather Shield had negligently supplied the windows and exterior sliding glass doors for the units and is responsible for resulting water damage to insulation, walls, ceilings, and electrical outlets. Id. The plaintiffs additionally alleged that the insulation, window units, sliding doors and cracked and stained wallboard in both the individual units and in the common areas must be repaired or replaced. Id. On appeal, the Illinois Appellate Court (the court) ruled that the losses alleged were solely economic, for which damages could not be recovered in negligence. Id. at 1295. Specifically, the court stated: With respect to Corra, plaintiffs allege improper sink, shower[,] and toilet installation and improper design and construction of the sink and shower, resulting in the repair or replacement of the sink and shower drains, garbage disposal, and toilets. [The p]laintiffs did not allege damage to property other than to the plumbing fixtures, nor did they allege personal injury resulting from the allegedly defective plumbing fixtures. Thus, we find that the alleged damages resulting from Corra's installation of the plumbing fixtures constitute solely economic losses not recoverable in tort. . . . A different situation arises with respect to the allegations of negligence against Weather Shield. . . . At the outset, we must determine whether the alleged property damage to insulation, walls, ceiling, floors, and electrical outlets constitutes consequential economic loss which would be barred from tort recovery . . . or whether the damage constitutes a valid exception to the economic loss [rule]. . . . . . . . In the present case, we find that the alleged property damage incidental to the defective windows and doors is . . . damage consequent to the qualitative defects and not recoverable in tort. . . . . . . . . . . [I]n the case at bar, both Corra and Weather Shield had a direct contractual relationship with Washington-Golf [Corp.], the general contractor/developer/vendor; and the alleged damages related directly to reasonable commercial expectations. Id. at 1293-95 (emphasis added). Consequently, the court ruled that the trial court erred in denying Corra's and Weather Shield's motions to dismiss the plaintiffs' negligence claims. Id. at 1295. In Calloway v. City of Reno, 116 Nev. 250, 993 P.2d 1259 (2000), overruled on other grounds by Olson v. Richard, 120 Nev. 240, 89 P.3d 31 (2004), the Nevada Supreme Court (the court) set forth the following reasons in support of its holding that the economic loss rule applies to construction defect cases: The crux of the [economic loss rule] is the premise that economic interests are protected, if at all, by contract principles, rather than tort principles. Contract law is designed to enforce the expectancy interests created by agreement between the parties and seeks to enforce standards of quality. This standard of quality must be defined by reference to that which the parties have agreed upon. In contrast, tort law is designed to secure the protection of all citizens from the danger of physical harm to their persons or to their property and seeks to enforce standards of conduct. These standards are imposed by society, without regard to any agreement. Tort law has not traditionally protected strictly economic interests related to product quality  in other words, courts have generally refused to create a duty in tort to prevent such economic losses. . . . . This court has applied the economic loss [rule] outside of the products liability context[] and has suggested that it could apply with respect to damages to a dwelling. Additionally, the economic loss [rule] has been specifically applied by other jurisdictions in construction defects cases. See, e.g., Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 690 P.2d 158 (Ct.App.1984) (applying the economic loss doctrine to a negligent construction against builder); 2314 Lincoln Park West Condo. v. Mann, 136 Ill.2d 302, 144 Ill.Dec. 227, 555 N.E.2d 346 (1990) (applying the economic loss doctrine to an architectural malpractice action); Atherton Condo. Bd. v. Blume Dev., 115 Wash.2d 506, 799 P.2d 250 (1990) (applying the economic loss doctrine to a negligent construction claim). We conclude that damages sought, in tort, for economic losses from a defective building are just as offensive to tort law as damages sought for economic losses stemming from a defective product. The Florida Supreme Court has fittingly recognized that the economic loss doctrine must be considered in construction defects cases: Buying a house is the largest investment many consumers ever make, and homeowners are an appealing, sympathetic class. If a house causes economic disappointment by not meeting the purchaser's expectations, the resulting failure to receive the benefit of the bargain is a core concern of contract, not tort, law. There are protections for home-buyers, however, such as statutory warranties, the general warranty of habitability, and the duty of sellers to disclose defects, as well as the ability of purchasers to inspect houses for defects. Coupled with homebuyers' power to bargain over price, these protections must be viewed as sufficient when compared with the mischief that could be caused by allowing tort recovery for purely economic losses. Casa Clara v. Charley Toppino and Sons, 620 So.2d 1244, 1247 (Fla.1993) (citations and footnotes omitted).[ [43] ] Accordingly, . . . we conclude that the economic loss doctrine applies to construction defect cases. 993 P.2d at 1265-66 (some citations, internal quotation marks, ellipsis, emphases, and footnote omitted). The court further noted that permitting tort recovery for economic losses from construction defects would create a general, societally imposed duty on the part of builders and developers to avoid such losses. These losses are not properly addressed by tort law, which has as its underlying policy the promotion of safety. Instead, such harm is paradigmatically addressed by the policies underlying contract law  to enforce standards of quality as defined by the parties' contractual relationships. Id. at 1266 n. 3. [44] Here, it appears that the AOAO's negligence claims against Liu are based on Liu's alleged violations of (1) contract specifications and (2) the Uniform Building Code (UBC). Although the AOAO and Liu are not in privity of contract, [p]ermitting economic loss recovery in tort here [for the AOAO's negligence claims based on violations of contract specifications] would blur the distinction between contract and tort law. Plourde Sand, 917 A.2d at 1256. Similar to the plaintiff in Plourde Sand, the AOAO is essentially alleging that Liu negligently performed its duties under its contract with another party[, i.e., S. Horita,] and that[,] as a result, the [AOAO (and/or its members)] has[/have] lost the benefit of its bargain with [the vendor]. Id. Where Liu and S. Horita have allocated the risks and benefits of performance in their contract, we would upset that allocation were we to impose tort liability on Liu. See id. Stated differently, [i]mposing a tort duty upon the defendant in this case would disrupt the contractual relationships between and among the various parties. Id. at 1256-57. Consequently, we agree with those jurisdictions that bar economic recovery in negligence where there was no privity of contract between the plaintiff and the defendant when allowing such recovery would blur the distinction between contract and tort law. See Plourde Sand, 917 A.2d at 1256-57; see also Redarowicz, 65 Ill.Dec. 411, 441 N.E.2d at 326-27; Washington Courte, 103 Ill.Dec. 752, 501 N.E.2d at 1293-95; Crowder, 564 S.W.2d at 882; Calloway, 993 P.2d at 1265-67. Indeed, as we have previously recognized, [t]he construction industry in particular would suffer [i]f tort and contract remedies were allowed to overlap, City Express, 87 Hawai`i at 470, 959 P.2d at 840 (citation omitted), and [t]he fees charged by . . . contractors . . . are founded on their expected liability exposure as bargained and provided for in the contract. Id. (citation and emphasis omitted). In our view, the AOAO's negligence claims  specifically, those based on violations of contract specifications  fall within the purview of the economic loss rule as set forth above. Nonetheless, as previously mentioned, the AOAO contends that the damages it suffered do not constitute purely economic losses. Rather, the AOAO maintains that other property was damaged as a result of Liu's negligent construction of the concrete floor slabs. Specifically, the AOAO argues that factual issues remain[] as to whether consequential damage occurred to property other than the floor slabs, such as cracked floor tile, demising walls, skewed door jambs and windows and damage caused by termites entering through the excessive floor cracks. In City Express, this court stated that, where negligent design of a building is alleged by the plaintiff, economic loss damages are those that pertain solely to the costs related to the operation and value of the building itself. Excluded are costs for personal injuries caused by the defective design or damage to property other than the building itself. 87 Hawai`i at 469, 959 P.2d at 839; see also Kawamata Farms, Inc. v. United Agri Products, 86 Hawai`i 214, 254, 948 P.2d 1055, 1095 (1997) (stating that, [w]here the finished product caused damage to other property, the economic loss [rule] does not apply). Other jurisdictions have similarly defined economic loss as 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. Oceanside at Pine Point Condo. Owners Ass'n v. Peachtree Doors, Inc., 659 A.2d 267, 270 n. 4 (Me.1995) (internal quotation marks and citation omitted) [hereinafter, Oceanside ]; see also Moorman Mfg. Co. v. Nat'l Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443, 449 (1982) (same); Flowers v. Viking Yacht Co., 366 N.J.Super. 49, 840 A.2d 291, 296 (2003) (same). In Calloway, the Nevada Supreme Court recognized that: Other jurisdictions have concluded that a defective building creates only economic loss, even if the particular defect causes damage to other parts of the structure. See, e.g., Chicago Heights Venture v. Dynamit Nobel of America, 782 F.2d 723 (7th Cir.1986) (holding roof material that failed during windstorm, resulting in leaks, was not legally significant, and only economic losses were at issue); Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 690 P.2d 158 (Ct.App.1984) (holding cracks in kitchen floor, vinyl flooring, family room and bedroom, and buckling of the roof, cracked bricks and joists, all involved damage to the structure itself; therefore, only economic losses were presented and owners could not sue in tort); Danforth v. Acorn Structures, Inc., 608 A.2d 1194 (Del.1992) (holding homeowner who brought tort action against seller of building kit for negligent design could not recover because deterioration of windows, door frames and exterior siding was strictly economic loss); Casa Clara [Condo. Ass'n] v. Charley Toppino and Sons, 620 So.2d 1244 (Fla.1993) (holding homeowners could not recover in tort for allegedly defective concrete that cracked and broke off); Redarowicz v. Ohlendorf, 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982) (holding owner of home who sought recovery for costs of repair and replacement for defectively constructed chimney, wall and patio suffered only economic losses not recoverable in tort because homeowner alleged only qualitative defects; inferior workmanship that leads to eventual deterioration is not properly addressed by tort law); Chenango C. Indus. D.A. v. Lockwood Greene E., 114 A.D.2d 728, 494 N.Y.S.2d 832 (1985) (holding building owners could not sue roofing material manufacturer in tort for cracks, splits and leaks in the roof because owners suffered only economic losses)[.] 993 P.2d at 1268 (holding that water intrusion, damage to flooring and ceilings, and structural and wood decay caused by defective framing in townhouses constituted damage to the townhouses themselves and, thus, the plaintiffs suffered purely economic losses not recoverable in negligence). In Oceanside, owners of condominium units and the condominium association [hereinafter, collectively, the plaintiffs] brought an action against the manufacturer of windows installed in the units based on, inter alia, negligence. 659 A.2d at 269. In concluding that the plaintiffs' negligence claim was barred by the economic loss rule, the Maine Supreme Judicial Court stated: Whether a product has injured only itself may, of course, be a difficult question to answer. We follow the approach taken by those courts when considering facts analogous to those before us, and look to the product purchased by the plaintiff, as opposed to the product sold by the defendant, to determine whether a product has injured only itself. See, e.g., Easling v. Glen-Gery Corp., 804 F.Supp. 585, 590 (D.N.J.1992) (no recovery permitted under strict liability theory for building damage caused by defective bricks because plaintiffs purchased completed apartment complex and not a load of bricks); Casa Clara Condo[.] Ass'n, . . . 620 So.2d [at] 1247 . . . (rejecting homeowners' argument that damages caused to a condominium by defective concrete was damage to other property because plaintiffs purchased finished homes, not component parts)[.] The plaintiffs here purchased finished condominium units, not individual components of the units. Because the windows were integrated into the finished product purchased by the plaintiffs, the damages caused by any defects in the windows constituted damage only to the product itself, not damage to other property. [The p]laintiffs' claims for economic damages  the costs of all repairs, renovation, corrections and replacements related to the [window manufacturer's] performance of its contract  are properly addressable under a warranty theory. The trial court correctly determined that the plaintiffs may not recover for these damages in tort and its grant of a summary judgment on this basis did not constitute an error of law. Id. at 271 (citation omitted) (emphases added); see Washington Courte Condo. Ass'n-Four, 103 Ill.Dec. 752, 501 N.E.2d at 1294 (water damage to insulation, walls, ceilings, and electrical outlets allegedly caused by negligently supplied windows and sliding glass doors constituted consequential economic loss which is barred from tort recovery under economic loss rule); Prendiville v. Contemporary Homes, Inc., 32 Kan.App.2d 435, 83 P.3d 1257, 1264 (2004) (concluding that damage by a defective component of an integrated system to either the system as a whole or other system components is not damage to `other property' which precludes the application of the economic loss [rule]; damage to home caused from flooding due to defective siding was not damage to other property for purposes of economic loss rule) (internal quotation marks, citation, and brackets omitted); Bay Breeze Condo. Ass'n v. Norco Windows, Inc., 257 Wis.2d 511, 651 N.W.2d 738, 745-46 (Wis.Ct.App.2002) (concluding that economic loss rule applies to condominium building construction defects when the defective product is a component part of an integrated structure; damage to interior and exterior walls and casements allegedly caused by defective windows not recoverable in negligence); but see Berish v. Bornstein, 437 Mass. 252, 770 N.E.2d 961, 975 (2002) (concluding that allegations that defects in condominium units included poor construction of retaining walls, improper installation of skylights and sliding glass doors, improper construction of foundations, and failure to install adequate flashing on roofs gave rise to reasonable inference that these defects caused property damage (including water damage to the units) beyond the defects in the units themselves). In the instant case, it is undisputed that the AOAO is not seeking damages for any personal injuries caused by the allegedly defective concrete floor slabs. As previously mentioned, the AOAO essentially alleged the following as damages: (1) damage to the units at Newtown Meadows; (2) a continuous exposure to conditions which resulted in damage to the units; (3) loss in value of the units; (4) the costs of experts; (5) an increase in maintenance costs; (6) the cost to remedy the defects; and (7) other consequential damages. Such damages, however, consist of purely economic losses. See City Express, 87 Hawai`i at 469, 959 P.2d at 839; see also Oceanside, 659 A.2d at 270 n. 4. Moreover, even assuming arguendo that the cracked floor tiles, demising walls, skewed door jambs and windows, and damage caused by termites entering through the cracks were caused by the allegedly defective floor slabs, such consequential damages do not constitute damage to other property. See Washington Courte Condo. Ass'n-Four, 103 Ill.Dec. 752, 501 N.E.2d at 1294; Oceanside, 659 A.2d at 271; Calloway, 993 P.2d at 1268; Bay Breeze Condo. Ass'n, 651 N.W.2d at 745-46. Furthermore, it should be pointed out that the AOAO does not provide any citation to the record to support its assertions that it incurred damage as a result of termite infestation and that skewed door jambs and windows resulted from the allegedly defective floor slabs. Consequently, the damages alleged by the AOAO against Liu consist of purely economic losses not recoverable in negligence. Thus, we conclude that the AOAO's negligence claims based on violations of contract specifications are barred by the economic loss rule. With respect to the AOAO's negligence claims  specifically, those based on violations of the UBC  the AOAO urges this court to adopt the exception carved out by the South Carolina Supreme Court in Kennedy v. Columbia Lumber & Manufacturing Co., 299 S.C. 335, 384 S.E.2d 730 (1989). In that case, the court held: A builder may be liable to a home buyer in tort despite the fact that the buyer suffered only economic losses where: (1) the builder has violated an applicable building code; (2) the builder has deviated from industry standards; or (3) the builder has constructed housing that he knows or should know will pose serious risks of physical harm. Id. at 738 (format altered) (emphasis added). In so holding, the court stated 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. Id. at 737 (citation omitted). The court, therefore, concluded that 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. In that situation, no cause of action in negligence will lie. Id. (emphasis in original) (footnote omitted). We believe the foregoing approach is sound, and, thus, we agree with the Kennedy court to the extent that a homeowner may pursue a negligence claim against a builder where it is alleged that the builder has violated an applicable building code, despite the fact that the homeowner suffered only economic losses. We decline to address whether we would adopt the second and third exceptions to the economic loss rule announced by the Kennedy court inasmuch as the AOAO did not contend that Liu deviated from industry standards[,] id. at 738, or that Liu constructed housing that [it] knows or should know will pose serious risks of physical harm[,] id. We, therefore, conclude that the AOAO's negligence claims based on violations of the UBC are not barred by the economic loss rule. Accordingly, based on the foregoing, we affirm in part and vacate in part the circuit court's denial of Liu's motion for summary judgment as it pertains to the AOAO's negligence claims. Specifically, inasmuch as the economic loss rule: (1) bars the AOAO's negligence claims based on violations of contract specifications, we hold the circuit court erred; and (2) does not bar the AOAO's negligence claims based on violations of the UBC, we hold the circuit court did not err. [45]