Court Opinion

ID: 2681899
Source: CourtListenerOpinion
Date Created: 2014-07-03 17:01:34.756274+00
Date Added: 2024-06-11T09:55:42.563991
License: Public Domain

Filed 7/3/14

       IN THE SUPREME COURT OF CALIFORNIA

BEACON RESIDENTIAL COMMUNITY )
ASSOCIATION,                           )
                                       )
           Plaintiff and Appellant,    )
                                       )                          S208173
           v.                          )
                                       )                   Ct.App. 1/5 A134542
SKIDMORE, OWINGS & MERRILL LLP )
et al.,                                )
                                       )                   San Francisco County
           Defendants and Respondents. )            Super. Ct. No. CGC-08-478453
____________________________________)

        A homeowners association on behalf of its members sued a condominium
developer and various other parties over construction design defects that allegedly
make the homes unsafe and uninhabitable for significant portions of the year.
Two defendants were architectural firms, which allegedly designed the homes in a
negligent manner but did not make the final decisions regarding how the homes
would be built. Applying our decision in Bily v. Arthur Young & Co. (1992) 3
Cal. 4th 370 (Bily) and relying on Weseloh Family Ltd. Partnership v. K.L. Wessel
Construction Co., Inc. (2004) 125 Cal. App. 4th 152 (Weseloh), the trial court
sustained a demurrer in favor of the defendant architectural firms, reasoning that
an architect who makes recommendations but not final decisions on construction
owes no duty of care to future homeowners with whom it has no contractual
relationship. The Court of Appeal reversed, concluding that an architect owes a

                                         1
duty of care to homeowners in these circumstances, both under the common law
and under the Right to Repair Act (Civ. Code, § 895 et seq.).
       Building on substantial case law and the common law principles on which
it is based, we hold that an architect owes a duty of care to future homeowners in
the design of a residential building where, as here, the architect is a principal
architect on the project — that is, the architect, in providing professional design
services, is not subordinate to other design professionals. The duty of care extends
to such architects even when they do not actually build the project or exercise
ultimate control over construction. Accordingly, we affirm the judgment of the
Court of Appeal.
                                          I.
       In considering whether a demurrer should have been sustained, ―we accept
as true the well-pleaded facts in the operative complaint.‖ (Aryeh v. Canon
Business Solutions, Inc. (2013) 55 Cal. 4th 1185, 1189, fn. 1.) The facts alleged in
plaintiffs‘ third amended complaint (the complaint) are as follows.
       Skidmore, Owings & Merrill LLP (SOM) and HKS, Inc. (individually and
doing business as HKS Architects, Inc.; hereafter HKS), are design professionals.
SOM and HKS (collectively defendants) provided architectural and engineering
services for The Beacon residential condominiums, a collection of 595
condominium units and associated common areas located in San Francisco (the
Project). Although the units were initially rented out for two years after
construction, defendants provided their services knowing that the finished
construction would be sold as condominiums. A condominium association was
formed, and the condominium‘s conditions, covenants, and restrictions were
recorded, before construction commenced.
       The homeowners association, plaintiff Beacon Residential Community
Association (Association), sued several parties involved in the construction of

                                           2
those condominiums, including several business entities designated as the original
owners and developers of the condominium, as well as SOM and HKS, with
whom the owners and developers contracted for architectural services. SOM and
HKS were the only architects on the Project. Plaintiff alleged that negligent
architectural design work performed by defendants resulted in several defects,
including extensive water infiltration, inadequate fire separations, structural
cracks, and other safety hazards. One of the principal defects is ―solar heat gain,‖
which made the condominium units uninhabitable and unsafe during certain
periods due to high temperatures. Plaintiff alleged that the solar heat gain is due to
defendants‘ approval, contrary to state and local building codes, of less expensive,
substandard windows and a building design that lacked adequate ventilation.
Defendants are named in the first cause of action (―Civil Code Title 7—Violation
of Statutory Building Standards for Original Construction‖), the second cause of
action (―Negligence Per Se in Violation of Statute‖), and the fifth cause of action
(―Negligence of Design Professionals and Contractors‖).
       According to the complaint, defendants ―provided architectural and
engineering services‖ for the Project that ―included, but were not limited to,
architecture, landscape architecture, civil engineering, mechanical engineering,
structural engineering, soils engineering and electrical engineering, as well as
construction administration and construction contract management.‖ Defendants
were paid more than $5 million for their work on the Project. In addition to
―providing original design services at the outset‖ of the Project, defendants played
an active role throughout the construction process, coordinating efforts of the
design and construction teams, conducting weekly site visits and inspections,
recommending design revisions as needed, and monitoring compliance with
design plans.

                                          3
       Defendants demurred, contending they owed no duty of care to the
Association or its members under the facts alleged. The trial court agreed: ―The
allegations do not show that either of the architects went beyond the typical role of
an architect, which is to make recommendations to the owner. Even if the
architect initiated the substitutions, changes, and other elements of design that
Plaintiff alleges to be the cause of serious defects, so long as the final decision
rested with the owner, there is no duty owed by the architect to the future
condominium owners, in the Court‘s view. The owner made the final decision
according to the third amended complaint.‖ The trial court granted plaintiff leave
to amend the complaint to allege that defendants ―actually dictated and controlled
the decision to eliminate [ventilation] ducts, acting in a manner that was contrary
to the directions of the owner, or that ignored the owner‘s directions,‖ but plaintiff
declined.
       The Court of Appeal reversed. It applied the factors set forth by this court
in Biakanja v. Irving (1958) 49 Cal. 2d 647, 650 (Biakanja), for determining
whether a party owes a duty of care to a third party and concluded that defendants
owed a duty of care to the Association in this case. The court distinguished
Weseloh, supra, 125 Cal. App. 4th 152, a case that found no duty of care owed by a
design engineer to a commercial property owner, on the grounds that Weseloh was
decided on summary judgment rather than demurrer and that Weseloh had
expressly limited its holding to its facts. The Court of Appeal further concluded
that Bily, supra, 3 Cal. 4th 370, did not support defendants‘ position. Finally, the
court concluded that the Right to Repair Act expressed a legislative intent to
impose on design professionals a duty of care to future homeowners. (See Civ.
Code, § 895 et seq.)
       We granted review.

                                           4
                                           II.
       ―Actionable negligence involves a legal duty to use due care, a breach of
such legal duty, and the breach as the proximate or legal cause of the resulting
injury.‖ (United States Liab. Ins. Co. v. Haidinger–Hayes, Inc. (1970) 1 Cal. 3d
586, 594.) This case is concerned solely with the first element of negligence, the
duty of care. Whether a duty of care exists ―in a particular case is a question of
law to be resolved by the court. [Citation.] [¶] A judicial conclusion that a duty is
present or absent is merely ‗ ―a shorthand statement . . . rather than an aid to
analysis . . . . ‗[D]uty,‘ is not sacrosanct in itself, but only an expression of the
sum total of those considerations of policy which lead the law to say that the
particular plaintiff is entitled to protection.‖ ‘ [Citation.] ‗Courts, however, have
invoked the concept of duty to limit generally ―the otherwise potentially infinite
liability which would follow from every negligent act . . . .‖ ‘ ‖ (Bily, supra, 3
Cal.4th at p. 397.)
       Here we consider whether design professionals owe a duty of care to a
homeowners association and its members in the absence of privity. Although the
issue presented in this case has not been decided by this court, we do not write on
a blank slate. As explained below, courts have found in a variety of circumstances
that builders, contractors, and architects owe a duty of care to third parties.
                                           A.
       Although liability for the supply of goods and services historically required
privity of contract between the supplier and the injured party, the significance of
privity has been greatly eroded over the past century. As we noted more than 50
years ago, ―[l]iability has been imposed, in the absence of privity, upon suppliers
of goods and services which, if negligently made or rendered, are ‗reasonably
certain to place life and limb in peril.‘ [Citations.] There is also authority for the
imposition of liability where there is no privity and where the only foreseeable risk

                                            5
is of damage to tangible property. [Citations.]‖ (Biakanja, supra, 49 Cal.2d at
p. 649.) In Biakanja, we held that a notary public who negligently drafted a will
was liable to the intended beneficiary of the will. (Id. at pp. 650–651.) We
explained that ―[t]he determination whether in a specific case the defendant will be
held liable to a third person not in privity is a matter of policy and involves the
balancing of various factors, among which are the extent to which the transaction
was intended to affect the plaintiff, the foreseeability of harm to him, the degree of
certainty that the plaintiff suffered injury, the closeness of the connection between
the defendant‘s conduct and the injury suffered, the moral blame attached to the
defendant‘s conduct, and the policy of preventing future harm.‖ (Id. at p. 650.)
       The declining significance of privity has found its way into construction
law. We described the evolution in Aas v. Superior Court (2000) 24 Cal. 4th 627
(Aas): ―Formerly, after a builder had completed a structure and the purchaser had
accepted it, the builder was not liable to a third party for damages suffered because
of the work‘s condition, even though the builder was negligent. (E.g., Fanjoy v.
Seales (1865) 29 Cal. 243, 249–250; see also Hale v. Depaoli [(1948)] 33 Cal. 2d
228, 230 [reviewing the former law].) The purchaser, of course, had remedies
against the builder in contract and warranty. But injured third parties had no clear
remedy until we, following the trend that began with MacPherson v. Buick Motor
Co. (1916) 217 N.Y 382 [111 N.E. 1050], qualified the general rule exonerating
manufacturers from third party claims with an exception applicable whenever
‗ ―the nature of a [manufactured] thing is such that it is reasonably certain to place
life and limb in peril when negligently made . . . .‖ ‘ (Kalash v. Los Angeles
Ladder Co. (1934) 1 Cal. 2d 229, 231–232, quoting MacPherson v. Buick Motor
Co., supra, 111 N.E. 1050, 1053.) Having already held that the manufacturers of
defective ladders [citation], elevators [citation], and tires [citation] could be liable
to persons not in contractual privity with them yet foreseeably injured by their

                                            6
products, we easily applied the same rule to someone responsible for part of a
house, i.e., a defective railing (Hale v. Depaoli, at pp. 230–232).
       ―We first recognized a remedy in the law of negligence for construction
defects causing property damage, as opposed to personal injury, in Stewart v. Cox
[(1961)] 55 Cal. 2d 857 [(Stewart)]. There, we upheld a homeowner‘s judgment
against a subcontractor who had negligently applied concrete to the inside of a
swimming pool, thereby causing the release of water that damaged the pool, lot
and house. In our opinion we noted, and seemingly were influenced by, the
‗ ―decisions . . . plac[ing] building contractors on the same footing as sellers of
goods, and . . . [holding] them to the general standard of reasonable care for the
protection of anyone who may foreseeably be endangered by the negligence, even
after acceptance of the work.‖ ‘ (Id. at p. 862, quoting Prosser, Torts (2d ed. 1955)
pp. 517–519.)‖ (Aas, supra, 24 Cal.4th at p. 637.)
       The court in Stewart applied the Biakanja factors to determine the scope of
the duty of care: ―Here it was obvious that the pool for which Cox provided the
gunite work was intended for the plaintiffs and that property damage to them ––
and possibly to some of their neighbors –– was foreseeable in the event the work
was so negligently done as to permit water to escape. It is clear that the
transaction between [the pool subcontractor] and Cox was intended to specially
affect plaintiffs. There is no doubt that plaintiffs suffered serious damage, and the
court found, supported by ample evidence, that the injury was caused by Cox‘s
negligence. Under all the circumstances Cox should not be exempted from
liability if negligence on his part was the proximate cause of the damage to
plaintiffs.‖ (Stewart, supra, 55 Cal.2d at p. 863.)
       Soon after, in Sabella v. Wisler (1963) 59 Cal. 2d 21, we held that a
contractor was liable to a homeowner, although the homeowner‘s identity was
unknown at the time of construction. The contractor had built a house on

                                           7
inadequately compacted soil, causing major subsidence and property damage.
Applying the Biakanja factors, we said that although ―it appears that . . . this house
was not constructed with the intention of ownership passing to these particular
plaintiffs, the Sabellas are members of the class of prospective home buyers for
which Wisler admittedly built the dwelling. Thus as a matter of legal effect the
home may be considered to have been intended for the plaintiffs, and Wisler owed
them a duty of care in construction. (See Prosser, Torts (2d ed. 1955) § 36,
pp. 166–168.) It is apparent that harm was foreseeable to prospective owners
when the home was constructed upon the inadequately compacted earth in the lot,
and it is undisputed that the Sabellas‘ home was seriously damaged. Also, there
was found to be a close connection between the negligent elements of
workmanship for which defendant contractor must be held responsible . . . and the
injury suffered.‖ (Sabella, at p. 28.)
       Courts have applied these third party liability principles to architects. In
Montijo v. Swift (1963) 219 Cal. App. 2d 351, the plaintiff sued an architect after
falling and injuring herself on a stairway at a bus depot that she alleged had been
negligently designed with an inadequate handrail. Relying in part on Stewart,
supra, 55 Cal. 2d 857, and Hale v. Depaoli, supra, 33 Cal. 3d 228, the court said:
―Under the existing status of the law, an architect who plans and supervises
construction work, as an independent contractor, is under a duty to exercise
ordinary care in the course thereof for the protection of any person who
foreseeably and with reasonable certainty may be injured by his failure to do so,
even though such injury may occur after his work has been accepted by the person
engaging his services.‖ (Montijo, at p. 353.) Similarly, in Mallow v. Tucker,
Sadler & Bennett (1966) 245 Cal. App. 2d 700, the court upheld an architect‘s
liability to a construction worker where the architect‘s plans negligently failed to

                                          8
indicate the location of underground high-voltage transmission lines, resulting in
the worker‘s electrocution. (Id. at pp. 702–703.)
       Architect liability to third parties has not been confined to personal injury;
it also extends to property damage. The Court of Appeal in Cooper v. Jevne
(1976) 56 Cal. App. 3d 860, perhaps the case most similar to the one before us,
recognized such liability to condominium purchasers where an architectural firm
―prepared and furnished to the builder-seller . . . architectural drawings and plans
and specifications for the construction and other improvements within the . . .
project and acted as supervising architects in the construction of the buildings
within the project.‖ (Id. at p. 867.) Applying the Biakanja factors, Cooper held
on demurrer that ―the architects‘ duty of reasonable care in the performance of
their professional services is logically owed to those who purchased the allegedly
defectively designed and built condominiums . . . . The architects must have
known that the condominiums they designed and whose construction they
supervised were built by [the builder-seller] for sale to the public and that
purchasers of these condominiums would be the ones who would suffer
economically, if not bodily, from any negligence by the architects in the
performance of their professional services.‖ (Id. at p. 869.)
       Similarly, in Huang v. Garner (1984) 157 Cal. App. 3d 404, the Court of
Appeal overturned a nonsuit in an action by a property owner against a building
designer and civil engineer for defective design, including insufficient fire
retardation walls, that violated building code standards. (Id. at pp. 411–415.) The
court took as a given that design professionals could be held liable to third parties
for defective designs causing property damage and economic loss; the only issue
was whether negligence had to be proven by expert testimony or could be
established by showing departure from then Uniform Building Code requirements
as negligence per se. (Id. at pp. 411–414.) In Huber, Hunt Nichols, Inc. v. Moore

                                          9
(1977) 67 Cal. App. 3d 278, the court said it is ―now well settled that . . . the
architect may be sued for negligence in the preparations of plans and
specifications either by his client or by third persons . . . .‖ (Id. at p. 299.)
                                            B.
       The Association argues that the general principle that an architect may be
sued in negligence by a future homeowner absent privity is also recognized by
statute. The Right to Repair Act establishes a set of building standards for new
residential construction and provides that builders and other entities ―shall . . . be
liable for‖ violation of those standards ―[i]n any action seeking recovery of
damages arising out of‖ such construction. (Civ. Code, § 896; see also id., § 936;
all subsequent statutory references are to this code.) Section 896 states that the
deficiencies for which builders and other entities are liable include ―the residential
construction, design, specifications, surveying, planning, supervision, testing, or
observation of construction‖ of a dwelling unit. The Association points to section
936, which provides in part: ―Each and every provision of the other chapters of
this title apply to general contractors, subcontractors, material suppliers, individual
product manufacturers, and design professionals to the extent that the general
contractors, subcontractors, material suppliers, individual product manufacturers,
and design professionals caused, in whole or in part, a violation of a particular
standard as the result of a negligent act or omission or a breach of contract. In
addition to the affirmative defenses set forth in Section 945.5, a general contractor,
subcontractor, material supplier, design professional, individual product
manufacturer, or other entity may also offer common law and contractual defenses
as applicable to any claimed violation of a standard.‖ (Italics added.) Section 937
makes clear that the term ―design professionals‖ includes ―architects and
architecture firms.‖

                                            10
       The Court of Appeal, relying on legislative history, concluded that the
Right to Repair Act is ―dispositive of the scope of duty‖ owed by defendants to the
homeowners in this case. Defendants make several arguments against this
position. First, they observe that whereas the act applies to ―new residential
units,‖ the residential units in the Project were initially rented as apartments.
Second, defendants contend that even if the Right to Repair Act applies to this
case, it does not support imposing a duty of care toward the Association‘s
members greater than the duty imposed at common law. Highlighting the portion
of section 936 that preserves ―common law . . . defenses,‖ defendants argue that
that under common law principles of duty articulated by this court, a design
professional owes no duty of care to homeowners in the circumstances of this
case. Defendants further rely on the established principle that ―[a] statute will be
construed in light of common law decisions, unless its language ‗ ―clearly and
unequivocally discloses an intention to depart from, alter, or abrogate the
common-law rule concerning a particular subject matter . . . .‖ ‘ ‖ (California
Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal. 4th 284,
297.) According to defendants, the Legislature‘s limited purpose in enacting the
Right to Repair Act in 2002 was to abrogate the ―economic loss rule‖ affirmed in
Aas, supra, 24 Cal. 4th 627, 636 (see Greystone Homes, Inc. v. Midtec, Inc. (2008)
168 Cal. App. 4th 1194, 1202 (Greystone)), not to otherwise create new tort duties.
       We need not decide whether the Right to Repair Act is itself dispositive of
the issue before us. Assuming defendants are correct that the existence of a
common law duty of care is required to maintain a negligence action under the
statute, such a duty exists under the facts alleged here. This conclusion follows
from an application of Biakanja and Bily, as we now explain.

                                          11
                                         III.
       As noted, Biakanja set forth a list of factors that inform whether a duty of
care exists between a plaintiff and defendant in the absence of privity: ―the extent
to which the transaction was intended to affect the plaintiff, the foreseeability of
harm to him, the degree of certainty that the plaintiff suffered injury, the closeness
of the connection between the defendant‘s conduct and the injury suffered, the
moral blame attached to the defendant‘s conduct, and the policy of preventing
future harm.‖ (Biakanja, supra, 49 Cal.2d at p. 650.) Although the application of
these factors necessarily depends on the circumstances of each case, it is possible
to derive general rules that govern common scenarios. An example is our decision
in Bily limiting the duty of care owed by auditing firms to nonclient third parties.
We begin here with a review of Bily, whose reasoning provides a useful point of
comparison. We then discuss the key considerations that counsel in favor of
recognizing a duty of care that design professionals owe to future homeowners in
circumstances like those alleged in plaintiff‘s complaint.
                                          A.
       Bily involved a suit brought by investors in a computer company against the
accounting firm that the company had hired to conduct an audit and issue audit
reports and financial statements. The plaintiffs claimed that the accounting firm,
Arthur Young & Company, had committed negligence in conducting the audit and
reporting a $69,000 operating profit rather than the company‘s actual loss of more
than $3 million. The computer company eventually filed for bankruptcy, and its
investors lost money. They sued, claiming injury from reliance on Arthur
Young‘s allegedly negligent audit. (Bily, supra, 3 Cal.4th at pp. 377–379.)
       We held that an auditor generally owes no duty of care to its client‘s
investors. (Bily, supra, 3 Cal.4th at p. 407.) In so holding, we recognized the
important ― ‗ ―public watchdog‖ function‘ ‖ of auditors (id. at p. 383) but sought

                                          12
to set a reasonable limit on their potential liability for professional negligence
given the vast range of foreseeable third party users of audit reports. ―Viewing the
problem . . . in light of the [Biakanja] factors,‖ the court in Bily focused on ―three
central concerns.‖ (Id. at p. 398.)
       First, ―[g]iven the secondary ‗watchdog‘ role of the auditor, the complexity
of the professional opinions rendered in audit reports, and the difficult and
potentially tenuous causal relationships between audit reports and economic losses
from investment and credit decisions, the auditor exposed to negligence claims
from all foreseeable third parties faces potential liability far out of proportion to its
fault . . . .‖ (Bily, supra, 3 Cal.4th at p. 398.) In elaborating on this concern, the
court observed that ―audits are performed in a client-controlled environment.‖ (Id.
at p. 399.) The client ―necessarily furnishes the information base for the audit,‖
―has interests in the audit that may not be consonant with those of the public,‖ and
―predominates in the dissemination of the audit report.‖ (Id. at pp. 399–400.)
―Thus, regardless of the efforts of the auditor, the client retains effective primary
control of the financial reporting process.‖ (Id. at p. 400.)
       In addition, the court noted a mismatch between the auditor‘s ―secondary‖
role in the financial reporting process and the ―primary‖ role attributed to the
auditor as the cause of economic loss in a negligence suit by a third party. (Bily,
supra, 3 Cal.4th at p. 400.) Because ―the auditor may never have been aware of
the existence, let alone the nature or scope, of the third party transaction that
resulted in the claim‖ (ibid.), and because ―the ultimate decision to lend or invest
is often based on numerous business factors that have little to do with the audit
report,‖ the auditor‘s conduct lacks a sufficiently ― ‗close connection‘ ‖ to the loss
of loaned or invested funds to justify recognition of a duty of care to third parties
(id. at p. 401). In this context, ―the spectre of multibillion-dollar professional
liability . . . is distinctly out of proportion to: (1) the fault of the auditor . . . ; and

                                             13
(2) the connection between the auditor‘s conduct and the third party‘s injury . . . .‖
(Bily, at p. 402.)
       Second, Bily emphasized that unlike ordinary consumers in product liability
cases, ―the generally more sophisticated class of plaintiffs in auditor liability cases
(e.g., business lenders and investors) permits the effective use of contract rather
than tort liability to control and adjust the relevant risks through ‗private ordering‘
. . . .‖ (Bily, supra, 3 Cal.4th at p. 398.) ―For example, a third party might expend
its own resources to verify the client‘s financial statements or selected portions of
them that were particularly material to its transaction with the client. Or it might
commission its own audit or investigation, thus establishing privity between itself
and an auditor or investigator to whom it could look for protection. In addition, it
might bargain with the client for special security or improved terms in a credit or
investment transaction. Finally, the third party could . . . insist[] that an audit be
conducted on its behalf or establish[] direct communications with the auditor with
respect to its transaction with the client.‖ (Id. at p. 403.) ―As a matter of
economic and social policy, third parties should be encouraged to rely on their
own prudence, diligence, and contracting power, as well as other informational
tools. This kind of self-reliance promotes sound investment and credit practices
and discourages the careless use of monetary resources. If, instead, third parties
are simply permitted to recover from the auditor for mistakes in the client‘s
financial statements, the auditor becomes, in effect, an insurer of not only the
financial statements, but of bad loans and investments in general.‖ (Ibid.)
       Third, Bily expressed skepticism that exposing auditors to third party
negligence suits would improve the quality of the audits. (Bily, supra, 3 Cal.4th at
pp. 404–405.) ―In view of the inherent dependence of the auditor on the client and
the labor-intensive nature of auditing, we doubt whether audits can be done in
ways that would yield significantly greater accuracy without disadvantages.

                                           14
[Citation.] Auditors may rationally respond to increased liability by simply
reducing audit services in fledgling industries where the business failure rate is
high, reasoning that they will inevitably be singled out and sued when their client
goes into bankruptcy regardless of the care or detail of their audits.‖ (Id. at
p. 404.)
       Notably, Bily did not categorically hold that auditors never owe a duty of
care to third parties. Instead, Bily limited the duty to a ―narrow class of persons
who, although not clients, may reasonably come to receive and rely on an audit
report and whose existence constitutes a risk of audit reporting that may fairly be
imposed on the auditor. Such persons are specifically intended beneficiaries of the
audit report who are known to the auditor and for whose benefit it renders the
audit report.‖ (Bily, supra, 3 Cal.4th at pp. 406–407.) In situations where an
auditor ―clearly intended to undertake the responsibility of influencing particular
business transactions involving third persons‖ with ―sufficiently specific economic
parameters to permit the [auditor] to assess the risk of moving forward,‖ liability
for negligent misrepresentation may extend to persons ―to whom or for whom the
misrepresentations are made‖ so long as those persons have actually and
justifiably relied on the auditor‘s report. (Id. at pp. 408–409.)
                                          B.
       In many ways, the circumstances of the present case stand in contrast to the
concerns in Bily that counseled against general recognition of an auditor‘s duty of
care to third parties. Here we focus on three considerations that drive the analysis
and distinguish this case from Bily: (1) the closeness of the connection between
defendants‘ conduct and plaintiff‘s injury; (2) the limited and wholly evident class
of persons and transactions that defendants‘ conduct was intended to affect; and
(3) the absence of private ordering options that would more efficiently protect
homeowners from design defects and their resulting harms. We then summarize

                                          15
this analysis in terms of the Biakanja factors, and we distinguish Weseloh, supra,
125 Cal. App. 4th 152, the principal case on which defendants rely. As explained
below, we hold that an architect owes a duty of care to future homeowners where
the architect is a principal architect on the project — that is, the architect, in
providing professional design services, is not subordinate to any other design
professional — even if the architect does not actually build the project or exercise
ultimate control over construction decisions.
                                           1.
       First, unlike the secondary role played by the auditor in the financial
reporting process, defendants‘ primary role in the design of the Project bears a
― ‗close connection‘ ‖ to the injury alleged by plaintiff. (Bily, supra, 3 Cal.4th at
p. 401.) According to the complaint, defendants were the only architects on the
Project. In that capacity, defendants ―reviewed and approved the course of action
where the specifications for the exterior windows . . . were changed to a design
that inadequately prevented heat gain, which causes a seriously defective and
nonfunctional condition that is also unhealthy.‖ Defendants also ―recommended
that the number of Z ducts [ventilation ducts] be reduced by a significant quantity,
which is a major factor in the nonfunctional, unhealthy condition [of] the interior
of the units.‖ The complaint alleges that these professional judgments were
negligent and rendered the residential units unsafe and uninhabitable during
certain periods of the year. Compared to ―the connection between the auditor‘s
conduct and the third party‘s injury (which will often be attenuated by unrelated
business factors that underlie investment and credit decisions)‖ (Bily, at p. 402),
the connection between defendants‘ unique role as the design professionals on the
Project and plaintiff‘s damages resulting from negligent design is far more direct
and immediate.

                                           16
       The trial court assigned dispositive significance to the fact that defendants
did not go ―beyond the typical role of an architect, which is to make
recommendations to the owner,‖ and that ―the final decision rested with the
owner.‖ Similarly, defendants contend that ―they had no role in the actual
construction. Instead, the developer, contractors, and subcontractors retained
primary control over the construction process, as well as final say on how the
plans were implemented.‖
       However, even if an architect does not actually build the project or make
final decisions on construction, a property owner typically employs an architect in
order to rely on the architect‘s specialized training, technical expertise, and
professional judgment. The Business and Professions Code defines ―[t]he practice
of architecture‖ as ―offering or performing, or being in responsible control of,
professional services which require the skills of an architect in the planning of
sites, and the design, in whole or in part, of buildings, or groups of buildings and
structures.‖ (Bus. & Prof. Code, § 5500.1, subd. (a); see id., § 5500.1, subd. (b)
[providing a nonexhaustive list of ―[a]rchitects‘ professional services‖].) The
profession is licensed and regulated by the California Architects Board (id.,
§§ 5510, 5510.1, 5510.15, 5526), and the unlicensed or unauthorized practice of
architecture is punishable as a misdemeanor (id., §§ 5536, 5536.1). In order to
practice architecture, an applicant must pass two specialized exams, must
demonstrate eight years of training and educational experience in architectural
work, and must complete an internship program. (Id., §§ 5550, 5551, 5552,
subd. (a); Cal. Code Regs., tit. 16, §§ 116–117.)
       In this case, defendants were the principal architects on the Project. Among
all the entities involved in the Project, defendants uniquely possessed architectural
expertise. There is no suggestion that the owner or anyone else had special
competence or exercised professional judgment on architectural issues such as

                                          17
adequate ventilation or code-compliant windows. Just as a lawyer cannot escape
negligence liability to clearly intended third party beneficiaries on the ground that
the client has the ultimate authority to follow or reject the lawyer‘s advice (see,
e.g., Heyer v. Flaig (1969) 70 Cal. 2d 223, 226; Lucas v. Hamm (1961) 56 Cal. 2d
583, 588), so too an architect cannot escape such liability on the ground that the
client makes the final decisions. An architect providing professional design
services to a developer does not operate in a ―client-controlled environment‖
comparable to the relationship between an auditor and its client. (Bily, supra, 3
Cal.4th at p. 399.) Whereas an auditor‘s ―client, of course, has interests in the
audit that may not be consonant with those of the public‖ (ibid.), it would be
patently inconsistent with public policy to hold that an architect‘s failure to
exercise due care in designing a building can be justified by client interests at odds
with the interest of prospective homeowners in safety and habitability.
       Were there any doubt as to defendants‘ principal role in the design of the
Project, it is dispelled by additional facts alleged here. According to the
complaint, defendants not only provided design services at the outset of the
Project but also brought their expertise to bear on the implementation of their
plans and specifications by doing weekly inspections at the construction site,
monitoring contractor compliance with design plans, altering design requirements
as issues arose, and advising the owner of any nonconforming work that should be
rejected — all for a fee of more than $5 million. In other words, defendants
applied their specialized skill and professional judgment throughout the
construction process to ensure that it would proceed according to approved
designs. The work defendants performed does not resemble ―a broadly phrased
professional opinion based on a necessarily confined examination‖ of client-
provided information (Bily, supra, 3 Cal.4th at p. 403), nor did defendants act
merely as ―suppliers of information and evaluations for the use and benefit of

                                          18
others‖ (id. at p. 410). Instead, defendants played a lead role not only in designing
the Project but also in implementing the Project design.
       Nor do we find persuasive defendants‘ claim that the connection between
their conduct and plaintiff‘s injury is ―attenuated because . . . when the developer
sold the units two years after construction, it was aware of, and concealed, the
alleged defects.‖ This specific allegation, if true, may inform whether defendants‘
conduct was the proximate cause of plaintiff‘s injury. (See, e.g., Gonzalez v.
Derrington (1961) 56 Cal. 2d 130, 134 [―independent, intervening cause‖ may
preclude finding of proximate cause]; 6 Witkin, Summary of Cal. Law, Torts (10th
ed. 2005) § 1214, pp. 590–591.) It also may give rise to a claim of equitable
indemnity by defendants against the developer. (See Evangelatos v. Superior
Court (1988) 44 Cal. 3d 1188, 1197–1198; Greystone, supra, 168 Cal.App.4th at
p. 1208.) There is no reason to think in this case or in general that the developer
and other major players have ―left the scene‖ via bankruptcy, as is often the case
with auditor liability suits. (Bily, supra, 3 Cal.4th at p. 400.) But because the
developer‘s alleged misdeeds are themselves derivative of defendants‘ allegedly
negligent conduct, they do not diminish the closeness of the connection between
defendants‘ conduct and plaintiff‘s injury for purposes of determining the
existence of a duty of care.
                                          2.
       Second, recognizing that an architect who is a principal provider of
professional design services on a residential building project owes a duty of care
to future homeowners does not raise the prospect of ― ‗liability in an indeterminate
amount for an indeterminate time to an indeterminate class.‘ ‖ (Bily, supra, 3
Cal.4th at p. 385, quoting Ultramares Corp. v. Touche (N.Y. 1931) 174 N.E. 441,
444.) As the complaint here alleges, defendants engaged in work on the Project
with the knowledge that the finished construction would be sold as condominiums

                                         19
and used as residences. There was no uncertainty, as there was in Bily, as to ―the
existence, let alone the nature or scope, of the third party transaction that resulted
in the claim.‖ (Bily, supra, 3 Cal.4th at p. 400.) Defendants‘ work on the Project
―was intended to affect the plaintiff,‖ and ―the ‗end and aim‘ of the transaction
was to provide‖ safe and habitable residences for future homeowners, a specific,
foreseeable, and well-defined class. (Biakanja, supra, 49 Cal.2d at p. 650.) There
is no ―spectre of vast numbers of suits and limitless financial exposure‖ in this
case. (Bily, at p. 400.) Instead, defendants ―clearly intended to undertake the
responsibility of influencing particular business transactions [i.e., condominium
purchases] involving third persons [i.e., prospective homeowners]‖ (id. at p. 408)
and could therefore ―ascertain the potential scope of its liability and make rational
decisions regarding the undertaking‖ (id. at p. 409). Further, as noted, defendants
can limit their liability in proportion to fault through an action for equitable
indemnification.
       Defendants point to a provision in the contract with the developer that
expressly disclaims the existence of any ―third-party beneficiary of the obligations
contained in the Agreement.‖ But we have never held that third party beneficiary
status is a prerequisite to alleging negligence. In Bily, we noted only that third
party beneficiaries ―may under appropriate circumstances possess the rights of
parties to the contract‖ (Bily, supra, 3 Cal.4th at p. 406, fn. 16), not that the lack of
such status precludes liability in tort. If anything, the contract provision on which
defendants rely ―only serves to emphasize the fact that [defendants] were more
than well aware that future homeowners would necessarily be affected by the work
that they performed,‖ as the Court of Appeal observed.
                                           3.
       Third, the prospect of private ordering as an alternative to negligence
liability is far less compelling here than in Bily. Whereas ―[i]nvestors, creditors,

                                           20
and others who read and rely on audit reports and financial statements are not the
equivalent of ordinary consumers‖ because ―they often possess considerable
sophistication in analyzing financial information and are aware from training and
experience of the limits of an audit report ‗product,‘ ‖ the average homebuyer is
more akin to ―the ‗presumptively powerless consumer‘ in product liability cases.‖
(Bily, supra, 3 Cal.4th at p. 403.) The typical homebuyer ― ‗clearly relies on the
skill of the developer and on its implied representation that the house will be
erected in reasonably workmanlike manner and will be reasonably fit for
habitation. He has no architect or other professional adviser of his own, he has no
real competency to inspect on his own, his actual examination is, in the nature of
things, largely superficial, and his opportunity for obtaining meaningful protective
changes in the conveyancing documents prepared by the builder vendor is
negligible.‘ ‖ (Kriegler v. Eichler Homes, Inc. (1969) 269 Cal. App. 2d 224, 228
(Kriegler).) As Chief Justice Traynor said for the court in Connor v. Great
Western Savings & Loan Assn. (1968) 69 Cal. 2d 850, ―the usual buyer of a home
is ill-equipped with experience or financial means to discern . . . structural defects.
[Citation.] Moreover a home is not only a major investment for the usual buyer
but also the only shelter he has. Hence it becomes doubly important to protect him
against structural defects that could prove beyond his capacity to remedy.‖ (Id. at
p. 867.)
       Defendants contend that plaintiff has options for redress within the bounds
of privity: Plaintiff may seek an assignment of the developer‘s rights against
defendants, or plaintiff may pursue its design defect claims against the developer,
and the developer may in turn seek redress from defendants. But it is questionable
whether this more attenuated form of liability will consistently provide adequate
redress. More importantly, the chief interest of prospective homeowners is to
avoid purchasing a defective home, not only to have adequate redress after the

                                          21
fact. The long-established common law rule holding architects as independent
professionals directly accountable to third party homeowners is most likely to
vindicate that interest.
       Moreover, as we recognized in Bily, the sophisticated consumer of audit
reports ―might expend its own resources to verify the client‘s financial statements
or selected portions of them that were particularly material to its transaction with
the client. Or it might commission its own audit or investigation, thus establishing
privity between itself and an auditor or investigator to whom it could look for
protection.‖ (Bily, supra, 3 Cal.4th at p. 403.) But it is unrealistic to expect
homebuyers to take comparable measures. A liability rule that places the onus on
homebuyers to employ their own architects to fully investigate the structure and
design of each home they might be interested in purchasing does not seem more
efficient than a rule that makes the architects who designed the homes directly
responsible to homebuyers for exercising due care in the first place. This seems
especially true in ―today‘s society‖ given the ―mass production and sale of homes‖
(Kriegler, supra, 269 Cal.App.2d at p. 227), such as the 595-unit condominium
project in this case.
                                          4.
       For the reasons above, we conclude that the allegations in the complaint are
sufficient, if proven, to establish that defendants owed a duty of care to the
homeowners who constitute the Association. Our conclusion, which coheres with
a substantial body of case law (ante, at pp. 5–10), may be summarized in terms of
the Biakanja factors: (1) Defendants‘ work was intended to benefit the
homeowners living in the residential units that defendants designed and helped to
construct. (2) It was foreseeable that these homeowners would be among the
limited class of persons harmed by the negligently designed units. (3) Plaintiff‘s
members have suffered injury; the design defects have made their homes unsafe

                                          22
and uninhabitable during certain periods. (4) In light of the nature and extent of
defendants‘ role as the sole architects on the Project, there is a close connection
between defendants‘ conduct and the injury suffered. (5) Because of defendants‘
unique and well-compensated role in the Project as well as their awareness that
future homeowners would rely on their specialized expertise in designing safe and
habitable homes, significant moral blame attaches to defendants‘ conduct. (6) The
policy of preventing future harm to homeowners reliant on architects‘ specialized
skills supports recognition of a duty of care. Options for private ordering are often
unrealistic for typical homeowners, and no reason appears to favor homeowners as
opposed to architects as efficient distributors of loss resulting from negligent
design.
       Defendants contend that the balance of Biakanja factors is no different in
this case than in Weseloh, supra, 125 Cal. App. 4th 152, where the court found no
duty of care owed by a design engineer to the third party owner of commercial
property. But the defendants in Weseloh played a materially different role in the
construction project than defendants did here.
       In Weseloh, a property owner (Weseloh) contracted with a general
contractor (Wessel) to build an automobile dealership on the property. A
subcontractor, Sierra Pacific Earth Retention Corporation (Sierra), built the
retaining walls for the project. Sierra, in turn, enlisted Charles Randle, an
employee of Owen Engineering Company (Owen), to design two retaining walls
for a fee of $1,500 or $2,200. Neither Randle nor Owen had a contractual
relationship with Weseloh, and neither supervised the construction of the retaining
walls. At Sierra‘s request, Randle and Owen inspected the retaining walls after
construction. When a portion of the retaining walls failed, resulting in $6 million
of property damage, Weseloh sued Wessel, Sierra, and Randle and Owen.
Weseloh entered into a settlement agreement with Wessel and Sierra, but the suits

                                          23
against Randle and Owen went forward. On summary judgment, the trial court
concluded that Randle and Owen owed no duty to Weseloh, and the Court of
Appeal affirmed. (See Weseloh, supra, 125 Cal.App.4th at pp. 158–162.)
       As suggested by the size of their fee, the defendants in Weseloh had a
limited role in the construction project. The ―undisputed evidence‖ showed that
―neither Randle nor Owen had a ‗role in the construction‘ of the retaining walls.‖
(Weseloh, supra, 125 Cal.App.4th at p. 164.) In addition, although ―Randle was
aware the property was owned by Weseloh,‖ the Court of Appeal found it
significant that Randle and Owen provided their services to Sierra, another
engineering firm. As the court observed, ―the earth retention calculations prepared
for Wessel . . . identified the preparer as [Sierra], not Randle or Owen. This
evidence bolsters the position that Randle and Owen‘s role in the project was to
primarily benefit Sierra as the preparer of the calculations. To the extent Randle
and Owen‘s participation in the project would also benefit Wessel and the
Weseloh plaintiffs, it was only through Sierra.‖ (Id. at p. 167; see id. at p. 171,
fn. 5 [noting that Sierra paid $1.2 million of the alleged $6 million liability under
the settlement agreement].)
       The circumstances in this case are plainly different. Unlike Randle and
Owen, whose work informed their client‘s own exercise of technical expertise in
preparing earth retention calculations, defendants here were the sole entities
providing architectural services to the Project. They did not provide their
specialized services to a client or other entity that in turn applied its own
architectural expertise to the plans and specifications supplied by defendants.
Moreover, defendants not only applied their expertise to designing the Project but
further applied their expertise to ensure that construction would conform to
approved designs. Weseloh, which expressly limited its holding to its facts
(Weseloh, supra, 125 Cal.App.4th at p. 173), does not stand for the broad

                                          24
proposition that a design professional cannot be liable in negligence to third
parties so long as it renders ―professional advice and opinion‖ (id. at p. 169)
without having ultimate decisionmaking authority. Instead, Weseloh merely
suggests that an architect‘s role in a project can be so minor and so subordinate to
the role or judgment of other design professionals as to foreclose the architect‘s
liability in negligence to third parties.
       Moreover, the Weseloh court, reviewing the case at the summary judgment
stage, concluded that the plaintiffs had ―failed to produce evidence showing how
and the extent to which their damages were caused by the asserted design defects.‖
(Weseloh, supra, 125 Cal.App.4th at p. 168.) The court also noted the absence of
evidence that ―Sierra actually used Randle and Owen‘s design without alteration
in constructing the retaining walls.‖ (Ibid.) These observations regarding lack of
causation not only informed Weseloh‘s duty analysis (see id. at pp. 168–169) but
also provided an independent basis for granting summary judgment in the
defendants‘ favor. In the present case, which is before us on demurrer, no similar
causation problem confronts us. According to the complaint, defendants approved
the use of defective windows and designed a defective ventilation system, all of
which created conditions that made the homes uninhabitable for portions of the
year. The complaint sufficiently alleges the causal link between defendants‘
negligence and plaintiff‘s injury that was lacking in Weseloh.
                                            IV.
       For the reasons above, we conclude that the trial court erred in sustaining
defendants‘ demurrer on the ground that they owed no duty of care to the

                                            25
Association‘s members. Because the Court of Appeal correctly reversed the trial
court‘s judgment, we affirm the Court of Appeal‘s judgment.

                                                LIU, J.

WE CONCUR: CANTIL-SAKAUYE, C. J.
           BAXTER, J.
           WERDEGAR, J.
           CHIN, J.
           CORRIGAN, J.
           RICHMAN, J.*

*      Associate Justice, Court of Appeal, First Appellate District, Division Two,
assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.

                                        26
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 211 Cal. App. 4th 1301
Rehearing Granted

__________________________________________________________________________________

Opinion No. S208173
Date Filed: July 3, 2014
__________________________________________________________________________________

Court: Superior
County: San Francisco
Judge: Richard A. Kramer

__________________________________________________________________________________

Counsel:

Law Offices of Ann Rankin, Ann Rankin, Terry L. Wilkens; Katzoff & Riggs, Kenneth S. Katzoff, Robert
R. Riggs, Sung E. Shim and Stephen G. Preonas for Plaintiff and Appellant.

Berding & Weil and Matt J. Malone for Consumer Attorneys of California and Executive Council of
Homeowners as Amici Curiae on behalf of Plaintiff and Appellant.

Horvitz & Levy, Peder K. Batalden and Peter Abrahams for Defendants and Respondents Skidmore,
Owings & Merrill LLP, and HKS, Inc.

Robles, Castles & Meredith and Richard C. Young for Defendant and Respondent Skidmore, Owings &
Merrill LLP.

Schwartz & Janzen, Noel E. Macaulay and Steven H. Schwartz for Defendant and Respondent HKS, Inc.

Fred J. Hiestand for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants
and Respondents.

Shannon B. Jones Law Group, Kathleen F. Carpenter, Jessica M. Takano and Amy R. Gowan for
California Building Industry Association as Amicus Curiae on behalf of Defendants and Respondents.

Collins Collins Muir + Stewart, David E. Barker and Melinda W. Ebelhar for The American Institute of
Architects California Council and The American Institute of Architects as Amici Curiae on behalf of
Defendants and Respondents.
Counsel who argued in Supreme Court (not intended for publication with opinion):

Robert R. Riggs
Katzoff & Riggs
1500 Park Avenue, Suite 300
Emeryville, CA 94608
(510) 597-1990

Peter Abrahams
Horvitz & Levy
15760 Ventura Boulevard, 18th Floor
Encino, CA 91436-3000
(818) 995-0800