Court Opinion

ID: 5159157
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:31:35.178147+00
Date Added: 2024-06-11T08:25:27.086210
License: Public Domain

ROVIRA, Justice,
dissenting:
I respectfully dissent.
The majority holds that subsequent purchasers may bring an action in negligence against a builder to recover for economic loss due to latent structural defects in the house, despite the absence of privity of contract between the subsequent purchaser and the builder. It points out that privity of contract is no longer the controlling consideration determining the viability of negligence claims. Although agreeing with this contention, I do not find it controlling here. It is true that in modern negligence theory foreseeability, and not privity, determines the scope of the duty owed by the tortfeasor. The question of the scope of the duty, however, deals with who may sue for the breach of a duty. The majority errs in failing to distinguish between the question of to whom the duty is owed and the question of what duty is owed.
In DeCaire v. Public Service Co., 173 Colo. 402, 479 P.2d 964 (1971), we held that a subsequent purchaser of a house could sue Public Service Company (PSC) for personal injuries and death resulting from its negligent inspection of a furnace that took place while the house was owned by the previous owner. The trial court had set aside a jury verdict on the ground that PSC had no duty to the plaintiffs because there was no privity of contract between the plaintiffs and PSC, since the contractual relationship was between PSC and the previous owners. We stated:
“No good reason appears to limit the liability, under the circumstances here, to the parties who requested the inspection. It was foreseeable in this age of shifting *1047populations that someone other than the [original purchasers] might be occupying the premises in the future. The unsafe condition remained after the [original purchasers] moved.”
173 Colo, at 407-08, 479 P.2d at 966.
Recovery was allowed under a similar theory in Wright v. Creative Corp., 30 Colo.App. 575, 498 P.2d 1179 (1972). In Wright, the plaintiffs, who were the second owners of a house, sought recovery for injuries to their child sustained when he ran into an unmarked sliding glass door. The court of appeals held that “where the completed work is reasonably certain to endanger third persons if negligently constructed, a contractor or builder ... is liable for injuries or death of third persons. ... ” 30 Colo.App. at 580, 498 P.2d at 1181-82.
The reason that recovery was allowed in these two cases was that under general rules of negligence a person has a duty not to act so as to harm the person or property of another. Privity in these cases was not determinative, because the duty breached did not arise out of the contract. The defendants would have been liable irrespective of the existence of any contract.
The reliance of the majority on Lembke Plumbing & Heating v. Hayutin, 148 Colo. 334, 366 P.2d 673 (1961), and Metropolitan Gas Repair Service, Inc. v. Kulik, 621 P.2d 313 (Colo.1980), is misplaced. The principle for which they are cited — “that a negligence claim, not limited by privity of contract, may lie against a contractor” — is not disputed.1 The question is under what circumstances such an action will lie. Lembke involved two acts of alleged negligence. The first was the negligent installation of plumbing that ruptured, which allowed water to saturate the clay formation beneath the house, in turn causing extensive structural damage. The second was the negligent conduct of one of Lembke’s employees, who, in making repairs to the heaters, stepped on a copper gauge tube and flattened it. Water subsequently leaked out and accumulated to a depth of several feet. Metropolitan involved the negligent servicing of a heating system, which resulted in the explosion of a boiler and extensive damage to the house and personal property contained therein. Both of these cases involved damage in excess of mere commercial disappointment.
The majority holds that extension of the above cases to this case is appropriate under the doctrine of foreseeability. What they are really holding, however, is that a new legal duty exists based upon the builder’s contractual undertaking to build a house. That there is no such legal duty is apparent from a comparison of the concepts of contractual duty and tort duty. Prosser describes the difference between the two as follows:
“The fundamental difference between tort and contract lies in the nature of the interests protected. Tort actions are created to protect the interest in freedom from various kinds of harm. The duties of conduct which give rise to them are imposed by the law, and are based primarily upon social policy, and not necessarily upon the will or intention of the parties. They may be owed to all those within the range of harm, or to some considerable class of people. Contract actions are created to protect the interest in having promises performed. Contract obligations are imposed because of conduct of the parties manifesting consent, and are owed only to the specific individuals named in the contract.”
W. Prosser, Handbook of the Law of Torts § 92 at 613. We recognized this distinction in Duncan v. Schuster-Graham Homes, supra, where we held that an action to recover for structural deficiencies was contractual in nature and thus not governed by the tort statute of limitations.2
*1048A recent case decided by the Supreme Court of Illinois clearly demonstrates the error of extending the concept of negligence to the kind of situation before us. Redarowicz v. Ohlendorf, 92 Ill.2d 171, 441 N.E.2d 324, 65 Ill.Dec. 411 (1982). The Illinois court denied recovery in negligence to the subsequent purchaser of an allegedly defective house, stating: “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.” 65 Ill.Dec. at 414, 441 N.E.2d at 327. Instead, it is a contractual interest that is sought to be protected, and contract principles should govern.3
Similarly, in Crowder v. Vandendeale, 564 S.W.2d 879 (Mo.1978), the Supreme Court of Missouri held that a tort action was an inappropriate vehicle for recovery for structural defects in a house. The court stated:
“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 (emphasis in original).
In addition to stating the reasons why allowing a negligence action is incorrect in principle, the court in Crowder also noted why such a course would be unsound as a matter of policy. First, in a tort action there would be no requirement that defects be latent, except insofar as the traditional negligence defenses of assumption of risk and contributory negligence require it. Second, where a tort duty runs directly from the builder to the subsequent purchaser, the builder would have no opportunity to disclaim or otherwise allocate the economic risk with the purchaser, because there would be no contractual relationship between them.4
There seems to be no sound policy reason to put such limitations on the parties’ ability to allocate risk. An original purchaser may be willing to accept the tradeoff of a poorer quality house for a lower purchase price. It is a questionable policy that would allow the specter of a claim by a subsequent purchaser to prevent that choice.
Cases from other jurisdictions that have held that subsequent purchasers have a cause of action in negligence for defects in construction have used the same faulty reasoning adopted by the majority. For the most part, the duty is assumed and the question is then one of foreseeability only. See, e.g., Coburn v. Lenox Homes, Inc., 173 Conn. 567, 378 A.2d 599 (1977); Terlinde v. Neely, 275 S.C. 395, 271 S.E.2d 768 (1980); Brown v. Fowler, 279 N.W.2d 907 (S.D.1979); Moxley v. Laramie Builders, Inc., *1049600 P.2d 733 (Wyo.1979). It is clear that a subsequent purchaser is foreseeable, but foreseeability alone does not create the duty. Any number of business transactions may cause an economic loss to foreseeable persons. The right of such persons to recover in tort, however, is dependent upon something in addition to foreseeability— breach of a legal duty.
The majority here, as have other courts, emphasizes the seemingly arbitrary distinction between economic loss and loss from personal injury or property damage. Thus, in Barnes v. Mac Brown & Co., 264 Ind. 227, 342 N.E.2d 619 (1976), the Supreme Court of Indiana stated:
“The contention that a distinction should be drawn between mere ‘economic loss’ and personal injury is without merit. Why there should be a difference between an economic loss resulting from [defects in] property and an economic loss resulting from personal injury has not been revealed to us. When one is personally injured from a defect, he recovers mainly for his economic loss. Similarly, if a wife loses a husband because of injury resulting from a defect in construction, the measure of damages is totally economic loss. We fail to see any rational reason for such a distinction.”
342 N.E.2d at 621. Although having a superficial appeal, the Indiana court’s reasoning is flawed, because it confuses the measure of damages with duty. The reason for allowing tort recovery for personal injuries, but not allowing recovery for economic loss, is that in the former case a tort duty — a duty imposed by law — has been violated, while in the latter case it has not.
A contractual duty arises out of the agreement between the builder-vendor and the first purchaser. We have held that implied in that contract is a warranty of habitability. Capenter v. Donohoe, supra. Does the. builder-vendor have any duties outside the contract? It is clear that he has a duty not to build the house in such a way as to cause injury to the person or property of others. Wright v. Creative Corp., supra. This duty arises by law and not out of the contract. The existence of a contract is irrelevant to the existence of this duty, which would be owed equally by a builder who built for himself and used the house as his own residence. Does a builder have a duty to ensure that his own house is habitable? I think not, at least not beyond that specified in the building codes. The reason he has no duty to build the house in a workmanlike manner is that there is no contract requiring him to do so. If he later sells the house, he may be liable to the purchaser, see Sloat v. Matheny, supra, but, if so, it is because he breached an implied warranty at the time of sale, not because he breached a duty to the purchaser when he was building the house.
That the duty to build so as not to harm another has a source different from the duty to build in a workmanlike manner is apparent from consideration of two hypothetical situations. Suppose a builder builds a house on a hill to the specifications of the buyer and the builder reasonably should know that the house will slide down the hill into a house below. If the house does slide and the builder is liable for the sliding of the house, it is because he has a legal duty cognizable in tort not to harm the person or property of others.
Suppose, on the other hand, that the buyer tells the builder to build a house on a six-inch concrete foundation and the builder tells the buyer that the foundation must be twelve inches in order to be sound. Further, suppose that the buyer tells the builder to go ahead with the six-inch foundation and the house ultimately suffers severe structural damage because of the inadequate foundation. One would think the builder not liable to the buyer on one of two theories.5 Either he was not negligent, i.e., he breached no legal duty, or he was negligent but may avail himself of the affirmative defenses of contributory negligence and assumption of risk. If the latter theory is adopted, the builder may be in an awk*1050ward position with respect to subsequent purchasers. If the builder has actually breached a legal, as opposed to contractual, duty to all foreseeable purchasers — that is, both first and subsequent purchasers — the fact that he built to the specifications of the first purchaser may not be relevant to the question of liability to subsequent purchasers, because the contributory negligence of the first purchaser may not be imputed to subsequent purchasers.
The principle expressed by the majority is a very broad one. It is that the breach of a duty arising solely out of a contract is also a breach of a tort duty, that is, that commercial expectations are protected by tort law. This is not the same as the principle that the breach of a duty arising as a matter of fact from a contractual relationship may be both a breach of contract and a tort. For example, a physician guilty of malpractice may also be guilty of a breach of contract. Although the same conduct may give rise to both claims for relief, the duties are separate. Even in the absence of a contract, careless treatment may give rise to a negligence action. Conversely, even in the absence of negligence, the doctor’s treatment may give rise to a breach of contract action, as where the doctor expressly warrants the results of a given treatment. Thus, one cause of action may exist in the absence of the other.
The same is true in the case of a home-builder. A builder may expressly or implicitly warrant the quality of the house. Failure to perform to standards may give rise to an action sounding in contract or warranty; negligence is not required. On the other hand, a builder may negligently build a house that explodes, causing personal injury to others; regardless of the terms of the contract or the existence of disclaimers of warranty, the builder is liable for injury. This is so whether the person injured bought the house from the builder, or whether the house had not yet been sold, or whether the builder was living in the house himself.
There is no logical limit to the principle adopted by the majority. If the duty to be obeyed is defined by the contract, it would seem to follow that every breach of contract is cognizable in tort. But see Metropolitan Gas Repair Service, Inc. v. Kulik, supra, (“The contractual obligation is not the touchstone of civil liability in tort.”). There is no principled way for this court— or any court — to limit the reasoning to the case of homebuilders; it can do so only by judicial fiat. While such line-drawing is appropriate for a legislative body — indeed that is its primary function — it is singularly inappropriate for a judicial body.
The effect of the majority opinion is to blur the distinction between tort and contract. The duties imposed by the two doctrines are different and arise out of different policy considerations. They should be kept conceptually distinct.
The majority limits its holding to latent defects, which it defines as “those manifesting themselves after purchase and which are not discoverable through reasonable inspection.” At 1045 (quoting Note, Builders’ Liability for Latent Defects in Used Homes, 32 Stan.L.Rev. 607 (1980)). It does not reveal the principle of negligence law from which it divines this limitation. Any limitation to latent defects or to houses can be made only by the sheerest form of ipse dixit.
Combined with its equation of personal injury and economic loss, at 1044 n. 5, the majority’s limitation of recovery to defects not reasonably discoverable leads inexorably to the conclusion that a claim for personal injuries resulting from the negligent construction of a house is barred if the defects could have been discovered through a reasonable inspection. This conclusion may be avoided only through enunciation of the “principle” that personal injury and economic loss are to be treated the same if a plaintiff is thereby allowed to recover for economic loss, but they are to be treated differently if necessary to allow a plaintiff to recover for personal injuries. Such a rule goes far toward creating remedies for plaintiffs, but does little to ensure that the same principles of law apply to everyone.
*1051We would do well to consider the reflections of Benjamin Cardozo in a chapter aptly entitled “The Method of Sociology. The Judge as a Legislator”:
“Our jurisprudence has held fast to Kant’s categorical imperative, ‘Act on a maxim which thou canst will to be law universal.’ It has refused to sacrifice the larger and more inclusive good to the narrower and smaller. A contract is made. Performance is burdensome and perhaps oppressive. If we were to consider only the individual instance, we might be ready to release the promisor. We look beyond the particular to the universal, and shape our judgment in obedience to the fundamental interest of society that contracts shall be fulfilled. There is a wide gap between the use of the individual sentiment of justice as a substitute for law, and its use as one of the tests and touchstones in construing or extending law.... The judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated «principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to ‘the primordial necessity of order in the social life.’ Wide enough in all conscience is the field of discretion that remains.”
B. Cardozo, The Nature of the Judicial Process 139-41 (1921). We ought not distort the principles of tort law merely to generate desired results.
I have no quarrel with the sentiments that lead the majority to its conclusions. There may be sound public policy reasons for a rule holding builders liable to subsequent purchasers. We must not, however, be carried into areas beyond our institutional competence by the talisman of “public policy.” There are two questions that should be answered before making any decision. First, who should make the decision? Second; what is the best decision? We should not jump over the first question in our haste to answer the second.
Much more than in the question of whether there should be an implied warranty running from builder-vendor to first purchaser, the question of tort liability to subsequent purchasers presents a host of competing considerations that are better left to the legislative process. The legislature has the resources and the appropriate mechanisms to ascertain the public will, to investigate the alternatives available, to consider the disparate views of the community, that would be affected, and to balance the impact of imposition of such liability. It may create such liability; there is no compelling reason for us to do so. See, e.g., Uniform Land Transactions Act §§ 2-311, 2-312, 13 U.L.A. 131-35 (1980 Pamphlet) (exclusion, modification, and assignments of warranties).
I would hold that a subsequent purchaser of a house does not have a claim for relief in negligence against a builder for structural defects, and I would reverse the judgment of the court of appeals.

. In point of fact, however, there was privity of contract present in both Lembke and Metropolitan.

. Although factually the case of Tamblyn v. Mickey and Fox, Inc., 195 Colo. 354, 578 P.2d 641 (1978), upon which the majority relies, is similar to the case before us, it is not control*1048ling, because the question of the propriety of a negligence action was not addressed or decided. The only question was which statute of limitations applied in an action against an engineer.

. The Illinois court did decide that the implied warranty of habitability extends to subsequent purchasers. The dissent pointed out, however, that implied warranty without a privity requirement is essentially strict liability in tort and that the court had recently held that recovery for economic loss was not available under strict tort liability.

. The majority appears to believe that Crowder and Redarowicz result from the peculiar case law in their respective jurisdictions, preventing recovery for “economic loss,” and states that “Colorado precedent is not so limited.” The Colorado “precedents” cited are Tamblyn and Lembke. However, the former case did not address the issue, while the latter was a case involving “property damage” in its ordinarily understood sense.

. Yet, the majority holds that “[a]n obligation to act without negligence in the construction of a home is independent of contractual obligations ... . ”