Court Opinion

ID: 5152727
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:03:59.291823+00
Date Added: 2024-06-11T08:25:09.290017
License: Public Domain

Justice KOURLIS
dissenting.
It is my view that since the economic loss suffered by the Homeowners’ Association here arose out of express or implied contractual duties, the economic loss rule would bar the Association from asserting tort claims against the subcontractors. The majority avoids that conclusion by determining that Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo.1983), set forth an independent duty of a builder to use reasonable care in constructing a home and such duty binds subcontractors as well. I disagree. In my view, Town of Alma deferred to Cosmopolitan Homes by virtue of precedent, and as the majority acknowledges, extension of Cosmopolitan Homes should be measured against the economic loss rule as well as against precepts governing the creation of a new tort. However, I disagree that the application of those precepts yields the result the majority announces. Accordingly, I would reverse the court of appeals and respectfully dissent from the majority opinion.
I. Discussion
What we are dealing with in this case is the assertion by the Homeowners’ Association of tort claims for economic losses arising out of alleged breaches by the subcontractors in the construction of homes in the housing development. The trial court dismissed the claims against the subcontractors by operation of the economic loss rule, concluding that the duties of the subcontractors arose solely out of their contractual relationships with the developer and the general contractor. The court of appeals reinstated the claims, and the majority now affirms that outcome.
The economic loss rule, as adopted by this court, means that “a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.” Maj. op. at 865 (citing1 Town of Alma v. Azco Const., Inc., 10 P.3d 1256, 1264 (Colo.2000)). The rule is an attempt to adhere to the distinctions between contract law and tort law. As we noted in Town of Alma, “[a]s a general rule, no cause of action lies in tort when purely economic damage is caused by negligent breach of a contractual duty. This economic loss rule prevents recovery for negligence when the duty breached is a contractual duty and the harm incurred is the result of failure of the purpose of the contract.” 10 P.3d at 1261, (citing Jardel Enterprises, Inc. v. Triconsultants, Inc., 770 P.2d 1301, 1303 (Colo.App.1988)). We concluded in Town of Alma that the economic loss rule really *871turned on an examination of the source of the duty between the parties: if the source of the duty was contractual, then only contractual remedies applied.
On the other hand, we carved out an exception to the rule contoured to circumstances “where we have recognized the existence of a duty independent of any contractual obligations. ...” Id. at 1263. We reaffirmed the test set out in Taco Bell, Inc. v. Lannon, 744 P.2d 43 (Colo.1987), as a means of determining the existence of such a duty of care independent of a contract. Id. Essentially, we declared in Taco Bell that whether the plaintiffs interest that has been infringed by the defendant deserves protection is dependent on a weighing of several factors. 744 P.2d at 46.
In Toim of Alma, the Town sought damages for the cost of repair and replacement of water lines against Azco, a company hired by the Town to install a water system. We characterized the claim as an economic loss claim. Town of Alma, 10 P.3d at 1264. Then, applying the Taco Bell test to determine whether an independent duty of care would allow the plaintiffs to escape application of the economic loss rule, we concluded there was no such duty and upheld the trial court’s dismissal of the Town’s suit. Id. at 1265. The court should treat the claims here similarly.
A. The pre-Town of Alma trilogy
In Town of Alma, we identified three eases in which we had reached different results under similar circumstances: Lembke Plumbing and Heating v. Hayutin, 148 Colo. 334, 366 P.2d 673 (1961); Metropolitan Gas Repair Serv., Inc. v. Kulik, 621 P.2d 313 (Colo.1980) and Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo.1983). In my view, those cases can be analogized to large, venerable trees allowed to stand in the midst of a new thoroughfare — with the street constructed around them. They represent precedent, and must be honored— however, because they are inconsistent with the development of the law in this court and elsewhere, they must be limited to their facts and very narrowly construed.
Lembke Plumbing involved two negligence claims by homeowners against Lembke Plumbing, a company they had engaged to install plumbing pipelines and repair a heating system. 148 Colo, at 337, 366 P.2d at 675. Lembke’s employees failed to protect the plumbing pipelines during installation, which resulted in a severed pipeline that caused severe flooding. Ultimately, the flooding even dislocated the house from its foundation. Id. In the second negligence suit, while repairing the plaintiffs’ heating system, Lembke’s employees stepped on and damaged a copper gauge tube, causing water to accumulate in a pit casing. Id. The defendant sought to avoid any liability by invoking the parties’ agreement, which imposed no duty on Lembke to exercise due care and caution and the necessary degree of skill involved in a plumbing contract. Id. This court rejected the defendant’s assertions, concluding that there was a common-law obligation to exercise due care under such circumstances. Id.
In Metropolitan Gas, the plaintiff brought a negligence suit against Metropolitan Gas for property damage resulting from an explosion of a gas operated boiler. 621 P.2d at 316. Metropolitan Gas had contracted with the plaintiff to perform repair work on the boiler. Id. The complaint alleged Metropolitan Gas was negligent in failing to discover a plugged or obstructed safety release valve during repair work on various occasions prior to the explosion. Id. We framed the issue as: whether the company’s legal duty to the plaintiffs was restricted to its contractual obligations to install the motor pump and that function alone, or whether it extended to the exercise of reasonable care and skill in performing the job, including a safety inspection of the boiler system. Id. at 317 n. 6. We announced the now familiar precept that “[t]he contractual obligation is not the touchstone of civil liability in tort. It is only the matrix from which an independent tort obligation may arise.” See id. at 317. We made clear that Metropolitan’s service contract did not “transform Metropolitan’s contractual obligation into the measure of its tort liability arising out of its contractual performance.” Id. We applied the “matrix” rule, as in Lemb-*872ke Plumbing, to a case involving physical injury or damage to other property as opposed to pure economic loss. In both cases, the plaintiffs sought damages for injuries that were outside the parameters of the contractual undertaking.
In 1983, this court decided Cosmopolitan Homes. In that case, we extended the principles enunciated in Lembke Plumbing and Metropolitan Gas to builders and contractors. The case would have been resolved differently if the economic loss rule were to have prevailed. To the contrary, we concluded that a builder or contractor should be “held to a standard of reasonable care in the conduct of its duties to the foreseeable users of the property.” Cosmopolitan Homes, 663 P.2d at 1045. In arriving at that conclusion, the court undertook a policy analysis, akin to that later suggested in Taco Bell, and concluded that a builder-vendor is in a better position to identify defects; a buyer analyzes mostly cosmetic features; a home is someone’s biggest investment; homes are likely to be resold a number of times to subsequent purchasers; and a latent defect would harm later purchasers as much as the initial purchaser. See id. The court confined the exception to the narrow context where the purchaser was unaware of latent defects at the time of purchase, reasoning that if a buyer knew of the deficiency, he could negotiate a lower price and should not then be allowed to assert a claim for negligence arising out of that defect. Id.
Even accepting the assumption that Cosmopolitan Homes removed the economic loss doctrine as a bar to negligence actions against builders and contractors, I cannot extend Cosmopolitan Homes to the facts of this case or to subcontractors in general.
B. The CDARA
The majority relies on the Construction Defect Action Reform Act (“CDARA”) for the proposition that “the General Assembly has explicitly recognized that subcontractors are under an independent duty of care.” Maj. op. at 868 (emphasis added). The General Assembly enacted CDARA in 2001,1 and modified it in 2003, (“CDARA II”)2. Relying on section 13-20-804 from CDARA II, the majority concludes, “CDARA restricts negligent construction defect claims to those resulting in ‘actual damage to real or personal property’ or ‘actual loss of the use of real or personal property.’ ”
First and foremost, CDARA and CDARA II post-date the claims in this case. The question, it would seem, is whether there was an independent duty flowing from the subcontractors to the Homeowners’ Association in 1998 when the claims arose — not whether there is such an independent duty now. The views of a subsequent general assembly cannot establish the intent of an earlier general assembly. See State v. Nieto, 993 P.2d 493, 504 n. 6 (Colo.2000); Common Sense Alliance v. Davidson, 995 P.2d 748, 763 (Colo.2000); see also 1A Norman J. Singer, Statutes and Statutory Construction § 22:13 at 295 (Sixth ed. 2002 & Supp.2005) (“Subsequent legislation does not serve retroactively to amend legislation or declare the intent of a prior General Assembly.”).
To the extent that CDARA and CDARA II can be some evidence of the General Assembly’s understanding of whether or not subcontractors owe a duty in tort to residential home purchasers, I would note that the purpose of the legislation was to “decrease construction defect litigation, and reduce the costs of insuring construction professionals.” Ronald M. Sandgrund and Scott F. Sullan, The Construction Defect Action Reform Act of 2008, 32 Colo. Law 7, 89 (2003). For example, CDARA I provided that no negligence claim seeking damages for a construction defect would lie if the claim arose from the failure to construct the property in substantial compliance with an applicable building code or industry standard, unless such failure causes: (1) actual or probable damage to real or personal property; (2) actual or probable loss of the use of real or personal property; (3) bodily injury or wrongful death; or (4) a risk of bodily injury or death to, or threat to the life, health, or safety of, the occupants of the residential *873real property. See § 13-20-804, 5 C.R.S. (2001) (emphasis added). In 2003, the General Assembly amended the section to delete “or probable”, see section 13-20-804(l)(a)~ (d), thereby further limiting the exposure.
The statute cannot be read as creating or acknowledging an independent duty of care on the part of subcontractors. To the contrary, the statute creates a limitation on negligence claims in light of leading decisions handed down in Colorado and California relating to the “economic loss” and “independent duty” doctrines. See Ronald M. Sand-grund & Scott F. Sullan, The Construction Defect Action Reform Act, 30 Colo. Law. 121 (2001). According to Sandgrund and Sullan, the provision arose out of the concern that some multi-family construction defect negligence claims were grounded on what was perceived to be purely “technical” building code violations that gave rise to nothing other than speculative issues of injury, damage, or loss. Id. They cited evidence that expensive litigation was being initiated over mere technical code violations. Id.
In total, the statute cannot bolster the creation of a subcontractor’s broad “independent duty of care.” Rather, the statute is “narrowly focused on claims where the only asserted wrong is the negligent violation of a building code with no actual, probable, or threat of injury or loss.” Colorado Bar Association: Practitioner’s guide to Colorado Construction Law § 14.2.2 (Robert Benson ed., 2003) (hereinafter “CBA Practitioner’s Guide ”). Even if the General Assembly intended to include “subcontractors” within the general ambit of the statute, that conclusion, in my view, would necessarily lead the court to conclude that the General Assembly is interested in limiting the liability of construction professionals — not extending it.3 Accordingly, neither our ease law nor statutory enactments support the existence of an independent duty, and the duty is thus a new one that, measured against the standard we set forth in Taco Bell, cannot be justified.
C. Taco Bell standard applied to subcontractors
In this case, the plaintiff wishes to assert a construction defect action against subcontractors who performed work in the construction of a townhouse development. The parties admit that the damages alleged by the plaintiffs are limited to damage to the specific property the defendants contracted to construct. The general contractor and subcontractors’ agreement contains the subcontractors’ guarantee “to perform the work in an efficient, good and workmanlike manner, according to the highest standards, customs, and practices in the land development industry, to-meet governmental rules, regulations and requirements.” The plaintiff is a third party beneficiary of that contract. See Jardel Enterprises, 770 P.2d at 1304 (the economic loss rule applies whether the plaintiff is a party to the contract or a third-party beneficiary of the contract). Accordingly, the economic loss rule applies: the duty is founded in contract, and the damages are purely economic.
In Taco Bell, we directed that in weighing whether or not to recognize an independent duty of care, the court should evaluate five factors: (1) risk involved; (2) foreseeability; (3) likelihood of injury as weighed against the social utility of the actor’s conduct; (4) the magnitude of the burden of guarding against the injury and (5) the consequences of placing that burden on the defendant. 744 P.2d at 46. Foreseeability is a necessary, but not sufficient, component. See 7 John W. Grund et al., Colorado Practice Series § 10.5 (West 2005) (citing University of Denver v. Whitlock, 744 P.2d 54 (Colo.1987)). In fact, we cautioned in Taco Bell that “no one factor is controlling and whether a duty should be imposed in a particular case is essentially [a question] of fairness under contemporary standards — whether a reasonable person would recognize a duty and agree that it exists.” Id. Recognizing the social utility of imposing such a duty on the builder-vendor, *874as we did in Cosmopolitan Homes, has little bearing on the analysis here. The subcontractor does not negotiate the contract with the purchaser. Instead, the subcontractor is “one who has entered into a contract, expressed or implied, for the performance of an act with the person who has already contracted for its performance.” See CBA Practitioner’s Guide, supra, at § 11.1.1. Thus, the subcontractor is a party awarded a portion of an existing contract by a general contractor. See Black’s Law Dictionary 1437 (Seventh ed.1999). General contractors understand and appreciate the entire project for which they have hired subcontractors. They are in a far better position to assess the various risks posed by the work of subcontractors, especially in circumstances such as presented here, where each subcontractor performed separate portions of the work necessary to complete the construction. The general contractor has a duty of oversight for the whole project and a working familiarity with the plans for the whole project; a subcontractor has no such duty and no such knowledge. The general contractor deals with the prospective purchaser; the subcontractor may not. The general contractor is usually a larger company, with more resources and a more extensive reputation; subcontractors may be small sole proprietors as often as large companies.
The, consequences, of placing on the subcontractor the burden of guarding against risk that already lies with the general contractor is of slight benefit. At minimum, subcontractors will now be forced to second-guess the decisions of a general contractor in an effort to protect against suits for ordinary negligence- — and to insure against those risks.- Such a result certainly does nothing more than increase costs of homebuilding. Most importantly, we are not faced here with a situation such as that in Cosmopolitan Homes where but for the rule we fashioned, subsequent buyers would have no recourse against builder-venders for latent, defects. Here, the plaintiff has already recovered from the general- contractor and the developer. In sum, there is an insufficient basis, under the Taco Bell analysis, to justify the imposition of an independent duty of care running from -the subcontractors to the Homeowners’ Association.
II. Conclusion
Because our cases do not create an exception to the economic loss doctrine on behalf of homebuyers against subcontractors; and because the circumstances do not give rise to the creation of a new independent duty of care by subcontractors, I respectfully disagree with the majority’s assertion to the contrary. I would reverse the court of appeals’ decision and remand with instructions to reinstate the dismissal of the plaintiffs suit.
I am authorized to state that Justice COATS joins in the dissent.

. Ch. 132, sec. 1, § 13-20-804, 2001 Colo. Sess. Laws 388, 389-90.

. Ch. 183, sec. 5, § 13-20-804, 2003 Colo. Sess. Laws. 1361, 1363.