Blahd v. Richard B. Smith, Inc.

• Decision Date: 04 March 2005
• Docket Number: No. 29709.,29709.
• Citation: 141 Idaho 296,108 P.3d 996
• Court: Idaho Supreme Court
• Parties: William BLAHD and Elizabeth Blahd, husband and wife, Plaintiffs-Appellants, v. RICHARD B. SMITH, INC., an Idaho Corporation, now doing business as Windermere Real Estate; Richard B. Smith, d/b/a The Windemere Company; Franklin B. Smith, Jr., Georgene M. Smith, Orin R. Givens and Genevieve Givens, d/b/a North Mountain Development Company; Robert P. Jones, d/b/A Robert P. Jones Company; Dean Briggs; Briggs Engineering, Inc., an Idaho corporation, Defendants-Respondents, and Peter Gysling and Kimberly B. Gysling, husband and wife; Craig Groves; Park Pointe Realty, now doing business as John L. Scott Real Estate; John Does 1-10; and Doe Companies 1-10, Defendants, Richard B. Smith, Inc., Windermere Real Estate; Richard B. Smith, The Windermere Company; Franklin B. Smith, Jr. and Georgene M. Smith, and North Mountain Development Company, Cross-Claimants, v. Peter Gysling, Kimberly B. Gysling, Robert P. Jones, Robert P. Jones Company, Craig Groves, Park Pointe Realty, John L. Scott Real Estate, Dean Briggs; Briggs Engineering, Inc., an Idaho Corporation; and John Does 1-10; and Doe Companies 1-10, Cross-Defendants.

108 P.3d 996

141 Idaho 296

William BLAHD and Elizabeth Blahd, husband and wife, Plaintiffs-Appellants, v. RICHARD B. SMITH, INC., an Idaho Corporation, now doing business as Windermere Real Estate; Richard B. Smith, d/b/a The Windemere Company; Franklin B. Smith, Jr., Georgene M. Smith, Orin R. Givens and Genevieve Givens, d/b/a North Mountain Development Company; Robert P. Jones, d/b/A Robert P. Jones Company; Dean Briggs; Briggs Engineering, Inc., an Idaho corporation, Defendants-Respondents, and Peter Gysling and Kimberly B. Gysling, husband and wife; Craig Groves; Park Pointe Realty, now doing business as John L. Scott Real Estate; John Does 1-10; and Doe Companies 1-10, Defendants, Richard B. Smith, Inc., Windermere Real Estate; Richard B. Smith, The Windermere Company; Franklin B. Smith, Jr. and Georgene M. Smith, and North Mountain Development Company, Cross-Claimants, v. Peter Gysling, Kimberly B. Gysling, Robert P. Jones, Robert P. Jones Company, Craig Groves, Park Pointe Realty, John L. Scott Real Estate, Dean Briggs; Briggs Engineering, Inc., an Idaho Corporation; and John Does 1-10; and Doe Companies 1-10, Cross-Defendants.

No. 29709.

Supreme Court of Idaho, Boise, December 2004 Term.

March 4, 2005.

Hawley Troxell Ennis & Hawley, LLP, Boise, for appellants. Joseph D. McCollum Jr. argued.

Brassey Wetherell Crawford & McCurdy, LLP, Boise, for respondents Richard B. Smith, Inc., Richard B. Smith d/b/a The Windemere Company, Franklin B. Smith, Jr., Georgene M. Smith, Orin R. Givens and Genevieve Givens, d/b/a North Mountain Development Company. Andrew C. Brassey argued.

Westberg, McCabe & Collins, Ctd., Boise, for respondents Robert P. Jones and Robert P. Jones Company. William D. Collins argued.

Anderson, Julian & Hull, LLP, Boise, for respondents Dean Briggs and Briggs Engineering, Inc. Robert A. Anderson argued.

TROUT, Justice.

Appellants, William and Elizabeth Blahd (the Blahds), bought a house on a hillside. When it was discovered that the ground underneath the house was settling, causing damage to the house, the Blahds brought suit against several entities, including the developer of the subdivision and two engineering firms. The Blahds appeal the district court's grant of summary judgment to some of the defendants.

I. FACTUAL AND PROCEDURAL BACKGROUND

Originally, North Mountain Development Company owned the undeveloped land where the Blahds' house is presently located. Several parties aided in developing the surrounding area into a subdivision, including: Richard B. Smith, Inc., doing business as Windermere Real Estate; Richard B. Smith, doing business as The Windemere Company; Franklin B. Smith, Jr.; Georgene M. Smith; Orin R. Givens and Genevieve Givens, doing business as North Mountain Development Company; (collectively the Smith Entities). The Smith Entities' development included grading, road construction, landscaping, and installing sewer and other utilities in the subdivision. The Smith Entities hired Robert P. Jones, P.E., doing business as Robert P. Jones Company (Jones), to perform a soil and foundation investigation. In 1988, North Mountain Development Company sold the lot to Peter and Kimberly Gysling (the Gyslings). Prior to constructing the house that is the subject of this lawsuit, the Gyslings hired Jones to examine the soil of their lot to determine if it was suitable for residential construction. Jones told the Gyslings the soil was adequate for residential construction if a few minor recommendations were followed. The Gyslings, acting as the general contractor, then constructed the house.

In January of 1996, the Blahds hired a real estate agent to assist them in acquiring a house in Boise. While touring the Gyslings' house, Mr. Blahd and the real estate agent noticed a crack in a concrete slab in the hallway of the unfinished basement. The crack was approximately 1/2 inch wide and had a vertical offset of 1/4 to 1/2 inch between the edges of the crack. Mrs. Blahd was also aware of this crack. The Blahds' real estate agent requested Dean Briggs, a professional engineer from Briggs Engineering, Inc. (Briggs), to conduct a visual inspection of the crack. Briggs told the Blahds the crack in the basement slab was a shrinkage crack and that the slab appeared to be in a stable condition. Based in part on Briggs' recommendation, the Blahds purchased the house in April 1996. The Blahds moved into the house in July 1996 and began to remodel. Part of this remodel included placing slate tile over the crack in the basement hallway.

In December 1996, the newly laid tile cracked and began breaking up in the same place where the original crack was located. In early 1997, a newly installed door in the basement became difficult to close and additional cracks started to appear around the windows on the main floor. During the spring or summer of 1997, the Blahds believed the western side of their house was sinking and asked an architect to examine their house. The architect told them it looked like the house was sinking and that he did not know whether it was from poor drainage or the land not being properly compacted. In 1999, the Blahds hired Strata, an engineering firm, to inspect their house. Strata concluded the cracks were caused by the settlement of thirty feet of improperly compacted fill dirt that was supporting the house. On September 3, 1999, the Blahds filed a complaint against several parties, including the Smith Entities, Jones and Briggs. The complaint alleged the Smith Entities were negligent in selecting, preparing and selling the building site; Jones was negligent in performing the engineering inspection; and Briggs negligently inspected the house. The Smith Entities and Jones moved for summary judgment on the ground that the Blahds' negligence claims were barred by the economic loss rule. The district court granted both motions. Briggs moved for summary judgment on the ground that the Blahds' negligence claim was time-barred by the statute of limitations. The district court granted Briggs' motion and the Blahds now appeal.

II. STANDARD OF REVIEW

In an appeal from a grant of summary judgment, this Court's standard of review is the same as the district court's standard in ruling upon the motion. Thomson v. Lewiston, 137 Idaho 473, 475-76, 50 P.3d 488, 490-91 (2002). Summary judgment must be granted when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). On review, this Court "liberally construes the record in a light most favorable to the party opposing the motion and draws all reasonable inferences and conclusions in that party's favor." Brooks v. Logan, 130 Idaho 574, 576, 944 P.2d 709, 711 (1997).

III. ANALYSIS

A. The Economic Loss Rule Bars the Blahds' Claims Against the Smith Entities and Jones Economic Loss Rule

Unless an exception applies, the economic loss rule prohibits recovery of purely economic losses in a negligence action because there is no duty to prevent economic loss to another. Duffin v. Idaho Crop Improvement Ass'n., 126 Idaho 1002, 1007, 895 P.2d 1195, 1200 (1995); Tusch Enters. v. Coffin, 113 Idaho 37, 41, 740 P.2d 1022, 1026 (1987); Clark v. International Harvester Co., 99 Idaho 326, 336, 581 P.2d 784, 794 (1978). The rule "applies to negligence cases in general; its application is not restricted to products liability cases." Ramerth v. Hart, 133 Idaho 194, 197, 983 P.2d 848, 851 (1999) (citations omitted). "Economic loss includes costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use." Salmon Rivers Sportsman Camps, Inc., v. Cessna Aircraft Co., 97 Idaho 348, 351, 544 P.2d 306, 309 (1975). On the other hand, "[p]roperty damage encompasses damage to property other than that which is the subject of the transaction." Id. The Blahds argue any damage to the house is property damage and that the subject of the transaction was the improperly filled and compacted lot, not the house that was later constructed on the lot. The Smith Entities and Jones argue the house and lot must be considered an integrated whole and any damage to the house is purely economic loss because both the house and the lot are the subject of the transaction. Prior decisions of this Court are instructive on what the "subject of the transaction" is.

In Tusch Enterprises, a seller hired a contractor to level a hill to prepare the area for construction. The seller participated in the site preparation, hired a builder to construct a duplex on the site and sold the duplex to a buyer. The buyer then discovered the duplex was damaged because the foundation was defective. The buyer sued the seller and the builder alleging negligence in preparing the foundation. This Court held the economic loss rule barred the negligence claims because the damage to the duplex caused by the defective foundation was purely economic. Tusch Enters., 113 Idaho at 41, 740 P.2d at 1026. This Court later explained in another case that it "considered the duplex itself, rather than its construction, to be the subject of the transaction." Ramerth, 133 Idaho at 197, 983 P.2d at 851.

In Ramerth, an airplane owner sued a repairman alleging the repairman's negligent servicing and inspection of the airplane caused damage to the engine and aircraft. The airplane owner argued the economic loss rule did not bar his negligence claim because the subject of the transaction was the repairman's services, not the engine or airplane that was serviced. This Court rejected that argument and held the damage to the engine and the aircraft were purely economic and therefore, subject to the economic loss rule. 133 Idaho at 197, 983 P.2d at 851. These cases indicate the word "transaction," for purposes of the...