Calloway v. City of Reno, 25628.

Citation116 Nev. 250, 993 P.2d 1259
Case DateFebruary 29, 2000
CourtSupreme Court of Nevada

993 P.2d 1259
116 Nev. 250

Charles CALLOWAY and Marlene Iacometti, on behalf of themselves and other property owners of Huffaker Hills Units Homeowners' Association, Appellants,
CITY OF RENO, P & H Construction Inc., Clarence Poehland, John Carl Construction Company, Highland Construction, Inc., and Offenhauser Development Company, Respondents.
City of Reno, Cross-Appellant,
Highland Construction, Inc., Offenhauser and Oetjen Construction, Inc., Offenhauser Development Company, Sparks Roofing and Siding Service, Inc., Charles Calloway and Marlene Iacometti on behalf of themselves and other property owners of Huffaker Hills Units Homeowners' Association, Cross-Respondents

No. 25628.

Supreme Court of Nevada.

February 29, 2000.

993 P.2d 1261
Robert C. Maddox & Associates, Reno, for Appellants/Cross-Respondents Charles Calloway, Marlene Iacometti, and other property owners of Huffaker Hills

Lemons, Grundy & Eisenberg, Reno, for Respondent/Cross-Appellant City of Reno.

Beasley, Holden & Kern, Reno, for Respondents P & H Construction, Inc., Clarence Poehland and John Carl Construction Company.

Erickson, Thorpe & Swainston, Ltd. and Thomas Beko, Reno, for Cross-Respondents Highland Construction, Inc. and Offenhauser and Oetjen Construction, Inc.

Haefner & Enzenberger, Reno, for Cross-Respondent Offenhauser Development Company.

Mortimer, Sourwine, Mousel & Sloane, Ltd., Reno, for Cross-Respondent Sparks Roofing and Siding Service, Inc.

Cecilia L. Rosenauer, Reno, for Amici Curiae Consulting Engineers Council of Nevada and Builders Association of Northern Nevada.



By the Court, YOUNG, J.:

On May 22, 1997, this court issued an opinion in the above-captioned appeal affirming in part, reversing in part and remanding the matter to the district court. Calloway v. City of Reno, 113 Nev. 564, 939 P.2d 1020 (1997). Respondents P & H Construction, Inc. (P & H), Clarence Poehland (Poehland), and John Carl Construction Co. (Carl) (collectively referred to as the subcontractors), petitioned this court for rehearing, and the City of Reno (the City) subsequently joined in the petition. On December 3, 1998, we granted rehearing and withdrew our opinion. We now issue this opinion in place of our prior opinion.

For the reasons set forth below, we conclude that the district court properly applied the economic loss doctrine to preclude appellants' negligence claims against the subcontractors and the City. We further conclude that the economic loss doctrine bars appellants' claim in strict products liability, and that the district court properly determined that the structures at issue in this case are not "products" for purposes of strict products liability. Finally, we conclude that we lack jurisdiction to consider the City's cross-appeal.


This class action arose from alleged defects in the Huffaker Hills Townhouse Development in Reno. Charles Calloway and Marlene Iacometti are class representatives, representing the class of 164 townhouse owners in Huffaker Hills who brought the action (appellants).

In their original complaint, appellants asserted that their homes were built with defective roofing and siding that was responsible

993 P.2d 1262
for extensive water damage from rain and snow. That complaint named Offenhauser Development Company, Highland Construction, Inc. (collectively referred to as the developer and contractor), and Sparks Roofing and Siding Service, Inc. (Sparks Roofing and Siding), all Nevada corporations, as defendants. Pursuant to NRCP 10(a), the complaint also named thirty fictitious individuals or entities as Doe defendants. Appellants sought recovery based upon breach of express and implied warranties, negligence, strict liability, fraud and misrepresentation

Thereafter, appellants amended their complaint four times during the next two years. The first amended complaint omitted appellants' claims for fraud and misrepresentation against the developer and contractor. Appellants' second amended complaint named the City, among others, as a defendant. The claim against the City was based upon negligent inspection of construction. In particular, appellants asserted that the City approved the construction with actual knowledge of the alleged defects. The third amended complaint added Gardner Plumbing and Heating (Gardner), and Cavallero Heating and Air Conditioning, Inc. (Cavallero), as defendants. Additionally, the third amended complaint set forth allegations of construction defects related to roofing, framing, plumbing, and heating and air conditioning.

In the interim, the developer and contractor, pursuant to NRCP 14(a), filed a first amended third party complaint naming P & H and Poehland as third party defendants. Ultimately, all third party claims and/or cross-claims filed by the developer and contractor were dismissed without prejudice pursuant to the stipulation of the parties. Subsequently, appellants moved the district court for an order permitting the amendment of the complaint to name the subcontractors in place of fictitiously named Doe defendants as entities responsible for the framing of the townhouses. The district court granted appellants' motions, and thereafter, appellants filed their fourth, and final, amended complaint adding the subcontractors as defendants. The claims against the subcontractors were based on defective framing. Appellants sought recovery against the subcontractors on theories of breach of express and implied warranties, negligence, and strict liability.

The subcontractors moved the district court for summary judgment on appellants' claims against them. The district court, applying the economic loss doctrine, granted the subcontractors' motion for summary judgment after determining that recovery for pure economic loss was not appropriate in negligence and that plaintiffs had to rely on their contractual remedies to recover for economic losses. Accordingly, the district court limited appellants' claims against the subcontractors and the City to recovery in contract, or for personal injury or harm to property in tort, and concluded that the repairs and replacement costs appellants sought to recover in tort were economic losses not amenable to tort recovery. In addition, the district court summarily dismissed appellants' strict liability claims on the ground that a townhouse is not a product. The district court explained that this court "has not yet pushed Nevada into the fold of those few jurisdictions [that] recognize strict liability for recovery of economic loss" and the district court declined to "lead the way." The district court also summarily dismissed sixty-five members of appellants' class based upon the statutes of repose.

Shortly thereafter, appellants settled their claims against the developer and contractor, and Sparks Roofing and Siding in the amount of $826,500.00. Appellants also settled their claims against Gardner and Cavallero in the amount of $225,000.00. Appellants then voluntarily dismissed their warranty claims and claims for damage to personal property against the subcontractors.

In addition to the claims brought by appellants, the City cross-claimed against the developer and contractor for indemnity and contribution. The developer and contractor moved for summary judgment on the City's cross-claims, and the district court granted the motion.

In this appeal, appellants challenge the district court's use of the economic loss doctrine to preclude their negligence claims

993 P.2d 1263
against the subcontractors and the City. Appellants also take issue with the district court's determination that the doctrine of strict liability does not apply to the townhouses at issue here. Additionally, appellants contend that the district court misinterpreted and improperly applied the statutes of repose retroactively to bar the claims of sixty-five appellants whose homes were substantially completed before October 30, 1981. The City has also filed an appeal and challenges the district court's dismissal of its cross-claim for indemnity and contribution against the developer and contractor


I. Standard of review

Under NRCP 56(c), summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Butler v. Bogdanovich, 101 Nev. 449, 705 P.2d 662 (1985). A summary judgment is reviewed de novo. Dermody v. City of Reno, 113 Nev. 207, 931 P.2d 1354 (1997); see also SIIS v. United Exposition Services Co., 109 Nev. 28, 846 P.2d 294 (1993) (summarizing authority for the conclusion that matters of law are reviewed de novo ). On appeal from a summary judgment, this court may "be required to determine whether the law has been correctly perceived and applied by the district court." Mullis v. Nevada National Bank, 98 Nev. 510, 512, 654 P.2d 533, 535 (1982).

II. Application of the economic loss doctrine

A. Overview of the economic loss doctrine

"The economic loss doctrine marks the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others." Sidney R. Barrett, Jr., Recovery of Economic Loss in Tort for Construction Defects: A Critical Analysis, 40 S.C.L.Rev. 891, 894 (1989) [hereinafter Construction Defects ]. In determining whether a claim sounds in contract or in tort, the pleadings and the alleged facts must be considered.

A breach of contract may be said to be a material failure of performance of a duty arising under or imposed by agreement. A tort, on the other hand, is a violation of a duty imposed by law, a wrong independent of contract. Torts can, of course, be committed by parties to a contract. The question to be determined ... is whether the actions or omissions complained of

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