Council of Co-Owners Atlantis Condominium, Inc. v. Whiting-Turner Contracting Co., CO-OWNERS

• Citation: 308 Md. 18,517 A.2d 336
• Decision Date: 14 November 1986
• Docket Number: CO-OWNERS,WHITING-TURNER,No. 7,7
• Parties: COUNCIL OFATLANTIS CONDOMINIUM, INC. et al. v.CONTRACTING COMPANY et al. Sept. Term 1986.
• Court: Court of Appeals of Maryland

Page 18

308 Md. 18

517 A.2d 336

COUNCIL OF CO-OWNERS ATLANTIS CONDOMINIUM, INC. et al. v. WHITING-TURNER CONTRACTING COMPANY et al.

No. 7 Sept. Term 1986.

Court of Appeals of Maryland.

Nov. 14, 1986.

Kerry A. Greenwald (Kerry A. Greenwald, now West Palm Beach, Fla.) (Marvin P. Sadur and Sadur & Pelland, on the brief), Washington, D.C., for appellants.

John Henry Lewin, Jr. (Kathleen M. McDonald, Geoffrey R. Garinther and Venable, Baetjer & Howard, on the brief), Baltimore, for appellee The Whiting-Turner Contracting Company.

Aaron J. Beyer (Meltzer & Schiffrin, on the brief), Philadelphia, Pa., for appellee Ewing Cole Erdmann Rizzio Cherry Parsky a partnership, Alexander Ewing, Individually and as General Partner and Colonial Mortgage Service Company (James W. Almand and Ayres, Jenkins, Gordy & Almand, on the brief, Ocean City, and Douglas G. Worrall, Christopher J. Heffernan and Smith, Somerville & Case, on the brief), Baltimore, for appellee Meyers & D'Aleo, Inc.

The American Institute of Architects, The Maryland Society of the American Institute of Architects, and The Baltimore Chapter of the American Institute of Architects filed by Geoffrey S. Mitchell, Semmes, Bowen & Semmes, on the brief, Baltimore, for amicus curiae.

Argued Before MURPHY, C.J., and SMITH ^*, ELDRIDGE, COLE, RODOWSKY, COUCH and McAULIFFE, JJ.

McAULIFFE, Judge.

The principal issue presented by this appeal is the extent to which tort liability should be imposed upon builders and architects for damages suffered by parties who enjoy no contractual privity with them. We hold that privity is not an absolute prerequisite to the existence of a tort duty in this type of case, and that the duty of builders and architects to use due care in the design, inspection, and construction of a building extends to those persons foreseeably subjected to the risk of personal injury because of a latent and unreasonably dangerous condition resulting from that negligence. Additionally, we hold that where the dangerous condition is discovered before it results in injury, an action in negligence will lie for the recovery of the reasonable cost of correcting the condition.

I

The Atlantis Condominium is a twenty-one story building containing 198 separate condominium units and located in Ocean City, Maryland. The council of unit owners as the governing regime of the condominium, and three unit owners who sue in their individual capacity and who seek to be certified as representative members of a class, brought an action in tort against the general contractor, developer, and architects involved in the construction of the building, contending that as a result of their negligence the utility shafts and related electrical work were not constructed and installed in accordance with the plans and specifications and did not comply with the requirements of the applicable building code. They allege that these latent conditions create a fire hazard that "presents a threat to the safety and welfare of the owners and occupants of the Atlantis Condominium and to the personal and real property of [the] owners and occupants."

The specific deficiency alleged is the failure to construct ten vertical utility shafts with materials having a fire resistance rating of two hours. Appellants do not allege negligence in the design of the shafts, but rather a failure to construct the shafts in accordance with the design. ¹ They allege negligent construction on the part of Whiting-Turner Contracting Company, the general contractor; negligent inspection, supervision, and acceptance of the work on the part of Meyers & D'Aleo, Inc., the design and supervising architects; and negligent inspection and misrepresentation on the part of Ewing Cole Erdman Rizzio Cherry Parsky, a partnership, and Alexander Ewing, individually, who they allege were the architects employed "to inspect the building and to certify to the Building Inspection Department of Ocean City, Maryland, that the building was constructed pursuant to the approved building permit in accordance with the plans and specifications submitted with the original permit application and that the building was ready for occupancy." Additionally, Appellants allege that Colonial Mortgage Service Company ("Colonial") was a developer of the project and that it knowingly or negligently permitted the shafts to be built at variance with the plans, as well as the requirements of the building code, and negligently obtained an occupancy permit. Appellants also allege that in advertising and selling the units, the developer negligently misrepresented "the building's suitability for occupancy." Appellants seek compensatory and punitive damages from each Appellee.

The builder and the certifying architects filed demurrers, contending that the declaration failed to allege facts sufficient to show a duty owing by them to Appellants. They contended that in the absence of privity no duty could arise. Recognizing, however, that the modern trend was toward the recognition of a duty to third parties under some circumstances, they advanced the alternative argument that a duty should not be recognized in this case because Appellants had suffered only economic loss, and not personal injury or property damage. The developer also demurred asserting as its sole challenge to the sufficiency of the count against it that there was no allegation of personal injury or property damage, and that it "cannot be liable in tort to plaintiffs for purely economic loss." We restrict our consideration of the sufficiency of the pleadings to those grounds specifically set forth in the demurrer and therefore properly before the trial judge. Shoreham v. Randolph Hills, 269 Md. 291, 303, 305 A.2d 465 (1973); Maryland Rule 885.

The trial judge sustained the demurrers without leave to amend, concluding that Maryland law would not recognize a tort duty in the absence of privity under these circumstances, and that in any event a duty would not be recognized where only economic loss was claimed.

Following that ruling, the supervising architect, who had initially filed a demurrer but then withdrew it by filing a general issue plea, filed a motion for summary judgment alleging it owed no duty to Appellants for the reasons relied upon by the trial judge in sustaining the demurrers of the other Appellees. The motion was granted and judgment entered. A timely appeal was taken and we granted certiorari prior to consideration of the case by the Court of Special Appeals.

II

We first consider whether a builder or architect may, under any circumstances, owe a tort duty of reasonable care to a person with whom he has no contractual privity.

In its early development, the law relating to builders and architects generally held that their duty did not extend to those with whom they had no contractual privity. Gradually, however, exceptions to the general rule of nonliability were judicially recognized. Actions in negligence were permitted, for example, where the contractor had practiced fraud or deceit or had deliberately concealed defects in the work; where construction created a condition that was imminently or inherently dangerous; or where the contractor created a nuisance per se. ² Additionally, the rule of nonliability was generally held to apply only where the injury to third persons occurred after acceptance of the work by the owner. Thus, where a duty of due care had been assumed by contract or conduct, recovery by a workman not in privity with the builder was permitted. See, e.g., Krieger v. J.E. Greiner Co., Inc., 282 Md. 50, 382 A.2d 1069 (1978), recognizing that supervising and consulting engineers may owe a tort duty to workmen with whom they have no privity, depending upon the terms of their contracts or their voluntary assumption of duties. See also Cutlip v. Lucky Stores, 22 Md.App. 673, 695, 325 A.2d 432, cert. denied, 273 Md. 719 (1974) recognizing a duty on the part of an architect in favor of a employee of a subcontractor.

As the list of exceptions to the rule of nonliability grew, and as the attack upon the citadel of privity progressed in the area of products liability, courts increasingly turned to a reexamination of the underpinnings and continued viability of the general rule. The authors of a recent text offer the following analysis of the results of that reappraisal:

In 1916 the leading case of MacPherson v. Buick Motor Co. [217 N.Y. 382, 111 N.E. 1050 (1916) ] marked the beginning of the present phase of development. Here at last Judge Cardozo recognized probability of harm as the broad basis of duty in these cases (as it is in negligence law generally). The case itself involved personal injury to a subvendee of an automobile having a latent defect and the actual decision was carefully limited to the facts. But the requirement that defendant know [of] the defect ... [was] satisfied where he simply should have known and "imminently dangerous" was ... rendered in effect "unreasonably dangerous." Limitations still persisted in many states.... The seminal principle continued to grow, however, and today the manufacturer's duty of care with respect to his products extends just about as far as the prudent eye can foresee unreasonable harm. The citadel of "privity" has indeed fallen.

Courts have perhaps been somewhat more reluctant to go so far in the case of other contractors (e.g., in building and construction work). Here the general rule is still often said to be one of nonliability for injuries caused after the owner has accepted the building or other subject of the contract. Some distinctions have been pointed out between the cases. The manufacturer makes standard goods and develops standard processes. Defects are harder to find in the contractor's special jobs. Again, the owner usually gives more thorough inspection to a building or structure than a vendee gives to a chattel. And a longer time may elapse between construction and injury in the contractor's...