Pulte v. Parex

• Decision Date: 24 May 2007
• Docket Number: No. 2122, Sept. Term, 2005.,2122, Sept. Term, 2005.
• Parties: PULTE HOME CORPORATION v. PAREX, INC. et al.
• Court: Court of Special Appeals of Maryland

923 A.2d 971

174 Md. App. 681

PULTE HOME CORPORATION v. PAREX, INC. et al.

No. 2122, Sept. Term, 2005.

Court of Special Appeals of Maryland.

May 24, 2007.

Brian A. Coleman (Michael J. McManus, Jeffrey J. Lopez, Drinker, Biddle & Reath, LLP, on the brief), Washington, DC, for appellant.

Robert L. Ferguson, Jr. (James E. Garland, Ferguson, Schetelich & Ballew, P.A., on the brief), Baltimore, for appellee.

Panel: DAVIS, SALMON, LAWRENCE F. RODOWSKY (retired, specially assigned), JJ.

DAVIS, J.

Pulte Home Corporation (Pulte), the plaintiff below and appellant/cross-appellee on appeal, is a Michigan corporation and a builder of luxury residential homes. Parex, Inc. (Parex), a defendant below and the appellee/cross-appellant in this Court, is incorporated in Georgia and was engaged in the business of manufacturing and selling a synthetic stucco product known as Barrier Exterior Insulation and Finish System, or Barrier EIFS,¹ for home exteriors.

The instant appeal arises from protracted and complex litigation in the Circuit Court for Montgomery County between Pulte, Parex, and several co-defendants/cross-plaintiffs who shall be discussed further herein. The litigation concerned extensive water damage to seventy-seven homes built in Montgomery County, Maryland and Fairfax County, Virginia between 1994 and 1998. Barrier EIFS had been applied to all of the homes.² From a judgment of the circuit court granting Pulte some, but not all, of the damages it sought, Pulte has filed this appeal. Parex has filed a cross-appeal.

FACTUAL AND PROCEDURAL BACKGROUND

As indicated supra, Barrier EIFS is a synthetic stucco material applied to the exteriors of residences and other buildings. Evidence presented at trial established that most residences, including the seventy-seven luxury homes at issue in this appeal, are built with wood studs which form the structure for attaching an exterior covering, such as plywood sheathing or gypsum board, and an interior finish, such as wallboard. The space between the exterior covering and interior finish is generally filled with insulation. A cladding, or additional covering, is attached or applied to the outside of the exterior covering.

There are two primary types of cladding systems. The first type, the cavity system, requires that brick or siding be attached to the exterior covering of the home. There is a cavity, or air space, behind the veneer of the brick or siding, and it is anticipated that some water will get into that cavity. The water will drop down and be forced out of the cladding system through a series of weeps and flashings before it can reach the exterior covering.

The second type of cladding system, used in the seventy-seven homes at issue in this case, is the barrier system. Products such as Barrier EIFS are applied to the outside of the exterior covering with the expectation that no water will ever get behind the cladding. A barrier cladding system requires the installation of a fiberglass mesh against the exterior covering, followed by the attachment of an insulation board. A cement-like mixture is then applied to the insulation board with a trowel. Finally, a fiberglass fabric is embedded into the cement-like mixture.

In order to ensure that water cannot seep behind the barrier cladding, leak-proof flashing, which will immediately repel water to the outside of the cladding system, must be used in places where the cladding adjoins other materials, such as window frames and cornices. Special tapes, caulks, sealants and insulations also must be used in such places to form a bond between the barrier product, the flashing and the other building materials. If water does get behind the cladding system it can cause damage, beginning with the exterior covering and possibly extending to the interior finish.

Pulte alleged that water penetrated and was retained behind the Barrier EIFS cladding on the seventy-seven homes in Montgomery County and Fairfax County, causing rot and other water-related damages. Pulte further alleged that it "expended millions of dollars in repair and replacement costs on these homes, and expects to incur additional such damages in the future." That is, Pulte replaced the Barrier EIFS cladding on the seventy-seven homes with drainable EIFS cladding that was not manufactured by Parex.

A drainable EIFS is, in essence, a hybrid of a cavity system and a barrier system. It integrates a small space behind the outside veneer of the EIFS to allow water to drop down. The system also uses more protective material between the space and the exterior covering.

On June 14, 2001, Pulte, on its own behalf and as the assignee of the individual owners of the seventy-seven homes, filed the complaint in the Circuit Court for Montgomery County that initiated this action. The suit named as defendants: Parex; Barrier EIFS suppliers/distributors American EIFS Stone & Stucco, Inc. (American EIFS) and American Stucco & Stone, Inc. (American Stucco); Barrier EIFS applicators Coronado Corporation (Coronado) and CSS, LLC (CSS), with whom Pulte had contracted to install the Barrier EIFS; and Bernard A. Franks and his son, Benjamin B. Franks, the principals, owners and/or controlling parties of American EIFS, American Stucco, Coronado, and CSS. Pulte mistakenly titled the complaint "Amended Complaint," apparently because it had earlier filed an initial "Complaint" that was dismissed without prejudice for lack of prosecution.

Pulte subsequently filed a "Second Amended Complaint and Jury Demand." Upon Parex's motion to dismiss, the court dismissed with prejudice counts against Parex for breach of express warranties, unfair and deceptive trade practices under Maryland law, violation of the Virginia Consumer Protection Act, common law indemnifications, contribution, and declaratory judgment. Pulte then filed its "Third Amended Complaint and Jury Demand," which we shall at times throughout this opinion refer to as simply "the complaint." It included the following counts:

COUNT ONE — Negligence on the parts of American EIFS, American Stucco, Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT TWO — Breach of contract by Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT THREE — Breach of express warranties by all defendants except Parex.

COUNT FOUR — Breach of implied warranty of merchantability and implied warranty of fitness for a particular purpose by all defendants.

COUNT SIX³ — Negligence and/or strict liability on the part of Parex.

COUNT SEVEN — Negligence and/or strict liability by way of failure to warn on the parts of all defendants.

COUNT EIGHT — Actual fraud on the part of Parex.

COUNT NINE — Negligent misrepresentation on the parts of all defendants.

COUNT TEN — Constructive fraud on the parts of all defendants.

COUNT ELEVEN — Actual fraud on the parts of Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT TWELVE — Negligent misrepresentation on the parts of Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT THIRTEEN — Constructive Fraud on the parts of Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT FOURTEEN — False advertising under Virginia law by Parex, American EIFS, American Stucco, Bernard Franks, and Benjamin Franks.

COUNT FIFTEEN — Contractual indemnification against Coronado, CSS, Bernard Franks, and Benjamin Franks.

COUNT SIXTEEN — Subrogation against all defendants.

American EIFS, American Stucco, Coronado, CSS, Bernard Franks, and Benjamin Franks filed cross-complaints against Parex,⁴ and in some cases against each other. American EIFS made claims against Parex in its cross-complaint for indemnity or contribution based on theories of breach of contract, negligence, and breach of warranty. It also made claims for breach of contract, negligence, and breach of warranty. American Stucco made claims against Parex and CSS for indemnity and contribution based on strict liability, negligence, breach of express and/or implied warranties of fitness and merchantability, and equity.⁵ CSS and Benjamin Franks alleged they were entitled to indemnity or contribution from Parex, American EIFS, and American Stucco based on theories of negligence and breach of express and/or implied warranties of fitness and merchantability. Coronado and Bernard Franks alleged that they were entitled to indemnity or contribution from Parex based on theories of negligence and breach of express and/or implied warranties of fitness and merchantability.

Various motions to dismiss and motions for summary judgment were then filed. The court entered summary judgment on all claims brought by Pulte against American Stucco on the ground that it "did not exist as a properly-formed entity until after the time that the subject Barrier EIFS homes were built."⁶ A hearing was held on the remaining motions and the court issued an order which set forth, in pertinent part, the following:

UPON CONSIDERATION of the several motions of [the defendants and cross-defendants], and argument of counsel, it is, this 23rd day of August 2004, by the Circuit Court for Montgomery County,

ORDERED as follows:

1. Parex's Motion for Summary Judgment as to the Third Amended Complaint be and hereby is GRANTED as to all Counts against Parex except Count XIV (False Advertising Under Virginia Law).

2. As to CSS's and Ben Franks' joinder in Parex's Motion for Summary Judgment, joinder is permitted, and the motion be and hereby is GRANTED as to Counts IV (Breach of Implied Warranties), Count VII (Negligence and/or Strict Liability), and Count XVI (Subrogation) against CSS and Ben Franks, and Count XIV (False Advertising Under Virginia Law).

3. As to American EIFS's Joinder in Parex's Motion for Summary Judgment, joinder is permitted, and the motion be and hereby is GRANTED as to Counts IV (Breach of Implied Warranties), Count VII (Negligence and/or Strict Liability) and Count XVI (Subrogation) against American EIFS, and Count XIV (False Advertising Under Virginia Law).

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