Sandarac Ass'n, Inc. v. W.R. Frizzell Architects, Inc.

• Decision Date: 11 December 1992
• Docket Number: Nos. 91-02254,91-01814,s. 91-02254
• Citation: 609 So.2d 1349
• Parties: 17 Fla. L. Weekly D2790 The SANDARAC ASSOCIATION, INC., a Florida corporation, Appellant, v. W.R. FRIZZELL ARCHITECTS, INC., a Florida corporation; and H.D. Rutledge & Son, Inc., a Florida corporation, Appellees.
• Court: Florida District Court of Appeals

Page 1349

609 So.2d 1349

17 Fla. L. Weekly D2790

The SANDARAC ASSOCIATION, INC., a Florida corporation, Appellant, v. W.R. FRIZZELL ARCHITECTS, INC., a Florida corporation; and H.D. Rutledge & Son, Inc., a Florida corporation, Appellees.

Nos. 91-02254, 91-01814.

District Court of Appeal of Florida Second District.

Dec. 11, 1992.

Wade H. Parsons of Parsons & Associates, Fort Myers, for appellant.

David C. Schwartz of Rumberger, Kirk, Caldwell & Wechsler, P.A., Orlando, for appellee W.R. Frizzell Architects, Inc.; and Mark A. Ebelini of Humphrey & Knott, P.A., Fort Myers, for appellee H.D. Rutledge & Son, Inc.

ALTENBERND, Judge.

The Sandarac Association, Inc. (Sandarac), a condominium association, appeals an order dismissing with prejudice its complaint against the architect and the general contractor who designed and built its condominium. Because the complaint alleges only negligence against these parties and seeks a recovery only for economic losses, we affirm. Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So.2d 899 (Fla.1987); McElvy, Jennewein, Stefany, Howard, Inc. v. Arlington Elec., Inc., 582 So.2d 47 (Fla. 2d DCA), dismissed, 587 So.2d 1327 (Fla.1991); Seawatch at Marathon Condo. Ass'n v. Charley Toppino & Sons, Inc., 610 So.2d 470 (Fla. 3d DCA 1992); Casa Clara Condo. Ass'n v. Charley Toppino & Sons, Inc., 588 So.2d 631 (Fla. 3d DCA 1991), jurisdiction accepted, 602 So.2d 533 (Fla. July 7, 1992); GAF Corp. v. Zack Co., 445 So.2d 350 (Fla. 3d DCA), review denied, 453 So.2d 45 (Fla.1984). But see Latite Roofing Co. v. Urbanek, 528 So.2d 1381 (Fla. 4th DCA 1988) (recovery in negligence available for economic loss if no privity of contract between the parties).

I. THE ALLEGATIONS OF THE AMENDED COMPLAINT

In 1990, Sandarac sued W.R. Frizzell Architects, Inc. (the architects), and H.D. Rutledge & Son, Inc. (the general contractor). The amended complaint states that Sandarac is responsible for maintaining a condominium originally to be known as Estero Towers and subsequently renamed Sandarac I Condominium. This project was commenced in 1974. The amended complaint does not disclose when the project was completed or when it received a certificate of occupancy.

Sandarac alleges that the general contractor committed certain negligent acts during the construction of the building. Specifically, Sandarac claims that the general contractor was negligent because it installed hollow precast lintels above the windows, used inadequate amounts of concrete to cover steel reinforcement on the balcony slabs, and failed to properly anchor masonry walls to the structural steel frame. Although the amended complaint is silent on the subject, we assume that these alleged defects were latent and were recently discovered. The amended complaint alleges that the defects "caused and will continue to cause damage to [Sandarac] by reason of the costs of repair of the common elements."

The allegations against the architect are similar. Sandarac maintains that the architect negligently prepared the plans for the building because it specified a "through the wall flashing" for the masonry walls. This flashing did not allow for the proper anchorage for the wall as required by the applicable building code. Again, this negligence allegedly had and would continue to result in damage only due to the costs of repair.

The trial court dismissed the two defendants in separate orders, and Sandarac did not seek to further amend its complaint. We have consolidated the two appeals.

Sandarac has not sued the developer for breach of contract, and has not sued any party for breach of an express or implied warranty of habitability, fitness or merchantability. See Greenburg v. Johnston, 367 So.2d 229 (Fla. 2d DCA 1979); Sec. 718.203, Fla.Stat. (1991). We assume that the decision not to pursue these claims was made either because the contract and warranties provide no relief at this late date or because the parties with which Sandarac had privity are no longer financially sound. ¹ Moreover, Sandarac has not alleged fraud or any other theory of intentional tort.

II. THE ISSUE

The difficult legal issue in this case is whether a condominium association can sue a general contractor or an architect in negligence to protect its purely economic interests arising out of defects in the common areas of a condominium structure. We recognize that the tension between A.R. Moyer, Inc. v. Graham, 285 So.2d 397 (Fla.1973), and AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So.2d 180 (Fla.1987), has made decisions in this area difficult to reconcile. ² We conclude, however, that the plaintiff has not established a legal justification in this case to authorize a judicial expansion of negligence law to protect these purely economic expectations arising from the relationship between a condominium association and the parties responsible for the construction of the condominium. We have come to this conclusion after a thorough review of Florida Power &amp Light, AFM, and East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). In light of the remedies available to the parties in such a relationship under contract, warranty, and statutory law, these specific circumstances do not warrant the creation of an exception to the traditional common law rule which limits the interests protected by negligence law to interests involving bodily injury and property damage.

As explained in greater detail later in this opinion, the judiciary has cautiously expanded the law of negligence to protect economic expectations only in situations where legal theories based on privity or statutory law have proven inadequate to protect important interests and strong public policies have warranted an expansion of negligence law to resolve problems traditionally protected only by private agreement or statutory regulation. To the extent recent case law suggests that negligence may cover economic interests as a matter of course in the absence of a contract between the parties, we believe those cases have misconstrued dicta in AFM.

III. THE ECONOMIC LOSS RULE

The economic loss rule is stated with ease but applied with great difficulty. The majority rule in this country holds that economic damages are not recoverable in negligence unaccompanied by physical property damage or bodily injury. See R. Dunn, Recovery of Damages for Lost Profits Sec. 3.6 (4th ed. 1992). Florida follows this general rule. Florida Power & Light; AFM. It is obvious, however, that exceptions exist to this rule. First Florida Bank, N.A. v. Max Mitchell & Co., 558 So.2d 9 (Fla.1990); First American Title Ins. Co. v. First Title Serv. Co. of the Florida Keys, 457 So.2d 467 (Fla.1984). Lawyers and judges alike have found it difficult to determine when the rule applies and when an exception is appropriate.

The case law demonstrates this confusion by applying at least three distinct analyses of the rule. The first view recognizes that the economic loss rule is largely a restatement of the traditional common law rule that negligence law is intended primarily to protect interests concerning the safety of one's person and property. The second view sees the economic loss rule as a limitation on recovery in negligence when the parties have elected an alternative remedy under contract law. The third view treats the economic loss rule as a bar to recovery on an otherwise viable cause of action in negligence because the damages are only economic. We conclude that an analysis which emphasizes basic principles of negligence law, under the first view, is more likely to lead to a sound decision. ³ This opinion briefly explains difficulties with the other two viewpoints.

A. The Economic Loss Rule as a Restatement of the Common Law Principle that Negligence Protects Interests in

the Safety of One's Person and Property.

Duty in negligence requires a relationship in which one person is determined to have a responsibility to protect some interest of another person. As explained in section 281 of the Restatement (Second) of Torts, "[t]he actor is liable for an invasion of an interest of another, if: (a) the interest invaded is protected against unintentional invasion...." Whether an interest is protected, under common law tradition, is a matter of law decided by the judiciary when it determines the issue of duty. McCain v. Florida Power Corp., 593 So.2d 500 (Fla.1992).

Historically, the judiciary has limited the protected interests in negligence to interests concerning the safety of one's person and property. A full discussion of the reasons for these limitations is beyond the scope of this opinion. Suffice it to say that these interests are ones that people usually have no opportunity to protect in private contracts. An allocation of these risks to the party who unreasonably causes the damages avoids social conflict and is frequently cost-effective. Through the law of negligence and the reasonable person standard, the judiciary allocates these risks among the members of society because private agreements simply cannot effectively accomplish the task. ⁴ If the judiciary allocates a risk in a manner that is contrary to the view of a majority of citizens, the legislature normally has the power to adjust the allocation. Compare Zorzos v. Rosen, 467 So.2d 305 (Fla.1985) with Sec. 768.0415, Fla.Stat. (1991) (court declines to create child consortium claim in personal injury but legislature creates the claim).

From this perspective, an "exception" to the economic loss rule is actually an expansion of negligence law to protect interests not traditionally protected by negligence law. The exception creates a new relationship of duty and a corresponding standard of care to protect a purely economic interest in the absence of bodily injury or property damage.

There is nothing inherently right or wrong with a judicial decision to expand negligence to protect such a new interest. When...