Sensenbrenner v. Rust, Orling & Neale, Architects, Inc.

• Decision Date: 18 November 1988
• Docket Number: No. 880249,880249
• Citation: Sensenbrenner v. Rust, Orling & Neale, Architects, Inc., 374 S.E.2d 55, 236 Va. 419 (1988)
• Parties: F. James SENSENBRENNER, Jr., and Cheryl Warren Sensenbrenner v. RUST, ORLING & NEALE, ARCHITECTS, INC. and KDI Sylvan Pools, Inc. Record
• Court: Virginia Supreme Court

Page 55

374 S.E.2d 55

236 Va. 419

F. James SENSENBRENNER, Jr., and Cheryl Warren Sensenbrenner v. RUST, ORLING & NEALE, ARCHITECTS, INC. and KDI Sylvan Pools, Inc.

Record No. 880249.

Supreme Court of Virginia.

Nov. 18, 1988.

Michael Joseph Gartlan, McLean, for appellants.

Michael McGettigan (David C. Schroeder, Murphy, McGettigan & West, P.C., Alexandria, on brief), for appellees.

Present: CARRICO, C.J., POFF, COMPTON, STEPHENSON, RUSSELL and THOMAS, JJ., and GORDON, Retired Justice.

RUSSELL, Justice.

Pursuant to Rule 5:42, the United States Court of Appeals for the Fourth Circuit, on March 2, 1988, certified to this Court two questions of Virginia law, which we accepted by order entered May 5, 1988. The certified questions were stated as follows:

1. Does Virginia law permit recovery by a home purchaser against the pool installer and the architect for damages to the indoor swimming pool and to the foundation of the house caused by a leaking pool, where the pool installer and the architect were not in privity of contract with the home purchaser, on the basis that the damages were injuries to property and not economic losses?

2. Whether, if the indoor swimming pool and its separate room enclosure were built against the house but outside its foundation, would that fact in any way affect the result?

The facts are stated as set forth in the complaint filed in the federal court and in the certificate. On October 3, 1984, F. James Sensenbrenner, Jr., and Cheryl Warren Sensenbrenner (the plaintiffs) entered into a contract with O'Hara and Company, Inc. (O'Hara) under which O'Hara would construct a new home for the plaintiffs on a lot in the city of Alexandria. The home was to include an enclosed swimming pool. Rust, Orling & Neale, Architects, Inc. (the architect) was to design the home, including the pool and its enclosure. The plaintiffs contracted only with O'Hara, who in turn contracted with the architect.

After the architect had furnished the requisite plans, O'Hara subcontracted the construction of the pool to KDI Sylvan Pools, Inc. (the pool contractor). The work was completed in the summer of 1985 and O'Hara conveyed the property to the plaintiffs at a closing held on August 15, 1985.

Plaintiffs allege that due to negligent design and supervision by the architect and negligent construction work by the pool contractor, the pool, which was built on fill rather than on natural soils, settled, causing water pipes to break; that water effusing from the broken pipes has eroded the soil under the pool and under a part of the foundation of the house next to the pool; and that the bottom of the pool and a part of the foundation of the house have cracked as a result of the erosion.

The plaintiffs filed separate civil actions against the architect and the pool contractor in the United States District Court for the Eastern District of Virginia, based entirely upon theories of negligence. Both defendants moved to dismiss under Fed.R.Civ.P. 12(b)(6) on the ground that the complaints had failed to state claims upon which relief could be granted. The defendants took the position that the plaintiffs claimed damages only for economic loss, for which there could be no recovery in tort in the absence of privity. The plaintiffs took the position that their claims were for property damage and, that under Virginia law, the defense of lack of privity had been abolished by Code § 8.01-223. The district court, relying on Bryant Elec. Co., Inc. v. City of Fredericksburg, 762 F.2d 1192 (4th Cir.1985) ¹, agreed with the defendants and dismissed both complaints. The plaintiffs appealed and this certification followed.

In Blake Construction Co. v. Alley, 233 Va. 31, 353 S.E.2d 724 (1987), we considered the economic loss rule in the context of a construction project. There, the Commonwealth, as owner, entered into one contract with a builder and another contract with an architect, both relating to the construction of an office building. The builder sued the architect for professional negligence resulting in economic losses to the builder. Although there was no privity between the builder and architect, the builder relied on Code § 8.01-223, ² which abolishes the lack-of-privity defense in actions for the recovery of damages to persons or property resulting from negligence. We held that Code § 8.01-223, being in derogation of the common-law requirement of privity in negligence actions, was to be strictly construed according to its terms. Because its language restricted its effect to cases involving injuries to persons or property, we held that it had no application to claims for purely economic losses. Thus, the builder's lack of privity with the architect was fatal to the builder's claim. Id. at 34, 353 S.E.2d at 727.

Here, the plaintiffs contend that Blake is inapposite because they are claiming damages for injury to property, not purely economic losses. They argue that they are not seeking to recover for the loss of use and enjoyment of the pool or diminution in its value. Rather, they say, they seek to recover for the cost of repairing the damage done to their home caused by the pool "as well as the cost of placing the pool in a condition where it will cause no further damage to their home." The architect and the pool contractor contend that the plaintiffs seek to recover purely economic losses, notwithstanding the language they employ. The resolution of the dispute depends entirely upon the classification in which the plaintiffs' claim properly belongs.

Many courts have been confronted with the problem of determining when a claim for damages crosses the line dividing purely economic losses from injuries to persons or property. Most jurisdictions equate economic losses, for which no action in tort will lie, with disappointed economic expectations. See, e.g., Redarowicz v. Ohlendorf, 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982). This is clearly the prevailing rule where damage is claimed because goods purchased fail to meet some standard of quality. See Moorman Mfg. Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982). ³

In East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), a unanimous Supreme Court, applying product-liability concepts in an admiralty case, held that when a product "injures itself" because one of its component parts is defective, a purely economic loss results to the owner for which no action in tort will lie. The Court rejected a rule adopted in some jurisdictions which would permit tort recovery where the defective product fails as a result of a sudden, calamitous event. Cf. Cloud v. Kit Mfg. Co., 563 P.2d 248 (Alaska 1977); East River, 476 U.S. at 870, 106 S.Ct. at 2301.

In East River, the Supreme Court observed that if, in product-liability cases, no-privity concepts were "allowed to progress too far, contract law would drown in a sea of tort." 476 U.S. at 866, 106 S.Ct. at 2300. To similar effect, we observed in Kamlar Corp. v. Haley, 224 Va. 699, 706, 299 S.E.2d 514, 517 (1983), that the limitations which apply to contract damages "have led to the 'more or less inevitable efforts of lawyers to turn every breach of contract into a tort' " (quoting W. Prosser, Handbook of the Law of Torts § 92 at 614 (4th Ed.1971)). Most jurisdictions have resisted such efforts by following the economic loss rule, limiting tort recovery against parties not in privity with the purchaser of a product to cases in which negligent manufacture or design has resulted in a product which constitutes a danger to the safety of persons or property other than the product itself. See Moorman, 91 Ill.2d at 77, 61 Ill.Dec. at 749, 435 N.E.2d at 446. ⁴

Although sales of real estate are not controlled by product-liability concepts in other respects, the rule limiting recovery for economic losses to the law of contracts does apply to sales of real property...