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A.C. Excavating v. Yacht Club II Homeowners Association6/27/2005
JUDGMENT AFFIRMED
EN BANC
JUSTICE KOURLIS dissents and JUSTICE COATS joins in the dissent.
We granted certiorari to review the court of appeals' decision in Yacht Club II Homeowners Assoc., Inc. v. A.C. Excavating, et al., 94 P.3d 1177 (Colo. App. 2003). In Yacht Club II, the court of appeals held that a homeowners association's negligence claim against construction subcontractors was not barred by the economic loss rule. We agree with the court of appeals and hold, as a matter of law, that subcontractors owe homeowners a duty of care, independent of any contractual obligations, to act without negligence in the construction of a home. Accordingly, we find the economic loss rule has no application to the present case and therefore affirm the judgment of the court of appeals.
I. Facts and Proceedings Below
Yacht Club II is a townhouse development (the development) that was constructed between 1994 and 1996. Respondents Yacht Club II Homeowners Association, Inc. (the Association) is comprised of and represents individual unit owners of the development. Petitioners are A.C. Excavating; Brady & Son Bonded Roof Co.; NDF Company; Formex Concrete Forming, Inc.; Frank's Finish Grading, Inc.; Hesterly Holland Construction, LLC; K.J. Woodworks, Ltd.; Rocky Mountain Flatwork, Inc.; Stevens Excavating, Inc.; Watren Concrete Forming, Inc.; and Yeager Concrete Corporation (collectively, the subcontractors).
The subcontractors were involved in the construction of the development.
In 1998, the Association filed this action against the subcontractors, developer, and general contractor, alleging a host of construction defects including: improperly installed windows, roofs, chimneys, and doors; improperly braced roof trusses; improperly graded soils, reverse sloping driveways, and improper drainage systems resulting in water penetration, heaving front porches, heaving and cracking basement floors, damaged drywall, and water stained sills, walls, carpets, and baseboards. The Association asserted against the developer and general contractor claims for breach of express and implied warranty, violation of the Colorado Consumer Protection Act, and negligence. The Association's suit against the subcontractors alleged only negligence.
The Association settled its claims with the developer and general contractor. Regarding the remaining negligence claim against the subcontractors, the trial court granted a motion for partial summary judgment in favor of the subcontractors, ruling that the Association lacked standing. The trial court also ruled that the Association's negligence claim was barred by the economic loss rule because the subcontractors' duties arose entirely out of the contracts between the subcontractors, the developer, and the general contractor. Finding that the subcontractors owed the Association no independent tort duty, the court entered judgment in favor of the subcontractors.
The Association appealed and the court of appeals reversed. The court of appeals first held that standing was conferred upon the Association by the Colorado Common Interest Ownership Act. Next, the court of appeals held that the economic loss rule had no application to the Association's negligence claim because subcontractors owe homeowners a duty of care, independent of any contract provision, in connection with the construction of homes. Yacht Club II, 94 P.3d at 1181. Citing our decision in Cosmopolitan Homes v. Weller, 663 P.2d 1041 (Colo. 1983), the court of appeals reasoned that, independent of any contractual duty, builders also have a general duty imposed by law to act without negligence in the construction of homes. Yach
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