MESA VISTA SOUTH TOWNHOME ASSOCIATION, Plaintiff and Appellant, v. CALIFORNIA PORTLAND CEMENT COMPANY, Defendant and Appellant.
In this residential construction defect case, the trial court, in a studious 57-page statement of decision, explained why it was making what it termed to be a “controversial” decision-holding the defendant concrete manufacturer and supplier liable for negligence when the only damage then suffered was submicroscopic damage to the product itself. While the damage at the time of trial was submicroscopic, the court found that the concrete comprising the slabs and foundations of the homes would disintegrate in time unless somehow prevented. The court awarded damages for the repair of the defective concrete, to be effectuated by the application of a protective gel intended to prevent the further decay of the slabs and foundations. The obvious concern was to prevent the ultimate loss of the structural integrity of the homes.1
The defendant contends that it has not committed negligence and, further, that the component supplier defense and the economic loss rule bar the recovery of damages. We uphold the decision of the trial court. The evidence supports the trial court's finding that the defendant committed negligence. The component supplier defense, as we shall show, does not absolve the defendant of liability in this case. The application of the economic loss rule in this context is the tough part. It is fraught with thorny issues, especially taking the historical framework of the rule into consideration.
Nevertheless, we conclude that the recent Supreme Court decisions in Jimenez v. Superior Court (2002) 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450 (Jimenez ) and Aas v. Superior Court (2000) 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 (Aas ) do not preclude the recovery of damages in this context. Neither case addressed whether the economic loss rule always bars the recovery of damages when a component part of a structure has already suffered appreciable harm and will ultimately disintegrate, likely causing substantial harm to other component parts of the structure over time. Moreover, even were we to construe the present damages as purely “economic losses,” Aas reaffirmed that, in a proper case, economic losses may be recoverable on a negligence theory when the six factors outlined in J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 (J'Aire ) are satisfied. Where in Aas the third factor, i.e., the degree of certainty that the plaintiff suffered injury, was not met, it is met here. In the case before us, the damage to the slabs and foundations constitutes the appreciable harm necessary to satisfy the third factor. The remaining five factors are also satisfied, as we shall show. We affirm.
The Mesa Vista South Townhome Association (Mesa Vista) is responsible for maintaining the concrete slabs and foundations in the 40-unit Mesa Vista South condominium complex. Mesa Vista filed a massive construction defect lawsuit against the developer, the general contractor, and many subcontractors, including California Portland Cement Company (California Portland). California Portland, through its Catalina Pacific Concrete division (Catalina), supplied the concrete for the project.2 By the time of trial, there had been a settlement as to all parties other than California Portland.
Causes of action for general negligence, negligence per se and strict liability proceeded to trial. At the conclusion of Mesa Vista's presentation of evidence, California Portland moved for judgment on the strict liability claim, pursuant to Code of Civil Procedure section 631.8.3 The court granted the motion.
Mesa Vista prevailed on its claims for general negligence and negligence per se. Judgment was entered against California Portland doing business as Catalina in the amount of $5,369,769.33, plus costs in the amount of $45,047. California Portland filed a motion to vacate the judgment and a motion for a new trial. Both motions were denied.
California Portland doing business as Catalina filed an appeal from the judgment and the orders denying the motion for a new trial and the motion to vacate the judgment.4 Mesa Vista purported to file an appeal from certain portions of the statement of decision.
The condominium complex was constructed on soils with a severe sulfate condition. Zeiser Kling Consultants, Inc. (Zeiser Kling), the geological engineers for the project, sent a November 8, 1993 precise grading plan review to Charlie Kluger of Newport National Development Company.5 In that document, Zeiser Kling stated: “Based on previous soluble content test results, Type V cement or equivalent should be used for concrete in contact with the onsite earth. It is expected that on site soils would possess a sulfate content rating of ‘severe’ (from 0.2 to 2.0% soluble sulfate by weight). All requirements presented on Table No. 26-A-3 for ‘Severe Sulfate Exposure’ in the 1991 UBC should be utilized for preliminary concrete mix design. This recommendation should be verified by sulfate testing conducted upon completion of lot reprocessing.” Zeiser Kling repeated this recommendation verbatim in a November 30, 1993 revised precise grading plan review, also addressed to Kluger.
CDR Concrete (CDR) installed the concrete for the project.6 It obtained the ready-mixed concrete from California Portland. CDR observed that the soils report for the project advised that the concrete should meet the requirements set forth in the 1991 Uniform Building Code Table No. 26-A-3 for severe sulfate exposure (the Sulfate Table). A representative of CDR testified that, when he contacted California Portland on the telephone to ascertain the correct concrete to order for the project, he read to the California Portland representative the applicable sentence about the need to comply with the Sulfate Table. The court found by a preponderance of the evidence that it was more likely than not that the CDR representative did indeed convey the information to the California Portland representative.
In addition to this actual knowledge, the court found that California Portland should have known and applied the requirements of the Sulfate Table. Type V cement was specified for the project. All of the California Portland personnel who testified knew that the primary reason why this type of cement would be specified was because it was resistant to sulfate attack. The court found that “[a]ll of the industry documents, guidelines, and specifications placed in evidence provided that when Type V cement is used, it is to be mixed with a water-cement ratio of 0.45 or less.” However, the water-cement ratio of the concrete that California Portland provided was in the range of 0.60 to 0.65.
Mesa Vista asserted that, because the concrete was not mixed in accordance with the Sulfate Table, it had a higher porosity and permeability than it should have, permitting the concrete slabs and foundations at the condominium complex to be damaged by sulfate attack. It further asserted that other building components had suffered damage as well, such as the corrosion and breaking of a post-tension cable and the delamination of the color coat on the stemwalls.
The court found it more likely than not that the concrete itself had suffered damage from sulfate attack and that the concrete would suffer additional damage over time. It found more specifically that the damage was largely submicroscopic at that point, but that the concrete would disintegrate in time unless somehow prevented. Mesa Vista presented evidence concerning damage to property other than the concrete itself, including stucco, post-tension cables, cable fasteners, vinyl flooring, carpeting and carpet tack strips. However, the court found that the evidence was insufficient to show that the unsuitable concrete mix was the cause of the damage.
Relying on Casey v. Overhead Door Corp. (1999) 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603 (Casey ), the court held that California Portland, as a component supplier, was not subject to strict liability. It observed that the issue of whether a supplier in a construction defect context could be held subject to strict liability was then pending before the California Supreme Court, but that Casey was the controlling law at the time.
In addressing the general negligence claim, the court stated the issue was whether California Portland “knew or should have known that the concrete it was required to supply for the Mesa Vista South job should [have been] mixed with Type V cement and a water-cement ratio of 0.45 or less.” The court, as indicated above, answered this question in the affirmative. It found California Portland had actual knowledge, as imparted to it by the CDR representative who provided information on the need to comply with the Sulfate Table. In addition, it found California Portland should have known of the necessary water-cement ratio, because industry guidelines provide that when Type V cement is used, it must be mixed with a water-cement ratio of 0.45 or less.
The court concluded that California Portland had a duty to apply this knowledge to the mix design for the Mesa Vista project concrete. It rejected the raw material/component supplier defense of Artiglio v. General Electric Co. (1998) 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817 (Artiglio), because not all elements of the test set forth in that case were met. Ultimately, the court held that California Portland had committed general negligence in supplying the concrete with the particular design mix used.
It also held that California Portland had committed negligence per se. The court determined that California Portland had violated Uniform Building Code section 2604(c)(1), requiring concrete exposed to sulfate-containing soils to conform to the requirements of the Sulfate Table. (See Evid.Code, § 669 [circumstances under which failure to exercise due care is presumed when statute, ordinance or regulation is violated].)
The court awarded damages with respect to the deteriorating concrete, but not with respect to any other property. It awarded $5,734,610, offset by $424,950 on account of the settlement with the other parties. The resulting award was $5,309,660, plus costs and disbursements.
On appeal, California Portland has two primary contentions: (1) pursuant to Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817, a supplier of a nondefective raw material or component is not liable for damages due to misuse of the product; and (2) the economic loss rule bars an award of damages with respect to the purportedly damaged concrete itself. On its cross-appeal, Mesa Vista argues that the court erred in its ruling on the strict liability cause of action. Our analysis of these issues follows.
(1) Component Supplier Defense
(a) California Portland's Involvement in the Concrete Order
California Portland argues it cannot be held liable for negligence when all it did was supply a component that met the specifications of O'Strand, the consultant that had prepared the post-tension design. It argues the testimony of Kluger, Newport National's vice president of construction, shows that the general contractor ordered the concrete, and required that it adhere to the specifications of the O'Strand plans with respect to minimum compressive strength and concrete type, i.e., Type V. It also argues this testimony reflects that the general contractor's inspectors confirmed that the deliveries conformed to these specifications. California Portland further states that nothing in the O'Strand plans indicates that the water-cement ratios in the Sulfate Table must be followed.
1. Kluger testimony
To a certain degree, the Kluger testimony can be construed as supporting California Portland's argument. Kluger oversaw construction activities at the Mesa Vista South project. When defendant's counsel asked upon whom Kluger had relied in deciding what type of concrete to order for the Mesa Vista South project, Kluger replied that he had considered the information provided by both Zeiser Kling and O'Strand. When asked if he had instructed his superintendents to follow any specific contract documents in ordering the concrete, Kluger replied that they had been instructed to follow the subcontract, among other things. When asked if he had instructed his superintendents to follow the O'Strand plans in purchasing the concrete, Kluger replied that he had.
When Kluger was asked if he had taken steps to ensure that the concrete ordered for Mesa Vista South was in compliance with the plans and specifications, he said that he had “[given] instructions to do so.” He explained that “[t]he field superintendent [had been] requested to make sure that the delivery tickets adhered to the concrete requirements.”
Kluger's answers in response to questions about concrete orders can well be construed as an indication that Newport National, whether through Kluger personally or through his superintendents, placed the concrete orders. However, subsequent Kluger testimony is at odds with this interpretation.
Kluger was asked for clarification with regard to the ordering of the concrete. Counsel for the plaintiff stated: “A bit ago, [counsel for the defendant] asked you about superintendents ordering concrete. To your knowledge, CDR Concrete is the entity that ordered the concrete that they installed on this construction site, correct?” Kluger replied, “Yes.” Counsel for the plaintiff then stated: “So the superintendents for Newport National ․, they did not order any of the concrete that Catalina Pacific or California Portland Cement delivered for CDR Concrete's use on the site, correct?” Kluger replied: “That is correct.” He also admitted that he had been relying on the concrete supplier to provide a suitable type of concrete and that he had no communication with California Portland before the cement was installed.
The totality of the testimony may be reconciled in this manner. Kluger determined that the concrete mix design should satisfy the requirements of both the Zeiser Kling reports and the O'Strand plans. He directed his superintendents to confirm that the concrete that was delivered was in conformity with the subcontract and the O'Strand plans. He did not take the initiative to clarify, in response to questions from defendant's counsel, that Newport National did not actually do the ordering. He only meant to convey that Newport National had reviewed the Zeiser Kling reports and the O'Strand plans and wanted to ensure that the concrete conformed to the requirements of those documents. When asked by plaintiff's counsel to clarify which party had done the ordering, Kluger did so explicitly. He stated that CDR Concrete had done the ordering, not Newport National, and that he himself had no contact with California Portland.
2. Klawitter, Sparks and Mock testimony
California Portland ignores the latter portion of Kluger's testimony and insists there is no evidence at all, let alone substantial evidence, to support the trial court's finding that orders were placed with a mix design number supplied by California Portland itself. We disagree.
William Klawitter was a vice president or a manager of Catalina when California Portland provided concrete for the Mesa Vista South project. He was the primary contact with CDR at that time. Klawitter did not remember any specific conversation with CDR regarding the concrete mix for the project. However, Klawitter acknowledged that either he or someone in his sales department would have given CDR the bid for the concrete.
Where Catalina's general procedures were concerned, Klawitter testified that he gave quotes based upon the information received from the customer. The type of information he obtained from the customer had to do with compressive strength, gravel size, cement type, and whether the concrete would be pumped or placed. After he gave the quote, any resulting orders were placed through the order department.
Thomas Mock was the estimator for CDR Unlimited, and then for CDR Concrete, Incorporated. He testified that Catalina would take the information he provided as to what was needed, such as information from the soils report, and that Catalina would provide the appropriate mix design. He further testified that Catalina had provided the mix design for all the concrete he had purchased from that company. He further explained that Klawitter would provide a mix design and a number for ordering. In his testimony, Edward Sparks, manager of the Catalina testing laboratory, confirmed that a concrete mix design number was required for the placement of an order.
Mock was the one who prepared the estimate for the Mesa Vista South project. He used the November 30, 1993 revised precise grading plan review in preparing the bid for the job. He testified that, in preparing the bid, he communicated information from that report to Klawitter over the telephone. He said that he read to Klawitter the paragraph from the report concerning the sulfate conditions and the requirement to conform to the Sulfate Table. He remembered the matter because soils reports did not typically reference the Sulfate Table as this one did. Mock thought Klawitter told him that he would take the information to Catalina's design people and that they would produce the mix designs for the concrete to be used at Mesa Vista South. In any event, Mock stated that Catalina thereafter provided the mix design for the job.
Mock testified that he was not involved in placing the actual orders for the concrete for the Mesa Vista South project. That was done through the CDR order desk.
Mock's testimony provides ample evidence to support the findings of the trial court. The court “conclude[d], by a rather slim margin, but nevertheless by a preponderance of the evidence, that it [was] more likely than not that Mr. Mock did read the subject paragraph from the soils report to Mr. Klawitter.” While the court considered it to be “a close decision on the evidence,” it determined that California Portland had received actual notice of its need to comply with the Sulfate Table.
California Portland nonetheless maintains there is no evidence that Klawitter made any recommendations regarding the specific concrete type suitable for installation at Mesa Vista South. However, the record does indeed contain evidence to show that Catalina supplied the mix design. While Klawitter testified that he did not remember the particular job, Mock testified that he had an explicit recollection of his conversation with Klawitter, because of the unusual soils report reference to the Sulfate Table. Mock also testified that it was Catalina's custom to provide the mix design for CDR to thereafter use in ordering and that Catalina did so in this case. Contrary to California Portland's assertion, this evidence is sufficient to support the judgment.
(b) Application of case law
The trial court findings notwithstanding, California Portland maintains that it is not liable in negligence because it supplied a nondefective component that met the project specifications and that it was not required to second-guess the sophisticated buyer who placed the order. This argument overlooks the court's implied finding: The buyer placed the order using the mix design that California Portland had specified, not using specifications from the O'Strand plans. This implied finding eviscerates the argument that California Portland cannot be liable because someone else specified the mix design and that California Portland merely delivered what was ordered pursuant to that mix design for which it bore no responsibility. California Portland was responsible for the mix design.
California Portland nonetheless cites passages from Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817, which it contends support its argument. As California Portland points out, the Artiglio court stated the general proposition that “ ‘[i]nappropriate decisions regarding the use of [raw] materials are not attributable to the supplier of the raw materials but rather to the fabricator that puts them to improper use. The manufacturer of the integrated product has a significant comparative advantage regarding selection of materials to be used. Accordingly, raw materials sellers are not subject to liability for harm caused by defective design of the end-product․’ [Citation.]” (Id. at p. 839, 71 Cal.Rptr.2d 817.) What California Portland fails to acknowledge is that the inappropriate decision regarding the use of the concrete in this case was attributed to itself, as the supplier that recommended the mix design. It was not attributed to the fabricator of the foundation, who relied upon California Portland's recommendation.
California Portland also argues it cannot be held liable because the component it supplied was not defective. It correctly cites the portion of the statement of decision providing that “[t]he evidence established ․ that even if the concrete supplied was not suitable for the Mesa Vista South project, it would have performed adequately in other environments. The problem here is that this concrete was used in an environment subjecting it to Sulfate Attack.” In other words, California Portland claims the product was not defective at all, and it cannot be liable for misuse of a nondefective product by an end-user.
California Portland omits to quote all the relevant language from the statement of decision. Immediately after the language quoted above, appear the words: “Although it may not have met established standards for severe sulfate exposure, it was nevertheless adequate for other purposes. This being so, a finding of fault in supplying the particular mix design is required.” The court's point was that the concrete, while suitable for use in some soils conditions, was not suitable for use in severe sulfate conditions, so the question was not whether the product was inherently defective in all contexts, but whether California Portland was at fault for specifying a mix design that was inappropriate for the known soils conditions. We see no flaw in this reasoning.
The situation is analogous to one in which a manufacturer supplies a standard bleach. The bleach, if applied to a white fabric, may produce an excellent result. However, if the manufacturer recommends the use of its bleach for application to a red and green tartan print, the results could be disastrous and the question would arise as to whether the manufacturer was at fault for recommending the bleach for use in that context, when it should have known that only a color-safe bleach could have been used safely.
In Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817, the supplier sold silicone compounds, which it produced to meet purchaser specifications. The purchaser cooked them into silicone gel and silicone shells and used the resulting items to manufacture breast implants. The court held that the silicone compound manufacturer had no duty to warn ultimate consumers as to the possible dangers of the breast implants.
The court stated that the duty of a component manufacturer or supplier to warn of the dangers of its product was not unlimited. (Artiglio, supra, 61 Cal.App.4th at p. 837, 71 Cal.Rptr.2d 817.) As it explained, “ ‘Making suppliers of inherently safe raw materials and component parts pay for the mistakes of the finished product manufacturer would not only be unfair, but it also would impose [an] intolerable burden on the business world (4)27 Suppliers of versatile materials like chains, valves, sand gravel, etc., cannot be expected to become experts in the infinite number of finished products that might conceivably incorporate their multi-use raw materials or components.’ [Citation.]” (Ibid.) The court then stated that there were certain “factors which should be carefully considered in evaluating the liability of component suppliers.” (Ibid.) It concluded “that component and raw material suppliers are not liable to ultimate consumers when the goods or material they supply are not inherently dangerous, they sell goods or material in bulk to a sophisticated buyer, the material is substantially changed during the manufacturing process and the supplier has a limited role in developing and designing the end product.” (Id. at p. 839, 71 Cal.Rptr.2d 817.)
In the case before us, the trial court questioned whether Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817 was even applicable, because it was a failure-to-warn case, unlike the case before us. However, the court nonetheless addressed the four factors enumerated in Artiglio. It concluded the product was not inherently dangerous, CDR was a sophisticated buyer, and California Portland had a limited role in developing and designing the end product, which the court, adopting the viewpoint of the plaintiff, construed as the entire residential structure. Therefore, three of the factors were satisfied. However, the court also found that the concrete was not substantially changed during the process of manufacturing the slabs and foundations, because it was placed substantially as delivered. Because of the failure of one of the four factors, the court concluded that Artiglio did not provide a defense.
California Portland asserts the court erred in its analysis of the Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817 decision in several respects. First, it complains that the court “refused” to apply the component supplier defense because it wrongly characterized Artiglio as a “failure to warn” case. This criticism misses the mark. While the court did question whether Artiglio applied, on account of that characterization, it nonetheless proceeded to analyze the Artiglio factors as though they did apply. The court simply found that the four factors were not all met.
Next, California Portland argues that the court erred in determining that the component supplier defense was not available because of the failure of one of the four factors. California Portland contends that Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817 did not require that each of the four factors be present before the defense is available. We agree with this reading of the case.
However, that does not mean that we disagree with the conclusion of the trial court in the matter before us. Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817 enumerated four factors for consideration and the court in the case before us considered each one of the four factors. It was persuaded that, because of the failure of one of those factors, the component supplier defense should not insulate California Portland from liability. Just as Artiglio does not state that the defense must fail if one factor is not met, it also does not state that the defense must be applied if three out of four factors are met.
In an effort to down-play the significance of the fact the concrete was not substantially altered during the process of manufacturing the slabs and foundations, California Portland draws our attention to 6 Witkin, Summary of California Law (2003 supp.) Torts, section 1253A, page 532. The treatise provides: “One who is engaged in the business of selling or otherwise distributing product components and sells or distributes a component is subject to liability for harm caused by a product into which the component is integrated in either of the following circumstances (Rest.3d, Torts: Products Liability § 5): [¶] (1) The component is defective in itself, and the defect causes the harm. [¶] (2) The seller or distributor of the component substantially participates in the integration of the component into the design of the product; the integration of the component causes the product to be defective; and the defect in the product causes the harm.” (Ibid.) Applying this summary of law provides no better result for California Portland than does applying the four factors of Artiglio, supra, 61 Cal.App.4th 830, 71 Cal.Rptr.2d 817.
Here, the first instance the treatise describes does not apply, because the concrete is not inherently defective. It may be suitable for use in different soils conditions. However, this case falls within the second enumerated circumstance, showing California Portland is subject to liability. The court found that California Portland “played a substantial role, actually, the sole role, in developing and designing the concrete mix.” Thus, California Portland, as the seller of the component, substantially participated in the integration of the concrete into the design of the foundations, and for that matter, the entire residential structure. It provided the mix design in response to Mock's request for one in compliance with the Sulfate Table. It was the integration of the product, i.e., the use of the particular concrete in soils with a severe sulfate condition, that caused the slabs and foundations to be defective, resulting in deterioration that will continue over time.
California Portland does not accept this analysis because it does not agree with the court's finding that California Portland was responsible for providing the inappropriate mix design. Nevertheless, as stated above, there is sufficient evidence to support this finding.7
(2) Economic Loss Rule
(a) In general
California Portland argues that the economic loss rule bars an award of damages with respect to the damaged concrete itself. The National Ready Mixed Concrete Association and the Southern California Ready Mixed Concrete Association have filed an amicus brief in support of the proposition that the economic loss rule should be construed to preclude the recovery of damages in a negligence action where a defect in a product causes physical injury only to the product itself. Mesa Vista, of course, disagrees.
At the outset, we observe that the proper application of the economic loss rule requires the review of a morass of case law, and distilling those cases into an easily workable rule is a daunting task. We receive guidance from two fairly recent Supreme Court cases on the topic-Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450 and Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125. In Aas, the court stated: “In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. [Citation.] This general principle, the so-called economic loss rule, is the primary obstacle to plaintiffs' claim.” (Aas, supra, 24 Cal.4th at p. 636, 101 Cal.Rptr.2d 718, 12 P.3d 1125, fn. omitted.)
In an effort to surmount this obstacle, Mesa Vista begins its discussion by asserting that California Portland has put the cart before the horse in labeling the damages in this case as purely “economic losses.” “ ‘ “Economic” loss or harm has been defined as “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits-without any claim of personal injury or damages to other property․” ’ [Citations.]” (Sacramento Regional Transit Dist. v. Grumman Flxible (1984) 158 Cal.App.3d 289, 294, 204 Cal.Rptr. 736 (Sacramento RTD ); accord, Jimenez, supra, 29 Cal.4th at p. 482, 127 Cal.Rptr.2d 614, 58 P.3d 450.) Put another way, “[t]he cost to repair or replace the defective product itself is purely economic loss and is not recoverable in tort. [Citation.]” (Casey, supra, 74 Cal.App.4th at p. 124, fn. 8, 87 Cal.Rptr.2d 603., disapproved on another point in Jimenez, supra, 29 Cal.4th at p. 481, fn. 1, 127 Cal.Rptr.2d 614, 58 P.3d 450.)
In the case before us, the trial court found that the concrete had suffered submicroscopic damage from sulfate attack but that there was insufficient evidence to show that the unsuitable concrete mix had resulted in damage to any part of the property other than the concrete itself. It awarded damages it found were reasonably required for the repair of the concrete slabs and foundations, but no damages with respect to any other property. A cursory look at the above-quoted definitions would lend support to California Portland's argument that the costs to repair the defective concrete itself are purely economic losses, not recoverable in tort. However, we must look beyond the bare bones definition of the term “economic loss” to the application and interpretation of the economic loss rule.
Mesa Vista argues that the economic loss rule, at least to the extent it requires damage to “other property,” should not be applied in the context of consumer claims. Perhaps more fundamentally, it also contends that the rule should not be interpreted to require that a defective component cause damage to a nondefective component. Rather, in order for recovery to be permitted, all that need be shown is appreciable physical damage. We will address these arguments in turn.
(b) Arguments concerning consumer claims
As Mesa Vista sees it, when taken in historical perspective, the economic loss rule was never intended to apply when a consumer's property suffers damage. According to Mesa Vista, the first California case to bar recovery due to lack of damage to “other property” was Sacramento RTD, supra, 158 Cal.App.3d 289, 204 Cal.Rptr. 736, a commercial law case. In Sacramento RTD, an operator of a fleet of busses discovered broken or cracked fuel tank supports in at least 26 busses and further that all of the 77 other busses it had purchased would likely suffer the same damage unless remedial repairs were made. The contractual warranty from the manufacturer of the busses had expired before the defects were discovered, so the operator sought damages upon theories of negligence and products liability. The court held “that a complaint filed by a plaintiff who is a merchant (Cal.U.Com.Code, § 2104, subd. (1)) fails to state a tort cause of action for strict liability or negligence against a manufacturer of a product purchased by the merchant where the only injury alleged is the cost of repair of a defect in the product.” (Id. at p. 291, 204 Cal.Rptr. 736.)
In addressing the economic loss rule, the Sacramento RTD court said plainly and simply: “Plaintiff failed to allege physical injury to its property apart from the manifestation of the defect itself in the busses. The rule imposing strict liability in tort for damage to property presupposes (1) a defect and (2) further damage to plaintiff's property caused by the defect. When the defect and the damage are one and the same, the defect may not be considered to have caused the physical injury. [Citation.] The expenses of repair plaintiff has incurred, and will incur in the future, are purely economic damages. [Citations.]” (Sacramento RTD, supra, 158 Cal.App.3d at p. 294, 204 Cal.Rptr. 736, fn. omitted.)
In applying this rule, the Sacramento RTD court emphasized that the Uniform Commercial Code regulated the sale of the busses to the plaintiff and the warranty liability with respect to the defects. (Sacramento RTD, supra, 158 Cal.App.3d at pp. 295-296, 204 Cal.Rptr. 736.) It further stated that the doctrine of strict liability in tort was not designed “to undermine the warranty provisions of the sales act or of the Uniform Commercial Code․' [Citation.]” (Sacramento RTD, supra, 158 Cal.App.3d at p. 295, 204 Cal.Rptr. 736.)
Mesa Vista is correct that Sacramento RTD, supra, 158 Cal.App.3d 289, 204 Cal.Rptr. 736 was not a consumer damages case. Indeed, the court implied that the commercial buyer could protect itself by negotiating warranty provisions. (Id. at p. 295, 204 Cal.Rptr. 736.) However, later cases have extended the application of the economic loss rule to the consumer damages context.
The Supreme Court decision in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 is of particular import. There, homeowners and a homeowners association sought recovery of construction defect damages. The plaintiffs acknowledged that many of the construction defects had not actually caused property damage. The trial court granted motions in limine to exclude evidence of those construction defects that had not caused property damage. In addressing whether the plaintiffs could “recover damages in negligence from the developer, contractor and subcontractors who built their dwellings for construction defects that have not caused property damage[,]” the Supreme Court “[applied] settled law limiting the recovery of economic losses in tort actions [citation], [and] answer[ed] the question in the negative․” (Id. at p. 632, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
Mesa Vista argues that the Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 did not squarely address the issue Mesa Vista frames, i.e., “whether the economic loss rule should have a shorter reach where the injured party is not a merchant, or a business, but a non-commercial consumer[?]” (Footnote omitted.) Mesa Vista overlooks the fact that the Aas court touched upon this issue in its discussion of the landmark case of Seely v. White Motor Company (1965) 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Seely ). In Seely, the court held that the plaintiff could not recover economic losses for the repair of a defective truck used in a business setting or for the income lost because the truck was out of commission. (Aas, supra, 24 Cal.4th at p. 640, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The Aas court indicated that the economic loss principles enunciated in Seely were not limited in application to the commercial context. (Id. at p. 642, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
In any event, while the Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 may not have engaged in the exact debate Mesa Vista would have liked, it clearly answered the question of whether the economic loss rule applies in the context of residential property construction defects. The facts of the Aas case speak for themselves. Consumer claims were at issue and the court applied the economic loss rule to bar recovery under a negligence theory on the facts before it. (Id. at p. 632, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The answer is clear: The economic loss rule may apply in the consumer claim context. This is not the end of our analysis, however.
(c) Arguments concerning appreciable physical damage
1. General requirement of damage to “other property”
We now turn to Mesa Vista's argument that the rule should require only appreciable physical damage apart from the defect itself. Mesa Vista contends it would go too far to require that a defective component cause damage to a different, nondefective component in order to allow recovery. It acknowledges that language in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 and Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450 seemingly requires damage to a separate component, i.e., “other property,” but asserts that the language is only dictum.
Some of the most plain language is contained in Jimenez, supra, 29 Cal.4th at page 483, 127 Cal.Rptr.2d 614, 58 P.3d 450, wherein the Supreme Court stated: “To apply the economic loss rule, we must first determine what the product at issue is. Only then do we find out whether the injury is to the product itself (for which recovery is barred by the economic loss rule) or to property other than the defective product (for which plaintiffs may recover in tort).” This sweeping language is consistent with much prior case law (see, e.g., Zamora v. Shell Oil Co. (1997) 55 Cal.App.4th 204, 63 Cal.Rptr.2d 762 [Zamora ] and Sacramento RTD, supra, 158 Cal.App.3d 289, 204 Cal.Rptr. 736), and would appear to answer the question point blank. Taken in isolation, this language would appear to state quite clearly that the economic loss rule, as commonly phrased, bars recovery for damage to the product itself.
Even so, one might question whether this seemingly hard-and-fast statement of the rule should apply in every case. In a case such as the one before us, there will be additional damage in the future, not only to the disintegrating product itself, but, by logical inference, to other portions of the structure as well. One might wonder whether there should be an exception to the rule when damage to the product itself may be seemingly insignificant today, but is destined to worsen and likely to cause damage to “other property” and perhaps to undermine the very structural integrity of a home. Yet the Supreme Court has also spoken plainly as to the significance of possible future damage, stating: “The breach of a duty causing only speculative harm or the threat of future harm does not normally suffice to create a cause of action. [Citation.]” (Aas, supra, 24 Cal.4th at p. 646, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
One of the cases the Supreme Court cited in Aas, supra, 24 Cal.4th at page 646, 101 Cal.Rptr.2d 718, 12 P.3d 1125 in connection with its discussion of the threat of future harm was Zamora, supra, 55 Cal.App.4th 204, 63 Cal.Rptr.2d 762. In Zamora, the defendant manufactured a resin used to make polybutylene pipes. The pipes were installed in 34 new homes, some of which suffered leaks in their plumbing systems. The defendant appealed the judgments against it with respect to the 14 homes that had suffered no leaks. The parties agreed that the sole damage to those homes was in the form of degradation and “micro-cracking” of the plumbing systems. (Id. at p. 208, 63 Cal.Rptr.2d 762.) The court reversed the judgments in favor of those 14 homeowners. It stated: “To the extent the homeowners contend they have suffered damage to the PB pipes by degradation and ‘micro-cracking’ of the PB pipes, Seely and its progeny preclude a negligence cause of action based on damage solely to the defective product. [Citations.]” (Id. at p. 211, 63 Cal.Rptr.2d 762.) It further emphasized that “appreciable present harm, not merely the threat of future harm, is required.” (Ibid.)
Zamora, supra, 55 Cal.App.4th 204, 63 Cal.Rptr.2d 762, cited with apparent approval in both Aas, supra, 24 Cal.4th at page 646, 101 Cal.Rptr.2d 718, 12 P.3d 1125 and Jimenez, supra, 29 Cal.4th at page 483, 127 Cal.Rptr.2d 614, 58 P.3d 450, bears substantial similarity to the case before us. Where in Zamora there was “micro-cracking” of pipes that had neither commenced leaking nor caused damage to other property, in the case before us there is submicroscopic damage to the concrete which has not resulted in a current lack of worthiness of the slabs or foundations or damage to other portions of the structures. Were we to look exclusively at Zamora, and focus only on the most obvious factual similarities, we might conclude Mesa Vista had no avenue of recovery.
Indeed, a surface analysis of other cases might counsel the same conclusion. One such case is Casey, supra, 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603 (disapproved on another point in Jimenez, supra, 29 Cal.4th at p. 481, fn. 1, 127 Cal.Rptr.2d 614, 58 P.3d 450). In Casey, a group of homeowners filed an action against the developer of the homes they had purchased and the manufacturer and supplier of the windows contained therein. They alleged that the windows were defective and leaking. They settled with the developer, but not the window manufacturer/supplier. The court granted the manufacturer/supplier's motion for summary adjudication as to the strict liability cause of action, holding that the doctrine of strict product liability could not be applied to a manufacturer/supplier. (Casey, supra, 74 Cal.App.4th at pp. 119-120, 87 Cal.Rptr.2d 603.) The homeowners' negligence cause of action remained.
The court granted the manufacturer/supplier's motion in limine to exclude the testimony of the homeowners' cost estimator. (Casey, supra, 74 Cal.App.4th at p. 117, 87 Cal.Rptr.2d 603.) The homeowners stipulated that their cost estimator would testify that the “ ‘only method of repair ․ [was] for the removal and replacement of all the windows in all the homes.’ ” (Ibid.) The manufacturer/supplier moved for nonsuit on the negligence cause of action and the court granted the motion. (Id. at pp. 117-118, 124, 87 Cal.Rptr.2d 603.) The appellate court affirmed. (Id. at p. 124, 87 Cal.Rptr.2d 603.) It concluded that the homeowners had admitted that their cost estimator would not testify that the repair would include work beyond the replacement of the defective windows themselves, such as new drywall or framing. Therefore, they had admitted that they had no evidence to support any claim for damages other than for economic loss, for which recovery was unavailable. (Ibid.)
The economic loss rule, as applied in both Casey, supra, 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603 and Zamora, supra, 55 Cal.App.4th 204, 63 Cal.Rptr.2d 762, would appear to present a significant stumbling block in the road to Mesa Vista's recovery of damages. This is particularly true because more recent cases continue to approve of many of the principles enunciated in Casey and Zamora. At the same time, a detailed analysis of Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450 and Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 yields a result in our case that differs from the results in Casey and Zamora.
2. Jimenez, supra, 29 Cal.4th 473
The Supreme Court in Jimenez, supra, 29 Cal.4th at page 484, 127 Cal.Rptr.2d 614, 58 P.3d 450 indicated its approval of the portion of the Casey affirming the nonsuit on the negligence cause of action because of the failure to prove damage to any portion of the property other than the defective windows. (See also Carrau v. Marvin Lumber and Cedar Company (2001) 93 Cal.App.4th 281, 112 Cal.Rptr.2d 869.) It disapproved Casey only to the extent the case disagreed with the proposition that the manufacturer of a defective product installed in a mass-produced home may be held strictly liable for damage that the defective product causes to other parts of the home. (Jimenez, supra, 29 Cal.4th at p. 481, fn. 1, 127 Cal.Rptr.2d 614, 58 P.3d 450.) The court stated quite broadly: “In summary, the economic loss rule allows a plaintiff to recover in strict products liability in tort when a product defect causes damage to ‘other property,’ that is, property other than the product itself. The law of contractual warranty governs damage to the product itself. [Citations.]” (Jimenez, supra, 29 Cal.4th at p. 483, 127 Cal.Rptr.2d 614, 58 P.3d 450.)
Following the Supreme Court decision in Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450, it might appear, as California Portland argues, that the economic loss rule plainly and simply requires damage to property other than the defective component part itself and that this is the answer to the case, period. Despite the sweeping language used in that case, however, we disagree with California Portland's characterization of the economic loss rule. Jimenez does not preclude recovery in the case before us. We shall explain why.
In Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450, homeowners brought an action against window manufacturers, suppliers and installers. They asserted that the windows were defective and that the defects had caused property damage, including damage to framing, drywall, stucco, insulation, paint, baseboards, and floor and wall coverings. (Id. at p. 476, 127 Cal.Rptr.2d 614, 58 P.3d 450.) They framed strict liability and negligence causes of action. The trial court granted summary adjudication on the strict liability cause of action in favor of the window manufacturers. (Ibid.) The appellate court issued a writ directing the trial court to vacate its order. (Id. at p. 477, 127 Cal.Rptr.2d 614, 58 P.3d 450.) The Supreme Court affirmed, holding that the manufacturers could be subject to strict products liability in tort. (Id. at pp. 481, 485, 127 Cal.Rptr.2d 614, 58 P.3d 450.)
One of the grounds upon which the defendant manufacturers sought to have the trial court ruling upheld was the economic loss rule. They argued that the product was the entire house, not the windows in isolation, and that since the only damage was to the product itself, not to any “other property,” the economic loss rule barred recovery. (Jimenez, supra, 29 Cal.4th at p. 483, 127 Cal.Rptr.2d 614, 58 P.3d 450.) The Supreme Court disagreed, stating: “California decisional law has long recognized that the economic loss rule does not necessarily bar recovery in tort for damage that a defective product (e.g., a window) causes to other portions of a larger product (e.g., a house) into which the former has been incorporated.” (Ibid.)
It is critical to note that the Supreme Court, in analyzing the application of the economic loss rule, addressed merely whether the economic loss rule necessarily precluded recovery of damages in the case before it, in which damage to other parts of the structure caused by the defective windows was alleged. It held that damages were not necessarily barred in that context and that the appellate court did not err in directing the vacation of the summary adjudication. The question before us, i.e., whether the economic loss rule always bars recovery of damages when the only present damage is to the defective product itself, very simply was not at issue in Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450.
The Supreme Court itself acknowledged the narrow scope of its opinion. It stated that it had “no occasion ․ to consider whether defective raw materials should be treated in the same manner as component parts or whether there may be situations in which the economic loss rule would bar recovery for damages that a defective component part causes to other portions of the finished product of which it is a part. We hold only that, under California decisional law, the economic loss rule does not bar a homeowner's recovery in tort for damage that a defective window causes to other parts of the home in which it has been installed.” (Jimenez, supra, 29 Cal.4th at p. 484, 127 Cal.Rptr.2d 614, 58 P.3d 450.)
We observe that the Supreme Court in Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450 also had no occasion to address the significance of the negligence theory of recovery predicated on Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16 and J'Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 (the Biakanja/J'Aire theory), a theory upon which the trial court in the matter before us relied in establishing liability. Inasmuch as Jimenez was a strict liability case, the application of the Biakanja/ J'Aire theory was not at issue. Therefore, nothing in Jimenez precludes recovery under the Biakanja/J'Aire theory, in the case before us.
Finally, we note the Supreme Court in Jimenez, supra, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450, discussed some foundational underpinnings of the economic loss rule that are of particular importance in the case before us. The court reiterated that, as it had explained in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125, recovery of damages would be precluded by the economic loss rule, absent “ ‘appreciable, nonspeculative, present injury․’ [Citation.]” (Jimenez, supra, 29 Cal.4th at p. 483, 127 Cal.Rptr.2d 614, 58 P.3d 450.) Thus, it stressed the importance of proof of “appreciable harm” as a predicate to recovery of damages. We thus turn our attention to the discussion of that principle, as well as the Biakanja/J'Aire theory, contained in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125.
3. Aas, supra, 24 Cal.4th 627
In Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 homeowners and a homeowners association filed actions against the developers, general contractors and many subcontractors involved in the construction of homes. They alleged a variety of construction defects, although we do not have all the particulars. It would appear that many of the construction defects were in the nature of deviations from industry standards and applicable building codes. For example, some of the purported building code violations included improperly constructed shear walls and fire protection walls, improperly supported electrical cables and light fixtures, and improperly labeled electrical circuits. (Id. at p. 633, fn. 1, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The plaintiffs asserted negligence, strict liability, and other causes of action. They sought the cost of repairing the alleged defects and damages for the diminution in value of their homes.
As mentioned previously, the plaintiffs in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 admitted that many of the defects had not actually caused property damage. (Id. at p. 633, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) Accordingly, the trial court granted the defendants' motions in limine to exclude evidence of the alleged construction defects that had not resulted in physical property damage. (Id. at pp. 633-634, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The Supreme Court took review of consolidated writ proceedings. Treating the motions in limine as motions for judgment on the pleadings, the court framed the issue of law as “whether plaintiffs may state a cause of action for construction defects that have not caused property damage. [Citation.]” (Id. at p. 635, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) It concluded that the economic loss rule barred recovery. (Id. at p. 632, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) However, the court expressly stated that it did not address liability for any construction defects that may have caused property damage. (Id. at p. 635, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
At the outset of its analysis, the Supreme Court stated: “Speaking very generally, tort law provides a remedy for construction defects that cause property damage or personal injury. Focusing on the conduct of persons involved in the construction process, courts in this state have found such a remedy in the law of negligence. Viewing the home as a product, courts have also found a tort remedy in strict products liability, even when the property damage consists of harm to a sound part of the home caused by another, defective part. For defective products and negligent services that have caused neither property damage nor personal injury, however, tort remedies have been uncertain. Any construction defect can diminish the value of a house. But the difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence.” (Aas, supra, 24 Cal.4th at pp. 635-636, 101 Cal.Rptr.2d 718, 12 P.3d 1125, fns. omitted.)
In continuing its discussion, the Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 engaged in a historical overview of the cases originating and developing the economic loss rule. The court mentioned that, in Sabella v. Wisler (1963) 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, it had upheld a judgment for property damage when the negligent preparation of a residential lot was a factor in causing subsidence and damage to a house. It noted that “[i]n the years following Sabella, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, the law governing tort remedies for construction defects diverged into two distinct theories: (1) strict products liability; and (2) the theory of negligence outlined in Biakanja, supra, 49 Cal.2d 647, 320 P.2d 16, and further developed in J'Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60.” (Aas, supra, 24 Cal.4th at pp. 638-639, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The court then addressed these two different theories.
It first addressed the strict products liability theory. The Supreme Court in Aas noted that case law had “applied the doctrine of strict liability to mass-produced homes, [but had] not create[d] a remedy for defects that have not caused property damage or personal injury. Whatever the product, whether homes or automobiles, strict liability affords a remedy only when the defective product causes property damage or personal injury. The tort does not support recovery of damages representing the lost benefit of a bargain, such as the cost of repairing a defective product or compensation for its diminished value.” (Aas, supra, 24 Cal.4th at p. 639, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
The Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 then considered its prior decision in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, in which it held that the plaintiff could not recover in either strict liability or negligence for the cost of repairs for a defective truck. The Aas court then quoted its prior language from Seely, which did not focus exclusively on strict liability: “ ‘Even in actions for negligence,’ we wrote, ‘a manufacturer's liability is limited to damages for physical injuries and there is no recovery for economic loss alone.’ [Citation.]” (Aas, supra, 24 Cal.4th at p. 640, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The Aas court acknowledged that this language could be construed as dictum, but disposed of that argument. It stated that “the principle articulated in Seely has by critical examination and application in subsequent cases been confirmed as law.” (Ibid.) The court then proceeded to review subsequent cases relying on Seely, including Casey, supra, 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603, Zamora, supra, 55 Cal.App.4th 204, 63 Cal.Rptr.2d 762, and Sacramento RTD, supra, 158 Cal.App.3d 289, 204 Cal.Rptr. 736.
Following that discussion, the Supreme Court addressed the development and application of the Biakanja/J'Aire theory, on which the Aas plaintiffs had placed heavy reliance. The court in J'Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 addressed the duty owed to a person not in privity with the defendant. Specifically, it asked whether a special relationship existed that would permit the recovery of economic damages by a commercial tenant; the tenant had suffered business losses due to the lack of diligence of a contractor with whom the tenant was not in privity. In pondering this question, the J'Aire court stated: “Liability for negligent conduct may only be imposed where there is a duty of care owed by the defendant to the plaintiff or to a class of which the plaintiff is a member. [Citation.] A duty of care may arise through statute or by contract. Alternatively, a duty may be premised upon the general character of the activity in which the defendant engaged, the relationship between the parties or even the interdependent nature of human society. [Citation.] Whether a duty is owed is simply a shorthand way of phrasing what is ‘ “the essential question-whether the plaintiff's interests are entitled to legal protection against the defendant's conduct.” ’ [Citations.]” (Id. at p. 803, 157 Cal.Rptr. 407, 598 P.2d 60.)
In order to determine whether a duty existed in the case before it, the court in J'Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 balanced six factors, as first set forth in the Biakanja v. Irving, supra, 49 Cal.2d 647, 320 P.2d 16 decision. Those factors were: “(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct and (6) the policy of preventing future harm. [Citation.]” (J'Aire, supra, 24 Cal.3d at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60, fn. omitted.) Upon balancing those factors, the J'Aire court held the defendant did indeed owe a duty to the plaintiff. (Id. at p. 808, 157 Cal.Rptr. 407, 598 P.2d 60.)
The Aas court noted that lower courts had applied the Biakanja/J'Aire theory in a wide variety of contexts. (Aas, supra, 24 Cal.4th at pp. 644-645, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) It then proceeded to apply those six factors to the case before it. The Aas plaintiffs' argument that the Biakanja/J'Aire factors permitted the recovery of damages fell flat upon consideration of the third factor, i.e., “the degree of certainty that the plaintiff suffered injury.” (Biakanja v. Irving, supra, 49 Cal.2d at p. 650, 320 P.2d 16.) As the court in Aas, supra, 24 Cal.4th at page 646, 101 Cal.Rptr.2d 718, 12 P.3d 1125 put it, “[c]onstruction defects that have not ripened into property damage, or at least into involuntary out-of-pocket losses, do not comfortably fit the definition of ‘ “appreciable harm” ’-an essential element of a negligence claim. [Citations.]'' It emphasized that “appreciable, nonspeculative, present injury” was a “fundamental prerequisite to a tort claim” and that J'Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 had not dispensed with that requirement. (Aas, supra, 24 Cal.4th at p. 646, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) The court concluded that, “applying the J'Aire factors, we do not find they justify a broad rule permitting recovery of repair costs unaccompanied by property damage or personal injury.” (Id. at p. 647, 101 Cal.Rptr.2d 718, 12 P.3d 1125.)
As California Portland sees it, this analysis is dispositive of the issues before us. California Portland maintains that the Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 made clear that the Biakanja/J'Aire theory does not permit recovery in the context before us. We are not persuaded.
The Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 laid out a full analysis of the Biakanja/J'Aire factors. It concluded that one of them, i.e., the third factor, was not satisfied, even assuming the other five factors were. It explained that, on the facts before it, there could be no recovery for construction defects because those defects had not caused appreciable harm. Therein lies the key. In the case before us, the existence of appreciable harm is clear.
As the decision in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 reflects, the trial court excluded evidence of defects that had not caused physical property damage or bodily injury. It “illustrated the possible effect of its ruling with the example of ‘a home with no resultant damages at all, but everybody agrees that the flashing's not lapped properly under the industry standards, ․ but it hasn't resulted in any leaks; everybody agrees that the tile is overextended, that is, it doesn't have the overlap of three inches that's called for by the manufacturer; that you have a nailing pattern on the shear walls which does not comply with the applicable provision in the [Uniform Building Code], but the house is still standing and hasn't started swaying․’ ” (Id. at p. 634, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) There is a marked difference between those examples and the defect in the case before us. If the flashing is not lapped properly, the tile is not set properly, or the nails are not placed in the pattern of choice, that does not mean that the flashing, the tile or the nails are defective. Each item may be in peak condition, having neither suffered nor caused damage. It is just that the manner in which each item has been affixed to the structure is not optimum. This is a sharp contrast to the situation before us, in which the concrete has begun to decay. The product itself is not sound.
These examples aside, the opinion in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 does not contain a great deal of information about the actual defects alleged. However, in discussing the degree of moral blame that should attach to conduct resulting in construction defects, the court indicated that little moral blame should be assigned with respect to lesser defects “and to such flaws as doors that are out of plumb, discolored drain stoppers, and inoperable garbage disposals, to take a few examples from this case.” (Id. at p. 647, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) Once again, these items do not fall into a category showing appreciable harm. While a door may be out of plumb, that does not mean the door itself is damaged. It may simply have been hung improperly and is a source of annoyance. Discolored drain stoppers and inoperable garbage disposals may be inherently defective, but these small items can be easily replaced and are unlikely to cause significant structural damage if left in place over time. These items differ markedly from a decaying foundation.
One of the plaintiffs in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 argued that “the express purpose of the building codes [was] to ‘provide minimum standards to safeguard life or limb, health, property and public welfare․’ (U. Bldg.Code, § 102, Cal.Code Regs., tit. 24, former § 2-102.)” (Id. at p. 647, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) In response to this argument the Supreme Court stated: “Plaintiffs have not shown, however, that any of the alleged defects actually poses a serious risk of harm to person or property. To say, as plaintiffs do, that the purpose of construction standards for shear walls is to ‘minimize property damage and personal injury in the event of seismic and wind forces,’ is not to say that any given defect is sufficiently grave to pose a realistic risk of structural failure.” (Ibid.)
The situation before us, however, is significantly different. The foundations are decaying. As the ever-present sulfate conditions continue to work their damage, the condition of the foundations will worsen. This is not a case in which the structures will remain sound absent possible seismic events or catastrophic wind conditions. The foundations will deteriorate over time because of the constant sulfate attack. Moreover, we are talking about the foundations of the structures. Logic would indicate that as the foundations disintegrate, at some point there may indeed be a realistic risk of structural failure.
In sum, in the case before us, not only is there present, nonspeculative harm, in the form of current submicroscopic damage to the concrete, there will be continued degradation of the foundations, possibly leading to the loss of structural integrity of the homes in later years. The trial court, after reviewing the technical evidence, found that unless the concrete is somehow repaired, it “will disintegrate.” The harm here is certainly appreciable. This being so, the third Biakanja/J'Aire factor is satisfied in this case, where it was not in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125. We turn now to the remaining five factors.
We are willing to assume, as was the Supreme Court in Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125, “that the conduct of a person engaged in construction is ‘intended to affect’ all foreseeable purchasers of the property. (J'Aire, supra, 24 Cal.3d 799, 804 [157 Cal.Rptr. 407, 598 P.2d 60] [factor (1) ]; [citations].) We may also assume that a sufficiently ‘close [ ] connection [exists] between ․ defendant's conduct’ and the alleged defects. (J'Aire, at p. 804 [157 Cal.Rptr. 407, 598 P.2d 60] [factor (4) ].)” (Aas, supra, 24 Cal.4th at pp. 646-647, 101 Cal.Rptr.2d 718, 12 P.3d 1125.) Surely, a foundation of a home is intended to benefit an owner of the home and it is foreseeable that a crumbling foundation will affect that owner. Furthermore, there is a close connection between the furnishing of concrete that is inappropriate for the soils conditions and the resultant damage to the concrete. Thus, the first, second and fourth Biakanja/ J'Aire factors are easily satisfied.
The fifth and sixth factors have to do with moral blame and the policy of preventing future harm. As the court in Aas, supra, 24 Cal.4th at page 647, 101 Cal.Rptr.2d 718, 12 P.3d 1125 indicated, some moral blame may attach to “many deviations from the building codes ( [citation] [factor (5) ] ), the degree of blame would appear to depend upon the nature of the deviation.” On the one hand, “significant moral blame [may inhere] in negligent construction creating a risk of likely structural failure leading to a notice of abatement [citation]․” (Ibid.) On the other hand, “reduced moral blame [may be assigned] to less serious defects not presenting that degree of risk․” (Ibid.) While no notice of abatement has been received in the case before us, in the scheme of things a deteriorating foundation certainly falls within the gambit of more serious defects. If the foundation is treated now, perhaps a notice of abatement can be avoided in the future. Given the fact California Portland ignored the requirements of the Sulfate Table and considering the seriousness of the resulting concrete defects, we deem the moral blame factor satisfied in this case.
With respect to the final factor, the court in Aas, supra, 24 Cal.4th at page 649, 101 Cal.Rptr.2d 718, 12 P.3d 1125 stated that the policy of preventing future harm was “probably plaintiffs' strongest argument.” However, the court was concerned that builders should not be made “the insurers of building code compliance, even as to defects that have not caused property damage or personal injury.” (Ibid.) Here, of course, there is property damage, whereas in Aas there was not. Moreover, the application of the Biakanja/J'Aire factors is a balancing test. In Aas, supra, 24 Cal.4th 627, 101 Cal.Rptr.2d 718, 12 P.3d 1125 the third factor was not met. Given that, the policy of preventing future harm was not enough to tip the scales in favor of liability. Here, the third factor is met and, as to the sixth factor, we are concerned with the policy of preventing harm which does cause property damage-to the very foundation of a home. In this case, all six factors weigh in favor of liability. Under the Biakanja/J'Aire theory, the economic loss rule does not preclude recovery in this case.
(3) Strict Liability
We turn now to the cross-appeal. Mesa Vista filed an appeal from the portions of the statement of decision pertaining to the dismissal of the strict liability cause of action and containing findings to the effect that damage to flooring, stucco and certain other items was not caused by the defective concrete. However, a statement of decision is not an appealable order. (Garat v. City of Riverside (1991) 2 Cal.App.4th 259, 279, 3 Cal.Rptr.2d 504, disapproved on another point in Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743, 29 Cal.Rptr.2d 804, 872 P.2d 143.) We construe the cross-appeal as being taken from the judgment and the order granting the motion for judgment on the strict liability cause of action.
Mesa Vista argues, as noted above, that the trial court erred in granting the motion for judgment on the strict liability cause of action. In so ruling, the trial court relied primarily on Casey, supra, 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603, for the proposition that a component supplier was not subject to strict liability in a construction defect context. As we have already observed, Jimenez, supra, 29 Cal.4th at page 481, 127 Cal.Rptr.2d 614, 58 P.3d 450 disapproved Casey on that point, after judgment was entered in the case before us. Mesa Vista is correct, therefore, that the trial court's ruling with respect to the strict liability cause of action was erroneous to the extent it relied on Casey.
However, we need not address whether, Casey, supra, 74 Cal.App.4th 112, 87 Cal.Rptr.2d 603 having been disapproved, California Portland should have been held liable on a strict liability cause of action. The issue is moot, inasmuch as we affirm the award of damages in this case, on the ground of negligence. We will not, as Mesa Vista requests, order the trial court to modify its statement of decision. (Cf. Garat v. City of Riverside, supra, 2 Cal.App.4th at p. 279, 3 Cal.Rptr.2d 504.)
The judgment is affirmed. Mesa Vista shall recover its costs on appeal.
1. The defendant asserts that there is no basis for the conclusion that the trial court was concerned about the long-term structural integrity of the homes. We disagree. In its statement of decision, the court stated, inter alia: “While the evidence is persuasive that the concrete at Mesa Vista South is damaged, it is difficult to appreciate damage that cannot be observed with the naked eye. The damage is largely sub-microscopic․ Yet, it has been established that in time, and unless somehow prevented, the concrete will disintegrate.” It also stated: “In the case at bar, the claimed defect is the presence of defective concrete (subject to Sulfate Attack) which, if attacked by an external sulfate-laden solution, will deteriorate and, over time, fail to support the building.” (Emphasis added.) In addition, the court said: “The court does find that the concrete foundations, including the concrete footings and integral slabs, are deteriorated and damaged and are experiencing destruction and deterioration of the concrete matrix, cracking of the concrete, and loss of strength of the concrete, and the concrete foundations will continue to deteriorate and suffer additional physical damage until such time as repair is implemented.” Finally, the court awarded damages for the repair of the concrete because the plaintiff “should not required to bear the risk of future deterioration or disintegration of the concrete.” (Emphasis added.) The repair costs were for the implementation of a plan “to seal the concrete against future intrusion of sulfate solutions․” (Emphasis added.) Clearly, the court was concerned not only with the present sub-microscopic damage to the foundations, but also with anticipated future damage and the ability of the foundations to “support the building.”
2. California Portland does business as Catalina, one of its divisions, but the two are not separate legal entities. The litigation concerned certain transactions with Catalina.
3. Code of Civil Procedure section 631.8, subdivision (a), provides in pertinent part:“After a party has completed his presentation of evidence in a trial by the court, the other party, without waiving his right to offer evidence in support of his defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party․”
4. California Portland makes no argument with respect to the order denying the motion for a new trial. Therefore, we deem the appeal from that order to be waived. (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979, 21 Cal.Rptr.2d 834.) California Portland's limited remarks with respect to the motion to vacate are consistent with its arguments in connection with the judgment, so we do not address them separately.
5. The statement of decision indicates that Newport National Communities was the general contractor for the Mesa Vista South project, although Mesa Vista states in its reply brief that Newport National Construction was the general contractor. Kluger testified that he was hired by Newport National Construction. We are unaware of the exact relationship between these two entities and Newport National Development Company. For ease of reference, we shall refer to the general contractor hereinafter as simply “Newport National.”
6. It is unclear from the record whether the concrete was supplied by CDR Unlimited or CDR Concrete, Incorporated, its successor. Both entities were named as defendants in the second amended complaint. The statement of decision references “CDR Concrete” as the installer.
7. California Portland has not demonstrated trial court error with respect to the general negligence holding and the findings in support of it. Because the court properly held California Portland liable on a general negligence theory, we need not address California Portland's argument that the court erred in holding it liable, in addition, on a negligence per se theory, for the purported violation of section 2604(c)(1) of the 1991 Uniform Building Code. That provision, as addressed by the court, stated: “Concrete to be exposed to sulfate-containing solutions or soils shall conform to the requirements of Table No. 26-A-3 or be made with a cement that provides sulfate resistance and used in concrete with maximum water-cement ratio or minimum compressive strength from Table 26-A-3.”
WE CONCUR: O'LEARY, Acting P.J., and FYBEL, J.