In the first edition of our Construction Law Adviser, we wrote concerning the First Appellate District's decision in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, First Appellate District No. A134542. In its opinion, the court held that design professionals could be held liable under the California Right to Repair Act (California Civil Code Section 895 et seq., S.B. 800). The court noted that Civil Code Sections 936 and 937 expressly provided that design professionals, who as a result of a negligent act or omission violated the statutory performance standards, could be held liable to the homeowners for damages resulting from such purchases. We cautioned, however, that the California Supreme Court had granted a petition for review of the First Appellate Court's decision.
The California Supreme Court has now affirmed the First Appellate Court's decision in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, California Supreme Court No. S208173 (July 3, 2014). The Court did not affirm the decision based upon the reasoning that the California Right of Repair Act provides that design professionals can be held liable for violation of the Act's performance standards. The Court noted that the condominiums in question were actually rented for two years after completion of construction therefore casting a question as to whether the condominium units were "new construction" for purposes of the Act. The Court, however, noted that the Act is not dispositive on the issue. Rather, the Court considered whether the design professionals had a common law duty to the homeowners.
Defendants argued that given the lack of privity between themselves and the association and its homeowner members, defendants owed no duty to the plaintiff association. The Court applied the factors established in Biakanja v. Irving (1958) 49 Cal. 2d 647 and Bily v. Arthur Young & Co. (1992) 3 Cal. 4th 370 to find that the defendant architect did have a duty to the homeowners. Distinguishing this matter from the decision in Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal. App. 4th 152, the court noted that defendants' role in the preparation of the design of the project created a close connection to the injury alleged by plaintiffs (damage resulting from errors in the design of the building). The Court further reasoned that recognizing that defendants' role as the principal provider of professional design services for the construction of a residential building project owes a duty of care to future homeowners does not raise a prospect of liability for an indeterminate amount over an indeterminate period of time to an indeterminate class of plaintiffs (defendants knew the units would be sold and liability for defects in the design and construction of the units is finite with an identifiable class of plaintiffs). Finally, the Court noted that homeowners are ill-equipped to discern defects in the design or construction of a home and rely upon the skill of the developer and others in designing and constructing the home, and therefore, the homeowners must be able to have adequate redress to address defects in their home, including suing responsible architects. The Court did, however, question if a homeowner would have a right to sue a design professional who was a subconsultant to the principal design professional due to their limited involvement in the design of the home.
Given the finding of an actionable duty, the Court held that defendants' demurrer on the basis of a lack of duty between the design professionals and the homeowners association should be overruled.
The ruling in Beacon is far more expansive than the previous appellate court decision. As the Court noted, "a liability rule that places the onus on homebuyers to employ their own architects to fully investigate the structure and design of each home they might be interested in purchasing does not seem more efficient than a rule that makes the architects who design the homes directly responsible to homebuyers for exercising due care in the first place." Such language clearly expands the duty a principal design professional owes to prospective third party users of the buildings it designs. While this decision is limited to a duty owed to prospective homeowners, one questions whether this decision might be used to expand the duty further to hotels and apartments particularly when personal injury claims might be involved.