Buyers Can’t Sue Home Builders Over House Stress
In a decision hailed by home builders, the state Supreme Court has ruled that homeowners may not recover damages for emotional distress suffered as a result of shoddy home construction.
The court’s Aug. 23 opinion stated that although the contractor named in the case was negligent in building a home for a San Luis Obispo County couple, the homeowners could not receive payment for emotional suffering for what essentially was economic loss due to a breach of contract.
The court opinion, written by Judge Janice Rogers Brown, recognized that building a home is often a stressful undertaking. But because the maintenance of the homeowners’ mental well-being is not an inherent part of contractors’ relationships with clients, the court said, damages for emotional upset should not be a consequence of negligence in building a house.
Furthermore, Brown wrote, “adding an emotional distress component to recovery for construction defects could increase the already prohibitively high cost of housing in California, affect the availability of insurance for builders, and greatly diminish the supply of affordable housing.”
Home builders lauded the court’s decision, which they hope will result in more affordable insurance for California home builders and, ultimately, more affordable new homes for consumers.
“It’s a positive step not just for home builders and trade contractors but for the people who want to own homes in California, which is getting harder and harder to do,” said Michael Pattinson, former chairman of a California Building Industry Assn. task force on construction disputes and president of Barratt American Inc., a Carlsbad-based home builder.
The decision stems from a 1991 lawsuit in which a San Luis Obispo County couple sued contractor John Menezes after the ocean-view home he built for them began to deteriorate in the winter rains.
Sandy and Barry Erlich moved into what was intended to be their dream home in December 1991. Two months later, their house began to leak “from every conceivable location,” court documents state.
Damage included water-saturated walls throughout the house, leaking windows and three inches of standing water in the living room.
The Erlichs hired another contractor and a structural engineer, who discovered a damaged roof, decks in danger of collapse, improperly installed shear walls and a foundation under a main beam for the two-story living room that could only support one-sixth of the weight it was designed to bear.
The couple testified that they were worried about the stability of the house and the safety of their daughter. Further, Barry Erlich testified that he felt sick and had to be “carted away in an ambulance” when he learned about the scope of the damage to his home.
A heart condition, exacerbated by the stress of the house problems, required him to quit his job as a teacher and athletic coach.
Menezes spent the better part of a year trying the correct the problems, but was unable to do so, said Edward Horowitz, a Brentwood attorney who represented Menezes’ insurance company before the Supreme Court.
A San Luis Obispo County Superior Court jury awarded the Erlichs $406,700 as the cost of repairs, $50,000 for each spouse for emotional distress, and an additional $50,000 for Barry Erlich’s physical pain and suffering and $15,000 for his lost earnings.
On appeal, a two-to-one appellate court majority affirmed the decision, including the emotional distress award.
The Supreme Court’s reversal of the lower court decision is significant because if the decision had gone the other way, contractors in effect would become “insurers of the mental health of the homeowner,” Horowitz said.
“The basic message for both sides is that you’re entering into a contract, and the normal rules of contract law that have existed for hundreds of years will apply, and recovery of your economic damages is the goal,” he said.
Sandra Stewart, an attorney with Cox, Castle & Nicholson who filed a “friend of the court” brief on behalf of the California Building Industry Assn., estimated that about a third of construction defect suits include a claim for emotional distress damages. To her knowledge, no plaintiffs have received such damages, she said.
If the Erlichs had received compensation for their emotional stress, she said, such claims would likely increase, and insurance rates for builders would rise, ultimately affecting consumers through higher home prices.
“California today finds itself mired in an affordable housing shortage due in large part to unchecked construction defect litigation,” wrote Stewart in documents filed with the Supreme Court. “Adding potentially limitless and unpredictable liability for claimed emotional distress could put California’s housing industry in crisis.”
The Santa Barbara lawyer who represented the Erlichs at trial, Victor Zilinskas, said the situation with the couple’s Shell Beach home was so outrageous that he felt they deserved to be compensated. But, he said, he was not surprised by the state Supreme Court’s decision.
“I can get in a car accident . . . and I break a toenail, and I can sue you for emotional distress, yet if you build me a custom house that is from hell and I suffer emotionally . . . I can’t do anything about it,” Zilinskas said. “But that’s built into the system of existing law. . . because on the other side of the coin, society can’t afford it.”
