With the advent of the Beacon Residential Community Association decision which held that a principal architect may potentially be liable in tort to an owners association for construction defects even absent privity of contract, a question has arisen as to whether defendants in a construction defects case may pursue an equitable indemnity cross-complaint against the architect or engineer even though there is no privity of contract.
The recent Court of Appeal decision in State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal.App.4th 1227 ("State Ready Mix") sheds some light on that question, although questions linger. In State Ready Mix, Bellingham Marine, Inc. ("Bellingham") hired Major Engineering Marine, Inc. ("Major") to construct a travel lift pier at the Channel Islands Harbor in Ventura County. Bellingham hired Moffatt & Nichol ("Moffatt"), a civil engineering firm, to prepare the plans for the pier. The plans required that the concrete have an entrainment of two to four percent and that the concrete, when cured, attain a compressive strength of 5,000 PSI in 28 days.
Major’s contract with Bellingham provided that, if the concrete failed to meet the 5,000 PSI standard, it would be removed and replaced at Major’s expense. State Ready Mix submitted a concrete mix design providing that Micro-Air (an air entrainment chemical) would be added to each batch of concrete. Moffatt, at the request of Major, reviewed and approved the mix design (but this apparently was not part of Moffatt’s scope of work in its contract with Bellingham).
During construction of the pier, State Ready Mix delivered premixed concrete, but testing showed that the concrete had a compressive strength of well less than 5000 PSI at 28 days. Major requested State Ready Mix to investigate and State Ready Mix’ own advisor reported that, due to a mechanical failure, State Ready Mix had to manually add “air entrainment” but there was an error in calculation which resulted in a chemical overdose. This overdose apparently resulted in deficient compressive strength.
Major then incurred significant costs to rebuild the pier and sued State Ready Mix. State Ready Mix then filed a cross-complaint against Moffatt for implied equitable indemnity and contribution, alleging that Moffatt failed to use reasonable care in reviewing and approving the mix design. The trial court sustained Moffatt’s demurrer without leave to amend citing the fact that Moffatt was not in privity of contract with Major or State Ready Mix and because the cross-complaint was barred by the economic loss rule.
On Appeal, the Court of Appeal, citing Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1041–1044, affirmed holding that the trial court correctly ruled that State Ready Mix could not sue for equitable indemnity or contribution since no facts were alleged that Moffatt owed State Ready Mix a duty of care sounding in tort. The Court of Appeal also ruled that the economic loss rule barred State Ready Mix’s cross-complaint because Moffatt had no contractual relationship with State Ready Mix or Major and no facts were alleged that the defective concrete injured a person or damaged property other than the pier itself. The Court of Appeal also ruled that State Ready Mix could not pursue Moffatt based on any implied contract between Major and Moffatt because no facts were alleged that Moffatt made a clear and unambiguous promise, or that Major detrimentally relied on Moffatt’s approval of the concrete mix design, or that Major’s damages are related to an “obligation assumed” but not performed by Moffatt. The Court of Appeal also rejected State Ready Mix' argument that Moffatt could be liable under a Good Samaritan or negligent undertaking.
State Ready Mix is certainly a victory for engineers insofar as claims by third parties. However, the question which has not been answered by that decision is whether an engineer who contracts to review, for example, the mix design of a subcontractor (which was not the case in State Ready Mix) can be sued by a third party such as a subcontractor in a construction defect case.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.
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