JAYNE HANSEN LIPPS and THOMAS LIPPS, Plaintiffs - Appellants, vs. HJELMELAND BUILDERS, INC., and ROGER KENNE, Defendants - Appellees.
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IN THE COURT OF APPEALS OF IOWA
No. 8-814 / 07-1410
Filed November 13, 2008
JAYNE HANSEN LIPPS and THOMAS LIPPS,
Plaintiffs-Appellants,
vs.
HJELMELAND BUILDERS, INC., and ROGER KENNE,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Kossuth County, Edward A.
Jacobson, Judge.
The plaintiffs appeal from the district court order granting summary
judgment on their tort claims against a subcontractor, stemming from work
performed in the construction of their home. AFFIRMED.
Brian L. Yung of Klass Law Firm, L.L.P., Sioux city, for appellants.
Mark Fonken, Lake Elmo, Minnesota, Patrick Rourick, Saint Angsar, and
John M. Wharton and Joseph M. Barron of Peddicord, Wharton, Spencer &
Hook, L.L.P., Des Moines, for appellees.
Considered by Sackett, C.J., and Vaitheswaran and Eisenhauer, JJ.
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EISENHAUER, J.
Jayne Hanson-Lipps and Thomas Lipps appeal from the district court
order granting summary judgment on their tort claims against a subcontractor,
Roger Kenne, stemming from work performed in the construction of their home.
They contend the court erred in finding the economic loss doctrine applies where
a homeowner produces evidence that a subcontractor’s work caused property
damage.
We review rulings on motions for summary judgment for errors at law.
Sain v. Cedar Rapids Cmty. Sch. Dist., 626 N.W.2d 115, 121 (Iowa 2001). The
record before the district court is reviewed to determine whether a genuine issue
of material fact existed and whether the district court correctly applied the law.
Id. We review the facts in the light most favorable to the party resisting the
motion. McIlravy v. North River Ins. Co., 653 N.W.2d 323, 328 (Iowa 2002). The
resisting party has the burden of showing a material issue of fact is in dispute.
Id.
It is a generally recognized principle of law that plaintiffs cannot recover in
tort when they have suffered only economic harm. Richards v. Midland Brick
Sales Co., Inc., 551 N.W.2d 649, 650 (Iowa Ct. App. 1996). The “economic loss
doctrine” holds that purely economic losses usually result from the breach of a
contract and should ordinarily be compensable in contract actions, not tort
actions. Id. at 650-51.
The distinction that the law has drawn between tort recovery for
physical injuries and warranty recovery for economic loss is not
arbitrary and does not rest on the “luck” of one plaintiff in having an
accident causing physical injury. The distinction rests, rather, on an
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understanding of the nature of the responsibility a manufacturer
must undertake in distributing his products. He can appropriately
be held liable for physical injuries caused by defects by requiring
his goods to match a standard of safety defined in terms of
conditions that create unreasonable risks of harm. He cannot be
held [liable] for the level of performance of his products in the
consumer's business unless he agrees that the product was
designed to meet the consumer's demands. A consumer should
not be charged at the will of the manufacturer with bearing the risk
of physical injury when he buys a product on the market. He can,
however, be fairly charged with the risk that the product will not
match his economic expectations unless the manufacturer agrees
that it will.
Id. at 651 (quoting Seely v. White Motor Co., 403 P.2d 145, 155 (Cal. 1965)).
Therefore, losses in product liability cases are generally limited to physical harm
to the plaintiff or physical harm to property of the plaintiff other than the product
itself, while economic losses to the product itself are excluded. Id. If the damage
was a foreseeable result from the failure of a product to work properly, the
remedy lies in contract, since the loss relates to a consumer's disappointed
expectations due to deterioration, internal breakdown, or nonaccidental cause.
Id. On the other hand, when the harm is a sudden or dangerous occurrence
resulting from a general hazard in the nature of the product defect, tort remedies
are generally appropriate because the harm could not have been reasonably
anticipated by the parties. Id. Despite its origins, the economic loss doctrine has
not been limited to product liability suits and clearly includes defective
construction claims. See Determan v. Johnson, 613 N.W.2d 259, 260-61, 263
(Iowa 2000).
Kenne worked as a subcontractor for Hjelmeland Builders, Inc., the
general contractor on the plaintiffs’ home. The plaintiffs allege negligence and
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strict liability against Kenne for damages caused when water entered the home
due to his alleged negligence in erecting the brick exterior of the house. Their
claim is one of damage that is a foreseeable result from the failure of the exterior
brick to protect the home from the elements.
The contract remedy is the
appropriate one.
The plaintiffs note that the damage here goes beyond the brick exterior
and into other areas of the house on which Kenne did not work. In Determan v.
Johnson, 613 N.W.2d at 260-61, 63 (Iowa 2000), our supreme court noted that
where the plaintiffs alleged a defective beam system supporting the roof and
inadequate vapor barrier caused cracks in the walls and moisture spots in the
walls and ceilings, “the plaintiff's damages result from the deterioration of the
house due to its poor construction.” The court concluded the plaintiff’s claim was
based on unfulfilled expectations with respect to the quality of the home and, as
such, the “remedy lies in contract law, not tort law.” Id. at 263. “When a buyer
loses the benefit of his bargain because the goods are defective . . . he has his
contract to look to for remedies. Tort law need not, and should not, enter the
picture.” Id. at 264 (quoting Nelson v. Todd's Ltd., 426 N.W.2d 120, 125 (Iowa
1988)).
Citing case law from other jurisdictions, the plaintiffs argue the economic
loss doctrine should not bar a negligence action against a subcontractor. We
decline to limit the doctrine here.
Because the district court did not err in granting summary judgment on the
tort claims against Kenne, we affirm.
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AFFIRMED.
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