Hayes v. Intermountain Geoenvironmental Servs. Inc. , 446 P.3d 594 ( 2019 )

2019 UT App 112THE UTAH COURT OF APPEALS
KIM HAYES AND NANCY HAYES,
Appellants,
v.
INTERMOUNTAIN GEOENVIRONMENTAL SERVICES INC.,
Appellee.
Opinion
No. 20180972-CA
Filed June 27, 2019
Second District Court, Farmington Department
The Honorable Glen R. Dawson
No. 170700693
Damian C. Smith, Attorney for Appellants
Anna Nelson, Attorney for Appellee
JUDGE RYAN M. HARRIS authored this Opinion, in which
JUDGES KATE APPLEBY and DIANA HAGEN concurred.
HARRIS, Judge:
¶1 A little more than a year after they built their “dream
home,” Kim and Nancy Hayes (Plaintiffs) began to notice cracks
in the house’s foundation and walls, and soon learned that the
soil beneath the house was unstable. More than a decade earlier,
Intermountain GeoEnvironmental Services Inc. (IGES) had, at
the request of a developer (Developer), authored a geotechnical
report concluding that residential construction could occur on
the site provided certain precautions were taken. After learning
that their house was built on unstable soil, Plaintiffs filed suit
against IGES, asserting various negligence-based tort claims. The
district court dismissed those claims, concluding that they were
barred by the economic loss rule. Plaintiffs appeal that decision,
and we affirm.
Hayes v. Intermountain GeoEnvironmental Services
BACKGROUND 1
¶2 In 2004, Developer hired IGES to conduct a geotechnical
investigation and prepare a slope stability report for a
subdivision it wanted to develop within the city limits of Layton,
Utah. Layton City required that such a report be generated prior
to construction of any houses on hillside lots. The lot upon
which Plaintiffs eventually built their house was within the
subdivision in question. After its investigation, IGES determined
that construction could occur within the subdivision, provided
that certain precautions were taken, ultimately concluding that
“slope stability is satisfactory and the site is suitable for the
proposed construction in accordance with the recommendations
contained in this report.”
¶3 Developer sold some of the subdivision lots to a third
party, who in turn sold one to Plaintiffs. In 2015, Plaintiffs hired
a general contractor (Contractor) to build a house on the lot, and
Contractor completed construction that same year. The record
on appeal contains little information about who designed the
house and drew the architectural plans that governed
construction, and does not reveal whether and to what extent
that designer (in designing the house) or Contractor (in building
it) relied on IGES’s conclusions. 2
1. Because this case comes to us on appeal from an order
granting a motion to dismiss, we recite the facts as alleged in
Plaintiffs’ complaint, and we assume their truth for the purposes
of our analysis. See Torgerson v. Talbot, 2017 UT App 231, ¶ 7, 414
P.3d 504 (“In reviewing a district court’s grant of a motion to
dismiss for failure to state a claim upon which relief can be
granted, we accept all facts alleged as true, and indulge all
reasonable inferences in favor of the non-moving party.”
(quotation simplified)).
2. The record contains a copy of the building permit for
Plaintiffs’ house, and that document lists a firm under the
(continued…)
20180972-CA 2 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
¶4 About fourteen months after construction of the house
was completed, Plaintiffs observed cracks in its foundation
and walls. Plaintiffs then hired a different engineering firm to
conduct another geotechnical study of the property. This study
noted that the house was “experiencing excessive foundation
settling,” that “some lateral movement of the foundation
elements has been observed,” and that the movement
was “believed to be the result of instability in the slope
immediately below and to the east of the home.” The report
concluded that “the existing slope at the site fails to meet the
minimum factors of safety” and, among other measures,
recommended installing additional support for the foundation of
the house, which would “likely need to extend at least 65 feet
below existing foundation elements.” Plaintiffs contacted several
contractors to ask them to undertake the work, but none was
willing to do so because of liability concerns. Unable to stabilize
the structure, Plaintiffs continued to observe widening cracks in
the foundation and walls of the house, and eventually concluded
that the house was not safe to live in and was unsalable on the
real estate market.
¶5 Plaintiffs then filed their lawsuit, suing IGES, Developer,
and Contractor. 3 Against IGES, Plaintiffs brought tort claims
for negligence, negligent misrepresentation, and negligent
infliction of emotional distress (NIED), as well as a breach of
contract claim in which Plaintiffs claimed to be third-party
(…continued)
heading “Architect or Engineer,” but this is the only mention of
that firm or its involvement in the project. Plaintiffs did not
include that firm in their complaint, and do not mention the firm
in their briefs on appeal.
3. Plaintiffs sued Developer for negligence and negligent
misrepresentation. Plaintiffs sued Contractor for breach of the
implied warranty of habitability. Plaintiffs’ claims against
Developer and Contractor are not at issue in this appeal.
20180972-CA 3 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
beneficiaries of the 2004 contract between IGES and Developer.
Plaintiffs sought to recover damages stemming from the damage
to their house, the diminution in value of their land, and moving
expenses. IGES moved, pursuant to rule 12(b)(6) of the Utah
Rules of Civil Procedure, to dismiss all of Plaintiffs’ claims
against it, arguing that the tort claims were barred under
both the statutory and common law version of Utah’s economic
loss rule, and that Plaintiffs were not third-party beneficiaries
of any contract with IGES. The district court granted IGES’s
motion, concluding that the economic loss rule applied to bar
all of Plaintiffs’ tort claims, and that Plaintiffs were not third-
party beneficiaries of any contract between IGES and
Developer. 4
ISSUE AND STANDARD OF REVIEW
¶6 Plaintiffs now appeal the district court’s order, arguing
that the court erred when it applied the economic loss rule to
4. Because this ruling only disposed of Plaintiffs’ claims against
IGES, and did not contain any rulings regarding Plaintiffs’
claims against the other defendants, the ruling did not dispose of
all matters between all litigants in the action below, and
therefore was not “a final order or judgment that ends the
controversy between the litigants.” See Copper Hills Custom
Homes, LLC v. Countrywide Bank, FSB, 2018 UT 56, ¶ 10, 428 P.3d
1133 (quotation simplified). Accordingly, the ruling was not
immediately appealable. See id. Plaintiffs attempted to obtain
certification for appeal pursuant to rule 54(b) of the Utah Rules
of Civil Procedure, but did so improperly, and on this basis we
dismissed Plaintiffs’ first appeal on jurisdictional grounds. See
Hayes v. Intermountain GeoEnvtl. Services, Inc., 2018 UT App 223,
¶¶ 4–5, 437 P.3d 650. Thereafter, Plaintiffs dismissed without
prejudice their claims against the other defendants, thereby
taking care of the final issues in the case at the district court
level, and filed a new notice of appeal.
20180972-CA 4 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
dismiss their tort claims. 5 “The decision to grant a motion
to dismiss presents a question of law that we review for
correctness.” Davencourt at Pilgrims Landing Homeowners Ass'n v.
Davencourt at Pilgrims Landing, LC, 2009 UT 65, ¶ 12, 221 P.3d 234(quotation simplified). When reviewing such an order, “we
accept the material allegations in the complaint as true and
interpret those facts and all reasonable inferences drawn
therefrom in a light most favorable to the plaintiff as the non-
moving party.” Id. (quotation simplified).
ANALYSIS
¶7 As originally articulated, the economic loss rule was
solely “a judicially created doctrine” marking “the fundamental
boundary between contract law, which protects expectancy
interests created through agreement between the parties, and
tort law, which protects individuals and their property from
physical harm by imposing a duty of reasonable care.” SME
Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs., Inc., 2001
UT 54, ¶ 32, 28 P.3d 669. In general, “the economic loss rule
prohibits tort claims for purely economic loss.” Gables at Sterling
Village Homeowners Ass’n, Inc. v. Castlewood-Sterling Village I, LLC,
2018 UT 04, ¶ 47, 417 P.3d 95.
¶8 Although it began as a common-law creation, the
economic loss rule now exists in Utah in both statutory and
common-law forms. The statutory version of the economic loss
rule was enacted in 2008, and applies only to “action[s] for
defective design or construction.” See Utah Code Ann. § 78B-4-
5. Plaintiffs do not appeal the district court’s dismissal of their
contract-based claim against IGES, or the district court’s
subsidiary determination that they were not third-party
beneficiaries of any contract between IGES and Developer.
20180972-CA 5 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
513(1) (LexisNexis 2018). 6 The common-law version of the
economic loss rule continues to apply in situations that are
beyond the scope of the statute. See, e.g., KTM Health Care Inc. v.
SG Nursing Home, LLC, 2018 UT App 152, ¶¶ 69–79, 436 P.3d 151.
(applying the economic loss rule outside the design or
construction context). IGES argues that it is protected from
Plaintiffs’ tort claims under both the statutory and the common-
law economic loss rule. We agree with IGES that the statutory
economic loss rule bars Plaintiffs’ tort claims against IGES, and
therefore we need not consider the applicability of the common-
law economic loss rule in this case.
¶9 Utah’s statutory economic loss rule provides that “an
action for defective design or construction is limited to breach of
the contract,” Utah Code Ann. § 78B-4-513(1), and that, in
general, “an action for defective design or construction may be
brought only by a person in privity of contract with the original
contractor, architect, engineer, or the real estate developer,” id.
§ 78B-4-513(4). The statute contains an exception, however, for
“damage to other property.” Id. § 78B-4-513(2). IGES contends
that Plaintiffs’ tort claims against it constitute “action[s] for
defective design or construction,” and are therefore barred by
the statutory economic loss rule. Plaintiffs resist this
characterization, and in addition assert that the “other property”
exception applies in any event. We conclude that Plaintiffs’ tort
claims constitute actions for defective design and construction,
as that term is used in the statute, and that the “other property”
exception does not apply.
6. While a few cases issued after the passage of Utah Code
section 78B-4-513 have addressed the economic loss rule in the
construction context, see, e.g., Reighard v. Yates, 2012 UT 45, 285
P.3d 1168; Davencourt at Pilgrims Landing Homeowners Ass’n v.
Davencourt at Pilgrims Landing, LC, 2009 UT 65, 221 P.3d 234, the
disputes giving rise to those cases arose before enactment of the
statute, and therefore the opinions in those cases relied largely
on the common law and did not directly interpret the statute.
20180972-CA 6 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
A
¶10 The first question presented is whether and to what extent
Plaintiffs’ tort claims constitute “an action for defective design or
construction” as that term is used in the statutory codification of
the economic loss rule. See id. § 78B-4-513(1). Under the statute,
such actions are “limited to breach of the contract,” and
therefore cannot be brought in tort. Id. Thus, to the extent
Plaintiffs’ tort claims constitute an action for defective design or
construction, those claims are barred.
¶11 The question presented is one of statutory interpretation.
“When interpreting a statute, our objective is to give effect to the
intent of the legislature in light of the purpose the act was meant
to achieve.” State v. Hunt, 2018 UT App 222, ¶ 17, 438 P.3d 1(quotation simplified). “Because the best evidence of the
legislature’s intent is the plain language of the statute itself, we
look first to the plain language of the statute.” GeoMetWatch
Corp. v. Utah State Univ. Research Found., 2018 UT 50, ¶ 15, 428
P.3d 1064 (quotation simplified). Sometimes, “the statutory text
may not be ‘plain’ when read in isolation,” but it “may become
so in light of its linguistic, structural, and statutory context.”
Olsen v. Eagle Mountain City, 2011 UT 10, ¶ 9, 248 P.3d 465.
¶12 As an initial matter, we think it plain that the tort claims
Plaintiffs filed against IGES constitute “an action.” In this
context, the word “action” means “[a] civil or criminal judicial
proceeding.” See Action, Black’s Law Dictionary (10th ed. 2014);
see also id. Action at Law (defining “action at law” as “[a] civil suit
stating a legal cause of action and seeking only a legal remedy”);
cf. Utah Code Ann. § 78B-2-101(1) (defining “action” in a statute-
of-limitations context as including “counterclaims and cross-
complaints and all other civil actions in which affirmative relief
is sought”); id. § 78B-6-202(6) (defining “civil action” in an
alternative-dispute-resolution context as “an action in which a
party seeks monetary or equitable relief at common law or
pursuant to statute”). By filing tort claims against IGES,
Plaintiffs commenced an “action” against it, as that word is used
in the statute.
20180972-CA 7 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
¶13 The more interesting part of the inquiry—and the one
upon which the parties spend their energies—is whether the
“action” Plaintiffs filed against IGES is one “for defective design
or construction.” IGES asserts that it is, and points out that the
gravamen of Plaintiffs’ claim is that their “dream home” was
built on unstable soil and has been rendered uninhabitable as a
result of settling and cracking, and that, at root, such claims
depend on Plaintiffs’ ability to demonstrate that their house was
poorly designed or constructed. Plaintiffs, by contrast, contend
that their tort claims against IGES are not for defective design or
construction, and point out that IGES’s 2004 report was issued
before any relevant structure—including their house—was
designed or constructed. Specifically, Plaintiffs assert that IGES’s
report “was a professional opinion on a state of facts concerning
a lot later purchased by Plaintiffs,” and argue that “IGES is being
sued because its opinion about the stability of the slope was
wrong, not because it improperly designed a structure.”
¶14 We find meaningful the statute’s use of the word “for,”
and see its use as a signal that—in order to determine if an action
is truly one seeking redress in connection with defective design
or construction—we should pay close attention to the claimed
cause of the specific damages sought in the action. The statute
asks us to consider what the “action” is being brought “for.”
That is, the legal label placed on each cause of action is less
important, in this context, than the underlying factual scenario
giving rise to the general grievance being lodged. Thus, to
answer the question presented, we must examine the relief
sought by Plaintiffs against IGES, as well as Plaintiffs’ basic
underlying theory of causation.
¶15 Our examination of Plaintiffs’ complaint reveals that they
are seeking only monetary relief from IGES, and that the
damages they seek fall into four categories. First, Plaintiffs
identify a category of damages “measured by actual physical
damage—and eventual total destruction—of” their house.
Second, Plaintiffs identify a category of damages related to
having to move out of the damaged house, including “costs
involved in finding replacement housing [and] storage
20180972-CA 8 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
expenses.” Third, as part of their NIED claim, Plaintiffs seek
damages for emotional distress associated with the “actual
physical peril” of being in the “zone of danger” created by
occupying a house they deem unsafe. Finally, Plaintiffs seek
damages related to harm to their lot, pointing out that the land
itself “is undergoing continuing sliding and destruction such
that it is totally unsuitable for residential construction.”
¶16 The first three of Plaintiffs’ four categories of claimed
damages clearly are aimed at seeking redress “for defective
design or construction.” Under Plaintiffs’ own version of events,
IGES’s allegedly faulty slope stability recommendations led to
Plaintiffs purchasing the lot, then constructing a house upon it,
then to the house settling and cracking, and then to emotional
distress and moving expenses. Indeed, the entire point of
commissioning a geotechnical report in this case was to
determine whether houses could safely be built in the proposed
subdivision and, if so, what sort of foundation and support those
houses would need. Even Plaintiffs’ chosen geotechnical
engineer, whose report is attached to their complaint,
acknowledges that houses can be safely constructed on the
property, as long as their foundations are bolstered by supports
extending at least sixty-five feet below the surface. Buildings
must be designed and constructed to fit the land upon which
they are built, and when a house is built to specifications that are
inappropriate for the site, that is ultimately a design and
construction issue. A common-sense understanding of Plaintiffs’
action is that they claim to have suffered damages arising from
something that went wrong—a defect—in the design and
construction of their house. Even if the architect or the builder
did not cause this defect, it is nonetheless a defect in the design
and construction of the house, and the action is one “for
defective design or construction.”
¶17 A closer look at the language and context of the statutory
economic loss rule reinforces this common-sense approach.
Plaintiffs resist the application of the statute to their case by
arguing that IGES “did not act as a ‘design professional’ in this
case” and that the report was not “design work,” but rather, was
20180972-CA 9 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
“a professional opinion about an existing state or condition.” But
Plaintiffs’ argument does not match the statute’s language or
context.
¶18 Geotechnical engineering recommendations are an
important first step in the design and construction process. See,
e.g., American Bar Ass’n, The Construction Project § 2.III.D
Geotechnical Engineer (Marilyn Klinger & Marianne Susong
eds., 2006) (“A geotechnical engineer is often an essential
participant on the design team. . . . [T]he geotechnical engineer
. . . provides recommendations for the design of the proposed
structure’s foundation and structural system. This information
. . . is typically one of the starting points for the structural
engineer.”); Shannon J. Briglia & Michael C. Loulakis,
Geotechnical Risk Allocation on Design-Build Construction Projects, J.
Am. C. Constr. Law., at 4, Sept. 2017 (“[G]eotechnical engineers
are retained by or on behalf of the owner to ascertain site
conditions, which information the design team uses to develop
its plans and specifications.”); see also Terracon Consultants W. Inc.
v. Mandalay Resort Group, 206 P.3d 81, 89 (Nev. 2009) (en banc)
(considering geotechnical engineers to be design professionals
for the purposes of the economic loss rule). Given these realities,
geotechnical engineers are considered “design professionals” as
that term is defined in another analogous section of the Utah
Code. See Utah Code Ann. § 13-8-2(1)(c) (LexisNexis 2013)
(defining “design professional” as “an architect, engineer, or land
surveyor,” including “any other person who, for a fee or other
compensation, performs services similar to the services of an
architect, engineer, or land surveyor in connection with the
development of land” (emphasis added)). Although the
statutory economic loss rule does not use the term “design
professional,” it certainly uses the word “design,” see Utah Code
Ann. § 78B-4-513(1) (2018), and in determining what the
legislature meant through its use of that term, it is helpful to
examine how it has defined similar terms in analogous contexts,
see, e.g., Wasatch Crest Ins. Co. v. LWP Claims Adm’rs Corp., 2007
UT 32, ¶¶ 13–14, 158 P.3d 548 (looking to other sections of
the Utah Code for guidance in defining the relevant term where
20180972-CA 10 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
the term was not defined in the statute at issue); Territorial Sav.
& Loan Ass’n v. Baird, 781 P.2d 452, 461 (Utah 1989) (same).
By including engineers within the definition of “design
professional” elsewhere in the Utah Code, the legislature
appears to have recognized the reality that engineers are often
integral members of a building’s design team. 7
¶19 Accordingly, the bulk of Plaintiffs’ lawsuit against IGES
can comfortably be categorized as “an action for defective design
or construction.” A lawsuit that seeks recovery from a design
professional—including a geotechnical engineer—for the
diminution in value of (or costs to repair) a structure that has
settled or sustained damage as a result of subsidence will nearly
always be properly categorized as a lawsuit seeking recovery for
defective design or construction. 8 Therefore, to the extent
7. As discussed at oral argument, the architect hired to design a
building sometimes subcontracts with a geotechnical engineer
for the express purpose of obtaining advice for the design of the
building’s foundation. In such scenarios, the geotechnical
engineer may work closely with the architect and may well be
directly involved in the actual design of the building. But—
assuming the architect actually relies upon the geotechnical
engineer’s recommendations—we see no principled reason to
treat a geotechnical engineer who completed his or her work
months before the building was designed any differently than an
engineer who works closely with the architect on a specific set of
plans and specifications. In each situation, the engineer’s
recommendations are an important part of the building’s design,
and any action against the engineer for damage to the building
alleged to be caused by the engineer’s faulty recommendations
would constitute an action for defective design or construction.
8. We do not mean to suggest that every case involving building
subsidence is automatically “an action for defective design or
construction.” For example, if the building is settling because the
adjoining landowner dug a tunnel under it, and the plaintiff is
(continued…)
20180972-CA 11 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
Plaintiffs seek damages related to the structure itself—including
claims for diminution in its value, repair costs, moving expenses
incurred for having to leave the structure, or emotional distress
related to living in it—their claims constitute actions for
defective design or construction, and are covered by Utah Code
section 78B-4-513(1).
¶20 Plaintiffs’ fourth category of damages—a claim for
damage to the lot—presents a closer question. With regard to
this category of damages, Plaintiffs’ claims do not directly
implicate any actual structure; instead, Plaintiffs seek recovery of
damages to the land itself. Although it is not entirely clear, at
this stage of the proceedings, what this claim is designed to
encompass—after all, IGES did not create whatever slope
stability issues might inhere in Plaintiffs’ lot—Plaintiffs appear
to be asserting that the value of their lot has diminished now
that it is known that construction on the property will be
problematic. Though Plaintiffs do not phrase it in exactly this
way, they appear to be claiming that, when they purchased their
lot, they did so in reliance on IGES’s recommendations, and paid
a price for the lot commensurate with it being readily buildable,
and that the lot is no longer worth what they paid for it because
of the slope stability issues that have since come to light.
¶21 Ultimately, however, we view this portion of the claim as
one for defective design or construction also. As noted, IGES was
originally hired to provide recommendations regarding what
kind of structures could be built on the property. That is, its
recommendations were to be used principally as guidance for
(…continued)
pointing the finger at the neighbor rather than at an architect,
contractor, or geotechnical engineer, the case would arguably
not be so categorized. But we are hard-pressed to imagine a
building-subsidence case in which the plaintiff is pointing the
finger at a contractor or design professional that would not be
“an action for defective design or construction.”
20180972-CA 12 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
designers and builders of structures. This is not a case in which
IGES’s recommendations were to be used for, say, determining
whether mining or grazing operations could usefully be
conducted on the property. IGES’s recommendations were
always about buildability, which is ultimately a design and
construction issue. Indeed, if we are construing Plaintiffs’ claim
correctly, the purported diminution in value of Plaintiffs’ lot has
to do with whether, and to what extent, the lot is buildable—that
is, whether a prospective purchaser will be able to build a house
on that lot and, if so, what kind of additional foundation
requirements must be included in the structure’s design in order
to make construction feasible.
¶22 In the end, we conclude that each category of damages
Plaintiffs seek from IGES is related to allegations of defective
design or construction. Accordingly, Plaintiffs’ tort claims
constitute an “action for defective design or construction,” and
are therefore within the purview of Utah Code section 78B-4-
513(1), which—subject to two exceptions, see Utah Code Ann.
§ 78B-4-513(2), one of which is discussed below—requires such
claims to be brought, if at all, as contract claims.
B
¶23 The statutory economic loss rule provides an exception
for claims seeking redress for “damage to other property,” even
if that damage is caused by “defective design or construction.”
See id. § 78B-4-513(2). Plaintiffs assert that this exception applies
here, at least to their claims for damage to the house (as opposed
to damage to the lot), which they attempt to characterize as
“other property.” We disagree.
¶24 Although the statutory codification of the economic loss
rule does not provide a complete definition of the phrase “other
property,” it does provide helpful guidance as to the term’s
reach, specifying that the “other property” exception set forth in
subsection (2) of the statute cannot apply to “the failure of
construction to function as designed,” or to the “diminution of
20180972-CA 13 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
the value of the constructed property because of the defective
design or construction.” Id. § 78B-4-513(3). This language directly
forecloses Plaintiffs’ argument that the house constitutes “other
property” not subject to the economic loss rule.
¶25 Moreover, the “other property” exception is also part of
the common-law economic loss rule, and was incorporated
into the codification of the statutory economic loss rule. See, e.g.,
Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at
Pilgrims Landing, LC, 2009 UT 65, ¶ 25, 221 P.3d 234 (discussing
the “other property” exception in the context of the common-
law economic loss rule). Because the legislature, in codifying
the economic loss rule, drew the term from the common law,
we find it helpful to examine how courts employ that term
in common law cases. In Davencourt, our supreme court held
that individual components of the product bargained for
cannot constitute “other property.” Id. (holding that the
condominiums at issue were purchased as a “finished product,”
and therefore the “individual components”—including the roof,
the foundation, and the siding—were not “other property”); see
also American Towers Owners Ass’n v. CCI Mech., Inc., 930 P.2d
1182, 1191 (Utah 1996) (holding that “walls, wall coverings,
carpeting, wall hangings, curtains, and other furnishings”
were not “other property” because “the ‘property’ was the
entire complex itself that was constructed as an integrated
unit under one general contract”), abrogated on other grounds by
Davencourt at Pilgrims Landing Homeowners Ass'n, 2009 UT 65.
¶26 Plaintiffs argue that, because they purchased the land and
contracted for the building of the house in two separate
transactions, the house constitutes “a separate property,” distinct
from the land, and should fall under the “other property”
exception. Plaintiffs assert that IGES’s recommendations applied
“only to a plot of land,” and reason that their house was a
“separate improvement, apart from the land, that was separately
bargained for and purchased.” (Quotation simplified.) Plaintiffs
compare their situation to one “where a defectively designed
building collapses and destroys a building built on adjacent
property.”
20180972-CA 14 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
¶27 But IGES’s recommendations did not apply only to a
plot of land, as Plaintiffs contend. The report was obtained by
a developer to assess the suitability of that land for construction
of houses. As discussed above, the entire point of the report
was to provide input regarding the type of support
any structures built on that land would need. Contrary to
Plaintiffs’ assertions, the condition of the land is inextricably
bound to the construction of the house. For instance, Plaintiffs’
house presumably could have been built—exactly as it was—
and placed on a more stable piece of land without incident;
likewise, even according to Plaintiffs’ expert, the land could have
supported a house built with a different foundation. The alleged
defect in this case lies at the intersection of the house and the
land; neither is defective without the other. Even though
Plaintiffs purchased the lot before they contracted for the
construction of the house, the house and the land upon which it
is built constitute an inseparable “integrated unit” for all intents
and purposes.
¶28 Accordingly, we conclude that the “other property”
exception built into the statutory economic loss rule is
inapplicable here.
CONCLUSION
¶29 By filing tort claims against IGES for faulty soils
recommendations, Plaintiffs are attempting to blame IGES
for damage to their house, moving expenses, and emotional
distress, as well as diminution in value of their land. Given their
nature, these are actions “for defective design or construction,”
as that term is used in the statutory version of the economic loss
rule. Utah Code Ann. § 78B-4-513. Moreover, these are not
claims for damage to “other property.” As a result, Plaintiffs’
tort claims against IGES are barred by the statutory economic
loss rule.
¶30 Even though Plaintiffs may not bring tort claims against
IGES, parties in Plaintiffs’ shoes typically are not without a
20180972-CA 15 2019 UT App 112Hayes v. Intermountain GeoEnvironmental Services
remedy. The economic loss rule, as applied in the construction
context, envisions a chain of contractual relationships, and
generally requires that parties in such situations bring claims
against the entities with whom they are in privity of contract. In
Plaintiffs’ case, that could have been the contractor who built
their house, or the architect who designed it, or any other person
or entity with whom they have a direct contractual relationship.
There are also limited opportunities to bring other claims in
these situations, including claims for breach of the warranty of
habitability. See Davencourt at Pilgrims Landing Owners Ass’n v.
Davencourt at Pilgrims Landing, LC, 2009 UT 65, ¶¶ 49–63, 221
P.3d 234. Indeed, Plaintiffs brought some such claims in this case
against Contractor and Developer. In this case, Plaintiffs are
disappointed that Contractor apparently does not possess valid
insurance coverage, a circumstance that is extremely unfortunate
for Plaintiffs but—even if true—is not grounds for us to ignore
the strictures of the economic loss rule, which bars the claims at
issue in this appeal. See Wasatch County v. Tax Comm’n, 2009 UT
App 221, ¶ 5 n.3, 217 P.3d 270 (“It is not within our province to
read something into the statute not found there, nor to carve out
exceptions to meet hard cases.” (quotation simplified)).
¶31 Affirmed.
20180972-CA 16 2019 UT App 112