Liability for Soils Problems in Residential Construction
| Publication year | 1978 |
| Pages | 1311 |
| Citation | Vol. 7 No. 8 Pg. 1311 |
1978, August, Pg. 1311. Liability for Soils Problems in Residential Construction
Elwyn F. Schaefer, Denver, is a partner in the firm of Cooke, Gilles & Schaefer.
It was reported five years ago in an article in Civil Engineering magazine that shrinking or swelling soils cause at least $2.3 billion in damage to houses, buildings, roads and pipelines in the United States. That dollar amount was more than twice the amount of damage caused by hurricanes, tornadoes, and earthquakes.(fn1) It was further estimated, by the authors of that article, that expansive soils cover one-fourth of the surface area of the United States and, moreover, that more than 250,000 new homes are built on expansive soils each year. Of that number, 60 percent would experience only minor damage, but 10 percent would experience significant problems(fn2) on a national basis.
The purpose of this article is to discuss liability for such problems as they pertain to residential construction in Colorado. All of the major cities in the Front Range Corridor (Denver, Greeley, Fort Collins, Boulder and Colorado Springs) are underlain by swelling soils. The percentage figures given above are probably most conservative, then, when it comes to residential construction in Corridor cities.
In brief, expansive soils are hard and strong, like rock, when they are dry. They swell and soften, however, when wet. Montmorillonite clays (bentonite) may increase in volume 1,560 percent as their moisture content is increased from dry to fully saturated. Since most soils contain only small amounts of montmorillonite, most swell to not more than one and one-half times their dry volume. Such water-saturated soils will tend to squeeze out from beneath a load, producing damage that ranges from sticking doors and hairline cracks to totally destroyed homes.(fn3)
What should counsel tell his homebuyer client? The broker has already told him that he just sells houses, does not build them and that he should go sue the builder. The builder has told the client that he followed his architect's and engineer's recommendations and that they, in turn, did everything they could. It was, the builder concludes, an "Act of God." The client wants to know if the practitioner will take his case on the basis of a contingency fee.
Let's look first at possible theories of recovery and then look for the parties to whom you can apply those theories.
Negligence requires no special elaboration. Did any of the parties do something with regard to the construction or sale of your client's house that they should not have done or did they fail to do something that perhaps they should have done?
Obviously, the negligence theory can be used against a contractor who ignores all or part of his engineer or architect's recommendations. For example, he doesn't properly compact the soil; or he puts in an improper drainage system or no drainage system at all; or he deviates from the plans and specifications in the installation of expansion joints.
Negligence may also be used as a theory against a broker who may have told your client that the builder took certain precautions in order to preclude soils problems when, in fact, the broker did not know what had been done in that regard.
If your client had had the foresight, and the money, to hire his own engineer or architect for an independent evaluation and if he had given approval without making a thorough investigation he may be liable; but you could not go after the builder's architect or engineer because your client had not himself, of course, hired him and there was therefore no contractual relationship between the two.
Could you charge the title company or lender with negligence? You certainly cannot charge the title company because it only insures title to the property itself, not the quality of the house built upon it. The case of the lender, however, provides a more interesting situation. Some ten years ago, the California Supreme Court examined the liability of a lender for construction defects in the case of Connor v. Great Western Savings & Loan Association.(fn4)
The plaintiffs therein had sustained serious damage from cracking caused by ill-designed foundations that could not withstand the expansion and cracking of adobe soil. The vendor-builder had been negligent in laying slab foundations on that soil without following the recommendations of soils engineers. In addition to filing suit against the vendor-builder, however, the plaintiffs named the lender, Great Western, as a defendant, also on the ground that it had (a) joint-ventured the development with the vendor-builder or (b) that it had breached an independent duty of care to plaintiffs.
The Court rejected the joint venture theory, despite the following recitation:
(Great Western) became an active participant in a home construction enterprise. It had the right to exercise extensive control of the enterprise. Its financing, which made the enterprise possible, took on ramifications beyond the domain of the usual money lender. It received not only interest on its construction loans, but also substantial fees for making them, a 20 percent capital gain for "warehousing" the land, and protection from loss of profits in the event individual home buyers sought permanent financing elsewhere. (Emphasis added.)(fn5)
Although rejecting liability on the joint venture theory, the Court nevertheless held Great Western liable on the basis that it had breached a duty to the buyers to exercise reasonable care to protect them from damages caused by major structural defects.
The Court adopted the following reasoning: (a) Great Western's financial transactions with the vendor-builder were intended to induce plaintiffs to buy in the particular...
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