{"id":1146,"date":"2014-07-22T15:02:00","date_gmt":"2014-07-22T15:02:00","guid":{"rendered":"https:\/\/www.sherin.com\/real-estate\/2014\/07\/22\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\/"},"modified":"2017-03-28T15:03:24","modified_gmt":"2017-03-28T15:03:24","slug":"a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/real-estate\/2014\/07\/22\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\/","title":{"rendered":"A Primer:  Economic Loss Doctrine Not Necessarily Bar to Tort Recovery"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" id=\"img-1406041604769\" class=\"alignRight alignright\" src=\"\/wp-content\/uploads\/sites\/2\/brick mill.jpg\" alt=\"brick mill\" width=\"213\" height=\"184\" border=\"0\" \/>Although the \u201ceconomic loss doctrine\u201d has historically barred recovery of certain classes of tort damages,\u00a0the Massachusetts Supreme Judicial Court recently affirmed an Appeals Court decision holding that the doctrine did not bar a condominium association\u2019s negligent construction claim against a developer for alleged faulty construction.\u00a0 The Court\u2019s ruling in <em>Wyman v. Ayer Properties. LLC<\/em>, SJC-11474 (July 19, 2014), based almost entirely on equitable principles, represents a potentially significant shift away from generally recognized principles of tort recovery.<\/p>\n<p>The economic loss doctrine establishes limitations on damages a plaintiff may recover in a negligence action.\u00a0 The rationale underlying the doctrine is that where a commercial transaction goes awry \u2013 absent harm to persons or property \u2013 the resulting loss is essentially a failure to receive the benefit of the bargain, traditionally the realm of contract law.\u00a0 Against this backdrop, the <em>Wyman<\/em> case was decided.<\/p>\n<p>In 2002, Defendant Ayer Properties, LLC (\u201cAyer\u201d) purchased a vacant mill building in Lowell, Massachusetts.\u00a0 Ayer began converting the building to residential condominium units in 2003.\u00a0 In August 2004, after several units had been sold, Ayer transferred control of the condominium to trustees made up of a consortium of unit owners (the \u201cTrust\u201d).<\/p>\n<p>Soon thereafter, the Trust became concerned about the condition of the condominium building and retained an engineer to evaluate the building\u2019s condition.\u00a0 The Trust\u2019s engineer identified three (3) major categories of concern:\u00a0 (1) twenty-two window frames had suffered excessive weather damage and leakage beyond the common area into the individual units; (2) the roof was leaking, causing damage to insulation under the roof and to individual units; and (3) the exterior brick masonry fa\u00e7ade was deteriorating.<\/p>\n<p>The Trust brought suit to recover for negligent design and construction of the common areas.\u00a0 After an 11-day trial, the judge awarded the Trust $140,000 in damages resulting from negligent design and construction of the window frames and the roof.\u00a0 The judge reasoned that the defective window frames and roof had caused additional harm within individual condominium units, thereby satisfying the property damage exception to the economic loss doctrine.\u00a0 The judge, however, found that defects to the exterior masonry did not extend beyond the masonry itself, i.e., it caused no damage to the individual units.\u00a0 Accordingly, the judge held that the economic loss doctrine barred recovery for the defective masonry work.<\/p>\n<p>Both sides appealed.\u00a0 The Appeals Court found that the economic loss doctrine did not preclude damages to the exterior masonry work and reversed the trial court\u2019s decision rejecting recovery for those damages.\u00a0 The Supreme Judicial Court subsequently granted the parties\u2019 request for further appellate review.<\/p>\n<p>In its decision, the SJC noted that condominium ownership is a \u201chybrid\u201d form of real estate interest, entitling the owner to an interest in both the individual unit as well as the common areas.\u00a0 The Court further noted that unit owners cede control of the common areas to third-party condominium associations, which are the only parties with standing to bring claims relating to those areas.\u00a0 The problem, as identified by the Court, is where, as here, the party exclusively responsible for bringing suit on the unit owners\u2019 behalf (i.e., the Trustees) lacks privity of contract with the party responsible for the damage (i.e., the builder).<\/p>\n<p>In affirming the Appeals Court\u2019s decision, the SJC relied somewhat on equitable principles: \u201c[T]he [economic loss doctrine] does not require a court to leave a wronged claimant with no remedy \u2026 the fundamental purpose of the rule is to confine the indeterminacy of damages, not to nullify a right and remedy for a demonstrated wrong and its harm.\u201d The Court noted that the \u201crule is intended to preclude recovery for intangible and unknown damages for lost contract or economic opportunity.\u201d Here, in contrast, the Trustees sought finite and foreseeable damages.<\/p>\n<p>To further support its decision, the SJC noted that: i) an eleven-day trial established Ayer\u2019s fault; (ii) harm was sustained to the common areas; and (iii) the Trust proved the precise amount of its damages.\u00a0 There was no allegation of consequential and\/or speculative damages, but rather, a \u201creliably proven amount needed to repair or replace the negligently constructed window frames, masonry and roof.\u00a0 Thus, the purposes of the economic loss rule [had] little applicability in these circumstances.\u201d<\/p>\n<p>The <em>Wyman<\/em> case was decided on somewhat unique circumstances because the plaintiff Trustees did not have a direct relationship with the defendant developer\/builder. Nevertheless, its holding serves as a cautionary tale. At its essence, the <em>Wyman<\/em> decision rests on equity. The Court ostensibly ignored the bright line standards of the economic loss doctrine. It was of no consequence that the Trust could not prove specific damage to individual condominium units (at least concerning the masonry work). Rather, the case turned on the lack of a remedy for damages which were straightforwardly ascertainable. It will be interesting to see if other jurisdictions adopt (or extend) this logic. A \u201ccomplete bar\u201d to recovery under one damages theory may not be so complete after all, especially where no alternative recovery is available.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Although the \u201ceconomic loss doctrine\u201d has historically barred recovery of certain classes of tort damages,\u00a0the Massachusetts Supreme Judicial Court recently affirmed an Appeals Court decision holding that the doctrine did not bar a condominium association\u2019s negligent construction claim against a developer for alleged faulty construction.\u00a0 The Court\u2019s ruling in Wyman v. Ayer Properties. LLC, SJC-11474 [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":1502,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[],"tags":[],"class_list":["post-1146","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Primer: Economic Loss Doctrine Not Necessarily Bar to Tort Recovery - Real Estate<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.sherin.com\/real-estate\/2014\/07\/22\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Primer: Economic Loss Doctrine Not Necessarily Bar to Tort Recovery - Real Estate\" \/>\n<meta property=\"og:description\" content=\"Although the \u201ceconomic loss doctrine\u201d has historically barred recovery of certain classes of tort damages,\u00a0the Massachusetts Supreme Judicial Court recently affirmed an Appeals Court decision holding that the doctrine did not bar a condominium association\u2019s negligent construction claim against a developer for alleged faulty construction.\u00a0 The Court\u2019s ruling in Wyman v. Ayer Properties. LLC, SJC-11474 [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.sherin.com\/real-estate\/2014\/07\/22\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\/\" \/>\n<meta property=\"og:site_name\" content=\"Real Estate\" \/>\n<meta property=\"article:published_time\" content=\"2014-07-22T15:02:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-03-28T15:03:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.sherin.com\/real-estate\/wp-content\/uploads\/sites\/2\/brick%20mill.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"450\" \/>\n\t<meta property=\"og:image:height\" content=\"388\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sherin and Lodgen\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sherin and Lodgen\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/\"},\"author\":{\"name\":\"Sherin and Lodgen\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/#\\\/schema\\\/person\\\/96bd34e7823afde2e3e7e561023c5a44\"},\"headline\":\"A Primer: Economic Loss Doctrine Not Necessarily Bar to Tort Recovery\",\"datePublished\":\"2014-07-22T15:02:00+00:00\",\"dateModified\":\"2017-03-28T15:03:24+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/\"},\"wordCount\":841,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/brick mill.jpg\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/\",\"url\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2014\\\/07\\\/22\\\/a-primer-economic-loss-doctrine-not-necessarily-bar-to-tort-recovery\\\/\",\"name\":\"A Primer: Economic Loss Doctrine Not Necessarily Bar to Tort Recovery - 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