C.A.: Subcontractor's Duty Set by Industry Standard, Not Subcontract
The standard of care a construction subcontractor owes a property owner is set by the industry standard, and is not limited by the subcontract with the general contractor, this District's Court of Appeal ruled yesterday.
Div. Two reversed Los Angeles Superior Court Judge Joseph R. Kalin, who granted subcontractor T.A. Staben's motion for nonsuit in a construction defect action filed against it by The Stonegate Home Owners Association.
The Stonegate project is a 238-home development in West Hills. The developer contracted with R& R Palacios Construction, Inc. to construct retaining walls. Palacios subcontracted the waterproofing and installation of drainage pipes to Staben.
After the work was completed, homeowners noticed seepage and drainage problems. Stonegate filed suit against the Palacios, Staben and others for negligence, alleging that the waterproofing and drainage were defective.
Stonegate resolved its claims against everyone but Staben. In its settlement, Palacios guaranteed a global payment of $3.3 million that would be reduced by amounts Stonegate recovered from other parties.
In a jury trial against Staben, Ron Palacios testified that he told Tom Staben to "waterproof [the walls] with Thoroseal," install four-inch subsurface drain lines, backfill the walls with sand and lay "v-ditches." Palacios testified that he did not know how to apply Thoroseal, and that he told Staben to apply it according to the manufacturer's specifications.
Palacios also testified that he never had a conversation with Staben about how to apply the Thoroseal or how to install the drains. Palacios testified: "I don't tell him [Tom Staben] how to do his job," explaining that Staben was a "professional."
Tom Staben testified that he was not given any specifications as to how to apply the Thoroseal to the walls at the Stonegate project, and that he was only told to apply it "the same way" he had at the "Moorpark project," which involved the same developer. But Palacios testified he had not worked on the Moorpark project, and that he was unaware of how Staben did the work on that project.
Stonegate attempted to present expert witness testimony on the standard of care in applying Thoroseal and in installing a subsurface back drain, and that Staben's work fell below those standards. Kalin precluded the testimony, ruling that the relevant issue was not the standard of care, but the oral contract between Palacios and Staben and what Staben was told to do under that agreement. Kalin deemed Palacios to be the "gatekeeper" and stated that Palacios should be responsible for any defects.
The day following the testimony of Stonegate's expert, it filed a motion for reconsideration, which included an offer of proof that the expert would testify that Staben failed to meet the manufacturer's specifications for applying Thoroseal that appeared on every bag of it when Staben did his work. Kalin denied the motion, saying he had no recollection that Ron Palacios had told Tom Staben to apply the Thoroseal according to the manufacturer's instructions.
At the close of Stonegate's evidence, Staben moved for nonsuit on the grounds that "there is no conflict in the evidence that Mr. Staben's duty was to do what Mr. Palacios asked him to do pursuant to what he had done for the same . . . developer in the project called Moorpark" and that Staben did not owe a duty to Stonegate.
Kalin granted the motion, saying:
"The bottom line of the situation is that the plaintiff just did not present any evidence of facts with regard to the contract between Palacios and Staben to raise any duty or obligation for Staben to perform other than he did."
After Kalin entered judgment for Staben, Stonegate and Palacios appealed, claiming that Kalin erred in narrowing the focus to the words of the oral agreement to the exclusion of evidence on the industry standard of care.
Justice Kathryn Doi Todd, writing for the Court of Appeal, agreed, saying:
"Staben agreed to perform the waterproofing and drainage work on the retaining walls built by Palacios and had the duty to perform those tasks in a good and workmanlike manner. As such, the testimony of Stonegate's experts was relevant to the issue of whether Staben met the standard of care expected within the industry."
Doi Todd explained:
"The trial court's focus on the terms of the oral agreement to the exclusion of the standard of care evidence puts contractors like Palacios in an untenable position. The evidence showed that Palacios did not know how to do portions of the work subcontracted to Staben and therefore did not tell Staben how to perform its work.
She continued:
"But under the trial court's theory, Staben would only be liable for defects in its work if Palacios had given it detailed instructions on how to do the work. In other words, according to the court, the more the contractor must rely on the subcontractor, the less the subcontractor will be held accountable."
The Justice concluded:
"This is not sound public policy and is not the law in California."
Presiding Justice Roger W. Boren and Justice Judith M. Ashmann-Gerst concurred in the opinion.
Jonathan S. Vick and Robert Nation of Robertson & Vick, represented Stonegate. Frank T. Sabaitis and Louis R. Chao of Sabaitis • O'Callaghan, represented Staben. Curt Cutting and Daniel J. Gonzalez of Horvitz & Levy and Matthew J. Eschenburg, Keith G. Bremer and Raymond Meyer, Jr. of Bremer Whyte Brown & O'Meara represented Palacios.
The case is The Stonegate Homeowners Association v. T.A. Staben, 06 S.O.S. 5416.