Casa Clara Condominium Association, Inc. v. Charley Toppino & Sons, Inc.
620 So.2d 1244 (1993)
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Rule of Law:
The economic loss rule prohibits a homeowner from recovering damages in tort for purely economic losses when a defective component part damages only the structure itself, without causing personal injury or damage to other property.
Facts:
- Charley Toppino & Sons, Inc. (Toppino) supplied concrete for various construction projects in Monroe County.
- The concrete supplied by Toppino contained a high salt content.
- This high salt content caused the reinforcing steel embedded within the concrete to rust.
- The rusting of the steel caused the concrete in the homeowners' condominium units and single-family homes to crack, break apart, and deteriorate.
- The homeowners' alleged damages were purely economic, consisting of the cost to repair their homes and the diminution in their homes' value.
- No personal injuries or damage to any property other than the homes themselves occurred as a result of the defective concrete.
Procedural Posture:
- The homeowners filed separate actions against Charley Toppino & Sons, Inc. in the Florida circuit court (trial court), alleging negligence, among other claims.
- The circuit court granted Toppino's motion to dismiss all counts against it.
- The homeowners appealed the dismissal to the Florida Third District Court of Appeal.
- The Third District Court of Appeal affirmed the circuit court's dismissal, holding that the economic loss rule barred the homeowners' tort claims.
- The Supreme Court of Florida granted review due to a conflict between the Third District's decision and decisions from other Florida appellate courts on the same issue.
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Issue:
Does the economic loss rule bar homeowners from recovering purely economic losses in a negligence action against the supplier of a defective component part used in the construction of their homes?
Opinions:
Majority - McDonald, J.
Yes. The economic loss rule bars homeowners from recovering purely economic losses in negligence from a component supplier. The rule establishes a fundamental boundary between contract law, which protects the expectancy interests of a bargain, and tort law, which protects individuals and property from physical harm. When a product damages only itself, the losses are purely economic and the proper remedies lie in contract law, such as through warranties or other contractual protections. In this case, the homeowners purchased finished products—their dwellings—not the individual components. The defective concrete was an integral part of the finished product, so its failure constitutes damage to the product itself, not to "other property." Allowing a tort claim for disappointed economic expectations would permit contract law to "drown in a sea of tort."
Dissenting - Barkett, C.J.
No. The economic loss rule should not be applied to deny these homeowners a remedy for the damage to their homes. The central premise of the economic loss rule—that parties can allocate risk through contract negotiations—is absent here, as the homeowners had no contractual relationship (privity) with Toppino. Furthermore, the majority's view that the defective concrete has not damaged "other property" is incorrect; the faulty concrete has clearly damaged the other individual components of the houses, which should be considered separate property. Applying the rule in this context violates the principle that wrongs must have remedies.
Dissenting - Shaw, J.
No. The rationale for the economic loss rule is to enforce the bargained-for allocation of risk between contracting parties, and that logic does not apply to an innocent, foreseeable third party. Toppino knew or should have known its defective concrete would be incorporated into homes and that defects would injure third-party purchasers. The homeowners suffered the loss of their homes, a foreseeable consequence of the faulty component. The economic loss rule was never intended to defeat a valid tort claim for damages caused to a foreseeable third party by a defective product.
Analysis:
This decision firmly entrenches the economic loss rule in Florida jurisprudence, particularly in the context of construction and real estate. It clarifies that a house is considered a single, integrated product, and a defect in one component that damages the structure is not damage to "other property." The ruling forces homeowners to seek remedies for construction defects through contract law (e.g., against the builder or seller they are in privity with) rather than through tort law against remote material suppliers. This strengthens the divide between contract and tort and limits the scope of liability for manufacturers of building materials in cases involving only economic loss.
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