Erlich v. Menezes
87 Cal. Rptr. 2d 886, 981 P.2d 978, 21 Cal. 4th 543 (1999)
Rule of Law:
Damages for emotional distress are not recoverable for a negligent breach of a contract to construct a house when the breach directly causes only economic injury and property damage, and violates no duty independent of the contract.
Facts:
- Barry and Sandra Erlich contracted with John Menezes, a general contractor, to build their 'dream house' on an ocean-view lot.
- After the Erlichs moved into the house in December 1990, heavy rains in February 1991 revealed that the house leaked from numerous locations, causing extensive water damage and flooding.
- Menezes made multiple unsuccessful attempts to repair the house, which involved using sledgehammers and jackhammers on walls and ceilings, and applying caulk that melted and stained the exterior.
- An independent inspection revealed pervasive, serious structural defects, including improperly installed load-bearing walls, inadequately connected roof turrets that were collapsing, and a dangerously weak foundation for a main support beam.
- The defects were so severe that three decks were in danger of 'catastrophic collapse.'
- As a result of the ongoing problems and fear for their safety, Sandra Erlich suffered fear and anxiety, and Barry Erlich developed a permanent, stress-induced heart condition which forced him to resign from his job as an athletic director.
Procedural Posture:
- Barry and Sandra Erlich sued John Menezes in trial court on theories including breach of contract and negligent construction.
- A jury found Menezes breached the contract by negligently constructing the home.
- The jury awarded the Erlichs $406,700 for cost of repairs, $50,000 each for emotional distress, and further damages to Barry Erlich for physical pain and lost earnings.
- Menezes appealed the emotional distress damages award to the California Court of Appeal.
- A divided Court of Appeal affirmed the trial court's judgment, including the award for emotional distress damages.
- The Supreme Court of California granted review to resolve the issue.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a contractor's negligent breach of a contract to construct a house, which results in only property damage and economic loss, entitle the homeowners to recover damages for emotional distress?
Opinions:
Majority - Brown, J.
No. Damages for emotional distress are not recoverable for the negligent breach of a construction contract that causes only property damage and economic loss. Conduct amounting to a breach of contract becomes tortious only when it also violates an independent duty arising from tort law, and a negligent breach alone is insufficient. Foreseeability of emotional harm is not enough to create a tort duty; policy considerations, such as the need for commercial stability and predictability, counsel against expanding tort liability into standard commercial contracts. Unlike insurance contracts, a contract to build a home does not involve the type of 'special relationship' that would justify tort remedies. Furthermore, emotional distress damages are not recoverable as special contract damages because the contract's primary purpose was economic—to build a house—not to protect the homeowners' emotional well-being. Permitting such damages would create limitless liability and is a policy matter best left to the legislature.
Concurring-in-part-and-dissenting-in-part - Werdegar, J.
I concur that a plaintiff may not recover damages for emotional distress based on a negligent breach of a contract to build a house when the defendant has breached no duty independent of the contract. However, I read the record differently and believe the plaintiffs did present an independent claim for negligence. Because the majority concluded that no such independent claim was presented, its discussion of when a tort plaintiff may recover for emotional distress was unnecessary.
Analysis:
This case reinforces the economic loss rule by strictly limiting the recovery of tort damages in contract disputes. The court's decision prevents the conversion of ordinary breach of contract cases, especially in construction, into tort actions with potentially uncapped damages for emotional distress. By refusing to extend the 'special relationship' doctrine outside the insurance context, the ruling maintains a clear distinction between tort and contract law, thereby promoting predictability and stability in commercial transactions. This precedent makes it significantly more difficult for future plaintiffs in construction defect cases to claim emotional distress damages unless they can prove an independent tort, such as fraud, or direct physical injury resulting from the defect.
Gunnerbot
AI-powered case assistant
Loaded: Erlich v. Menezes (1999)
Try: "What was the holding?" or "Explain the dissent"