Beware of Soggy Siding

By now you have probably all heard about Louisiana Pacific’s problems with certain home siding material.  It manufactured a few years ago.  If not installed properly, or for other reasons, the siding would absorb water and rot.  L-P has paid out millions of dollars due to a defective product.

What happens when, instead of poor material, a builder installs or treats siding improperly?  In short, it is not the product that’s defective, but instead, its treatment and installation that was at fault.

That was the question our Court of Appeals just decided in Griffith v. Centex Real Estate Corp., 93 Wn. App. 202 (1998).  In Griffith, a group of homeowners filed a Class Action lawsuit against Centex.  Centex is a National builder and vendor.  It marketed its homes to first-time home- buyers, emphasizing reliance on the builder and promising quality homes.  Centex showed the buyers model homes and provided brochures describing the homes and discussing Centex’s warranty and commitment to customers’ satisfaction.  Based upon the information, [buyers] contracted with Centex to purchase new, cedar-sided homes.  The Real Estate Contract provided for a “one-year Builder Limited Warranty”.  The contract also stated that the buyer waived all other repair claims except as provided for in the warranty.

As you can guess, the cedar siding failed.  It began to crack, warp, and mildew within 3-5 years of construction.  Understandably, the buyers of “quality homes” got upset, and sued Centex.  In their lawsuit they alleged the following three causes of action: 1) Breach of Warranty; 2) Negligent Misrepresentation; and 3) Violation of the Washington Consumer Protection Act.  Before trial, a Superior Court Judge threw out all three claims against Centex.  The buyers appealed that decision.

The Court of Appeals was not overly sympathetic to the home- buyers.  It affirmed the dismissal of the Breach of Warranty claim, saying the one-year warranty period had already expired.  As to the Negligent Misrepresentation Claim, the Court engaged in a somewhat complicated legal analysis.  In brief, the Court stated that Washington does recognize claims for negligent misrepresentation based upon tort (personal or property injury) theories.  Nonetheless, when there is a contract, and that contract allocates right of economic loss, the terms of the contract will control.

In Griffith, the Court characterized the damage done by the deteriorated siding as an “economic loss.”  The Court next determined that the contract between Centex and the home-buyers did allocate the risk of loss, and that the buyers had accepted the risk.

Finally, the Court did provide the buyers a glimmer of relief when it reviewed the Consumer Protection Act Claim.  To be successful, the buyers must prove that five separate items called “elements” were true in their case.  Both sides agreed that four of the five elements were present.  The one element that was contested was whether Centex was engaged in an “unfair or deceptive act.”  The buyers stated that Centex failed to disclose known defects with the exterior finish of the siding, and failed to comply with industry standards.  Centex disagreed.  The Court of Appeals reviewed the matter, and sent the case back to the Superior Court to determine whether the lack of disclosure and compliance/noncompliance with industry standards amount to an “unfair or deceptive act.”

So what does this mean to you?  First, and always, read your contracts before signing them.  Second, just because you might be a group of homeowners with sympathetic problems, the Court is not inclined to let you out of contract terms.  Third, bringing a negligent misrepresentation claim against a builder/vendor will require careful attention to the facts of each individual case and a detailed evaluation of the relevant law.  Finally, read your warranty and property disclosure forms carefully.  In Griffith, the Court took great pains to review what they said, and to enforce them as they related to the overall contract.

Published April, 1999

This article contains information of general interest, and is not intended to be, nor should it be relied upon as a substitute for specific legal advice.