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Dean v. Barrett Homes

April 15, 2009


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8451-04.

The opinion of the court was delivered by: Carchman, P.J.A.D.



Argued September 22, 2008

Before Judges Carchman, Sabatino and Simonelli.

Plaintiffs Robert R. Dean (Robert),*fn1 Jennifer P. Dean (Jennifer) and Mary Sue Dean appeal from a final judgment of the Law Division dismissing their complaint against Sto Corp*fn2 (Sto). The claims arise as a result of damages caused by the manufacture and installation of allegedly defective exterior siding that was used on a house purchased by plaintiffs from the original owners. Plaintiffs asserted two primary causes of action --- a claim under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -184, and the Products Liability Act (PLA), N.J.S.A. 2A:58C-1 to -11. The motion judge granted summary judgment to defendant Sto as to both causes of action. We affirm.

These are the relevant facts derived from the record. On February 18, 2002, Robert and Jennifer entered into a contract for the purchase of a house located at 7 Rechtenwald Court in Old Tappan. The sellers were Angelo and Maria Messina (the Messinas), the original owners, who had purchased the house in 1995 from defendant Barrett Homes Inc. (Barrett).

Sto was the manufacturer of the exterior siding product used on the house. Barrett had subcontracted the siding work to defendant Architectural Exterior Finishes. William E. Borra, Jr., Barrett's representative, claimed only that Sto had brought him some samples of the siding product for him to examine, and no other representations were made to Barrett regarding the siding.

The Messinas neither had any problem with the house nor were familiar with the stucco material used on the house's exterior. Although the builder may have provided them with some literature regarding the siding, they did not read it, and they never discussed the siding with Barrett or Sto. The Messinas never told plaintiffs that the exterior was maintenance-free, and they never gave plaintiffs any documents or literature regarding the exterior siding.

Likewise, plaintiffs' realtor never spoke to or gave any information to plaintiffs regarding the product used on the exterior of the house. Prior to closing, plaintiffs never gave any thought to the exterior of the house, other than to assume it was "stucco" and maintenance-free, even though no one had made that representation to them. They neither asked for nor received any information from Sto, and they never received any warranties regarding the exterior of the house.

Plaintiffs did act affirmatively to protect their investment in the house. On February 26, 2002, plaintiffs secured a house inspection performed by defendant HouseMaster, Inc. Prior to the inspection, plaintiffs learned that their insurance carrier would not insure a house with stucco. When Robert mentioned this to the inspector, the inspector said that the carrier was probably worried about a cable company or phone installer punching a hole in the siding, which could allow water that could not be immediately seen, to get behind it. He told Robert to make sure that all holes were caulked. Otherwise, according to the inspector, the siding on the house was an excellent insulator.

The inspector also told Robert that the siding was an Exterior Insulation Finishing System (EIFS), an unfamiliar term to plaintiffs. Plaintiffs admitted that, even after they learned that their house was clad with EIFS, they did no research on the product or the manufacturer. Robert claimed that there was no need to do any research because he could tell by his observations that the house did not require any painting.

In its report, which plaintiffs admitted they did not read in any great detail, HouseMaster warned: "While no visible defects were noted, this type siding [sic] can be prone to hidden defects. Keep siding/stucco well sealed and seal as req'd, such as at siding penetrations for lawn sprinkler control wiring and at bruised area near the ground behind downspout." Robert concluded that this statement was consistent with his conversation with the HouseMaster inspector, and that there was nothing to worry about. However, the report also stated that:

Exterior Insulation Finish Systems (EIFS) incorporate foam insulation panels, reinforced mesh and a textured finished coating. Certain products and/or installation methods make this wall-cladding system highly susceptible to moisture infiltration and subsequent structural damage and mold particularly at penetrations, joints, and roof terminations. Recommend evaluation by a specialist and/or the manufacturer as a precaution. [(Emphasis added).]

Robert conceded that this cautionary statement was not consistent with what he had been told by the HouseMaster inspector, and he took no action in response to this report.

Plaintiffs took title to the house on May 14, 2002. At closing, the Messinas told plaintiffs that there was a bucket of "Sto" in the garage that had been left by the builder in case they needed it for a "touch-up." Plaintiffs assumed that "Sto" was the manufacturer of the exterior product.

Approximately one year after moving in, plaintiffs began to notice black lines over the exterior of the house. Jennifer thought she could use the material in the bucket to touch it up, but when she called the manufacturer or distributor, she learned that she could not simply paint the material on but needed to follow "a process." A family member then told plaintiffs that he had seen a news report regarding the hidden dangers of stucco. Despite the earlier warning from the home inspector, Robert finally did some research and learned that there had been many problems with other houses that had been finished with EIFS.

EIFS is an "exterior cladding component of the building envelope" and is not sold as a final product. The "traditional" EIFS consists of:

(1) an adhesive; (2) expanded polystyrene ("EPS") board; (3) base coat; (4) reinforcing mesh; and (5) finish coat. The mesh is sold in rolls, EPS board sold in large sheets, and the adhesive, base and finish coats sold in buckets. The EPS board and mesh are cut and sized by the contractors usually at the jobsite, and the adhesive, base coat and finish coat are applied with the EPS board and mesh to the building by the contractors.

According to plaintiffs, the defect in defendant's product was that "[t]here [was] no secondary weather protection behind the cladding to protect the underlying moisture sensitive substrate and no means of drainage of water which may penetrate the wall assembly." Their expert found that plaintiffs had sustained water damage to the wall sheathing and framing of their house due to water intrusion behind the EIFS cladding. The expert found fifteen deficiencies in the installation of the EIFS that had caused this water intrusion. In addition, the expert found that the EIFS itself was defectively designed, because: "Standard installation specifications, details, and instructions by EIFS manufacturers did not adequately address actual field conditions encountered and also required installation that could not be achieved."

Plaintiffs were advised to undertake the following remediation to their house: "Removal of the EIFS, repairs to water-damaged structural components, installation of new cladding, windows and doors, and repairs to improperly installed and constructed building components should be performed as soon as possible due to the ongoing water intrusion."

Ultimately, plaintiffs removed and replaced their exterior siding, at a cost approximating $65,000. In addition, they spent another $85,000 to do the consequential work associated with this removal and replacement. This additional work included repairs to the interior of the house, replacement of their fireplace, repairs to the roof and soffits, and installation of new windows and doors. However, plaintiffs admitted that the fireplace work had nothing to do with the removal of the EIFS. They claimed damage to the underlying sheathing, framing and substrate of the house.

In addition, although toxic mold was found inside plaintiffs' house, they did not pursue any personal injury claim against defendant. Also, they admitted that they did not perform any work on the interior of the house to remediate or eliminate the mold, that no personal property in the house was damaged, and that no landscaping required any replacement. Jennifer claimed that there was a "stigma" associated with the mold, as well as a diminution in the value of their home, although she could not state whether the house had in fact decreased in value.

Plaintiffs filed a complaint in the Law Division against Barrett, Sto, HouseMaster and Architectural and others, alleging, among other causes of action, negligence, breach of implied and express warranties, consumer fraud and strict liability. Following extensive discovery, Sto filed a motion for summary judgment.

In opposition to summary judgment, plaintiffs presented an array of materials that supported their position that defendant was aware of the defects and problems with their EIFS since at least the 1980s, that they were responsible for selling and distributing the EIFS and putting it into the stream of commerce, and that they had been engaged in a great deal of litigation regarding their EIFS, both here in New Jersey and in other states.

The trial judge dismissed plaintiffs' claims for strict liability and negligence because he found that plaintiffs had sustained an "economic loss" only. That is, defendant's product was defective and had to be removed, which may have caused some incidental or consequential damage to plaintiffs' house, but the house itself was not destroyed, was not rendered unsafe or uninhabitable, and plaintiffs had not sustained any personal injuries. He dismissed their CFA claim because defendant had no contact whatsoever with plaintiffs and made no misrepresentations to them. Plaintiffs' motion for reconsideration also was denied.

On appeal, plaintiffs assert that the motion judge erred by improperly applying the economic loss rule, resulting in dismissal of plaintiffs' tort claim, and further erred in concluding that the CFA did not apply.

Subsequent to oral argument in this matter, we decided Marrone v. Greer & Polman Constr. Inc., 405 N.J. Super. 288 (App. Div. 2009), where, on facts strikingly similar to those before us here, we held that the CFA did not apply and "plaintiffs' claims based on the Products Liability Act... were properly dismissed under the economic loss doctrine because the only claimed damage was to the house, of which the siding was a component." Id. at 290-91.

We briefly describe the facts in Marrone. In 1995, the DeCilveos contracted to build a new home. The home included stucco siding --- EIFS --- manufactured and distributed by Sto. In 2003, the Marrones purchased the home from the DeCilveos who had experienced no problem with the siding. As here, the DeCilveos had no contact with Sto, received no warranties and did not rely on any representations regarding the siding. After the Marrones purchased the home, they received a letter from their homeowners insurance company threatening to cancel their coverage because of the siding. Additionally, they discovered that the EIFS siding was defective. Thus, the Marrones brought a cause of action against various defendants, including Sto. The same expert who presented a report on plaintiffs' behalf here, also presented a report in Marrone. As we noted:

A September 2005 expert report provided to plaintiffs by R.V. Buric indicated that the construction contractor had improperly installed the EIFS cladding. However, Buric also opined that the EIFS system was poorly designed because it depended on the applied cladding being perfectly water-tight and had no back-up system to carry moisture away from the exterior walls if water penetrated behind the cladding. Buric found damage to the ...

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