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(A revised version of this article appears in The Construction
Lawyer, Volume 22, No. 4, Fall 2002, published by the
American Bar Association's Forum on the Construction Industry.)
By John W. Ralls
Howrey LLP
A
couple hired a contractor to build a home. After construction
was completed, the owners noticed heaving and cracking of
concrete in their basement as well as problems with their
basement, patio, garage floor and foundation. Investigation
revealed that the problems stemmed from improper backfill
and compaction attributable to the subcontractor that performed
excavation. The prime contractor began to make repairs.
The
subcontractor's liability carrier agreed to reimburse the
prime contractor for specified repairs. In return, one of
the owners (the husband) and the prime contractor signed
a release that discharged the subcontractor "from any
and all claims… arising from [the subcontractor]'s
work…." The wife witnessed the release but did
not sign in her individual capacity.
After
the release was signed and after the repairs were made,
the owners continued to experience problems (including cracking
and heaving of the driveway and cracks in the foundation
walls) and found more construction defects. The owners sued
the prime contractor for damages arising from these construction
defects.
The
prime contractor moved for summary judgment based on the
release. The prime contractor claimed that all of the problems
that formed the basis of the complaint stemmed from the
subcontractor's excavation work. The prime contractor argued
that the release of the subcontractor also released any
vicarious liability claim against the general contractor.
The trial court agreed with the prime contractor's position
and granted its motion for summary judgment. The South Dakota
Supreme Court affirmed in part and reversed in part. Crause
v. Reyelts, 2002 S.D. 64 (2002).
The
court drew a distinction between the effect of the release
on the husband's claims and the effect of the release on
the wife's claims.
Regarding
the husband's claims, the court agreed with the trial court
that the release barred any effort to impose vicarious liability
upon the prime for problems arising from the subcontractor's
work. However, the owners submitted evidence that some of
the problems at issue in the suit did not arise from the
subcontractor's work. "Therefore, we remand for the
trial court to consider which, if any, of [husband]'s vicarious
liability claims are barred because they arose out of [subcontractor]'s
work, and which, if any, of [husband]'s other claims may
be pursued because they do not arise out of [subcontractor]'s
work."
As
to the wife's claims, the prime contractor argued that the
wife was bound by the husband's release because the husband
had actual or ostensible authority to bind her. By granting
summary judgment in favor of the prime contractor, the trial
court implicitly found that the wife was bound by the release.
The South Dakota Supreme Court found that the issue turned
on a question of fact and could not be resolved as a matter
of law. The court remanded the question to the trial court
to determine whether, in fact, the husband had actual or
ostensible authority to bind his wife.
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-848-3362 or at rallsj@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2002 Howrey LLP
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