When a homeowners sues a subcontractor for damage caused by the defective waterproofing work on retaining walls that the subcontractor installed, is it a complete answer for the subcontractor to say that it did exactly what the general contractor told them to do (regardless of what the standard of care is) and that the general contractor was satisfied with its work when it finished the job? A recent case holds that it is not.

In Stonegate Homeowners Association v. Staben (06 CDOS 10306 published on 11/7/06) the developer hired a general contractor to build retaining walls, who subbed out the waterproofing work to Staben. The general contractor instructed the subcontractor to waterproof the walls with Thoroseal according to the manufacturer’s specifications, because the general contractor was not familiar with applying Thoroseal. The sub claimed that he never received any specifications on how to apply the Thoroseal to the walls. The sub completed the waterproofing and drainage installation on the walls and the general contractor did not have any problem with the work, and paid him. Later efflorescence appeared on the walls and boggy conditions appeared next to the retaining wall, and the homeowner association sued.

The trial court granted summary judgment against plaintiff and a nonsuit of the general contractor’s indemnity claim, holding that the subcontractor was only required to do what the general contractor asked for him to do as part of the oral agreement. The trial court excluded expert testimony on the standard of care, including manufacturer’s recommendations printed on the product that was used, because it found that was outside the oral agreement and, as a result, irrelevant to the action. The direct action failed, as did the general contractor’s cross-complaint, and attorneys fees were awarded to the subcontractor.

The appellate court viewed the issue differently and rejected the idea that the contract alone defines the subcontractor’s duty.

Quoting Miller and Starr’s treatise on California Real Estate, the court found that the subcontractor could be held liable in negligence if it failed to complete its work in a good and workmanlike matter:

"The subcontractor has a duty to perform work in a good and workmanlike manner. A subcontractor who is careless and negligent in the performance of the work is liable to the general contractor, to the owner, and to third persons for any damages proximately caused. When the work is performed in a defective manner, the measure of liability is the same as the damages that the owner can recover from the contractor … [¶] The owner ordinarily has a cause of action against the subcontractor arising from subcontractor’s defective work, even though there is no privity of contract between the owner and the subcontractor. The owner usually has a cause of action in negligence as a party within the area of foreseeable risk."

In terms of this particular, case, the Court felt that public policy required the subcontractor perform their specialized services consistent with the standard in the industry:

"Staben agreed to perform the waterproofing and drainage work on the retaining walls built by Palacios and had the duty to perform those tasks in a good and workmanlike manner. As such, the testimony of Stonegate’s experts was relevant to the issue of whether Staben met the standard of care expected within the industry. The trial court’s focus on the terms of the oral agreement to the exclusion of the standard of care evidence puts contractors like Palacios in an untenable position. The evidence showed that Palacios did not know how to do portions of the work subcontracted to Staben and therefore did not tell Saben how to perform its work. But under the trial court’s theory, Staben would only be liable for defects in its work if Palacios had given it detailed instructions on how to do the work. In other words, according to the court, the more the contractor must rely on the subcontractor, the less the subcontractor will be held accountable. This is not sound public policy and is not the law in California. Indeed, that Palacios did not tell Staben how to waterproof the walls or how to install the back drains underscores why Staben was under a duty to adhere to the standard of care in the industry. Without adherence to the standard of care, Staben could not have achieved the desired objective of its work." (Emphasis added.)

The case was remanded for trial on the merits. At least in this context, “I did what he told me to do” was held not to be not a complete defense.

It should be noted that some courts apply different legal standards to non-residential construction projects, distinguishing the case law dealing with residential construction. Thus, it is possible that a court could reach a different result in a public works, commercial or industrial project.