Title: HAWTHORNE v KOBER CONSTRUCTION CO

State: montana

Issuer: Montana Supreme Court

Document:

No. 81-159 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981 GLENN HAWTHORNE, d/b/a HAWTHORNE STEEL et al., Plaintiff and Appellant, KOBER CONSTRUCTION COMPANY, INC., et al., Defendant and Respondent. Appeal from: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone Honorable William J. Speare, Judge presiding. Counsel of Record: For Appellant: Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana Jack Lewis argued, Great Falls, Montana For Respondent: Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana Cynthia Ford argued, Billints, Montana Cebull & Jones, Billings, Montana Submitted: December 4, 1981 Decided:cB I f p~ + I# ; . r . . 3 'I!'! Filed: M r . J u s t i c e Frank B. Morrison, Jr., d e l i v e r e d t h e Opinion of t h e Court. This a c t i o n w a s i n s t i t u t e d by Glenn Hawthorne, d/b/a Hawthorne S t e e l (Hawthorne), a g a i n s t t h e prime c o n t r a c t o r Kober Construction Co., Inc. (Kober) and a g a i n s t Pittsburgh- D e s Moines S t e e l Company (PDM), a s t e e l s u p p l i e r . The t r i a l c o u r t entered p a r t i a l summary judgment a g a i n s t Hawthorne and i n favor of PDM. Hawthorne appeals following c e r t i f i c a t i o n by t h e t r i a l c o u r t t h a t t h e order was an appealable one. Kober contracted t o b u i l d t h e Metra building i n B i l l i n g s , Montana, and on January 2 , 1974, entered i n t o a c o n t r a c t with P D M by which P D M agreed t o f u r n i s h steel f o r t h e construction of t h e building. O n January 11, 1974, Kober entered i n t o a subcontract with Hawthorne by which Hawthorne agreed t o erect t h e s t e e l . O n March 25, 1974, Hawthorne and h i s son, Jack, m e t with o f f i c i a l s of PDM i n Des Moine, Iowa, t o d i s c u s s arrangements f o r t h e d e l i v e r y of s t e e l . A d e l i v e r y d a t e f o r t h e s t e e l was n o t s p e c i f i c a l l y discussed a t t h i s meeting, b u t a d e l i v e r y d a t e of May 1, 1974, had been discussed between t h e p a r t i e s on p r i o r occasions. Hawthorne, by a f f i d a v i t , s t a t e d t h a t he mobilized h i s employees t o commence e r e c t i o n of s t r u c t u r a l s t e e l i n June, 1974. On March 4 , 1974, PDM had received a d i r e c t i v e from t h e United S t a t e s Government t o s h i p s t e e l t o t h e government on o r before April 17, 1974. The c o n t r a c t e x i s t i n g between PDM and t h e United S t a t e s f o r t h e d e l i v e r y of s t e e l pre-existed t h e c o n t r a c t between Kober and Hawthorne. Hawthorne was n o t t o l d of t h e c o n t r a c t ' s existence. P D M d i d n o t d e l i v e r s t e e l i n May o r June of 1974, and on August 9, 1974, P D M acknowledged by l e t t e r t o ~ o b e r Construction t h a t it was having schedule problems i n meeting i t s commitments t o customers because of t h e d i r e c t i v e it had received from t h e United S t a t e s Government on March 4 , 1974. Apparently Kober d i d n o t transmit t h i s information t o Hawthorne. I t was not u n t i l t h e l a t t e r p a r t of October, 1974, t h a t Hawthorne received any shipments and then, according t o Hawthorne, it d i d n o t r e c e i v e t h e s t e e l shipments i n t h e sequence promised by PDM. O n June 2 , 1975, Hawthorne attended a meeting i n B i l l i n g s , a t which PDM's r e p r e s e n t a t i v e was i n attendance. A t t h i s t i m e , Hawthorne was shown t h e d i r e c t i v e from t h e United S t a t e s Government issued t o PDM. Hawthorne's a f f i d a v i t , which f o r purposes of summary judgment, would have t o be taken a s t r u e , provided: "At no time during our meeting with M r . Davis i n March, 1974, d i d he make any mention of t h e d i r e c t i v e letter from t h e U.S. Department of Commerce; a t no time was I o r anyone i n m y busi- ness advised of t h e d i r e c t i v e l e t t e r from t h e U.S. Department of Commerce u n t i l t h e meeting I attended with M r . Davis i n B i l l i n g s , Montana, on o r about June 2 , 1975." B y way of complaint f i l e d i n t h e D i s t r i c t Court, Hawthorne a l l e g e d t h a t t h e delay i n d e l i v e r y of s t e e l caused him t o be unable t o f i n i s h h i s work u n t i l about January of 1976. H e a l l e g e d t h a t as a consequence of t h e delay sustained, he s u f f e r e d f i n a n c i a l l o s s e s . PDM d i d n o t d i s p u t e t h a t it f a i l e d t o d e l i v e r s t e e l . PDM a l l e g e d t h a t it had no c o n t r a c t u a l r e l a t i o n s h i p with Hawthorne and because of t h e lack of p r i v i t y , Hawthorne could n o t maintain an a c t i o n a g a i n s t PDM. The t r i a l c o u r t agreed and p a r t i a l summary judgment i n favor of PDM r e s u l t e d . The following i s s u e s a r e presented on appeal: (1) Can Hawthorne maintain an a c t i o n a g a i n s t PDM based upon negligence? ( 2 ) I f p r i v i t y of c o n t r a c t is required, d i d Hawthorne have p r i v i t y with PDM on t h e b a s i s of t h e i r i n t e r a c t i o n ? ( 3 ) Can Hawthorne p r e v a i l on t h e b a s i s of implied o r quasi-contract? ( 4 ) Is t h e a c t i o n barred by t h e s t a t u t e of l i m i t a t i o n s ? W e hold t h a t p r i v i t y of c o n t r a c t i s n o t required t o maintain an a c t i o n grounded i n negligence. Therefore, we need not d i s c u s s a contention t h a t p r i v i t y e x i s t e d o r t h a t t h i s a c t i o n can be maintained on t h e b a s i s of implied o r quasi-contract. f u r t h e r f i n d t h a t t h e a c t i o n i s n o t barred by t h e s t a t u t e of l i m i t a t i o n s . The p r i n c i p l e i s s u e t o be determined i s whether Hawthorne can maintain an a c t i o n f o r negligence i n t h e performance of d u t i e s growing o u t of c o n t r a c t , where no p r i v i t y of c o n t r a c t e x i s t e d . W e have examined t h e a u t h o r i t i e s and f i n d a d i v i s i o n t o e x i s t . The C a l i f o r n i a Supreme Court resolved a s i m i l a r question i n determining whether a c o n t r a c t o r who undertook c o n s t r u c t i o n work pursuant t o a c o n t r a c t with an owner of premises, could be held l i a b l e i n t o r t f o r business l o s s e s s u f f e r e d by a l e s s e e where t h e l e s s e e a l l e g e d t h e c o n t r a c t o r negligently f a i l e d t o complete t h e p r o j e c t with due diligence. In J ' A i r e Corporation v. Gregory (1979), 157 Cal.Rptr. 407, 598 P.2d 60, t h e C a l i f o r n i a Supreme Court s a i d : ". . . Where a s p e c i a l r e l a t i o n s h i p e x i s t s between t h e p a r t i e s , a p l a i n t i f f may recover f o r l o s s of expected economic advantage through t h e negligent performance of a c o n t r a c t although t h e p a r t i e s were not i n c o n t r a c t u a l p r i v i t y . " The Oregon Supreme Court has denied recovery on t h e b a s i s of l a c k of p r i v i t y . I n Mandal v. Hoffman Construction Co. (1974), 270 O r . 248, 527 P.2d 387, t h e City of Salem had contracted with a landscaping firm which i n t u r n sub-contracted t h e work t o t h e p l a i n t i f f . I n a t o t a l l y s e p a r a t e c o n t r a c t , t h e c i t y h i r e d t h e defendant t o do s i t e development work. The p l a i n t i f f subcontractor a l l e g e d t h a t because of negligence on t h e p a r t of t h e s i t e developer, p l a i n t i f f was unable t o complete i t s work w i t h i n p r e s c r i b e d t i m e and thereby s u f f e r e d damage. I n deciding f o r defendant, t h e Oregon Supreme Court s a i d : "The q u e s t i o n i s whether non-intentional con- d u c t of t h i s n a t u r e w i l l c o n s t i t u t e a breach of duty, w i t h i n t h e framework of t h e law of t o r t s , t o a person i n t h e p o s i t i o n of p l a i n - t i f f i n t h i s case. W e hold t h a t t h e r e is no such duty where t h e only negligence charged is t h e f a i l u r e t o perform a c o n t r a c t w i t h a t h i r d p a r t y . " The philosophy of t h e Oregon c o u r t was, a t one t i m e , t h e e s t a b l i s h e d r u l e . There i s a t r e n d of a u t h o r i t y , r e p r e s e n t e d by t h e C a l i f o r n i a Supreme Court, moving away from p r i v i t y a s a requirement i n t h i s type of a c t i o n . This Court was a pioneer i n a b o l i s h i n g p r i v i t y a s a requirement f o r recovery i n a personal i n j u r y o r wrongful d e a t h case. Brandenburger v . Toyota (1973), 162 Mont. 506, 513 P.2d 268. W e have n o t f e l t permanently bound t o a r c h a i c l e g a l concepts no m a t t e r how deeply rooted they may be. W e view p r i v i t y t o be a concept having proper a p p l i c a t i o n i n t h e a r e a of c o n t r a c t law. There s e e m s t o be no sound p u b l i c p o l i c y argument f o r extending its a p p l i c a t i o n t o t o r t . P l a i n t i f f ' s a c t i o n sounds i n t o r t . The a c t i o n is one f o r negligence i n t h e performance of a c o n t r a c t u a l duty. With r e s p e c t t o such an a c t i o n Professor P r o s s e r , Law of T o r t s , 4 t h Ed., S e c t i o n 93, says: ". . . by e n t e r i n g i n t o a c o n t r a c t with A, t h e defendant may p l a c e himself i n such a r e l a t i o n toward B t h a t t h e law w i l l impose upon him an o b l i g a t i o n , sounding i n t o r t and n o t i n c o n t r a c t , t o a c t i n such a way t h a t B w i l l not be injured. The i n c i d e n t a l f a c t of t h e existence of t h e c o n t r a c t with A does n o t negative t h e r e s p o n s i b i l i t y of t h e a c t o r when he e n t e r s upon a course of a f f i r m a t i v e conduct which may be expected t o a f f e c t t h e i n t e r e s t s of another person. ". . . t h e r e a r e s i t u a t i o n s i n which t h e mak- ing of t h e c o n t r a c t c r e a t e s a r e l a t i o n between t h e defendant and t h e promisee, which is suf- f i c i e n t t o impose a t o r t duty of reasonable care. By t h e same token, t h e r e a r e s i t u a t i o n s i n which t h e making of a c o n t r a c t with A may c r e a t e a r e l a t i o n between t h e defendant and B, which w i l l c r e a t e a s i m i l a r duty toward B , and may r e s u l t i n l i a b i l i t y f o r f a i l u r e t o a c t . " The f a c t s of t h i s case speak s t r o n g l y i n favor of adopting t h e r u l e enunciated by Prosser. A trier of f a c t could determine, from t h e record before t h e t r i a l c o u r t here, t h a t PDM had reason t o know t h a t Hawthorne was r e l y i n g upon P D M t o d e l i v e r s t e e l f o r e r e c t i o n i n June of 1974. Likewise, t h a t t r i e r of f a c t could f i n d t h a t P D M could f o r e s e e damage t o Hawthorne a r i s i n g from f a i l u r e of P D M t o honor i t s c o n t r a c t commitment t o Kober. Thus, t o paraphrase Prossor, by e n t e r i n g i n t o a c o n t r a c t with Kober, PDM has placed i t s e l f i n such a r e l a t i o n toward Hawthorne, t h a t t h e law w i l l impose upon PDM an o b l i g a t i o n , sounding i n t o r t , t o a c t i n such a way t h a t Hawthorne w i l l n o t be injured. W e do n o t intend t o i n d i c a t e a breach of duty on t h e p a r t of PDM. I f t h e r e a r e m a t e r i a l i s s u e s of genuine f a c t , those f a c t s must be determined. W e simply hold t h a t , viewing t h e f a c t s i n a l i g h t most favorable t o Hawthorne, a g a i n s t whom summary judgment w a s entered, a s u f f i c i e n t case i s presented t o f o r e c l o s e t h e e n t r y of summary judgment. This case i s governed by t h e t h r e e year s t a t u t e of l i m i t a t i o n s applicable t o negligence cases. Section 27-2- 2 0 2 ( 3 ) , MCA. Hawthorne's claim f o r negligence is rooted i n t h e f a i l u r e of P D M t o honor a c o n t r a c t commitment f o r t h e d e l i v e r y of steel i n May of 1974. The s t a t u t e of l i m i t a t i o n s could n o t run b e f o r e t h a t time. Hawthorne's complaint was f i l e d i n A p r i l of 1977, w i t h i n t h e t h r e e y e a r p e r i o d of l i m i t a t i o n s . Accordingly, it w a s timely. P a r t i a l summary judgment i n f a v o r of Pittsburgh-Des Moines S t e e l Company i s vacated. The cause i s remanded t o t h e District Court t o proceed W e Concur: Chief J u s t i c e -