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: 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

This action was instituted by Glenn Hawthorne, d/b/a 

Hawthorne Steel (Hawthorne), against the prime contractor 

Kober Construction Co., Inc. (Kober) and against PittsburghDes Moines Steel Company (PDM), a steel supplier. The trial 

court entered partial summary judgment against Hawthorne and 

in favor of PDM. Hawthorne appeals following certification 

by the trial court that the order was an appealable one. 

Kober contracted to build the Metra building in Billings, 

Montana, and on January 2, 1974, entered into a contract 

with PDM by which PDM agreed to furnish steel for the construction 

of the building. On January 11, 1974, Kober entered into a 

subcontract with Hawthorne by which Hawthorne agreed to 

erect the steel. 

On March 25, 1974, Hawthorne and his son, Jack, met 

with officials of PDM in Des Moine, Iowa, to discuss arrangements 

for the delivery of steel. A delivery date for the steel 

was not specifically discussed at this meeting, but a delivery 

date of May 1, 1974, had been discussed between the parties 

on prior occasions. Hawthorne, by affidavit, stated that he 

mobilized his employees to commence erection of structural 

steel in June, 1974. 

On March 4, 1974, PDM had received a directive from the 

United States Government to ship steel to the government on 

or before April 17, 1974. The contract existing between PDM 

and the United States for the delivery of steel pre-existed 

the contract between Kober and Hawthorne. Hawthorne was not 

told of the contract's existence. 

PDM did not deliver steel in May or June of 1974, and 

on August 9, 1974, PDM acknowledged by letter to ~ober 
Construction that it was having schedule problems in meeting 

its commitments to customers because of the directive it had 

received from the United States Government on March 4, 1974. 

Apparently Kober did not transmit this information to Hawthorne. 

It was not until the latter part of October, 1974, that 

Hawthorne received any shipments and then, according to 

Hawthorne, it did not receive the steel shipments in the 

sequence promised by PDM. 

On June 2, 1975, Hawthorne attended a meeting in Billings, 

at which PDM's representative was in attendance. At this 

time, Hawthorne was shown the directive from the United 

States Government issued to PDM. Hawthorne's affidavit, 

which for purposes of summary judgment, would have to be 

taken as true, provided: 

"At no time during our meeting with Mr. Davis 

in March, 1974, did he make any mention of the 

directive letter from the U.S. Department of 

Commerce; at no time was I or anyone in my business advised of the directive letter from the 

U.S. Department of Commerce until the meeting 

I attended with Mr. Davis in Billings, Montana, 

on or about June 2, 1975." 

By way of complaint filed in the District Court, Hawthorne 

alleged that the delay in delivery of steel caused him to be 

unable to finish his work until about January of 1976. He 

alleged that as a consequence of the delay sustained, he 

suffered financial losses. 

PDM did not dispute that it failed to deliver steel. 

PDM alleged that it had no contractual relationship with 

Hawthorne and because of the lack of privity, Hawthorne 

could not maintain an action against PDM. The trial court 

agreed and partial summary judgment in favor of PDM resulted. 

The following issues are presented on appeal: 

(1) Can Hawthorne maintain an action against PDM based 

upon negligence? 
(2) If privity of contract is required, did Hawthorne 

have privity with PDM on the basis of their interaction? 

(3) Can Hawthorne prevail on the basis of implied or 

quasi-contract? 

(4) Is the action barred by the statute of limitations? 

We hold that privity of contract is not required to 

maintain an action grounded in negligence. Therefore, we 

need not discuss a contention that privity existed or that 

this action can be maintained on the basis of implied or 

quasi-contract. further find that the action is not 

barred by the statute of limitations. 

The principle issue to be determined is whether Hawthorne 

can maintain an action for negligence in the performance of 

duties growing out of contract, where no privity of contract 

existed. We have examined the authorities and find a 

division to exist. 

The California Supreme Court resolved a similar question 

in determining whether a contractor who undertook construction 

work pursuant to a contract with an owner of premises, could 

be held liable in tort for business losses suffered by a 

lessee where the lessee alleged the contractor negligently 

failed to complete the project with due diligence. In 

J'Aire Corporation v. Gregory (1979), 157 Cal.Rptr. 407, 

598 P.2d 60, the California Supreme Court said: 

". . . Where a special relationship exists 

between the parties, a plaintiff may recover 

for loss of expected economic advantage 

through the negligent performance of a 

contract although the parties were not in 

contractual privity." 

The Oregon Supreme Court has denied recovery on the 

basis of lack of privity. In Mandal v. Hoffman Construction 

Co. (1974), 270 Or. 248, 527 P.2d 387, the City of Salem had 

contracted with a landscaping firm which in turn sub-contracted 
the work to the plaintiff. In a totally separate contract, 

the city hired the defendant to do site development work. 

The plaintiff subcontractor alleged that because of negligence 

on the part of the site developer, plaintiff was unable to 

complete its work within prescribed time and thereby suffered 

damage. In deciding for defendant, the Oregon Supreme Court 

said: 

"The question is whether non-intentional conduct of this nature will constitute a breach 

of duty, within the framework of the law of 

torts, to a person in the position of plaintiff in this case. We hold that there is no 

such duty where the only negligence charged 

is the failure to perform a contract with a 

third party." 

The philosophy of the Oregon court was, at one time, 

the established rule. There is a trend of authority, represented 

by the California Supreme Court, moving away from privity as 

a requirement in this type of action. 

This Court was a pioneer in abolishing privity as a 

requirement for recovery in a personal injury or wrongful 

death case. Brandenburger v. Toyota (1973), 162 Mont. 506, 

513 P.2d 268. We have not felt permanently bound to archaic 

legal concepts no matter how deeply rooted they may be. We 

view privity to be a concept having proper application in 

the area of contract law. There seems to be no sound public 

policy argument for extending its application to tort. 

Plaintiff's action sounds in tort. The action is one 

for negligence in the performance of a contractual duty. 

With respect to such an action Professor Prosser, Law of 

Torts, 4th Ed., Section 93, says: 

". . . by entering into a contract with A, 

the defendant may place himself in such a 

relation toward B that the law will impose 

upon him an obligation, sounding in tort 

and not in contract, to act in such a way 
that B will not be injured. The incidental 

fact of the existence of the contract with 

A does not negative the responsibility of 

the actor when he enters upon a course of 

affirmative conduct which may be expected 

to affect the interests of another person. 

". . . there are situations in which the making of the contract creates a relation between 

the defendant and the promisee, which is sufficient to impose a tort duty of reasonable 

care. By the same token, there are situations 

in which the making of a contract with A may 

create a relation between the defendant and 

B, which will create a similar duty toward B, 

and may result in liability for failure to 

act." 

The facts of this case speak strongly in favor of 

adopting the rule enunciated by Prosser. A trier of fact 

could determine, from the record before the trial court 

here, that PDM had reason to know that Hawthorne was relying 

upon PDM to deliver steel for erection in June of 1974. 

Likewise, that trier of fact could find that PDM could 

foresee damage to Hawthorne arising from failure of PDM to 

honor its contract commitment to Kober. Thus, to paraphrase 

Prossor, by entering into a contract with Kober, PDM has 

placed itself in such a relation toward Hawthorne, that the 

law will impose upon PDM an obligation, sounding in tort, 

to act in such a way that Hawthorne will not be injured. 

We do not intend to indicate a breach of duty on the 

part of PDM. If there are material issues of genuine fact, 

those facts must be determined. We simply hold that, viewing 

the facts in a light most favorable to Hawthorne, against 

whom summary judgment was entered, a sufficient case is 

presented to foreclose the entry of summary judgment. 

This case is governed by the three year statute of 

limitations applicable to negligence cases. Section 27-2- 

202(3), MCA. Hawthorne's claim for negligence is rooted in 
the failure of PDM to honor a contract commitment for the 

delivery of steel in May of 1974. The statute of limitations 

could not run before that time. Hawthorne's complaint was 

filed in April of 1977, within the three year period of 

limitations. Accordingly, it was timely. 

Partial summary judgment in favor of Pittsburgh-Des 

Moines Steel Company is vacated. The cause is remanded to 

the District Court to proceed 

We Concur: 

Chief Justice -