### Filed 12/6/18 by Clerk of Supreme Court
IN THE SUPREME COURT
STATE OF NORTH DAKOTA

2018 ND 273

Shannon Bakke, Plaintiff and Appellant

v. Magi-Touch Carpet One F loor & Home, Inc., Defendant and Appellee

and
SPS Companies, Inc., Defendant

No. 20180116

Appeal from the District Court of Burleigh County, South Centra l Judicial District, the Honorable David E. Reich, Judge.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Opinion of the Court by Jensen, Justice

. Shawn A. Grinolds , Bismarck, ND, for plaintiff and appellant.

Cloe A. Kilwein(argued) and William P. Harrie (on brief), Fargo, ND, for defendant and appellee Magi-Touch Carpet One Floor & Home, Inc.Bakke v. Magi-Touch Carpet One Floor & Home, Inc.
No. 20180116

Jensen, Justice. [¶1] Shannon Bakke appeals from a judgment in favor of Magi-Touc h Carpet One Floor & Home, Inc. and denial of her motion to amend her compla int. Bakke asserts the district court erred in concluding she could not pursue a c laim against Magi-Touch because Magi-Touch was not liable for the acts of its independe nt contractor. Bakke also asserts the district court erred in denying, as futile, he r motion to amend her complaint to assert a contract claim against Magi-Touch. We af firm in part, reverse in part, and remand this case to the district court for further proceedings on Bakke’s contract claim.
I. [¶2] Bakke entered into a contract with Magi-Touch for the insta llation of floor tiles, a shower base, and related products in a bathroom withinBakke’s home. MagiTouch arranged to have the shower base and tile installed by VASolutions, LLC, an independent contractor. Bakke asserts the shower door was impr operly installed, the improper installation resulted in the shower door imploding, an d the implosion caused damage to property in and around th e shower requiring the bathr oom door and trim to be repainted. [¶3] Magi-Touch refused to compensate Bakke for repainting the b athroom door and trim. Bakke initiated the litigation in small claims court using a court provided small claims court affidavit form and sought to recover compens ation for the repairs to the bathroom door and trim. The small claims court affidavi t form only requires a general description of the claim, and Bakke did not state whe ther she was asserting tort or contract claims. [¶4] Magi-Touch responded to the small claims court affidavit wi th a formal answer and did not use the small claims court answer form. The answer included a demand for a jury trial and defenses that can be fairly characterized as responding to a

1negligence (tort) cause of action. The answer included an asse rtion that Bakke’s claim was barred by the economic loss doctrine; the economic lo ss doctrine would limit Bakke’s recovery to a breach of contract claim and preclu de tort claims such as negligence. Magi-Touch also requested removal of the case from the small claims court to the district court. [¶5] After removal of the case to the district court, Magi-Touchmoved for summary judgment asserting VA Solutions was hired as an independent contractor and MagiTouch could not be held liable for the negligence of an indepen dent contractor. The district court granted Magi-Touch’s request for summary judgment after determining Magi-Touch had no liability for the negligence of an independen t contractor. In the same order, the district court granted SPS Companies, Inc.’s mo tion to dismiss after determining SPS was relieved from liability for distribution of a defective product because SPS is a non-manufacturing seller as defined by N.D.C.C . § 28-01.3-04. Bakke has not appealed the dismissal of SPS from the litigation

. [¶6] At the same time the district court considered Magi-Touch’s motion for summary judgment and SPS’s motion to dismiss, the district court considered Bakke’s motion to file an amended complaint. The amended complaint exp anded on the general claim asserted in the small claims court affidavit and specifically asserted claims for breach of contract, fraud, deceit, negligence, and unlawful sales practices. The district court denied Bakke’s request for leave to file the amended complaint after determining the claims would be futile. In doing so, the distr ict court relied on its prior determination that Magi-Touch could not be held responsib le for the negligent acts of VA Solutions, an independent contractor.
II. [¶7] In its order granting summary judgment, the district court determined Bakke and Magi-Touch entered into a contract for the installation of floor tiles, a shower base, and the related products in a bathroom within Bakke’s hom e. That finding is consistent with Magi-Touch’s assertion in its answer that the e conomic loss doctrine precludes tort claims.

2[¶8] The elements of a contract are outlined in N.D.C.C. § 9-01- 02 and include parties capable of contracting, the consent of the parties, a l awful object, and consideration. In the present case, all of those elements exis t: 1) both parties were capable of entering into a contract; 2) both parties consented to the contract; 3) installation/remodeling of a bathroom is a lawful object; and 4 ) consideration for the contract was satisfied by Magi-Touch’s agreement to provide mat erials and installation in exchange for payment from Bakke. The district court properly determined the existence of a contract between the parties for the installation of floor tiles, a shower base, and the related products in a bathroom wi thin Bakke’s home.
III. [¶9] North Dakota law recognizes an implied warranty of fitness for the purpose in construction contracts. Leno v. K & L Homes, Inc. , 2011 ND 171, ¶ 10 , 803 N.W.2d 543 (citing Dobler v. Malloy , 214 N.W.2d 510, 516 (N.D. 1973)). This Court has recognized the implied warranty of fitness for a particular pur pose in construction contracts where: (1) the contractor holds himself out, expressly or by implicati on, as competent to undertake the contract; and the owner (2) has no p articular expertise in the kind of work contemplated; (3) furnishes no pl ans, designs, specifications, details, or blueprints; and (4) tacitl y or specifically indicates his reliance on the experience and skill of the contractor, after making known to him the specific purposes for which the building is intended.
Dobler , at 516 . The existence of an implied warranty of fitness for a partic ular purpose in a construction contract, and the breach of that warr anty, are findings of fact. Air Heaters, Inc. v. Johnson Elec., Inc. , 258 N.W.2d 649, 654 (N.D. 1977). [¶10] In distinguishing between claims for breach of a contract warranty and tort claims, this Court has held:
In Dakota Grain Co. v. Ehrmantrout , 502 N.W.2d 234, 236-37 (N.D. 1993), we explained the difference between a breach of warrantyaction arising under a sales contract and a negligence action. The se ller’s negligence, or lack of negligence, is not relevant to the quest ion of whether the seller breached his or her express warranty to deli ver conforming goods. Id . at 236 . A mere breach of contract does not, by

3itself, furnish a basis for tort liability grounded in negligen ce. Id

. Conduct which constitutes a breach of contract does not subject the actor to an action for negligence, unless the conduct also cons titutes a breach of an independent duty that did not arise from the contr act. Id

. at 236-37; see also Olander Contracting Co. v. Gail Wachter Investments , 2002 ND 65, ¶ 26 , 643 N.W.2d 29. Border Res., LLC v. Irish Oil & Gas, Inc. , 2015 ND 238, ¶ 48 , 869 N.W.2d 758 (Crothers, J., specially concurring) (citation omitted). [¶11] Bakke’s breach of contract claim falls under the judiciall y-recognized doctrine of implied warranty of fitness for a particular purpose arising from the parties’ construction contract. See e.g. , Leno , 2011 ND 171, ¶ 16 , 803 N.W.2d 543 (citing
Dobler , 214 N.W.2d at 516 ). The cause of action was for the economic loss associated with Bakke not receiving what had been bargained for in the parties’ agreement; the installation of floor tiles, shower base, and re lated materials in a manner that would satisfy the implied warranty of fitness for aparticular purpose. See
Leno , at ¶ 16 (citing W. Page Keeton, Pr osser & Keeton on Torts , 658-59, 680 (5th ed. 1984). “Though implied warranties are often described as s ounding both in tort and contract law, we decline to apply a tort concept to a contr actually-based implied warranty.” Id . Despite pleadings which asserted negligence, fraud/deceit, unlawful sales practices, defective products and other tort claims, alon g with extensive argument in the district court and this Court regarding the tort claims, the actionable portion of this case involves a breach of contract and is governed by contract law, not the law of torts.
IV. [¶12] We agree with the district court’s conclusion that Bakke w ould generally be precluded from asserting a negligence action against Magi-Touch for any negligent acts of its independent contractor, VA Solutions. See Grewal v. North Dakota Ass’n of Ctys. , 2003 ND 156, ¶¶ 10-12 , 670 N.W.2d 336; Rogstad v. Dakota Gasification
Co. , 2001 ND 54, ¶ 14 , 623 N.W.2d 382. However, Bakke also seeks to assert a claim for the breach of a contract, aside from negligence and o ther related torts.

4[¶13] A breach of contract is the nonperformance of a contractua l duty when it is due. See Restatement (Second) of Contracts § 235(2) (1981); see also WFND, LLC v. Fargo Marc, LLC , 2007 ND 67, ¶ 13 , 730 N.W.2d 841 (citing NDJI Civil C-50.50 (1995)). The elements of a prima facie case for breach of contract are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the breach. See Kuhn v. Marquart , 45 N.D. 482, 487, 178 N.W. 428, 429 (1920). Here, Magi-Touch agreed to provide materials and labor for the installation of floor tiles, a shower base, and related materials. [¶14] Magi-Touch attempts to avoid any implied warranty by sugge sting that its contractual obligation to provide the labor was satisfied by ar ranging for the labor and, once they had delegated that obligation to VA Solutions, they were relieved from any liability. “It is a well-established principle in the law of contracts that a contracting party cannot escape its liability on the contract b y merely assigning its duties and rights under the contract to a third party.” Rosenberg v. Son, Inc. , 491 N.W.2d 71, 74 (N.D. 1992). This well-established principle has been codifie d with regard to the sale of goods in N.D.C.C. § 41-02-17(1), N.D.C.C. , which reads as follows: 1. A party may perform that party’s duty through a delegate un less otherwise agreed or unless the other party has a substantial in terest in having the other party’s original promisor perform or control the acts required by the contract. No delegation of performance relieve s the party delegating of any duty to perform or any liability for br each. Professor Corbin explained this point succinctly in his treatis e on contract law as follows: An assignment is an expression of intention by the assignor that his duty shall immediately pass to the assignee. Many a debtor wis hes that by such an expression he could get rid of his debts. Any debto r can express such an intention, but it is not operative to produce s uch a hoped-for result. It does not cause society to relax its compu lsion against him and direct it toward the assignee as his substitute . In spite of such an “assignment,” the debtor’s duty remains absolutely unchanged. The performance required by a duty can often be delegated; but by such a delegation the duty itself is not esca ped.

5Rosenberg , at 74 (quoting 4 Corbin on Contracts § 866 at 452). This Court has applied this rule of law to all categories of contracts. Id

. [¶15] Here, Magi-Touch contracted to install floor tiles, a show er base, and related materials with its performance be ing subject to the implied war ranty of fitness for a particular purpose. A failure to satisfy the warranty of fitne ss for a particular purpose would be a breach of the contract between Magi-Touch and Bakke and give rise to a claim for breach of contract claim against Magi-Touch. While the agreement did not prevent Magi-Touch from engaging an independent contractor to d o the installation, the hiring of an independent contractor does not relieve Magi-T ouch from the performance of its obligations under the contract it had with B akke, including the satisfaction of the implied warranty of fitness for a particular purpose. In summary, assuming Bakke properly asserted a claim for breach of the part ies’ contract, the delegation of Magi-Touch’s obligation to provide labor to VA So lutions does not preclude a cause of action against Magi-Touch for a breach of the contract.
V. [¶16] Bakke’s proposed amended complaint included a claim that M agi-Touch had breached the parties’ contract by failing to perform in a “work manlike manner.” While not stated specifically as a breach of the warranty of fi tness for a particular purpose, the allegations sufficiently raises a claim for breachof the warranty of fitness for a particular purpose. [¶17] “Under N.D.R.Civ.P. 15(a) , once a responsive pleading has been served, a complaint may only be amended by leave of court or by written c onsent of the opposing party.” Johnson v. Hovland , 2011 ND 64, ¶ 8 , 795 N.W.2d 294. This Court has described the standard to be applied when a party moves to amend its complaint in response to an opposing party’s summary judgment motion: If leave to amend is sought before discovery is complete and ne ither party has moved for summary judgment, the accuracy of the “futi lity” label is gauged by reference to the liberal criteria of Federal Rule of Civil Procedure 12(b)(6). In thi s situation, amendment is not deemed futile as long as the proposed amended complaint sets forth a g eneral scenario which, if proven, would entitle the plaintiff to relie f against the

6defendant on some cognizable theory. If, however, leave to ame nd is not sought until after discovery has closed and a summary judgm ent motion has been docketed, the proposed amendment must be not on ly theoretically viable but also solidly grounded in the record. In that type of situation, an amendment is properly classified as futile unl ess the allegations of the proposed amended complaint are supported by substantial evidence. Darby v. Swenson, Inc.
, 2009 ND 103, ¶ 12 , 767 N.W.2d 147 (quoting Hatch v. Dep’t for Children, Youth and Their Families, 274 F.3d 12, 19 (1st Cir. 2001) (citations omitted)). An amendment is futile for purposes of determining whether leave to amend should be granted, if the added claim would not survive amotion for summary judgment. Benz Farm, LLP v. Cavendish Farms, Inc. , 2011 ND 184, ¶ 26 , 803 N.W.2d 818. [¶18] The district court denied Bakke’s request to amend the com plaint after determining the amendment would be futile. The district court’ s determination of the amendment to be futile was based on the premise that Bakke’s ne gligence claim was precluded because the work was performed by an independent contractor. While we agree a negligence cause of action against Magi-Touch would be precluded, the existence of the independent contractor did not relieve Magi-To uch of its obligation to perform under the terms of i ts contract with Bakke. In the context of a claim for a breach of the parties’ contract, the amendment was not futile and should have been allowed.
VI. [¶19] We agree with the district court that the remaining claims for fraud, deceit, and deceptive/fraudulent acts as proposed by Bakke would not withst and summary judgment. The remedy for fraud is rescission of the contract and requires returning the parties back to their original positions. Heart River Partners v. Goetzfried , 2005 ND 149, ¶ 21 , 703 N.W.2d 330. Fraud, if asserted, terminates the contract at its inception through the rescission. Bakke does not seek rescissi on of the contract, and the amendment to assert a claim for fraud was properly denied.

7[¶20] In contrast to fraud, deceit is not an action dependent ona contract; it is a tort cause of action, and allows recove ry of damages upon proof of an affirmative misrepresentation or suppression of material facts. See N.D.C.C. § 9-10-02; Delzer v. United Bank of Bismarck , 527 N.W.2d 650, 653 (N.D. 1995). Deceit appears in N.D.C.C. ch. 9-10, Obligations Imposed by Law, along with inten tional acts and negligence. If the parties have a contractual relationship, it is possible, in only very limited circumstances, to assert both a breach of contract clai m and a deceit claim. Delzer , at 654 ; Pioneer Fuels, Inc. v. Montana-Dakota Utils., Co. , 474 N.W.2d 706,
709 (N.D. 1991). Bakke has alleged no facts that there was deceit separate from the parties’ contract and dismissal of an amended complaint to asse rt a cause of action for deceit was appropriate. [¶21] Lastly, N.D.C.C. § 51-15-02 prohibits deceptive or fraudul ent acts in connection with the sale of merchandise. Bakke sought leave to amend without requesting additional discovery and a summary judgment motion h as been docketed. Under those circumstances, the proposed amendment must be both theoretically viable and solidly grounded in the record. Darby , 2009 ND 103, ¶ 12 , 767 N.W.2d 147. The district court properly denied the amendment for a cl aim under N.D.C.C. ch. 51-15 in determining the amendment to be futile because the allegations of the proposed amended complaint, with regard to a claim under N.D.C. C. ch. 51-15, were not supported by substantial evidence.
VII. [¶22] On remand, if Bakke is able to establish her breach of contract claim, she will be entitled to damages. The parties agree Bakke has already be en compensated for the damaged door, and the installation has been completed. The ir dispute involves the expense associated with repairing damage to the bathroom do or and trim caused by the implosion of the shower door. The bathroom door and tri m were not included within the items and installation covered by the parties’ contr act. [¶23] The general rule in the case of a breach of contract is th at the measure of damages is the amount which will compensate the injured person for the loss which

8a fulfillment of the contract would have prevented or the breac h of the contract now requires. Vallejo v. Jamestown Coll. , 244 N.W.2d 753, 758 (N.D. 1976). “The person injured is, as far as it is possible to do so by monetary award, to be placed in the position he would have been in had the contract been perfor med.” Id . The North Dakota Legislature, through N.D.C.C. § 32-03-09, has set out th e measure of damages for breach of contract, which provides as follows: For the breach of an obligation arising from contract, the meas ure of damages, except when otherwise expressly provided by the laws o f this state, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby or which in the ordinary course of things would be likely to result therefrom. No damag es can be recovered for a breach of contract if they are not clearly ascertainable in both their nature and origin. “This statutory provision is, in effect, the adoption of the co mmon law rule.” Id

. (citing Hayes v. Cooley , 13 N.D. 204, 100 N.W. 250, 254 (1904); Needham v. H.S.
Halverson & Co. , 22 N.D. 594, 135 N.W. 203, 207 (1912)). [¶24] In Dobler , we outlined the measure of damages under N.D.C.C. § 32-03-09, for breach of a construction contract as follows: There are, of course, two possible measures of damages. If the contract is substantially performed, and the breach of contract can be remedied without taking down and reconstructing a substantial p ortion of the building, the amount of damages is the cost of making th e work conform to the contract. Or, where the defects cannot be remed ied without reconstruction of a substantial portion of the work, th e measure of damage is the difference in value between what it would have been if built according to contract and what was actually built. 214 N.W.2d at 518 (citing Karlinski v. P.R. & H. Lumber & Constr. Co. , 68 N.D. 522, 281 N.W. 898, 901 (1938). This Court has recognized that under some circumstances, the cost to repair is the correct method for mea suring damages. Swain v. Harvest States Coops. , 469 N.W.2d 571, 574 (N.D. 1991). [¶25] The present dispute involves Bakke’s claim for damages nec essitated by the need to repair property damaged as a result of the alleged brea ch of contract premised on the failure to satisfy the warranty of fitness for a particu lar purpose. Bakke’s

9damages, if proven, fall within the scope of damages recoverabl e for a breach of

contract. VIII. [¶26] Bakke’s cause of action against Magi-Touch is properly ass erted as a breach of contract claim, must be resolv ed by the law of contracts, an d is not precluded by Magi-Touch employing an independent contractor to complete the installation. We affirm the district court’s summary judgment of Bakke’s tort cl aims against MagiTouch, affirm the dismissal of the claim against SPS, affirm th e denial of Bakke’s request to amend the complaint to assert tort claims, and rever se the district court’s denial of Bakke’s request to amend the complaint to assert a br each of contract claim. We remand this case for further proceedings consistent with thi s opinion on Bakke’s breach of contract claim. [¶27] Jon J. Jensen Lisa Fair McEvers Daniel J. Crothers Jerod E. Tufte Gerald W. VandeWalle, C.J.

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