Case Name: HEXAGON HOLDINGS, INC. v. CARLISLE SYNTEC INCORPORATED et al.
Court: Rhode Island Supreme Court
Jurisdiction: Rhode Island
Decision Date: 2019-01-17
Citations: 199 A.3d 1034
Docket Number: No. 2017-175-Appeal.; WC 15-512
Parties: HEXAGON HOLDINGS, INC.
v.
CARLISLE SYNTEC INCORPORATED et al.
Judges: 
Reporter: West's Atlantic Reporter, Third Series
Volume: 199
Pages: 1034–1046

Head Matter:
HEXAGON HOLDINGS, INC.
v.
CARLISLE SYNTEC INCORPORATED et al.
No. 2017-175-Appeal.
WC 15-512
Supreme Court of Rhode Island.
January 17, 2019
Justice Indeglia, for the Court.
The plaintiff, Hexagon Holdings, Inc. (Hexagon), appeals from the grant of summary judgment in favor of defendant McKenna Roofing and Construction, Inc. (McKenna). This matter originally appeared before the Court on an order to show cause why the issues in the case should not be summarily decided. In an order dated March 5, 2018, the Court returned the case to the regular calendar for full argument. Hexagon Holdings, Inc. v. Carlisle Syntec Incorporated , 179 A.3d 146, 147 (R.I. 2018) (mem.). In doing so, we "specifically direct[ed] the parties to brief the third-party intended beneficiary issue among such other issues that they consider germane to decide the issue before this Court." Id. The parties appeared before the Court on October 3, 2018, for oral argument. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.
I
Facts and Travel
The pertinent facts are as follows. In 2006, Hexagon entered into a contract with A/Z Corporation to construct a new facility at the Quonset Business Park, located in North Kingstown, Rhode Island. As general contractor, A/Z Corporation subcontracted the roofing installation to McKenna, authorizing McKenna to install a specific roofing system manufactured by defendant Carlisle Syntec Incorporated (Carlisle). Hexagon alleges that, almost immediately, the new roof began to leak.
On October 14, 2015, approximately nine years after first contracting with A/Z Corporation, Hexagon filed a complaint in Washington County Superior Court against Carlisle and McKenna, alleging breach of contract as to both defendants (Count I); breach of express warranty as to Carlisle only (Count II); and breach of the implied warranty to construct in good and workmanlike manner (Count III), misrepresentation (Count IV), and negligence (Count V), against both defendants. Hexagon alleged that McKenna had improperly installed the roof and sought to recover the cost of replacing it. Hexagon did not assert claims against A/Z Corporation, the general contractor, for reasons Hexagon later described as "judicial efficiency and not choosing to damage a relationship with somebody that [it] had a positive relationship with * * *." McKenna moved for summary judgment pursuant to Rule 56 of the Superior Court Rules of Civil Procedure and provided the following as the undisputed statement of facts:
"The plaintiff entered into a contract with A/Z Construction [sic ] to act as a general contractor for the construction of its building located at 250 Circuit Drive, North Kingstown, RI in 2006. * * * Plaintiff alleges that Carlisle supplied a 'Carlisle Golden Seal Total Roofing System' to the building. * * * Plaintiff's Complaint further alleges that Carlisle supplied it with a written warranty concerning the roofing system dated July 15, 2006. * * * McKenna was a subcontractor on the project, and installed the Carlisle roofing system.
"Plaintiff alleges that the roofing system failed. * * * Specifically, the plaintiff claims that the roof began leaking in 2006. * * * The plaintiff further alleges that the leaks are due to defects in materials and/or installation."
In its memorandum in support of its motion, McKenna argued that Hexagon did not allege viable claims for breach of contract and breach of implied warranty against McKenna because no contract existed between the parties. McKenna further argued that Hexagon failed to specifically plead that Hexagon was an intended beneficiary of the subcontract between McKenna and A/Z Corporation, as required by Rule 8 of the Superior Court Rules of Civil Procedure. In addition, McKenna argued that the economic loss doctrine barred Hexagon from recovering economic damages on the negligence claim in Count V of its complaint.
In its opposition to McKenna's motion for summary judgment, Hexagon accepted McKenna's undisputed facts in their entirety, and countered that its claims against McKenna for breach of contract and breach of implied warranty were sustainable because third-party intended beneficiaries can maintain a breach-of-contract claim even in the absence of a contract between a plaintiff and a defendant. Hexagon added that this theory did not need to be specifically pled and that, for summary-judgment purposes, it had provided sufficient proof of this third-party intended beneficiary theory by accepting the undisputed facts offered by McKenna. In this regard, we note that Hexagon failed to submit either the general contract between Hexagon and A/Z Corporation or the subcontract between McKenna and A/Z Corporation in its opposition to the motion. Addressing its negligence claim, Hexagon argued that the economic loss doctrine, which bars recovery for pure economic loss in a negligence action, does not apply to this case because no privity of contract existed between Hexagon and McKenna.
The hearing on McKenna's motion for summary judgment was held on November 21, 2016. The motion justice granted the motion, holding that Hexagon was only an incidental beneficiary, as opposed to an intended beneficiary, of the subcontract between McKenna and A/Z Corporation. The court reasoned that Hexagon had failed to show that it was directly and unequivocally an intended beneficiary. He held that the economic loss doctrine applied, barring Hexagon's claim for pure economic loss, because the parties were engaged in a commercial transaction. An order granting McKenna's motion for summary judgment was entered on December 6, 2016. On December 19, 2016, Hexagon prematurely appealed to this Court. Final judgment was entered on December 27, 2016, in favor of McKenna on all counts of Hexagon's complaint, pursuant to Rule 54(b) of the Superior Court Rules of Civil Procedure.
II
Standard of Review
A motion for summary judgment "is designed to decide in an expeditious fashion cases presenting groundless claims * * *." Gallo v. National Nursing Homes, Inc. , 106 R.I. 485, 487, 261 A.2d 19, 21 (1970). When we review a hearing justice's grant of a motion for summary judgment, we conduct our analysis de novo . Jessup & Conroy, P.C. v. Seguin , 46 A.3d 835, 838 (R.I. 2012). If we determine that "there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law[,]" then we will affirm the grant of the motion. Sisto v. America Condominium Association, Inc. , 68 A.3d 603, 611 (R.I. 2013) (quoting Zanni v. Voccola , 13 A.3d 1068, 1071 (R.I. 2011) ). In this endeavor, "[w]e view the evidence in the light most favorable to the nonmoving party." Narragansett Indian Tribe v. State , 81 A.3d 1106, 1109 (R.I. 2014). However, once the moving party establishes "the absence of a material factual issue, the party opposing the motion has an affirmative duty to establish either by affidavit or by other means the material issue of fact to be decided." Grissom v. Pawtucket Trust Co. , 559 A.2d 1065, 1066 (R.I. 1989). The party opposing the motion cannot establish a genuine issue of fact merely by resting on denials in its pleadings. Volino v. General Dynamics , 539 A.2d 531, 533 (R.I. 1988). Rather, the opposing party must "respond with specific facts that would constitute a genuine issue for trial." Id.
McKenna filed a motion to dismiss the misrepresentation claim pursuant to Rule 12(b)(6) of the Superior Court Rules of Civil Procedure. The motion justice granted the motion and dismissed that claim, without prejudice, and it is not part of this appeal.
The claims against Carlisle are not at issue in this appeal.
"[T]his Court will treat [a] premature appeal as if it had been timely filed." Terzian v. Lombardi , 180 A.3d 555, 557 n.4 (R.I. 2018).

Opinion:
In cases where a party seeks summary judgment on a negligence claim, "[t]he motion justice may treat the issue of negligence as a matter of law only if the facts suggest only one reasonable inference." Berard v. HCP, Inc. , 64 A.3d 1215, 1218 (R.I. 2013) (quoting DeMaio v. Ciccone , 59 A.3d 125, 130 (R.I. 2013) ).
III
Discussion
A
Contract Claims
Hexagon contends that the hearing justice erred in granting summary judgment with respect to Counts I and III of its complaint, which allege breach of contract and breach of implied warranties. The thrust of Hexagon's argument is that, armed with McKenna's undisputed statement of facts, a reasonable jury could find that McKenna owed a contractual duty to Hexagon as a third-party beneficiary to the subcontract between A/Z Corporation and McKenna. We are therefore called upon to determine whether the owner of a building may survive summary judgment based on a third-party-beneficiary theory where the only evidence presented was that the subcontractor may have had knowledge of the identity of the property owner, who was the ultimate beneficiary of the work that was performed.
We deal first with McKenna's argument that Hexagon's third-party beneficiary assertion is not properly before this Court because it was not specifically pled. Rule 8(a) requires a complaint to contain: "(1) A short and plain statement of the claim showing that the pleader is entitled to relief; and (2) A demand for judgment for the relief the pleader seeks." A viable complaint must "give the opposing party fair and adequate notice of the type of claim being asserted[,]" even if it does not plead the ultimate facts or precise legal theory upon which the claim is based. Berard v. Ryder Student Transportation Services, Inc. , 767 A.2d 81, 83-84 (R.I. 2001) (quoting Haley v. Town of Lincoln , 611 A.2d 845, 848 (R.I. 1992) ). Here, even though Hexagon did not specifically reference the subcontract between A/Z Corporation and McKenna in its complaint, McKenna was on notice that Hexagon was bringing a claim for breach of contract with respect to this same transaction, even though the ultimate facts upon which Hexagon now relies are different from those set out in its complaint.
Further, "[i]t is well settled that '[w]hen one party for valuable consideration, engages another by contract to do some act for the benefit of a third party, the latter who would enjoy the benefits, may maintain an action for breach of contract.' " Glassie v. Doucette , 157 A.3d 1092, 1097 (R.I. 2017) (quoting Davis v. New England Pest Control Co. , 576 A.2d 1240, 1242 (R.I. 1990) ). "If the third party is an intended beneficiary, the law implies privity of contract." Davis , 576 A.2d at 1242. That is to say, if Hexagon were an intended beneficiary of the subcontract between A/Z Corporation and McKenna, Hexagon could maintain a breach-of-contract cause of action against McKenna. Therefore, the issue of Hexagon's claim for breach of contract as a third-party beneficiary of the subcontract between A/Z Corporation and McKenna is properly before this Court.
Having decided that Hexagon's third-party beneficiary assertions are properly before us, we turn now to the question of whether its claims for breach of contract and breach of implied warranty may survive McKenna's motion for summary judgment. "In order to prevail on a contract claim as a third-party beneficiary, the claimant must prove that he or she is an intended beneficiary of the contract." Glassie , 157 A.3d at 1097 (emphasis added). "An intended beneficiary of a contract 'stands in the shoes' of the promisee." Id. (quoting Cathay Cathay, Inc. v. Vindalu, LLC , 962 A.2d 740, 746 (R.I. 2009) ). Rhode Island courts follow the Restatement (Second) Contracts § 302 (1981) for guidance in distinguishing between intended and incidental beneficiaries of a contract. See Glassie , 157 A.3d at 1097 ; Cathay Cathay, Inc. , 962 A.2d at 745, 746. This section reads:
"(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
"(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
"(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
"(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary."
Both parties cite the Restatement (Second) Contracts § 302 at cmt. e. , illustration 19 (1981), to justify their respective positions. This illustration provides: "A contracts to erect a building for C. B then contracts with A to supply lumber needed for the building. C is an incidental beneficiary of B's promise, and B is an incidental beneficiary of C's promise to pay A for the building." In such a situation, the owner (C) is an incidental beneficiary of the contract between the general contractor (A) and the subcontractor (B). Incidental beneficiaries are not entitled to bring a claim for breach of contract under the third-party beneficiary doctrine. See Glassie , 157 A.3d at 1097 ; Restatement (Second) Contracts § 302(2). However, according to the Restatement (Second) Contracts § 302(1)(b), where a subcontractor provides more than mere materials, the owner's status will change from incidental to intended beneficiary of the subcontract, if "the circumstances indicate that [the subcontractor] intends to give [the owner] the benefit of the promised performance."
As we have stated, "[t]he language employed by the parties to a contract is the best expression of their contractual intent, and when that language is 'clear and unambiguous, words contained therein will be given their usual and ordinary meaning and the parties will be bound by such meaning.' " Cathay Cathay, Inc. , 962 A.2d at 746 (quoting Singer v. Singer , 692 A.2d 691, 692 (R.I. 1997) (mem.) ). Here, Hexagon has submitted neither the subcontract between A/Z Corporation and McKenna nor the general contract between Hexagon and A/Z Corporation into evidence; neither has it provided any evidence in the form of affidavits, interrogatories, or depositions to prove that the intent of A/Z Corporation and McKenna was to directly benefit Hexagon. While Hexagon proffers that this intent did exist, its only support lies in conjecture. Viewing the evidence in the light most favorable to Hexagon, as we must, its only evidence-from the undisputed facts supplied by McKenna-is that McKenna may have known that Hexagon owned the building. This alone does not create an issue of material fact as to McKenna's intent under the circumstances to benefit Hexagon apart from its own contract with A/Z Corporation. See Restatement (Second) Contracts § 302(1)(b).
Hexagon relies on two opinions by this Court in support of its position. In the first, Davis , we allowed a subsequent purchaser to claim breach of contract as a third-party beneficiary of a termite-inspection contract. Davis , 576 A.2d at 1242. Ruling on "the granting of a motion for a directed verdict" below, "the trial justice found there was evidence on which a jury could say that there was a contractual obligation between [the defendant] and the [plaintiffs]." Id. On appeal, this Court cited to "a substantial body of case law that holds that a pest-exterminating company is liable to a plaintiff who purchases property in reliance upon a false or inaccurate wood-infestation report provided to the vendor." Id. Thus, in that case, privity of contract was created by a clear duty on the part of the inspector to the subsequent purchaser. See id.
In Credit Union Central Falls v. Groff , 966 A.2d 1262 (R.I. 2009), we recognized "that the liability of an attorney may extend to third-party beneficiaries of the attorney-client relationship if it is clear that the contracting parties intended to benefit the third party." Groff , 966 A.2d at 1272. We then quoted an opinion of the Minnesota Supreme Court in holding that intended beneficiary status may be found where the "central purpose[,]" the "end and aim[,]" and the "heart of the contract" at issue were to benefit the third party. Id. at 1273 (quoting McIntosh County Bank v. Dorsey & Whitney, LLP , 745 N.W.2d 538, 547 (Minn. 2008) ). On appeal, we affirmed a trial court's grant of summary judgment in favor of the plaintiff because, under the circumstances, it was clear "that the legal services rendered by [the defendant] on behalf of his borrower-clients were done for the direct purpose of" benefiting the plaintiff lending institution. Id. at 1274 (emphasis added). Under the circumstances, the attorney-defendant clearly knew that the "central purpose" of the work he performed was for the benefit of the third-party lending institution, and, therefore, a contractual duty existed between the two. Id.
In both Davis and Groff , it was clear, under the particular circumstances of each case, that the contracting party (the inspection company and the lawyer, respectively) intended to directly benefit the third party (the subsequent purchaser and the lending institution, respectively). However, in the instant case, it is difficult for us to discern the intent of the parties, due to the limited record; we do not know the "central purpose" of the subcontract between A/Z Corporation and McKenna, because that contract is not before us. Furthermore, we know little about other circumstances surrounding the contract between A/Z Corporation and McKenna; we certainly do not know enough to find a genuine issue of material fact about McKenna's intent to benefit Hexagon.
The motion justice granted McKenna's motion for summary judgment on the basis that Hexagon was "an incidental beneficiary as opposed to intended beneficiary." Looking to the Restatement, he went on to state that, under the circumstances, it "must be clear that the owner of the property was directly and unequivocally the intended benefi[ciary]. So that's not the case here." We agree that this is a correct statement of law and that the motion justice appropriately granted summary judgment in favor of McKenna on Hexagon's claims of breach of contract and breach of implied warranties. See Groff , 966 A.2d at 1274. Although we have stated that "[s]ummary judgment is an extreme remedy that should be applied cautiously[,]" Hill v. National Grid , 11 A.3d 110, 113 (R.I. 2011) (quoting Plainfield Pike Gas & Convenience, LLC v. 1889 Plainfield Pike Realty Corp. , 994 A.2d 54, 57 (R.I. 2010) ), "[a] party who opposes summary judgment has a duty to establish that a genuine issue of material fact exists and may not rest solely upon allegations and denials in the pleadings." Urena v. Theta Products, Inc. , 899 A.2d 449, 452 (R.I. 2006). We are wary of allowing a party opposing a motion for summary judgment to point only to the moving party's submissions, without providing anything of its own.
It is clear from our review of the record that Hexagon failed to include any discovery from McKenna in its opposition to McKenna's motion for summary judgment. Furthermore, Hexagon has put forth no evidence, save for a suggestion-supplied by McKenna-that McKenna knew that it was performing work on Hexagon's building. We are left with a sparse record containing no indication that, at the time A/Z Corporation and McKenna entered into the subcontract, there was a specific intent to benefit Hexagon. As such, we affirm the motion justice's grant of summary judgment with respect to Counts I and III of Hexagon's complaint.
B
Negligence Claim
Next, Hexagon argues that the hearing justice erred in granting summary judgment with respect to Count V, alleging negligence against McKenna. Hexagon avers that, if there were a lack of contractual privity between Hexagon and McKenna, the economic loss doctrine would not bar recovery for purely economic loss due to negligence, even in a commercial transaction. The issue here is whether an owner of a commercial building may circumvent contractual privity with a general contractor by suing the subcontractor to evade application of the economic loss doctrine. We answer this question in the negative.
"The economic loss doctrine provides that 'a plaintiff is precluded from recovering purely economic losses in a negligence cause of action.' " Franklin Grove Corp. v. Drexel , 936 A.2d 1272, 1275 (R.I. 2007) (quoting Boston Investment Property # 1 State v. E.W. Burman, Inc. , 658 A.2d 515, 517 (R.I. 1995) ). "In other words, under this doctrine, a plaintiff may not recover damages under a negligence claim when the plaintiff has suffered no personal injury or property damage." Id. Where there are damages in the construction context between commercial entities, the economic loss doctrine will bar any tort claims for "purely economic damages." Id. (quoting E.W. Burman, Inc. , 658 A.2d at 517 ). In such a context, a party who is injured must resort to contract law for recovery. Id.
Hexagon asserts that a lack of privity in a transaction between commercial entities is sufficient to bar application of the economic loss doctrine. In E.W. Burman, Inc. , we were called to answer the following certified question from the United States District Court for the District of Rhode Island: "In the absence of privity of contract with the general contractor, is the subsequent purchaser of a commercial office building in Rhode Island entitled to recover economic damages which it is alleged were proximately caused by the negligence of the general contractor?" E.W. Burman, Inc. , 658 A.2d at 515. We answered this question in the negative, stating that it was "important to note that the parties involved in the matter before us are commercial entities. This is not a situation in which there is a discrepancy in the bargaining powers of the parties." Id. at 517. We therefore held that "[a]n extension of tort liability for economic damages to subsequent purchasers of commercial property is unwarranted. In the case of sophisticated commercial entities in the commercial real estate market, contract law is the proper device to allocate economic risk." Id. at 518.
In both Drexel and E.W. Burman, Inc. , we expressed our agreement with the Supreme Court of New Jersey's decision in Spring Motors Distributors, Inc. v. Ford Motor Co. , 98 N.J. 555, 489 A.2d 660 (1985), that:
"[t]he purpose of a tort duty of care is to protect society's interest in freedom from harm, i.e., the duty arises from policy considerations formed without reference to any agreement between the parties. A contractual duty, by comparison, arises from society's interest in the performance of promises. Generally speaking, tort principles, such as negligence, are better suited for resolving claims involving unanticipated physical injury, particularly those arising out of an accident. Contract principles, on the other hand, are generally more appropriate for determining claims for consequential damage that the parties have, or could have, addressed in their agreement. " E.W. Burman, Inc. , 658 A.2d at 517-18 (emphasis in original) (quoting Spring Motors Distributors, Inc. , 489 A.2d at 672 ); see also Drexel , 936 A.2d at 1275-76.
This rationale is no less applicable here. The motion justice granted summary judgment for McKenna, holding that, "[i]n a case such as this, it is a commercial transaction, it's appropriate for commercial entities to utilize contract law to protect themselves from economic damages." We agree that this is a correct statement of the law and that summary judgment was appropriately granted in favor of McKenna. Clearly, the economic loss doctrine would bar Hexagon, a commercial entity, from bringing a negligence claim against the general contractor, A/Z Corporation, with which it was in privity of contract. See Drexel , 936 A.2d at 1275-76 ; E.W. Burman, Inc. , 658 A.2d at 517-18. At least in this setting, where Hexagon deliberately avoided suing the general contractor, A/Z Corporation, Hexagon is barred from asserting a lack of privity with McKenna to avoid application of the economic loss doctrine. As such, summary judgment was appropriate as to Hexagon's claim for negligence against McKenna.
IV
Conclusion
For the reasons stated herein, we affirm the judgment in favor of McKenna on Counts I, III, and V of Hexagon's complaint, and remand the papers to the Superior Court.
Justice Goldberg did not participate.