Opinion ID: 880774
Heading Depth: 1
Heading Rank: 4

Heading: Contract Claim Versus Tort Claim.

Text: Peat Marwick presents this issue in two phases, (1) the Clinic's contract claim sounds only in tort and should have been dismissed, and (2) that given the conduct of the parties, the implied contract between the Clinic and Peat Marwick defendants cannot reasonably be interpreted as having required the Peat Marwick defendants to consider the impact of the reorganization on the proposed IRB financing. Under the first phase of this issue, Peat Marwick contends that the gravamen of the Clinic's claim is one in tort, a claim that Peat Marwick did not perform with due care their obligation to review the Pepper report. Peat Marwick states that the Clinic's claim here is solely a tort action, and not a contract claim. The principal citation for this position asserted by Peat Marwick is Erickson v. Croft (1988), 233 Mont. 146, 760 P.2d 706. In that case the purchaser of ranch property brought suit against a real estate broker for fraud, negligence and breach of implied contract, and against an attorney and law firm for malpractice. In the District Court both defendants moved separately for summary judgment based on the applicable statutes of limitation and the District Court granted summary judgment against the plaintiff in that the claims were timedbarred. In granting summary judgment, the District Court in Erickson, above, determined that the essence of the causes of action alleged by Erickson was common law fraud and negligence, and that the claim under a contract theory was merely a rehashing of the fraud and negligence claims. The statute of limitations had run on both the fraud and negligence claims. Sections 27-2-203 and 27-2-204, MCA. Erickson claimed that his claim was based on an implied contract between him and the real estate broker. The District Court held that regardless of the possibility of the existence of an implied contract claim, under the nature of the claim asserted, the action was based on fraud and negligence, so that the longer statute of limitations applying to implied contracts, § 27-2-202, MCA, did not apply. This Court affirmed on appeal. Peat Marwick relies on this case, contending that the Clinic's contract claim is nothing more than a relabeling of the Clinic's negligence claim. See Erickson, 760 P.2d at 710. There is in truth sometimes a thin distinction drawn between whether an action is grounded in tort or a contract. Generally, the test of distinction seems to be that if the claim is based on a breach of specific terms of the contract without any reference to the legal duties implied by law upon the relationship created thereby, the action is in contract; whereas, if there is a contract for services which places the parties in such relation to each other that in an attempt to perform the promised service, a duty imposed by law as a result of the contractual relationship is breached, then the gravamen of the action is the breach of the legal duty rather than a breach of the contract, and so is a tort. See Brueck v. Krings (a case in which Peat Marwick was involved) (1982), 230 Kan. 466, 638 P.2d 904, 907; Yeager v. Dunnaven (1946), 26 Wash.2d 559, 174 P.2d 755; Sato v. Van Denburgh (1979), 123 Ariz. 225, 599 P.2d 181, 183. We also said in Erickson, above, distinguishing a holding in Unruh v. Buffalo Building Company (Mont. 1981), 633 P.2d 617, 618, that the gravamen of the claim and not the label attached controlled the limitations period to be applied to that claim. 760 P.2d at 710. In Thiel v. Taurus Drilling Ltd. (1985), 218 Mont. 201, 710 P.2d 33, we held that under certain circumstances, potential liability in tort may coexist with liability in contract, when the facts warrant either form of action. In this case, Peat Marwick perceived it had duty, express or implied, to review the Pepper report for tax and accounting considerations. The jury found that in failing to note the impact of the reorganization upon the IRB financing, Peat Marwick had breached its express or implied contract. By the same token, since a professional contract existed between the parties, the law imposed upon Peat Marwick the duty of employing that degree of learning, skill and judgment ordinarily possessed by members of the accounting profession, in the manner a reasonably careful accountant would do under the same or similar circumstances. Thus, whether looked at from the viewpoint of breach of contract, or from the breach of a duty imposed by law upon the performance of the contract, the allegations of the claims in this case can be stated either in tort or in contract. Such a result seems not to be uncommon. Hawkins, in Professional Negligence Liability of Public Accountants, 12 Vand.Law Review 797 (1959), an authority relied on by Peat Marwick, said: Like other professionals, the accountant usually gets into the position where he must exercise his professional skill as the result of a contract. The contract says what he has undertaken to do, but the law says that he must do it with reasonable care, by professional standards. If he fails, he may be liable either for breach of his contract or in tort, for breach of the general duty to exercise due care arising out of the contract relationship. We cannot therefore agree with Peat Marwick that the Clinic had only a single form of claim against the Peat Marwick defendants. A scissors more sharp than we command is required to pare away the contract implications from the tort claim here. The claims exist mutually in contract and in tort. The District Court was correct in refusing to dismiss the action on the grounds urged by Peat Marwick. Under the same issue, and almost in the same breath, Peat Marwick argues that the implied contract between the Clinic and Peat Marwick defendants could not reasonably be interpreted as requiring the Peat Marwick defendants to consider the impact of the reorganization on the IRB. Again, Peat Marwick argues that since the Clinic and Peat Marwick never actually negotiated or agreed to language defining the scope of Peat Marwick's engagement, an express contract did not exist. It argues that an implied contract can exist only where the terms are manifested by conduct. In support, they point to the sentence in the June 25, 1982 letter to the Clinic in which Peat Marwick said As some of Pepper, Hamilton, and Scheetz's recommendations relate to general business and legal considerations, we will limit our comments herein to those recommendations in which we see accounting or tax implications. This is but a repetition of the earlier argument, phrased in another form. It all comes to one. Either under the contract, express or implied, the duty to review for tax and accounting considerations included a duty to recognize the impact of the proposed reorganization upon the IRB financing; or from the tort viewpoint, it became the duty of Peat Marwick in examining the tax and accounting considerations, to exercise the due professional care ordinarily required of members in that profession. Under the circumstances here, the jury has decided those factual issues, whether in contract or tort.