Palau Intern. Traders, Inc. v. Narcam Aircraft, Inc.

• Decision Date: 15 March 1995
• Docket Number: No. 92-2529,92-2529
• Citation: 653 So.2d 412
• Parties: 20 Fla. L. Weekly D649 PALAU INTERNATIONAL TRADERS, INC., a Florida corporation, Appellant, v. NARCAM AIRCRAFT, INC., a Florida corporation, and International Airlines Holdings Corporation, a foreign corporation, Appellees.
• Court: Florida District Court of Appeals

Page 412

653 So.2d 412

20 Fla. L. Weekly D649

PALAU INTERNATIONAL TRADERS, INC., a Florida corporation, Appellant, v. NARCAM AIRCRAFT, INC., a Florida corporation, and International Airlines Holdings Corporation, a foreign corporation, Appellees.

No. 92-2529.

District Court of Appeal of Florida Third District.

March 15, 1995.

Rehearing Denied May 10, 1995.

McDonald & McDonald, and David M. McDonald, Miami, for appellant.

Arthur C. Moller, and John D. Hoffman, Miami, for appellee, Narcam Aircraft, Inc.

Before SCHWARTZ, C.J., and BARKDULL, HUBBART, NESBITT, BASKIN, JORGENSON, COPE, LEVY, GERSTEN and GODERICH, JJ.

EN BANC

GERSTEN, Judge.

Appellant, Palau International Traders, Inc. ("the buyer"), appeals a summary judgment entered in favor of appellee, Narcam Aircraft, Inc. ("Narcam"). We affirm.

I.

The issue is whether, under a negligence theory, a purchaser of a used airplane can recover for purely economic losses from an airplane mechanic with whom it has no privity.

The buyer, a Florida corporation, contracted with International Airlines Holding Corporation ("the seller") to purchase a used airplane. The buyer intended to use the airplane to transport freshly caught fish from the island of Palau to Japan where the fish would be sold to the Japanese sashimi market.

Prior to the sale, the airplane was under Peruvian registry. Under the terms of the contract, the seller was to: 1) provide the airplane with a United States registration; 2) deliver the airplane to the buyer with a valid United States certificate of airworthiness; and 3) have the airplane placed in conformity with a continuous maintenance program.

The contract provided in pertinent part:

At the time of delivery of the aircraft and closing of this transaction, the aircraft shall be under U.S. Registry and shall have a current United States' FAA Certificate of Airworthiness....

There was no legal requirement to obtain the airworthiness certificate to buy the plane, but one was needed to fly the plane. The contract also contained a bold type "AS IS, WHERE IS" disclaimer which disclaimed any and all warranties except those regarding liens and encumbrances. The disclaimer provided:

DISCLAIMER: THE USED AIRCRAFT AND OTHER ITEMS DELIVERED HEREUNDER ARE SOLD TO BUYER "AS IS, WHERE IS" AND THE WARRANTY OF TITLE SET FORTH IN (i) ABOVE IS EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER AND RIGHTS, CLAIMS AND REMEDIES OF BUYER AGAINST SELLER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT OR OTHER THING DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO (A) ANY CONDITION OF ANY ITEM DELIVERED PURSUANT TO THIS AGREMENT (SIC); (B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS: (C) ANY IMPLIED WARRANTY ARISING FROM THE COURSE OR (SIC) PERFORMANCE, COURSE OF DEALING OR USAGE OR (SIC) TRADE: (D) ANY OBLIGATION LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM THE STRICT LIABILITY OR THE ACTUAL OR IMPUTED NEGLIGENCE OF SELLER; AND (E) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

At the time buyer and seller entered their contract, Aeronaves del Peru was leasing this airplane from the seller. Aeronaves del Peru, in turn, contracted with Narcam to perform the necessary repairs, maintenance, and inspections on the airplane to obtain a United States certificate of airworthiness.

Narcam is a Federal Aviation Administration ("FAA") certificated domestic repair station located in Miami. 14 C.F.R. Sec. 145.1-145.63. The FAA requires that a certificated domestic repair station perform the requisite inspections on used airplanes before applying for a standard airworthiness certificate. 14 C.F.R. Sec. 21.183(d)(2). For issuance of the certificate, the airplane must be inspected to ensure that it conforms with its type design, is in accordance with the performance rules for 100-hour inspections and is found airworthy by the holder of a repair station certificate. 14 C.F.R. Sec. 21.183(d)(2)(ii).

Although Aeronaves del Peru hired Narcam to repair and inspect the airplane, Narcam was aware of the contract between the buyer and seller. Narcam also knew that the purpose of its maintenance and inspection work was to obtain an airworthiness certificate. Yet, Narcam did not control the issuance of the airworthiness certificate. The FAA had the final authority to certify the airplane as airworthy. 14 C.F.R. Sec. 21.183(d)(3).

After concluding its work, Narcam entered a maintenance release in the airplane's logbook and completed the application for an airworthiness certificate. Narcam verified that the airplane had been inspected and found airworthy. Although the sale had not yet been consummated, the buyer signed the section of the application entitled "owner certification."

Two days later, the buyer executed a chattel mortgage and promissory note to the seller for the airplane. The following day, the buyer took delivery of the airplane even though the standard airworthiness certificate had not been issued by the FAA.

A week after the buyer took delivery of the airplane, an FAA-designated airworthiness representative reviewed the airplane's maintenance records and logbooks, inspected the plane, and certified the application for an airworthiness certificate. Thereafter, the FAA-designated airworthiness representative issued a standard airworthiness certificate for the airplane.

Six months later, when the airplane was located in Palau, the buyer discovered that the landing gear was cracked due to extensive corrosion. The buyer alleged this condition existed when Narcam conducted its inspection of the airplane six months earlier. It is undisputed that there were no accompanying personal injuries or property damage to property outside the contract.

The buyer filed a complaint against the seller and Narcam for economic losses including the cost of repairs to the airplane, loss of use of the airplane, and consequential damages. In the complaint, the buyer alleged that the seller breached its contract; that Narcam was negligent in its repairs on the airplane; and, that Narcam negligently misrepresented the condition of the airplane. The buyer further alleged that Narcam had negligently overlooked existing conditions involving corrosion while inspecting the airplane in Miami. Consequently, the buyer sought damages from Narcam for the additional expense of having the repairs performed on a Pacific island.

The seller cross-claimed against Narcam for indemnification. The buyer then settled its claim against the seller and the claims and cross-claims between the buyer and seller were dismissed. The buyer's claims against Narcam were unaffected by the settlement.

Narcam then moved for summary judgment alleging that the complaint failed to state a cause of action based upon the economic loss rule. The trial court granted Narcam's motion for summary judgment as a matter of law.

II.

The buyer contends two exceptions to the economic loss rule apply precluding the granting of summary judgment for Narcam. First, relying upon A.R. Moyer, Inc. v. Graham, 285 So.2d 397 (Fla.1973), the buyer argues it is a third party who could foreseeably sustain an economic loss proximately caused by the negligent performance of Narcam as a certificated airplane mechanic and repair station. Thus, the buyer submits it has a cause of action against Narcam under a tort theory despite the absence of privity. Second, relying upon First Florida Bank, N.A. v. Max Mitchell & Co., 558 So.2d 9 (Fla.1990), the buyer maintains that it reasonably relied upon information which was negligently supplied by Narcam and which guided the buyer in its decision to purchase the airplane.

Narcam asserts that the trial court properly entered summary judgment as a matter of law because Florida's economic loss rule bars the buyer's tort claims and no exceptions to the economic loss rule apply.

In order to evaluate the merits of these respective positions, it is necessary to discuss the evolving Florida law on the economic loss rule and the exceptions to the rule.

III.

In A.R. Moyer, Inc. v. Graham, 285 So.2d at 397, a non-privity of contract case, the court approved recovery for economic losses without personal injury or property damage based on a negligent tort. The court stated that "a third party general contractor, who may foreseeably be injured or sustained an economic loss proximately caused by the negligent performance of a contractual duty of an architect, has a cause of action against the alleged negligent architect, notwithstanding absence of privity." Id. at 402. The court explained:

Altogether too much control over the contractor necessarily rests in the hands of the supervising architect for him not to be placed under a duty imposed by law to perform without negligence his functions as they affect the contractor. The power of the architect to stop the work alone is tantamount to a power of economic life or death over the contractor. It is only just that such authority, exercised in such a relationship, carry commensurate legal responsibility.

Id. at 401 (emphasis added) (quoting United States ex rel. Los Angeles Testing Lab. v. Rogers & Rogers, 161 F.Supp. 132, 136 (S.D.Cal.1958).

In First American Title Ins. Co. v. First Title Service Co., 457 So.2d 467 (Fla.1984), the court addressed a claim by a party not in privity with an abstract company for negligent preparation of an abstract. The court found that the plaintiff was a third party beneficiary of the abstracter's employment contract. In First American, unlike Moyer, the court limited liability to parties to the abstract transaction and intended and known third party beneficiaries, rather than to all foreseeable injured parties. Id. at 472-73. See also ...