Aardema v. U.S. Dairy Systems, Inc.

• Decision Date: 24 August 2009
• Docket Number: No. 35218.,35218.
• Citation: 215 P.3d 505,147 Idaho 785
• Court: Idaho Supreme Court
• Parties: Don AARDEMA, an individual, Ron Aardema, an individual, and Donald J. Aardema, an individual and doing business as Aardema Dairy; Don Aardema, an individual and Ron Aardema, an individual, doing business as Double A. Dairy, Plaintiffs/Respondents/Cross-Appellants v. U.S. DAIRY SYSTEMS, INC., an Idaho corporation, doing business as Automated Dairy Systems, Inc., Westfaliasurge, Inc., a foreign corporation, and Earl Patterson, an individual Defendants/Appellants/Cross-Respondents, Freedom Electric, Inc., an Idaho corporation, John Doe and Jane Doe, husband and wife, I through X, and Business Entities I through X, Defendants.

215 P.3d 505

147 Idaho 785

Don AARDEMA, an individual, Ron Aardema, an individual, and Donald J. Aardema, an individual and doing business as Aardema Dairy; Don Aardema, an individual and Ron Aardema, an individual, doing business as Double A. Dairy, Plaintiffs/Respondents/Cross-Appellants v.U.S. DAIRY SYSTEMS, INC., an Idaho corporation, doing business as Automated Dairy Systems, Inc., Westfaliasurge, Inc., a foreign corporation, and Earl Patterson, an individualDefendants/Appellants/Cross-RespondentsFreedom Electric, Inc., an Idaho corporation, John Doe and Jane Doe, husband and wife, I through X, and Business Entities I through X, Defendants.

No. 35218.

Supreme Court of Idaho, Boise, June 2009 Term.

August 24, 2009.

Anderson, Julian & Hull, LLP, Boise, for appellant/cross-respondentU.S. Dairy Systems, Inc.Robert Anderson argued.

Benoit, Alexander, Harwood, High & Valdez, L.L.P., Twin Falls, and Brice A. Tondre, P.C., Lakewood, Colorado, for appellants/cross-respondentsWestfaliaSurge, Inc. and Earl Patterson.Brice Tondre argued.

Pedersen and Whitehead, Twin Falls, and Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, Kansas, for respondents/cross-appellantsDon Aarmeda, Ron Aarmeda, Donald J. Aarmeda, Aardema Dairy and Double A Dairy.Ken Peterson argued.

W. JONES, Justice.

This case is before this Court on interlocutory appeal from the district court's denial of Defendants/Appellants' (U.S. Dairy Systems, Inc., Westfaliasurge, Inc., and Freedom Electric, Inc.)motion for summary judgment.This Court granted permission to appeal pursuant to I.A.R. 12.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs/Respondents(Aardema Dairy) entered into a contract with Defendants/Appellants for the installation and maintenance of an automated milking system.Aardema Dairy filed suit alleging negligent design, installation and maintenance of the milking system which resulted in decreased milk production, quality and damage to the cows.Aardema Dairy moved to dismiss the contract claims and proceeded solely on the negligence issue.The district court granted Aardema Dairy's motion and dismissed the contract claim.Westfaliasurge and Freedom Electric filed written motions for summary judgment alleging that Aardema Dairy's negligence claim was barred by the economic loss rule.Aardema Dairy defended the motion for summary judgment by arguing that the economic loss rule did not apply, or alternatively, that the claim was not barred because the special relationship exception applied to the parties.U.S. Dairy orally joined the motion for summary judgment.The district court partially denied the motion finding that the economic loss rule did not bar Aardema Dairy's negligence action.Further, the district court held that no special relationship existed between Aardema Dairy and Defendants/Appellants.Defendants/Appellants filed a motion for permissive appeal, which this Court granted.

The primary dispute before this Court is whether there was an injury to Aardema Dairy's property or whether the damages are based purely on economic loss.Defendants/Appellants contend that the district court erred by denying summary judgment on the issue of whether the economic loss rule barred Aardema Dairy's tort claim.Aardema Dairy further contends that the district court erred in granting Westfaliasurge and U.S. Dairy's motion for summary judgment on the issue of whether a special relationship existed between the respective parties.

ISSUES ON APPEAL

Essentially, the only issue on appeal is whether the economic loss rule bars Aardema Dairy's tort claim.Therefore, we will address (1) whether the economic loss rule applies to Aardema Dairy's tort claim; (2) whether a genuine issue of material fact exists as to whether Aardema Dairy suffered any property damage; and (3) whether the district court improperly granted U.S. Dairy and Westfaliasurge's motion for summary judgment holding that no special relationship existed between Aardema Dairy and the respective Defendants.

STANDARD OF REVIEW

"An order denying a motion for summary judgment is not an appealable order itself[.]"Grover v. Wadsworth,147 Idaho 60, 66, 205 P.3d 1196, 1202(2009)(quotingHunter v. Dep't of Corr.,138 Idaho 44, 46, 57 P.3d 755, 757(2002)).

Permission may be granted by the Supreme Court to appeal from an interlocutory order or decree of a district court in a civil or criminal action, or from an interlocutory order of an administrative agency, which is not otherwise appealable under these rules, but which involves a controlling question of law as to which there is substantial grounds for difference of opinion and in which an immediate appeal from the order or decree may materially advance the orderly resolution of the litigation.

I.A.R. 12."[T]he intent of I.A.R. 12[is] to provide an immediate appeal from an interlocutory order if substantial legal issues of great public interest or legal questions of first impression are involved."Budell v. Todd,105 Idaho 2, 4, 665 P.2d 701, 703(1983)(per curiam).A permissive appeal pursuant to I.A.R. 12 is "an unusual posture."Winn v. Frasher,116 Idaho 500, 501, 777 P.2d 722, 723(1989).Due to "the unusual posture of the case, we are constrained to rule narrowly and address only the precise question that was framed by the motion and answered by the trial court."Id."Such appeal, [after acceptance by this Court,] shall proceed in the same manner as an appeal as a matter of right, unless otherwise ordered by [this Court]."I.A.R. 12(d).

"On a motion for summary judgment, all facts and inferences must be drawn in favor of the nonmoving party, and summary judgment is proper only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law."Thompson v. City of Idaho Falls,126 Idaho 587, 590, 887 P.2d 1094, 1097(Ct. App.1994)."Summary judgment dismissal of a claim is appropriate where the plaintiff fails to submit evidence to establish an essential element of the claim."Nelson v. City of Rupert,128 Idaho 199, 202, 911 P.2d 1111, 1114(1996).

ANALYSIS

Rule 12 appeals are only accepted in the most exceptional cases with the intent to resolve "substantial legal issues of great public interest or legal questions of first impression[.]"Budell,105 Idaho at 4, 665 P.2d at 703.Due to confusion regarding the application of the economic loss rule, this Court accepted this permissive appeal and offers this opinion, per the district court's request,¹ on the application of economic loss rule.This Court declines to make a determination whether the summary judgment motion was denied in error on the issue of whether Aardema Dairy's tort claim is barred by the economic loss rule.Instead, we vacate the district court's decision denying Defendants/Appellant's motion and remand this case to the district court for further proceedings in light of this opinion.We will address the issue of whether a special relationship existed between the parties and whether Westfaliasurge and U.S. Dairy's motions were properly granted on that basis only.

Whether the economic loss rule applies to Aardema Dairy's tort claim.

Aardema Dairy's tort claim arises out of the contract for the milking system.Negligence and breach of contract are "two distinct theories of recovery."Just's, Inc. v. Arrington Const. Co., Inc.,99 Idaho 462, 468, 583 P.2d 997, 1003(1978)."Ordinarily, breach of contract is not a tort, although a contract may create the circumstances for the commission of a tort....A tort requires the wrongful invasion of an interest protected by the law, not merely an invasion of an interest created by the agreement of the parties."Id.Generally, a plaintiff may not recover in tort where the sole allegation is that the defendant prevented the plaintiff from gaining a purely economic advantage.Id.However, damage to person or property when the property is not the subject of the transaction is recoverable under a negligence theory.Duffin v. Idaho Crop Improvement Ass'n,126 Idaho 1002, 1007, 895 P.2d 1195, 1200(1995).Economic loss has been defined as, but not limited to, "costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use."Id.(quotingSalmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Co.,97 Idaho 348, 351, 544 P.2d 306, 309(1975)(rev'd on other grounds)).

There can be no doubt that the seller's liability for negligence covers any kind of physical harm, including not only personal injuries, but also property damage to the defective chattel itself, as where an automobile is wrecked by reason of its own bad brakes, as well as damage to any other property in the vicinity.But where there is no accident, and no physical damage, and the only loss is a pecuniary one, through loss of the value or use of the thing sold, or the cost of repairing it, the courts have adhered to the rule, to be encountered later, that purely economic interests are not entitled to protection against mere negligence, and so have denied the recovery.

Clark v. Int'l Harvester Co.,99 Idaho 326, 333, 581 P.2d 784, 791(1978)(quotingW. Prosser, Handbook on the Law of Torts, § 101 at 665 (4th ed.1971)).

The manufacturer bears the risk that his product will cause physical injury to the consumer.Clark,99 Idaho at 334, 581 P.2d at 792(quotingSeely v. White Motor Co.,63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, 151(1965))."[The consumer] can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will."Id.;See alsoMyers v. A.O. Smith Harvestore Prod., Inc.,114 Idaho 432, 436, 757 P.2d 695, 699(1988)(holding that decreased milk production in cows caused by defective feed storage system is not an injury from a "calamitous event or dangerous failure of the product" and is...