American Reciprocal Insurers v. Bessonette

• Decision Date: 02 August 1963
• Citation: 235 Or. 507,384 P.2d 223
• Parties: AMERICAN RECIPROCAL INSURERS, Reciprocal Managers, Inc., a New York corporation, Appellant, v. Glenn D. BESSONETTE, Marshall O. Bessonette, and Joy O. Bessonette, husband and wife, and Walter A. Graff, dba Bessonette and Graff, General Contractors, Respondents, and Pacific Automatic Sprinkler, an Oregon corporation, Defendant.
• Court: Oregon Supreme Court

Page 223

384 P.2d 223

235 Or. 507

AMERICAN RECIPROCAL INSURERS, Reciprocal Managers, Inc., a New York corporation, Appellant, v. Glenn D. BESSONETTE, Marshall O. Bessonette, and Joy O Bessonette, husband and wife, and Walter A. Graff dba Bessonette and Graff, General Contractors, Respondents, and Pacific Automatic Sprinkler, an Oregon corporation, Defendant.

Supreme Court of Oregon, In Banc.

Argued and Submitted June 4, 1963.

Decided Aug. 2, 1963.

Richard E. Miller, Eugene, argued the cause for appellant. With him on the briefs were Robert E. Moulton, Eugene and Robert J. Johnston, Portland.

William G. Wheatley, Eugene, argued the cause for respondents. On the brief were Jaqua & Wheatley, Eugene.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, GOODWIN and DENECKE, JJ.

SLOAN, Justice.

We could not improve upon appellant-plaintiff's statement of this case taken from its brief:

'This appeal involves an action of law for damages tried by the court sitting without a jury.

'The owner, hereinafter referred to as the Lafferty partnership, contracted with defendant (this should be defendants) Bessonette and Graft to erect a grocery warehouse and with defendant Pacific Automatic Sprinkler to install a sprinkler system. Defendant Bessonette and Graff * * * caused a concrete wall to be constructed so as to cause a main sprinkler pipe to break after the building had been completed and accepted. Water under great presure in the pipe escaped and damaged the building. The tenant, Lefferty-Pioneer Corporation, had groceries stored in the warehouse which were damaged. Plaintiff insured both the partnership and the tenant corporation and is subrogated to their claims.

'The court granted an order of involuntary nonsuit to the contractor which built the sprinkler system.

'After trial, the court found defendant Bessonette and Graff negligently and proximately caused the damage complained of, but not responsible for the injury to the tenant for lack of privity. Judgment was entered accordingly against defendant for damages to the building only. Appeal is against defendant Bessonette and Graff only.'

Decision in this case is governed by the recent case of Strandholm v. General Construction Co., decided June 12, 1963, Or., 382 P.2d 843. Obviously, the trial judge did not have the advantage of the decision in Strandholm when he decided this case, nor did counsel at the time the case was submitted here.

It is claimed that even though the privity of contract doctrine may not apply to manufacturers and the like, it should apply to building contractors. We think such a distinction cannot be justified. See text and cases cited in 1 Products Liability, 1960, Frumer & Friedman, § 5.03(2), page 37, and Prosser, Torts, 1955, § 85, page 517-19; Hanna v. Fletcher, 1956, 97 U.S.App.D.C. 310, 231 F.2d 469, 58 A.L.R.2d 847. And, it is held that the lapse of time which may exist between the time of negligent construction and eventual injury is a factor for the jury to consider in determining the causal connection between the negligence and the injury. Leigh v. Wadsworth, 1961, Okl., 361 P.2d 849; Hale v. Depaoli, 1948, 33 Cal.2d 228, 201 P.2d 1, 13 A.L.R.2d 183; Begley v. Adaber Realty & Investment Company, Mo., 358 S.W.2d 785; and see the excellent opinion by Judge Murrah in Pryor v. Lee C. Moore Corporation (U.S.C.A. 10th Cir. 1958), 262 F.2d 673, which overruled a prior case (Lynch v. International Harvester Co. (C.C.A. 10th, Cir. 1932), 60 F.2d 223) in the same circuit; 1 Products Liability, 1960, Frumer & Friedman, § 11.03.

After the trial judge had found that defendants were factually liable he denied any of the damage suffered by the tenant because of the lack of privity. The Strandholm case holds that there was a duty in spite of the lack of privity, so this case must be reversed. Inasmuch as the only issue now left undetermined is that of damages the cause is remanded for the purpose of finding the amount thereof. Scott et al. v. Lawrence Whse. Co., 1961, 227 Or. 78, 101, 360 P.2d 610.

ROSSMAN, Justice (dissenting).

I do not believe that this case calls for the statement of the legal principles which govern the liability, if any, of a contractor to a person who, after completion of the building, becomes one of its tenants and later claims that through defective construction of the building he sustained damages.

In this case the persons whose rights are under analysis are the following: (1) the owners, (2) a lessee of the owners, (3) the general contractors, that is, the defendants who constructed the building, (4) another contractor who, under contract directly with the owners, installed the sprinkler system, and (5) the plaintiff, an insurance company which paid to the owners and the lessee damages that they incurred when water entered the building and who now claims that it is subrogated to the rights of the owners and the lessee.

The plaintiff claims that (1) it was the insurer of the owners of the building and one of the lessees, (2) a water pipe which lay under the floor of the building broke when the building settled, (3) the owner and the lessee were damaged when water entered the structure, (4) obedient to the terms of the policies of insurance which it had written, it paid the owners and the lessee the amounts of their damages, and (5) it became subrogated to the rights of the owners and the lessee against the contractor.

The circuit court awarded the plaintiff nothing on account of the sum which it had paid to the lessee, but awarded to the plaintiff judgment for the amount it had paid to the owners. The plaintiff challenges on appeal the refusal of the circuit court to grant judgment against the contractor, that is, the defendants, for the amount the plaintiff had paid to the lessee. The opinion of the majority reverses the judgment as to the lessee's claim and remands the case so that judgment may be entered for the loss that the tenant sustained. I am satisfied that the pleadings contain no averments whatever which permit the entry of judgment for the tenant's loss. The transcript of evidence is not before us. We have only the pleadings and the findings. Neither warrant the action which the majority is taking. A legally sufficient complaint must always precede the entry of judgment. A wrong must have been done by the person against whom a court is asked to enter judgment.

There is a material distinction between a transaction in which one buys an article, such as an automobile that later proves to be defective and another transaction in which he contracts for the construction of a building. When one buys an automobile, the latter is a finished product which stands before him and which he may see. It was not built according to any plans, specifications or directions which he gave.

Before a building contractor starts his work, the building is only a subject of contemplation. Possibly nothing more tangible than preliminary plans exist at that point. If the preliminary discussions are favorable, an architect will prepare plans and specifications. Then will come the bids and if one of them is satisfactory, a contract will be drafted which later will be signed by the owner and the contractor. The contract always incorporates within itself the plans and specifications. It requires the contractor to build the structure as designated in the plans and specifications. It likewise provides that the owner must accept and pay for the structure if it is built in accordance with the plans and specifications. Still later, when all construction work has been completed, the architect will certify to the owner, if the contractor was faithful to his contract, that the contractor has abided by his contract, that payment should be made, and the building should be accepted.

The basic legal principle which governs transactions concerning a finished product is the law of sales. The basic legal principle which governs the construction of a building is the law of contracts.

It may be that through an occurrence for which the contractor is not responsible, such as settling of the building, a defect develops and someone sustains injury. Possibly, the person who sustained injury was not a party to the contract between the owner and the contractor. A development of that kind projects the type of issue that is now before us. It should not be settled by over simplification. The contract must receive attention. We should not merely inquire whether the contractor was negligent; we must give attention to the contract.

In the case at bar, the lessee did not sign the building contract. The plaintiff, that is, the insurance company, wishes this court to hold that the contractor owed a duty to the lessee one and one-half years after the owner had accepted the building. In my opinion, the complaint wholly fails to allege any basis for a duty of that nature; and therefore I do not believe that the issue is before us. I think that we should not reverse the challenged judgment.

The plaintiff itself recognizes the challenge to the sufficiency of the complaint. It wishes to use the complaint as the basis for obtaining judgment for the purported loss sustained by the lessee. Its own brief states:

'The claimed pleading deficiency must be reviewed within the framework of the general rules promulgated in times past by this court when pleadings were examined.

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