Bakke v. Magi-Touch Carpet One Floor & Home, Inc.

• Decision Date: 06 December 2018
• Docket Number: No. 20180116,20180116
• Citation: 920 N.W.2d 726
• Parties: Shannon BAKKE, Plaintiff and Appellant v. MAGI-TOUCH CARPET ONE FLOOR & HOME, INC., Defendant and Appellee and SPS Companies, Inc., Defendant
• Court: North Dakota Supreme Court

920 N.W.2d 726

Shannon BAKKE, Plaintiff and Appellant

v. MAGI-TOUCH CARPET ONE FLOOR & HOME, INC., Defendant and AppelleeandSPS Companies, Inc., Defendant

No. 20180116

Supreme Court of North Dakota.

Filed December 6, 2018

Shawn A. Grinolds, Bismarck, ND, for plaintiff and appellant.

Cloe A. Kilwein (argued) and William P. Harrie (on brief), Fargo, ND, for defendant and appellee Magi-Touch Carpet One Floor & Home, Inc.

Jensen, Justice.

[¶ 1] Shannon Bakke appeals from a judgment in favor of Magi-Touch Carpet One Floor & Home, Inc. and denial of her motion to amend her complaint. Bakke asserts the district court erred in concluding she could not pursue a claim against Magi-Touch because Magi-Touch was not liable for the acts of its independent contractor.

Bakke also asserts the district court erred in denying, as futile, her motion to amend her complaint to assert a contract claim against Magi-Touch. We affirm in part, reverse in part, and remand this case to the district court for further proceedings on Bakke’s contract claim.

I.

[¶ 2] Bakke entered into a contract with Magi-Touch for the installation of floor tiles, a shower base, and related products in a bathroom within Bakke’s home. Magi-Touch arranged to have the shower base and tile installed by VA Solutions, LLC, an independent contractor. Bakke asserts the shower door was improperly installed, the improper installation resulted in the shower door imploding, and the implosion caused damage to property in and around the shower requiring the bathroom door and trim to be repainted.

[¶ 3] Magi-Touch refused to compensate Bakke for repainting the bathroom door and trim. Bakke initiated the litigation in small claims court using a court provided small claims court affidavit form and sought to recover compensation for the repairs to the bathroom door and trim. The small claims court affidavit form only requires a general description of the claim, and Bakke did not state whether she was asserting tort or contract claims.

[¶ 4] Magi-Touch responded to the small claims court affidavit with a formal answer and did not use the small claims court answer form. The answer included a demand for a jury trial and defenses that can be fairly characterized as responding to a negligence (tort) cause of action. The answer included an assertion that Bakke’s claim was barred by the economic loss doctrine; the economic loss doctrine would limit Bakke’s recovery to a breach of contract claim and preclude tort claims such as negligence. Magi-Touch also requested removal of the case from the small claims court to the district court.

[¶ 5] After removal of the case to the district court, Magi-Touch moved for summary judgment asserting VA Solutions was hired as an independent contractor and Magi-Touch could not be held liable for the negligence of an independent contractor. The district court granted Magi-Touch’s request for summary judgment after determining Magi-Touch had no liability for the negligence of an independent contractor. In the same order, the district court granted SPS Companies, Inc.’s motion to dismiss after determining SPS was relieved from liability for distribution of a defective product because SPS is a non-manufacturing seller as defined by N.D.C.C. § 28-01.3-04. Bakke has not appealed the dismissal of SPS from the litigation.

[¶ 6] At the same time the district court considered Magi-Touch’s motion for summary judgment and SPS’s motion to dismiss, the district court considered Bakke’s motion to file an amended complaint. The amended complaint expanded on the general claim asserted in the small claims court affidavit and specifically asserted claims for breach of contract, fraud, deceit, negligence, and unlawful sales practices. The district court denied Bakke’s request for leave to file the amended complaint after determining the claims would be futile. In doing so, the district court relied on its prior determination that Magi-Touch could not be held responsible for the negligent acts of VA Solutions, an independent contractor.

II.

[¶ 7] In its order granting summary judgment, the district court determined Bakke and Magi-Touch entered into a contract for the installation of floor tiles, a shower base, and the related products in a bathroom within Bakke’s home. That finding is consistent with Magi-Touch’s assertion in its answer that the economic loss doctrine precludes tort claims.

[¶ 8] The elements of a contract are outlined in N.D.C.C. § 9-01-02 and include parties capable of contracting, the consent of the parties, a lawful object, and consideration. In the present case, all of those elements exist: 1) both parties were capable of entering into a contract; 2) both parties consented to the contract; 3) installation/remodeling of a bathroom is a lawful object; and 4) consideration for the contract was satisfied by Magi-Touch’s agreement to provide materials and installation in exchange for payment from Bakke. The district court properly determined the existence of a contract between the parties for the installation of floor tiles, a shower base, and the related products in a bathroom within Bakke’s home.

III.

[¶ 9] North Dakota law recognizes an implied warranty of fitness for the purpose in construction contracts. Leno v. K & L Homes, Inc. , 2011 ND 171, ¶ 10, 803 N.W.2d 543 (citing Dobler v. Malloy , 214 N.W.2d 510, 516 (N.D. 1973) ). This Court has recognized the implied warranty of fitness for a particular purpose in construction contracts where:

(1) the contractor holds himself out, expressly or by implication, as competent to undertake the contract; and the owner (2) has no particular expertise in the kind of work contemplated; (3) furnishes no plans, designs, specifications, details, or blueprints; and (4) tacitly or specifically indicates his reliance on the experience and skill of the contractor, after making known to him the specific purposes for which the building is intended.

Dobler , at 516. The existence of an implied warranty of fitness for a particular purpose in a construction contract, and the breach of that warranty, are findings of fact. Air Heaters, Inc. v. Johnson Elec., Inc. , 258 N.W.2d 649, 654 (N.D. 1977).

[¶ 10] In distinguishing between claims for breach of a contract warranty and tort claims, this Court has held:

In Dakota Grain Co. v. Ehrmantrout , 502 N.W.2d 234, 236-37 (N.D. 1993), we explained the difference between a breach of warranty action arising under a sales contract and a negligence action. The seller’s negligence, or lack of negligence, is not relevant to the question of whether the seller breached his or her express warranty to deliver conforming goods. Id. at 236. A mere breach of contract does not, by itself, furnish a basis for tort liability grounded in negligence. Id. Conduct which constitutes a breach of contract does not subject the actor to an action for negligence, unless the conduct also constitutes a breach of an independent duty that did not arise from the contract. Id. at 236-37 ; see also Olander Contracting Co. v. Gail Wachter Investments , 2002 ND 65, ¶ 26, 643 N.W.2d 29.

Border Res., LLC v. Irish Oil & Gas, Inc. , 2015 ND 238, ¶ 48, 869 N.W.2d 758 (Crothers, J., specially concurring) (citation omitted).

[¶ 11] Bakke’s breach of contract claim falls under the judicially-recognized doctrine of implied warranty of fitness for a particular purpose arising from the parties’ construction contract. See e.g. , Leno , 2011 ND 171, ¶ 16, 803 N.W.2d 543 (citing Dobler , 214 N.W.2d at 516 ). The cause of action was for the economic loss associated with Bakke not receiving what had been bargained for in the parties’ agreement; the installation of floor tiles, shower base, and related materials in a manner that would satisfy the implied warranty of fitness for a particular purpose. See Leno , at ¶ 16 (citing W. Page Keeton, Prosser & Keeton on Torts, 658-59, 680 (5th ed. 1984) ). "Though implied warranties are often described as sounding both in tort and contract law, we decline to apply a tort concept to a contractually-based implied warranty." Id. Despite pleadings which asserted negligence, fraud/deceit, unlawful sales practices, defective products and other tort claims, along with extensive argument in the district court and this Court regarding the tort claims, the actionable portion of this case involves a breach of contract and is governed by contract law, not the law of torts.

IV.

[¶ 12] We agree with the district court’s conclusion that Bakke would generally be precluded from asserting a negligence action against Magi-Touch for any negligent acts of its independent contractor, VA Solutions. See Grewal v. North Dakota Ass’n of Counties , 2003 ND 156, ¶¶ 10-12, 670 N.W.2d 336 ; Rogstad v. Dakota Gasification Co. , 2001 ND 54, ¶ 14, 623 N.W.2d 382. However, Bakke also seeks to assert a claim for the breach of a contract, aside from negligence and other related torts.

[¶ 13] A breach of contract is the nonperformance of a contractual duty when it is due. See Restatement (Second) of Contracts § 235(2) (1981) ; see also WFND, LLC v. Fargo Marc, LLC , 2007 ND 67, ¶ 13, 730 N.W.2d 841 (citing NDJI Civil C-50.50 (1995) ). The elements of a prima facie case for breach of contract are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the breach. See Kuhn v. Marquart , 45 N.D. 482, 487, 178 N.W. 428, 429 (1920). Here, Magi-Touch agreed to provide materials and labor for the installation of floor tiles, a shower base, and related materials.

[¶ 14] Magi-Touch attempts to avoid any implied warranty by suggesting that its contractual obligation to provide the labor was satisfied by arranging for the labor and, once they had delegated that obligation to VA Solutions, they were relieved from any liability. "It is a well-established principle in the law of contracts that a contracting party cannot escape its liability on the contract by merely assigning its duties and rights under the contract...