Bay Garden Manor Condominium Ass'n, Inc. v. James D. Marks Associates, Inc.

• Court: Florida District Court of Appeals
• Writing for the Court: FERGUSON
• Citation: Bay Garden Manor Condominium Ass'n, Inc. v. James D. Marks Associates, Inc., 576 So.2d 744, 16 Fla. L. Weekly 455 (Fla. App. 1991)
• Decision Date: 12 February 1991
• Docket Number: No. 89-2576,89-2576
• Parties: 16 Fla. L. Weekly 455 BAY GARDEN MANOR CONDOMINIUM ASSOCIATION, INC., Appellant, v. JAMES D. MARKS ASSOCIATES, INC., and Hufsey Nicolaides Associates, Inc., Appellees.

Page 744

576 So.2d 744

16 Fla. L. Weekly 455

BAY GARDEN MANOR CONDOMINIUM ASSOCIATION, INC., Appellant, v. JAMES D. MARKS ASSOCIATES, INC., and Hufsey Nicolaides Associates, Inc., Appellees.

No. 89-2576.

District Court of Appeal of Florida Third District.

Feb. 12, 1991.

Rehearing Denied April 16, 1991.

Hyman & Kaplan, and Michael L. Hyman and Edoardo Meloni, Miami, for appellant.

McDermott, Will & Emery, and James E. McDonald and Roderick V. Hannah, Miami for appellee Hufsey Nicolaides Associates, Inc.

Fredrica B. Elder and David L. Swimmer, Miami, for appellee James D. Marks.

Before BARKDULL, NESBITT and FERGUSON, JJ.

FERGUSON, Judge.

The question presented is whether an engineering firm which supplies false information to an owner-client as to the physical condition of an apartment building--in contemplation of a conversion to condominiums--may be liable in tort to subsequent purchasers of the condominium units with whom there is no contractual relationship.

A summary judgment was entered on the legal conclusion that the plaintiff association could not maintain a tort action to recover economic losses absent an independent injury to persons or property. We reverse on the authority of First Florida Bank v. Max Mitchell & Co., 558 So.2d 9 (Fla.1990), which was decided after the judgment on review was entered.

The material facts are not disputed. Bay Garden, the appellant, is a Condominium Association which represents its members, all of whom are unit owners. Marks and Hufsey Nicolaides, the appellees, are engineering firms which made inspections of the building and improvements prior to the conversion of the apartment building into a condominium. Section 718.504(15), Florida Statutes (1985), required the owner of an apartment building which is being converted to a condominium to provide to each buyer, as part of a prospectus or offering circular, an inspection report on the physical condition of the building and improvements. When the unit owners moved into their respective apartments they discovered that the condition of the building was not as represented by the two engineering firms. They sued the engineering firms for negligence.

The arguments of the parties focus on the economic loss rule, a doctrine which generally bars a tort action for purely economic losses. The purpose of the oft-criticized rule ¹ is to shield a defendant from unlimited liability for all economic consequences of a negligent act, particularly in commercial settings, thus keeping the risk of liability reasonably calculable. Local Joint Exec. Bd. v. Stern, 98 Nev. 409, 410, 651 P.2d 637, 638 (1982). Under the rule, in the absence of privity of contract between two disputing parties, there is no "duty to exercise reasonable care to avoid intangible economic loss or losses to others that do not arise from tangible physical harm to persons and tangible things." Prosser & Keeton, Law of Torts § 92, at 657 (5th ed. 1986). While having undergone considerable erosion in recent years, ² the economic loss rule has long been the law in Florida. Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So.2d 899 (Fla.1987).

In First Florida Bank v. Max Mitchell & Co., 558 So.2d 9 (Fla.1990), the supreme court answered a certified question on the liability of an accountant to a third party for damages resulting from the accountant's negligence in the absence of privity between the accountant and the third party. The court noted that there were essentially four lines of authority with respect to the issue including that expressed in Restatement (Second) of Torts § 552 (1976), which reads:

Information Negligently Supplied for the Guidance of Others

(1) One who, in the course of his business, profession or employment, or in

any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance on the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the...