Comptech Intern., Inc. v. Milam Commerce Park, Ltd.

• Decision Date: 20 May 1998
• Docket Number: No. 96-1056,96-1056
• Citation: 711 So.2d 1255
• Court: Florida District Court of Appeals
• Parties: 23 Fla. L. Weekly D1257 COMPTECH INTERNATIONAL, INC., a Florida corporation, Appellant, v. MILAM COMMERCE PARK, LTD., a Florida limited partnership and D & M Modeling, Inc., a dissolved Florida corporation. Appellees.

Page 1255

711 So.2d 1255

23 Fla. L. Weekly D1257

COMPTECH INTERNATIONAL, INC., a Florida corporation, Appellant, v.MILAM COMMERCE PARK, LTD., a Florida limited partnership and D & M Modeling, Inc., a dissolved Florida corporation. Appellees.

No. 96-1056.

District Court of Appeal of Florida Third District.

May 20, 1998.

Jeffrey J. Pardo, Miami Beach, for appellantComptech International, Inc.

Womack, Appleby & Brennan, and David C. Appleby, Miami, for appelleeMilam Commerce Park, Ltd.

Before COPE, GERSTEN and SHEVIN, JJ.

ON MOTION FOR REHEARING

GERSTEN, Judge.

We withdraw our previously issued opinion and substitute the following in its place.

Appellant, Comptech International, Inc.("Comptech"), appeals a final summary judgment in favor of its landlord, appelleeMilam Commerce Park, Ltd.("Milam").We affirm finding the "other property" exception to the economic loss rule ("ELR") does not apply because potential damage to Comptech's computers should have been contemplated by the parties' commercial lease contract.Once again, we reiterate this Court's strong embrace of the economic loss rule and express desire to uphold the doctrine's underlying policies.

Comptech, a computer hardware distributor, leased commercial space from Milam since 1987.In 1990, the two parties agreed to enter into a second lease.The new lease stipulated that Comptech would lease an additional 13,000 square feet of warehouse space, and, that Milam would build 2,000 square feet of office space in the area that Comptech was already leasing.The lease contained an indemnity provision whereby Comptech agreed to indemnify Milam from all claims for damages arising under the use and occupancy of the premises, including any improvements.

During the construction of the additional office space, Comptech complained that the improvements were not being constructed in a timely and workman-like fashion resulting in damage to its office space and computers.Comptech brought suit against Milam asserting negligence in selection of contractors, negligent construction, damages resulting from violation of the South Florida Building Code, punitive damages, and return of rent illegally collected.All of the counts in Comptech's third amended complaint except "negligence in selection of contractors" were dismissed with prejudice.

Thereafter, the trial court granted Milam's motion for summary judgment on the sole remaining negligence count finding that:

Any duty imposed upon [Milam] to hire a competent contractor to fulfill the terms of the lease agreement at issue wherein additional office space was to be built, was a duty which stemmed from the lease agreement.Any breach of that duty giving rise to a negligence claim is foreclosed by the Economic Loss Doctrine.A breach of contract alone cannot support a cause of action in tort.Casa Clara v. Charlie [Charley] Toppino & Sons, 620 So.2d 1244(Fla.1993).

We agree.Although we reject as meritless the several arguments raised by Comptech on appeal, our reasoning for affirmance requires further discussion to clarify application of the ELR's "other property" exception in a commercial context, as well as its effect upon claims brought under the South Florida Building Code.

I.

First, we reject Comptech's argument that Milam's alleged breach of the building code, Section 553.85,Florida Statutes(1989), constitutes an "exception" to the ELR.¹Our Supreme Court has recognized only two narrow exceptions to the application of the doctrine, seeCasa Clara, 620 So.2d at 1244, and there is no justification under these circumstances to carve out a third.

Simply, the ELR does not permit a cause of action for economic damages brought under the South Florida Building Code where the claims are clearly contractual in nature and the cause of action is inseparably connected to the breaching party's performance under the agreement.SeeHotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So.2d 74(Fla. 3d DCA), review denied700 So.2d 685(Fla.1997);Ginsberg v. Lennar Florida Holdings, Inc., 645 So.2d 490(Fla. 3d DCA1994)(and cases cited therein), review denied, 659 So.2d 272(Fla.1995);accordHoseline, Inc. v. U.S.A. Diversified Products, Inc., 40 F.3d 1198(11th Cir.1994).Where the parties to an agreement negotiate within a contractual setting the same duties as occasioned by the statute, a breach of which would lead to the same economic losses involving identical elements to the claim, the economic loss doctrine prevails.

As recently recognized in Sarkis v. Pafford Oil Co., Inc., 697 So.2d 524(Fla. 1st DCA1997): "Florida courts have held that the economic loss rule can be applied to statutory actions, but this line of cases appears to be limited to actions that could be characterized as statutory torts."Section 553.84 is a statutory tort.Thus the ELR applies if the cause of action founded on the statutory tort is dependent upon the contract.²

Here, Milam's alleged breach of duty to Comptech stemmed from the lease.But for the lease agreement, there would have been no damages.The statutory tort claim is dependent upon the contractual obligation at issue.Thus the statutory tort claim is subsumed by the ELR because the economic losses sought are no different from those that could have been asserted in a contract action for breach of the lease agreement.SeeSarkis v. Pafford Oil Co., Inc., 697 So.2d at 524.

The dissent argues to the contrary quoting the language in Section 553.84 which provides a cause of action against the party committing a violation "notwithstanding any other remedies."According to the dissent, this language constitutes a statutory mandate eliminating application of the ELR to the statutory cause of action.We decline to adopt such a literal interpretation which in our view would thwart the manifest purpose of the economic loss doctrine."Notwithstanding any other remedies available" does not necessarily imply "notwithstanding the Economic Loss Rule," when "but for" the contract, there would be no damages.

We emphasize that the ELR does not exclude separate and independent building code violation claims, or claims arising from noncontractual settings.³At the risk of being repetitive, we clarify that our holding is limited to actions for economic damages inseparably connected to the breaching party's performance under the agreement.Where the essence of an asserted building code violation concerns the heart of the parties' agreement, attempting to mask a contract claim in the guise of a building code violation will not suffice to subvert the spirit of the economic loss doctrine.SeeHotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So.2d at 74.⁴Thus we find the ELR does apply to prohibit Comptech from pursuing a dependent statutory tort action in an attempt to expand its remedies for breach of contract beyond that which was agreed to.⁵

II.

Second, we also reject Comptech's argument that its damaged property falls within the "other property" exception to the ELR.Specifically, Comptech's complaint alleged its office suffered property damage by:

i. tearing down walls there;

ii.Ruining the flooring there;

iii. destroying the existing bathrooms;

iv. interrupting and overloading the electrical system thereby causing both lost data and physical damage to computers;

v. preventing use of warehouse space and causing Comptech to continuously move its inventory from location to location.

v. failing to prevent excessive dust and dirt from being absorbed by the air conditioning system thereby damaging computers and data therein.

vii. failing to clean up debris.

Basically, the complaint alleged Comptech suffered property damage to its electrical systems, warehouse space and computers, claiming damages in excess of $2,000,000.00 plus interest and costs.Comptech further sought punitive damages against Milam in the sum of $5,000,000.00.

Under Florida law, the ELR prohibits a plaintiff who has a contract claim from recovering tort damages for purely economic losses in the absence of personal injury or damage to "other property."Casa Clara Condominium Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So.2d 1244(Fla.1993);AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So.2d 180(Fla.1987);Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So.2d 899(Fla.1987).The policy behind the rule is to encourage contracting parties to protect their economic interests through negotiation and insurance, recognizing that in a free market, disappointed economic expectations are often the unintended result of an imperfect bargain.

In accordance with the ELR's underlying policy, this court on numerous occasions has reiterated its position that disappointed economic expectations are best protected by the law of contract and not tort.McDonough Equipment Corp. v. Sunset Amoco West, Inc., 669 So.2d 300(Fla. 3d DCA1996);Standard Fish Company, Ltd., v. 7337 Douglas Enterprises, Inc., 673 So.2d 503(Fla. 3d DCA1996);Florida Bldg. Inspection Services, Inc. v. Arnold Corp., 660 So.2d 730(Fla. 3d DCA1995);Palau International Traders, Inc. v. Narcam Aircraft, Inc., 653 So.2d 412(Fla. 3d DCA), rev. denied, 661 So.2d 825(Fla.1995);Bay Garden Manor Condominium Assoc., Inc. v. James D. Marks Associates Inc., 576 So.2d 744, 745(Fla. 3d DCA1991).As explained by the supreme court in Casa Clara Condominium Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So.2d at 1246(citations omitted):

[E]conomic losses are disappointed economic expectations, which are protected by contract law, rather than tort law.This is the basic difference between contract law, which protects expectations, and tort law, which is determined by the duty owed to an injured party.

A commercial party always has the ability to protect its interests through negotiation and contractual bargaining or insurance.The ability of the parties to independently protect themselves from the risk of economic loss...