Duyck v. Tualatin Valley Irr. Dist.

Citation742 P.2d 1176,304 Or. 151
PartiesLloyd DUYCK and Geraldine Duyck, Petitioners on Review, v. TUALATIN VALLEY IRRIGATION DISTRICT, Respondent on Review. TC 41-164; CA A32381; SC S33201.
Decision Date22 September 1987
CourtSupreme Court of Oregon

Thomas J. Moore, Hillsboro, argued the cause for petitioners on review. With him on the brief was Brink, Moore, Brink & Peterson, Hillsboro.

Alfred T. McGill, Portland, argued the cause for respondent on review.

Before PETERSON, C.J., and LENT, LINDE, CAMPBELL, CARSON and JONES, JJ.

PETERSON, Chief Justice.

The plaintiffs brought this action against defendant Tualatin Valley Irrigation District (TVID) alleging that TVID negligently misrepresented the availability of irrigation water and that TVID negligently failed to warn the plaintiffs that water would not be available for the 1978 growing season. The jury returned a verdict in favor of the plaintiffs. On the defendant's appeal, the Court of Appeals held that the plaintiffs' action was barred by the statute of limitations and reversed. Duyck v. Tualatin Valley Irrigation District, 80 Or.App. 602, 723 P.2d 1043 (1986). We affirm the Court of Appeals.

I

We state the facts in the light most favorable to the plaintiffs. The plaintiffs raise strawberries and beans. They are members of TVID. TVID successfully sought an irrigation system from the Bureau of Reclamation of the Department of the Interior. The Bureau of Reclamation was responsible for planning, engineering and constructing a new irrigation system that included an 85-mile irrigation system delivering water to Washington County farmers. 1 The plaintiffs had several farms, including the "Gregg Farm" and the "Gun Club Farm." These two farms were about a mile apart and were to be served by different branches of Unit Four of the irrigation system.

In 1976 the Bureau of Reclamation informed TVID that the irrigation system would be completed for the 1978 growing season (June through August). The Bureau of Reclamation expected to transfer the irrigation system to TVID for interim operation of the project beginning February 1, 1978. TVID, in several newsletters between May 1976 and May 1978, told its members that they could expect to receive water service about June 1, 1978. The plaintiffs also kept in touch with TVID's manager, Palmer Torvend, to insure that their final crop choice determinations were based on an accurate estimation of available water supplies. On numerous occasions in April and May 1978, Torvend assured the plaintiffs that they would receive water by June 1, 1978. Torvend, however, testified that he knew that Unit Four would not be completed until late summer or early fall, 1978. At least as of May 1978, Torvend knew that Unit Four would not be completed in time for the 1978 growing season, but he gave no indication in the newsletter or otherwise that Unit Four's completion date would be later than the projected date of other units, June 1978.

Believing that irrigation water would be available for the 1978 growing season, in May 1978, the plaintiffs planted Romano beans on the Gun Club Farm and "290 beans" on the Gregg Farm. Irrigation water was neither available nor necessary to plant these crops. However, these crops were eventually damaged as a result of the unavailability of irrigation water at the anticipated time.

The plaintiffs also had planted a strawberry crop on the Gregg Farm, the planting of which required irrigation water. The Unit Four irrigation pipeline branch for the strawberries and the beans on the Gregg Farm suffered a substantial leak or a "blowout" on May 28, 1978. The plaintiffs knew at this point that water would not be available from TVID for the Gregg Farm by June 1. They may have incorrectly concluded that, but for the blowout, water would have arrived on June 1. The evidence is uncontradicted that even had the May 28 leak not occurred, water would not have been delivered until late summer.

Because the plaintiffs believed that they had commitments to a cannery to grow strawberries, they proceeded with the strawberry planting after the blowout occurred. They obtained permission to use a neighbor's pond as an alternate source of water. On May 30, 1978, the plaintiffs incurred costs in transferring the water from the neighbor's pond, including costs for a pump, pipes and labor to install the system. On June 2, 1978, the plaintiffs commenced planting strawberries. By mid-June the plaintiffs believed that water would not be available for at least two additional weeks. In the first week of July the plaintiffs obtained permission from a second neighbor to pump water from a second pond to resupply the first pond. These alternative sources of water were inadequate to prevent significant damage to the crops. The beans began to show damage in early July; by the end of the summer the strawberry planting proved to be nearly a complete failure. The plaintiffs pumped water from the neighbors' ponds until the plaintiffs finally received water from TVID in early August for the Gregg Farm.

When no water was available from TVID to irrigate the Gun Club Farm beans, the plaintiffs tilled up half the first plantings and made another planting of beans at the end of June. TVID water arrived at the Gun Club Farm on July 24, 1978. Although the first two plantings were damaged by the lack of water, the third planting resulted in a good crop.

The plaintiffs filed this action on June 18, 1980. Their complaint contained a negligence and a contract theory for recovery. The plaintiffs alleged that the defendant negligently represented that irrigation water would be available to their farms for the 1978 growing season and that the defendant negligently failed to warn the plaintiffs that water might not be available. The plaintiffs also alleged that TVID was in breach of contract for failure to deliver water by June 1, 1978. The defendant asked for and received summary judgment on the plaintiffs' contract claim. 2

On the negligence claims, the defendant contended that the claim was not filed within the two-year statute of limitations of ORS 30.275(8). The trial court denied the defendant's motions for summary judgment and for a directed verdict on the negligence claims. The trial court also refused to present the statute of limitations issue to the jury, stating that "reasonable people could not disagree if they followed my instructions as to when the harm begins * * * that is, that it was timely filed * * *." The jury returned a verdict for the plaintiffs.

The Court of Appeals reversed, holding that the action was time-barred. 80 Or.App. at 608, 723 P.2d 1043. That court agreed with the defendant's contention that "at the latest, plaintiffs' arrangement for the alternative irrigation system in early June, 1978, more than two years before the action was brought, initiated the running of the statute." Id. at 606, 723 P.2d 1043.

II

The plaintiffs rely, and the case was tried, upon the theory of liability described in section 552(1) of the Restatement (Second) Torts (1977), 3 which provides:

"(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 upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information."

This court has yet to recognize the tort of "negligent misrepresentation," and as will be seen below, we do not do so herein, because we decide the case on the statute of limitations issue. We deem the statute of limitations question to be a threshold issue, and for this purpose, we shall assume the existence of such a tort in Oregon. Even so, in order to decide that issue, it is necessary to examine the nature of the tort to determine whether the tort defined in Restatement Section 552(1) arises in negligence or in deceit.

This case involves a claim for damages for economic loss allegedly sustained from the plaintiffs' reliance upon representations negligently made by the defendant to the plaintiffs. In England, though the English courts had long recognized the forms of action of deceit and negligence, the House of Lords, in 1889, held that an action for deceit could not be maintained by a plaintiff who had been induced to enter into a disfavorable commercial or financial venture unless the false statement upon which the plaintiff relied was made "(1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false." Derry v. Peek, 14 App.Cas. 337, 374 (1889). According to Prosser, the English rule was that, "in the absence of some fiduciary relation between the parties, there was no remedy for merely negligent misrepresentation, honestly believed, where the harm that resulted to the plaintiff was only pecuniary loss," Prosser, Misrepresentations and Third Parties, 19 Vand L Rev 231, 234 (1966) (footnote omitted).

The best known statement for not recognizing liability for economic loss arising from a negligent misrepresentation causing only economic loss appears in Ultramares v. Touche, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139 (1931). In that case the New York Court of Appeals, fearing limitless liability, refused to hold an accounting firm liable for negligently certifying a firm's balance sheet. The claimants were third persons who had suffered economic losses in reliance thereon. Judge Cardozo, for the court, stated:

"If liability for negligence exists, a thoughtless slip or blunder, the failure to detect a theft or forgery beneath the cover of deceptive entries, may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. The hazards of a business conducted on these terms are so extreme...

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