Essex v. Ryan
| Decision Date | 21 March 1983 |
| Docket Number | No. 2-681A199,2-681A199 |
| Citation | 446 N.E.2d 368 |
| Parties | Robert Grant ESSEX and Helen Y. Essex, Appellants (Plaintiffs Below), v. Mary S. RYAN, Personal Representative of the Estate of John C. Ryan, Deceased, Appellee (Defendant Below). |
| Court | Indiana Appellate Court |
Kenneth C. Kern and Gregory A. Purvis, Kenneth C. Kern & Associates, Indianapolis, for appellants.
Theodore J. Nowacki, Daniel C. Emerson, Bose, McKinney & Evans, Indianapolis, for appellee.
Plaintiffs-appellants Robert Grant Essex and Helen Y. Essex (the Essexes) appeal from a summary judgment entered in favor of Mary S. Ryan (personal representative of the deceased John C. Ryan (Ryan)) in the Essexes' suit to recover damages arising from a survey which Ryan had negligently performed for their predecessor in title in 1955, the Essexes claiming damages they suffered were recoverable because of the deceased's professional incompetence and because they were assignees of their predecessors in interest.
We reverse.
Ryan was hired by Sylvester Davis to survey Davis's lot at 2911 West 62nd Street, Indianapolis. Davis wished to make an addition to the east side of his house and sought the survey to make sure that the house would not encroach upon the lot to the east. The 1955 survey showed that the Davis house was thirty-four feet away from the eastern boundary of the lot, and Ryan attached his certificate as a registered surveyor to this effect. In reliance upon this, Davis built a thirty-foot extension on the east side of his house, bringing the eastern end of the house to within four feet of the property line staked out by Ryan.
Ryan's survey was in error: The actual boundary line was twenty-five feet west of the boundary established by the 1955 survey. The addition made in reliance upon that survey caused Davis's house to encroach upon the adjoining lot by twenty-one feet.
In 1959, Davis sold the house to one Kennedy, who sold to the Essexes in 1962.
The owners of the adjoining lot to the east of the Davis/Essex lot filed their action to quiet title and for damages in trespass on March 5, 1976. The Essexes were bound by their conditional sales contract with their purchaser, Beatrice Smith, to defend title. That suit was settled; as a result, 21.1 feet of the twenty-five foot error remained with the Davis/Essex lot. The remaining 3.9 feet were ceded to the adjoining property owner. The Essexes released Beatrice Smith from the remaining $2,271.30 owing on the sales contract. Legal and surveying expenses in defending title for Smith cost them $7,869.20, making the Essexes' total claim of damage $10,140.50.
To recover these damages, the Essexes filed their suit against Ryan on August 21, 1978. That complaint was once dismissed and twice amended. Ryan, now deceased and appearing by his personal representative, Mary S. Ryan, filed a motion for summary judgment on October 14, 1980, which was granted December 31, 1980. From the denial of the motion to correct error on March 16, 1981, the Essexes now appeal.
On December 5, 1980, the Essexes obtained from Davis an assignment of "any and all rights, interests, property, claims, demands, cause of action, or chose in action ... against or due from John C. Ryan ... on account of" the 1955 survey. Record at 212. This assignment was presented to the trial court in the Essexes' response to Ryan's motion for summary judgment.
The issues the Essexes present are best restated as follows:
Did the trial court err in deciding that the Essexes had no cause of action under a theory of a) fraud or negligent misrepresentation or b) breach of contract or breach of warranty?
PARTIES' CONTENTIONS--The Essexes cite the Restatement (Second) of Torts, Sec. 552 (1977) for the proposition that if a professional negligently supplies false information for the guidance of other persons, he is liable for the losses sustained by those persons in reliance on that information. The Essexes argue that because, as subsequent tenants, they are within the class of persons who would foreseeably rely upon the 1955 survey, they are entitled to recover on this theory. They also assert there is liability in contract by pointing to the assurances attached to the 1955 survey that the boundaries staked out were accurate. This, they argue, is a warranty of the accuracy of the survey, which, if it does not run with the land, was certainly made to Davis and was assignable to the Essexes.
Ryan's response is that lack of privity is a defense to all of the Essexes' claims and that Davis had no cause of action to assign.
CONCLUSION--Ryan owed no duty to the Essexes with respect to the 1955 survey. However, Davis did have assignable contract rights which the Essexes, as assignees, are entitled to enforce.
The Essexes do not suggest that the error in Ryan's survey was in any way intentional. The tort of actual fraud requires actual knowledge, or reckless lack of knowledge, that the fact misstated is false. Rhoda v. Northern Indiana Public Service Co., (1976) 171 Ind.App. 401, 357 N.E.2d 287. Any tort liability that Ryan may have to the Essexes must rest not on actual fraud, but on either constructive fraud or negligence.
The Essexes' motion to correct error restricts its tort theories to theories of negligence; constructive fraud is not mentioned in the motion, and no argument as to constructive fraud exists in the memorandum supporting the Essexes' motion to correct error. The Essexes therefore have waived consideration of constructive fraud for purposes of this appeal, for appellants may not introduce new substantive theories for the first time on appeal. Danes v. Automobile Underwriters, Inc., (1974) 159 Ind.App. 505, 307 N.E.2d 902; Bielat v. Folta, (1967) 141 Ind.App. 452, 229 N.E.2d 474.
The Restatement (Second) of Torts, Sec. 552, [hereinafter referred to as section 552] defines the tort of negligent misrepresentation:
"(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.
(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 group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and (b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them."
It is upon this rather broad language that the Essexes rest their tort claim against Ryan. Our conclusion is that section 552 expands the scope of liability for negligent misrepresentation beyond existing case law and the existing public policy of this State. To the extent that it would provide for a negligent misrepresentation suit against Ryan, brought by the Essexes, complete strangers to his original contractual obligation, we must decline to adopt section 552.
Although it has been held that Indiana does not recognize the tort of negligent misrepresentation, see English Coal Co. v. Durcholz, (1981) Ind.App., 422 N.E.2d 302, trans. denied, it is axiomatic that one who contracts to perform services may commit both a breach of contract and the tort of negligence when he negligently fails to perform in a workmanlike manner. Flint & Walling Mfg. Co. v. Beckett, (1906) 167 Ind. 491, 79 N.E. 503; Staley v. Jameson, (1874) 46 Ind. 159; Capitol Builders v. Shipley, (1982) Ind.App., 439 N.E.2d 217; Shriner v. Union Federal Savings & Loan Ass'n, (1955) 126 Ind.App. 454, 125 N.E.2d 168, trans. denied. And certain professionals, by virtue of the nature of their business, make representations, render opinions, and give advice in the course of performing a contract. Thus, brokers are liable in tort for failure to disclose all facts within their knowledge that may be material to the matter in which they are employed, Mason Produce Co. v. Harry C. Gilbert Co., (1923) 194 Ind. 462, 141 N.E. 613; attorneys are liable for failure to exercise ordinary care, skill, and diligence, Anderson v. Anderson, (1979) Ind.App., 399 N.E.2d 391; and abstractors may be held accountable for failure to fulfill their duty to prepare an accurate abstract. Mayhew v. Deister, (1969) 144 Ind.App. 111, 244 N.E.2d 448, trans. denied. Surveyors like Ryan, then, may be liable in tort for failure to skillfully discharge their contractual obligation. The next question is: To whom are they liable for their negligent misrepresentation?
The scope of tort liability arising out of contractual services has traditionally been framed in terms of concepts borrowed from the law of contracts. Thus, the tortfeasor's duty has been limited to only those parties in privity with him. See Holland Furnace Co. v. Nauracaj, (1938) 105 Ind.App. 574, 14 N.E.2d 339. The Restatement view attempts to abolish the privity rule. Although section 552 would not render the tortfeasor liable to all foreseeable plaintiffs, "[i]t is sufficient ..., insofar as the plaintiff's identity is concerned, that the maker [of representations] supplies the information for repetition to a certain group or class of persons and that the plaintiff proves to be one of them." Section 552, comment h.
The Essexes urge us to accept the scope of liability provided for in the Restatement. Identifying themselves as among the "limited...
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