Floor Craft Floor Covering, Inc. v. Parma Community General Hosp. Ass'n

• Citation: 560 N.E.2d 206,54 Ohio St.3d 1
• Decision Date: 19 September 1990
• Docket Number: Nos. 89-1044 and 89-1045,s. 89-1044 and 89-1045
• Parties: FLOOR CRAFT FLOOR COVERING, INC., Appellant, v. PARMA COMMUNITY GENERAL HOSPITAL ASSOCIATION, et al., Appellees.
• Court: Ohio Supreme Court

Page 1

54 Ohio St.3d 1

560 N.E.2d 206

FLOOR CRAFT FLOOR COVERING, INC., Appellant, v. PARMA COMMUNITY GENERAL HOSPITAL ASSOCIATION, et al., Appellees.

Nos. 89-1044 and 89-1045.

Supreme Court of Ohio.

Submitted May 30, 1990.

Decided Sept. 19, 1990.

Syllabus by the Court

In the absence of privity of contract no cause of action exists in tort to recover economic damages against design professionals involved in drafting plans and specifications.

Floor Craft Floor Covering, Inc. ("Floor Craft"), plaintiff-appellant, is a flooring installation contractor. On August 27, 1982, Floor Craft entered into a construction contract with defendant-appellee, Parma Community General Hospital ("Parma Hospital"), for the installation of resilient vinyl floor covering in a renovation project undertaken by Parma Hospital. The contract appears to be a standard American Institute of Architects ("A.I.A.") agreement between the contractor (Floor Craft) and the owner (Parma Hospital).

Defendant-appellee, Braun & Spice, Inc., is an architectural firm which prepared plans and specifications for the renovation project that included the installation of resilient vinyl flooring. As noted by Braun & Spice, it entered into a separate A.I.A. contract with Parma Hospital.

Pursuant to its agreement with Parma Hospital, Floor Craft claims to have installed the flooring in a manner prescribed by Parma Hospital's installation instructions. After Floor Craft had completed installation of the flooring, it noticed that bubbles of varying size began to appear. Floor Craft states that upon discovery of the bubbles it began additional work to identify and correct the problem with the flooring, at the direction of Parma Hospital. The total cost for the additional work was $5,000. The explanation offered by Floor Craft for the bubbling in the flooring was that the concrete had not properly cured and excess water from the concrete had reacted with the flooring adhesive.

Floor Craft brought suit against Parma Hospital and Braun & Spice in order to recover damages caused by the flooring defect. The first count of the amended complaint asserted that Braun & Spice "negligently specified flooring and sealant which was [sic] incompatible with the construction methods utilized in the [p]roject," thereby requiring Floor Craft to expend $5,000 for additional work. The second count alleged breach of contract against Parma Hospital and sought a judgment for $10,859.75. Floor Craft also sought a judgment of $5,000 for the additional work performed at the hospital's request. Count three requested a declaratory judgment to construe an arbitration clause contained within the contract between Floor Craft and Parma Hospital. The final count contained in Floor Craft's complaint asserted a right to indemnity or contribution from the appellees if the hospital prevailed in its claim for breach of contract, in the amount of $100,576.92 for replacement of the failed flooring.

The trial court granted appellees' motions to dismiss for failure to set forth a claim and certified the case to the court of appeals pursuant to Civ.R. 54(B). The court of appeals held that the dismissal of the claim against the hospital implicitly required Floor Craft to pursue its claim in arbitration proceedings. However, the trial court erred in not staying the proceedings; therefore, the matter was remanded for a stay. Further, the appellate court refused to assign liability to the architect, Braun & Spice, in the absence of privity of contract.

The court of appeals certified the record of the case to this court as being in conflict with other appellate court decisions (case No. 89-1044). ¹ The cause is also before this court pursuant to the allowance of a motion to certify the record (case No. 89-1045).

Zellmer & Gruber, Jeffrey P. Posner and John M. Manos, Cleveland, for appellant.

Cassidy & Mottl and Kevin P. Weiler, Parma Heights, for appellee Parma Community General Hosp.

Gallagher, Sharp, Fulton & Norman and Robert H. Eddy, Cleveland, for appellee Braun & Spice, Inc.

HOLMES, Justice.

The key issue presented in this case is whether a contractor may sue an architect for economic injury in the absence of privity of contract between the parties. For the reasons which follow we answer such query in the negative.

In the absence of privity of contract between two disputing parties the general rule is "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 (5 Ed.1984) 657, Section 92. In addressing the propriety of economic damages arising from a products liability claim this court in Chemtrol Adhesives, Inc. v. American Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40, 44-45, 537 N.E.2d 624, 630, noted:

"For actions sounding in negligence, '[t]he well established general rule is that a plaintiff who has suffered only economic loss due to another's negligence has not been injured in a manner which is legally cognizable or compensable.' Nebraska InnKeepers, Inc. v. Pittsburgh-Des Moines Corp. (Iowa 1984), 345 N.W.2d 124, 126. Accord Local Joint Exec. Bd. of Las Vegas, Culinary Workers Union, Local No. 226 v. Stern (1982), 98 Nev. 409, 410-411, 651 P.2d 637, 638. See, also, Note, Economic Loss [in Products Liability Jurisprudence (1966), 66 Colum.L.Rev. 917,] * * * 929 (noting that '[n]egligence has proved to be among the least fruitful avenues for recovery of economic loss')."

This court has not previously addressed this issue of the right of contractors to recover economic damages where design professionals have allegedly drafted defective plans and specifications. In a general review of the case law on this subject, including some of our Ohio appellate court decisions, we conclude that tort liability may not be imposed for purely economic damages. In L.R. Patrick, Inc. v. Karlsberger & Assoc. (Dec. 27, 1983), Franklin App. No. 82AP-1008, 1983 WL 3843 unreported, ² the court of appeals found that architects and engineers could be held accountable for negligence in the preparation of plans and specifications and design of the construction upon which a contractor relies to its detriment. The L.R. Patrick, Inc. court relied on this court's decision in Haddon View Investment Co. v. Coopers & Lybrand (1982), 70 Ohio St.2d 154, 24 O.O.3d 268, 436 N.E.2d 212. In Haddon View this court held that "[a]n accountant may be held liable by a third party for professional negligence when that third party is a member of a limited class whose reliance on the accountant's representation is specifically foreseen." Id. at syllabus. In Haddon View the plaintiffs were individual limited partners who detrimentally relied upon representations the accounting firm made to its client, the limited partnership. The Haddon View court only partially withdrew the privity requirement with respect to malpractice actions taken against accountants.

As the court of appeals in this case correctly recognized, Haddon View is not dispositive of the issue before us. In Columbus City School Dist. Bd. of Edn. v. Fry, Inc. (1984), 22 Ohio App.3d 94, 95, 22 OBR 281, 283, 489 N.E.2d 294, 296, the court of appeals was faced with an analogous situation to the one presented here. In Fry, a contractor which installed a roof on a school was sued by the school board for damages resulting from allegedly defective work. The roofing contractor filed a third-party action against the architect that prepared the plans and specifications for the roof. The contractor claimed that the architect negligently prepared the plans and specifications. The Fry court held:

"Presumably, [the contractor] is proceeding upon a theory similar to that of Haddon View Investment Co. v. Coopers & Lybrand (1982), 70 Ohio St.2d 154 [24 O.O.3d 268, 436 N.E.2d 212]. However, assuming that the principle of Haddon View applies to [architects and] engineers as well as accountants, the fact situation here differs substantially in that Fry [the contractor] does not seek an independent recovery against Lawrence [the architect], but, instead, seeks only indemnification from Lawrence for any liability that Fry may have to plaintiff board because of negligent design by Lawrence. No such liability can exist in this case. Plaintiff board, in contracting with Fry for the construction of the Linden Park building, adopted the specifications of the architect, Lawrence; hence, if Fry complied with the specifications so furnished, it cannot be found to be in breach of its contract with plaintiff board. In short, there [is] no set of circumstances under which the liability of Fry to plaintiff board could be predicated upon the negligence of Lawrence in designing the building. Accordingly, the trial court did not err in sustaining third-party defendant Lawrence's motion to dismiss."

To arrive at the more correct result, we look to the analysis given this issue by other jurisdictions. In Blake Constr. Co. v. Alley (1987), 233 Va. 31, 353 S.E.2d 724, the Supreme Court of Virginia held that the Virginia statute which allows for actions in negligence for damage to persons or property in the absence of privity is in derogation of the common law and, therefore, must be strictly construed. The court recognized that "[u]nder the common law there could be no recovery by * * * [the contractor] from * * * [the architectural firm] in tort for only economic loss in the absence of privity. * * * " Id. at 36, 353 S.E.2d at 727. The court concluded inter alia that:

"The architect's duties both to owner and contractor arise from and are governed by the contracts related to the construction project. While such a duty may be imposed by contract, no common-law duty requires an architect to protect the contractor from purely economic loss. * * *

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" * * * Protection against economic losses caused by another's failure properly to perform...