Grynberg v. Agri Tech, Inc.

• Decision Date: 18 February 1999
• Citation: 985 P.2d 59
• Docket Number: 97CA1184
• Parties: Jack J. GRYNBERG; Celeste C. Grynberg; Rachel S. Grynberg; Stephen M. Grynberg; and Miriam Z. Grynberg, Plaintiffs-Appellees and Cross-Appellants, v. AGRI TECH, INC., a Colorado corporation; Morgan County Feeders, Inc., a Colorado corporation; A T Cattle Co., Ltd., a Colorado limited partnership; Gary A. Weisbart; Simon Chilewich; and Chilewich Sons & Co., a New York partnership, Defendants-Appellants and Cross-Appellees.
• Court: Colorado Court of Appeals

985 P.2d 59

Jack J. GRYNBERG; Celeste C. Grynberg; Rachel S. Grynberg; Stephen M. Grynberg; and Miriam Z. Grynberg, Plaintiffs-Appellees and Cross-Appellants, v. AGRI TECH, INC., a Colorado corporation; Morgan County Feeders, Inc., a Colorado corporation; A T Cattle Co., Ltd., a Colorado limited partnership; Gary A. Weisbart; Simon Chilewich; and Chilewich Sons & Co., a New York partnership, Defendants-Appellants and Cross-Appellees.

No. 97CA1184.

Colorado Court of Appeals, Div. V.

February 18, 1999.

Rehearing Denied April 22, 1999.

Certiorari Granted October 4, 1999.

Reiman & Bayaz, P.C., Jeff Reiman, Eric B. Liebman, Darren E. Nadel, Denver, Colorado, for Plaintiffs-Appellees and Cross-Appellants.

Berryhill, Cage & North, P.C., Jack W. Berryhill, Rita J. Bonessa, Denver, Colorado, for Defendants-Appellants and Cross-Appellees.

Opinion by Judge DAVIDSON.

Defendants, Agri Tech, Inc., Morgan County Feeders, Inc., A T Cattle Co., Ltd., Gary A. Weisbart, Simon Chilewich, and Chilewich Sons & Co., appeal from the judgment entered upon special jury verdicts finding them liable to plaintiffs, Jack J. Grynberg, Celeste C. Grynberg, Rachel S. Grynberg, Stephen M. Grynberg, and Miriam Z. Grynberg, for breach of fiduciary duty and negligence in the course of administering a cattle investment program. Defendants also appeal the trial court's award of costs to plaintiffs and the denial of their motions for attorney fees and costs. Plaintiffs cross-appeal, seeking attorney fees and an adjustment in the amount of prejudgment interest awarded to them. We reverse and remand for further proceedings.

In 1985, defendant Weisbart made a presentation to plaintiffs concerning the possibility of their investing in a cattle program. Plaintiffs, as the investors in the program, would provide capital through their personal investment of money and by financing supplied through defendant Morgan County Feeders. The other defendants were involved in the purchase, care, and sale of the cattle on plaintiffs' behalf. Plaintiffs claim that defendants promised an average return on their investment of 35%. Although plaintiffs made a profit on their investment, they did not realize the rate of return that they claim they were promised.

Plaintiffs filed suit against defendants, asserting several claims. At trial, five claims, breach of fiduciary duty, fraud, conspiracy, breach of contract, and negligence were submitted to the jury. The jury found in favor of plaintiffs on their claim of breach of fiduciary duty against defendants Agri Tech, Morgan County Feeders, A T Cattle Co., and Weisbart but awarded no damages. The jury also found for plaintiffs on their negligence claim against defendants Agri Tech, Weisbart, Chilewich, and Chilewich Sons & Co. and awarded damages. Defendants were found not to be liable on the remaining claims.

After a hearing on certain post-trial motions, the trial court upheld the jury verdict, denied all parties' motions for attorney fees, and awarded costs to plaintiffs as the prevailing party.

I.

Defendants first contend that the trial court erred in submitting plaintiffs' negligence claim to the jury. They argue that, because the circumstances giving rise to plaintiffs' breach of contract claims are identical to those upon which plaintiffs base their negligence claim, the negligence claim cannot be maintained. We agree.

A claim asserting a breach of contract is based on a party's failure to perform promises mutually bargained for and agreed upon by the parties to the contract. A claim based in tort law alleges the breach of a duty other than contractual owed by one party to another. Each has duties arising under different circumstances. See Murr, Deceptive Trade Practices & Misrepresentations Which Become the Terms of a Contract: "Contract Law Trumps Tort Law, Not the Other Way Around", 61 Tex. B.J. 334, 336 (1998) ("if contract law determines that its own rules are applicable, contract law trumps tort law, not the other way around"); Madison Newspapers, Inc. v. Pinkerton's Inc., 200 Wis.2d 468, 545 N.W.2d 843 (Wis.Ct.App. 1996) (under common law, causes of action in tort and contract historically have had different purposes and protected different interests).

Thus, in determining whether a cause of action in tort exists, a court should consider both the source of a defendant's duty to act, that is, whether such duty arises from a contract or from some other source, and the nature of the remedy sought by the plaintiff. If the duty allegedly owed by one party to another is created by the terms of a contract and the damages sought arise from a breach of the duties set forth under the contract, then the cause of action lies in contract. If a party is seeking damages in tort based on the existence of a duty that arises by the terms of the contract and a breach of such duty, then the allegations in support of the tort claim are equivalent to those upon which the breach of contract claim is based. See Madison Newspapers, Inc. v. Pinkerton's Inc., supra (although the circumstances which arise out of a contract may furnish the occasion for a tort, such circumstances do not form the underlying duty for the tort; such duty must exist independent of the performance of the contract).

In both instances, the parties are seeking damages because of a failure of the performance of the contract. To permit both claims to stand would allow the distinctions between tort law and contract law to become so blurred as to render ineffective the parties' attempts, through contract, to determine for themselves their respective duties and obligations in a relationship. See Terrones v. Tapia, 967 P.2d 216 (Colo.App.1998) (because parties entering into a contract are able to shape its terms and restrict the available remedies as they please, the duty owed is contractual); Centennial Square, Ltd. v. Resolution Trust Co., 815 P.2d 1002 (Colo.App. 1991) (dismissal of tort claims proper where duties alleged to be tortiously breached were created by contractual relationship); Jardel Enterprises, Inc. v. Triconsultants, Inc., 770 P.2d 1301 (Colo.App.1988) (as a general rule, no cause of action lies in tort for the negligent breach of a contractual duty); cf. Town of Alma v. Azco Construction, Inc., 985 P.2d 56 (Colo.App.1999) (under economic loss rule, the nonbreaching party to a contract does not have a negligence cause of action if the only damages asserted for the breach of contract are for economic loss); Graphic Technologies, Inc. v. Pitney Bowes Inc., 998 F.Supp. 1174 (D.Kan.1998) (although party may not base tort claim on contractually created duty, tort claim is recognized if independent duty exists).

Lembke Plumbing & Heating v. Hayutin, 148 Colo. 334, 366 P.2d 673 (1961); Metropolitan Gas Repair Service, Inc. v. Kulik, 621 P.2d 313 (Colo.1980); and Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo. 1983), upon which plaintiffs rely, do not dictate otherwise.

In those cases, the duty asserted by the parties alleging negligence arose from an independent duty of care recognized under the common law but not contemplated under the terms of the contract. In a contract to repair, the implied duty of care is grounded in the common law which recognizes that such duty would exist even without a contractual relationship. See Osman v. Summer Green Lawn Care, Inc., 209 Mich.App. 703, 532 N.W.2d 186 (1995) (contract may create the relationship out of which arises a common law duty to exercise care; at issue was the duty owed the public to exercise care in removing snow); Jacobs v. Karls, 178 Wis.2d 268, 504 N.W.2d 353 (Wis.Ct.App.1993) (common law recognizes general duty to use reasonable care in effecting repairs which exists independent of contractual obligations).

Indeed, in Metropolitan Gas Repair Service, Inc. v. Kulik, supra, the supreme court noted that a tort obligation could arise independent of a contractual duty. See Cosmopolitan Homes, Inc. v. Weller, supra (although some overlap may exist in the elements required to prove a claim of negligence and a claim of breach of implied warranty, the scope of duty differs and the basis of liability is distinguishable).

Further, we read the various insurance cases cited by plaintiffs, which allow a party to pursue claims of both breach of contract and negligence, as an exception to the general rule and limited to actions arising between an insured and the insurer. See, e.g., Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo.1984) (basis for liability in tort of an insurer's implied duty of good faith and fair dealing is grounded upon the special nature of the insurance contract and the quasi-fiduciary nature of the insurance relationship).

Here, plaintiffs alleged that defendants breached oral and written contracts to administer an investment program for plaintiffs by purchasing, caring for, and selling cattle for them. Plaintiffs asserted in their complaint that defendants breached these agreements by their actions and omissions in conducting the cattle program and, therefore, caused damage to them. In support of their negligence claim, plaintiffs again asserted that defendants breached duties owed to them by virtue of the specific terms of the contracts. However, absent the contractual relationship between plaintiffs and defendants to conduct a cattle investment program, there is no duty of care owed to plaintiffs by defendants. It is the contract itself which establishes and defines the relationship between the parties.

Although plaintiffs argue that defendants breached duties not specifically enumerated in the contracts, we fail to see that plaintiffs have alleged any duty owed to them that was not a part of the contracts entered into by the parties. See Centennial Square, Ltd. v. Resolution Trust Co., supra.

Indeed, the feeder agreement between plaintiffs and defendant Agri Tech specifically calls for Agri Tech to care for plaintiffs' cattle according to the customary...