Hardaway Co. v. Parsons, Brinckerhoff, Quade & Douglas, Inc.

• Decision Date: 21 January 1997
• Docket Number: No. S96G1228,S96G1228
• Citation: 267 Ga. 424,479 S.E.2d 727
• Parties: , 97 FCDR 214 HARDAWAY CO. v. PARSONS, BRINCKERHOFF, QUADE & DOUGLAS, INC., et al.
• Court: Georgia Supreme Court

Page 727

479 S.E.2d 727

267 Ga. 424, 97 FCDR 214

HARDAWAY CO. v. PARSONS, BRINCKERHOFF, QUADE & DOUGLAS, INC., et al.

No. S96G1228.

Supreme Court of Georgia.

Jan. 21, 1997.

Joseph Bernard Haynes, Charles K. McKnight, Jr., King & Spalding, Atlanta, for Hardaway Co.

Kent T. Stair, Gregory Howard Wheeler, Webb, Carlock, Copeland, Semler & Stair, Atlanta, for Parsons, Brinckerhoff, Quade & Douglas, Inc., et al.

SEARS, Justice.

In this appeal, we must determine when a cause of action accrues in a suit brought by a general contractor seeking recovery for economic losses incurred due to alleged negligent misrepresentations made by a design engineer, with whom the contractor is not in privity. The Court of Appeals held that the cause of action accrued when the general contractor entered into a contract in partial reliance on the alleged misrepresentations. Because we hold that a negligence action of this sort accrues only when it is certain, and not speculative, that the plaintiff has suffered economic loss, we reverse.

Appellee Parsons, Brinckerhoff, Quade & Douglas, Inc. ("Parsons") contracted with the Georgia Department of Transportation ("DOT") to design the reconstruction of State Highway 19 in Savannah, including the construction of ten approach bridges for the Talmadge Memorial Bridge over the Savannah River ("the Project"). As part of its design package, Parsons planned a detailed erector system for use in erecting a number of bridge girders, each weighing approximately fifty tons, that were to be installed above a highway and warehouse district.

After DOT received the design package from Parsons, it accepted bids to construct the Project. Appellant Hardaway Co. ("Hardaway") was the successful bidder, and in May 1988, it entered into a contract with DOT to construct the Project. No contract existed between the parties to this action--Parsons and Hardaway--rather, each party contracted with DOT; the former to design the project, and the latter to construct it.

Under Hardaway's construction plan, fabrication of the bridge girders was to begin in July 1989, and their installation was to begin in September 1989. Six months after contracting with DOT, in October 1988, Hardaway asked DOT to verify the workability of the erector system designed by Parsons. In November 1988, apparently after consulting with Parsons, DOT affirmed the integrity of the designed erector system. The record indicates that no additional representations about the erector system's workability were made to Hardaway until June 1989.

The record shows that in March 1989, Parsons began to revise its computer analysis of the erector system, and by May 1989, Parsons appears to have concluded that its designs for the erector system were flawed. On June 15, 1989, Hardaway apparently was informed that the erector system would not operate properly as designed. Hardaway claims that as a result, the fabrication of the bridge girders was delayed for approximately two months, and installation of the girders was delayed roughly six months. The uncontroverted evidence of record shows that until it learned of the alleged faults in the erector system designs on June 15, 1989, Hardaway incurred no pecuniary losses due to delays in the Project's construction. From that date onward, however, Hardaway claims it incurred economic losses due to extra work caused by delays in the fabrication and installation of the bridge girders.

On April 8, 1993, Hardaway filed suit against Parsons, alleging that Parsons' negligent design of the erector system, and its negligent misrepresentation of the system's integrity, caused Hardaway to suffer pecuniary loss. ¹ In the trial court, Parsons filed a motion for summary judgment, claiming that Hardaway's cause of action was barred by the applicable four year limitation period. Parsons argued that the statute of limitation began to run when Hardaway contracted with DOT in May 1988. In opposition, Hardaway argued that the limitation period did not commence until it began to incur economic losses in June 1989. The trial court denied Parsons' summary judgment motion.

The Court of Appeals reversed, ruling that Hardaway's cause of action accrued when it contracted with DOT in May 1988, because at that time it "could first have maintained the action to a successful result," and thus the four year limitation period had run when Hardaway filed its complaint. ² In reaching this conclusion, the Court of Appeals reasoned that because Hardaway had relied upon Parson's imperfect designs in preparing its bid to construct the Project, it had suffered injury from the moment it contracted with DOT in partial reliance thereon. ³

This Court granted certiorari in order to examine when a cause of action accrues when recovery is sought for economic loss resulting from alleged tortious negligent misrepresentation. As explained below, we find that the Court of Appeals misapprehended the essential requirement that in order to maintain its action, Hardaway must have suffered economic loss, and that until actual economic losses were incurred with certainty, and not merely as a matter of speculation, Hardaway's claim did not accrue, and the limitation period did not commence.

1. Hardaway's cause of action was first recognized by this Court in Robert & Co. Assoc. v. Rhodes-Haverty Partnership, ⁴ and was adopted from the Restatement (Second) of Torts, § 522. Its essential elements are: (1) the defendant's negligent supply of false information to foreseeable persons, known or unknown; (2) such persons' reasonable reliance upon that false information; and (3) economic injury proximately resulting from such reliance. ⁵

The parties both assert that the four year limitation period for actions claiming injury to personalty, set forth in OCGA § 9-3-31, is applicable to this matter. In light of the relevant case law applying that Code section, we agree with that assertion. ⁶ Accordingly, we must determine whether Hardaway's cause of action accrued before or after April 8, 1989, four years before it filed its complaint.

Parsons urges us to affirm the Court of Appeals' ruling that Hardaway's cause of action accrued in May 1988, when it contracted with DOT to construct the Project based upon Parson's allegedly deficient designs, because at that time, Hardaway could have successfully maintained an action. At that time, Parsons argues, Hardaway (1) had been provided with the allegedly defective erector system plans; (2) had relied on those plans to its detriment in preparing its bid; and (3) had suffered pecuniary loss by contracting itself to build the Project for a payment price it claims was too low, given the error in the plans. With regard to this last element, Parsons argues that the economic losses that Hardaway claims it sustained were the same on the day it signed the contract as on the day it learned the Project would be delayed due to the faulty erector system.

In making this argument, Parson focuses on the third requirement of Hardaway's claim for economic loss due to negligent misrepresentation--"pecuniary loss caused by ... justifiable reliance upon the [false] information" supplied by a defendant. ⁷ Parsons urges us to construe this requirement to include "speculative pecuniary loss" caused by negligent misrepresentation. For the reasons explained below, we reject Parsons' argument.

With the benefit of hindsight, we can see now that at the time Hardaway signed the contract, it may have been foreseeable, or even likely, that it would lose money due to delays caused by apparent errors in the initial designs. However, the uncontroverted evidence shows that it did not suffer actual "pecuniary loss" due to flawed designs until it was certain that the Project would not commence as scheduled....