Mid-Western Elec., Inc. v. DeWild Grant Reckert & Associates Co.

• Decision Date: 19 May 1993
• Docket Number: MID-WESTERN,No. 17858,17858
• Citation: 500 N.W.2d 250
• Parties: ELECTRIC, INCORPORATED, a South Dakota Corporation, Plaintiff and Appellee, v. DeWILD GRANT RECKERT & ASSOCIATES CO., Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 250

500 N.W.2d 250

MID-WESTERN ELECTRIC, INCORPORATED, a South Dakota

Corporation, Plaintiff and Appellee, v. DeWILD GRANT RECKERT & ASSOCIATES CO., Defendant and Appellant.

No. 17858.

Supreme Court of South Dakota.

Argued Jan. 11, 1993.

Decided May 19, 1993.

Jon C. Sogn, Lynn, Jackson, Shultz & Lebrun, P.C., Sioux Falls, for plaintiff and appellee.

Steven W. Sanford, Cadwell, Sanford & Deibert, Sioux Falls, for defendant and appellant.

WUEST, Justice.

The engineering firm of DeWild Grant Reckert & Associates (DGR) prepared specifications for and advised the Guard concerning the installation of a fire detection and suppression system to be installed at the Air National Guard's base in Sioux Falls, South Dakota. Mid-Western Electric, Inc. (Mid-Western), the electrical subcontractor for the project, alleged DGR was professionally negligent after the equipment Mid-Western installed was rejected as not conforming to specifications. The jury found DGR liable. DGR claims seven errors which we address seriatim. We reverse.

FACTS

DGR is a multi-disciplinary engineering and architectural firm with offices in Rock Rapids, Sioux City and Des Moines, Iowa, Denver, Colorado and Sioux Falls, South Dakota. In 1982, the Air National Guard hired DGR to prepare drawings and specifications for fire detection and suppression systems for the Guard's base at Joe Foss Field in Sioux Falls, South Dakota. The plans required input from several engineering specialties. The specifications at issue in this case were originally drafted by Jim Wagner, an electrical engineer with DGR. After Wagner left DGR in 1983, Ted Clavell, a DGR mechanical engineer took over the project. The plans were sent to Schirmer Engineering of Chicago in August of 1983 to review the electrical portion of the specifications; Schirmer made some changes and the plans were returned to DGR. Subsequent changes were made by DGR. Throughout the process, the Air National Guard in Sioux Falls, Maryland and Washington, D.C. reviewed, commented on and made changes in the plans and specifications. The plans were approved and submitted to the Guard as 95% completed. The Guard requested further changes which were made by DGR. After all the changes, the plans and specifications contained discrepancies.

In 1985, funding was obtained, bids solicited and DGR entered into a contract with the Guard to oversee the project. In July, 1985, Terry Prestbo, a licensed electrician and president of Mid-Western, Inc., obtained the plans and specifications for the electrical portion of the project. He received bids from suppliers of electrical equipment, the lowest bid coming from TLC Sales. TLC put in a general bid (without a list of specific equipment) that it would supply all necessary equipment. TLC's bid was much lower (up to half the price) than the bids of other electrical suppliers. Because of the tremendous price spread, Mid-Western contacted TLC twice to question whether the bid was complete and the equipment up to specifications; it was assured the bid was correct. Mid-Western then added its own costs and profit to the TLC offer and submitted its bid to several general contractors for the project. Jans Corporation received the general contract for the project and notified Mid-Western it was the successful bidder for the electrical work.

Mid-Western then checked the background and references of TLC Sales; it received good recommendations. Prestbo traveled to an Air National Guard Base in Kentucky to view the testing of TLC supplied equipment installed at a similar project. In July of 1985, Mid-Western received a list of the equipment TLC had bid. Prestbo did not check the equipment list against the specifications for the project. In September of 1985, Mid-Western signed the contract with Jans to do the electrical work on the project.

The list of equipment TLC provided to Mid-Western was submitted through the Guard to DGR for its review and approval. DGR notified the Guard the plans and specifications called for two radio receiving consoles, one with a printer, in separate buildings--not one radio receiving console in one building with a remote receiving printer in another building as per the list supplied by Mid-Western. Mid-Western was required to provide the additional receiving console for the project with no additional compensation.

The plans and specifications also called for installation of ultraviolet (UV) detectors in the airplane hangars. The detectors were required to recognize the energy given off by a fire and then trigger a system that would flood the hangar with four feet of foam to smother any fire before it spread. The specifications called for detectors that could discover a 10' X 10' (100 sq. feet) fuel fire at a distance of 150' within five seconds. Additionally, to detect the energy given off by flame (as distinguished from the energy given off by a source such as sunlight), the detectors were to be "sensitive to radiation in the range of 1,850 to 2,450 angstroms." The alarm panel for the detectors showed two detection zones on the specifications, one zone for each room. The Guard required that contractors submit "catalog cuts" of equipment for prior approval to insure the equipment met specifications. Additionally, equipment deviating from specifications was to be noted on a cover page, a form 3000, submitted along with the catalog cuts.

The catalog cuts of the UV detectors submitted for DGR's approval were to detect flame in a range of 1700 to 2900 angstroms within six seconds. Neither Mid-Western nor TLC noted any deviations from specifications on the cover sheet. The difference in the detectible range was brought to the attention of the Guard by DGR's project manager, Ed Cable, but he assumed the detectors could be adjusted to cover a narrower energy band. Mid-Western was never notified of the discrepancies. The equipment was given approval and the detectors were installed.

Arrangements were made to test the detectors after installation. An Air National Guard Officer was brought in to run the tests. When he saw the detectors before the test, the officer stated they were not what the Guard wanted. Because the hangar was not large enough to test a fire from 150', the size of the fire was reduced. The detectors failed to go off within five seconds. After the detectors were repositioned, a larger fire was lighted; eventually the detectors went off in nine seconds.

Mid-Western contacted the manufacturer of the equipment, repositioned the detectors and asked to have them tested again. The Guard informed Mid-Western that should the detectors meet the time requirement, they would be rejected for two additional reasons. First, it claimed the detectors picked up too wide an energy band. Second, although the alarm panel showed which zone a tripped detector was in, it failed to identify which one of the 16 detectors had been tripped.

The Guard then requested a change order specifying the UV detectors be replaced with ultraviolet, infrared detectors (UVIR). The Guard agreed to pay Mid-Western an additional amount for the UVIR detectors but refused to give Mid-Western full credit for the UV detectors that did not meet specifications, although it did give Mid-Western more credit than DGR had recommended.

Mid-Western then sued DGR, Sid Early of TLC, and the Ames Security Corporation, supplier of the UV detectors, for the economic loss it had suffered. Early and Ames were dismissed as defendants by Mid-Western and the case against DGR went to trial. The jury returned a verdict in favor of Mid-Western in the amount of $45,020.

DGR appeals stating seven issues:

I. MID-WESTERN'S CLAIM IN TORT FOR ECONOMIC LOSS CANNOT BE MAINTAINED WHERE MID-WESTERN HAD AN ADEQUATE CONTRACTUAL REMEDY AGAINST THE PARTIES TO ITS CONTRACTS AND WHERE MID-WESTERN WAS NOT A PARTY TO THE DGR CONTRACT WITH THE GUARD.

II. MID-WESTERN OFFERED NO EVIDENCE THAT DGR "OMITTED" TO PERFORM ITS CONTRACT WITH THE GUARD AND MID-WESTERN'S EVIDENCE

WAS OTHERWISE INSUFFICIENT TO SUPPORT THE VERDICT.

III. THE TRIAL COURT ERRED IN REFUSING TO GIVE DGR'S REQUESTED INSTRUCTION ON CONTRIBUTORY NEGLIGENCE.

IV. THE TRIAL COURT ERRED IN GIVING INSTRUCTIONS NOS. 8 AND 20 AND IN REFUSING TO GIVE DGR' S PROPOSED INSTRUCTIONS NOS. 2, 4 AND 102-105 REGARDING BURDEN OF PROOF, ISSUES TO BE DECIDED BY THE JURY AND THE LIABILITY THEORIES AGAINST DGR.

V. THE EVIDENCE CONCERNING LAPSE OF ED CABLE'S SOUTH DAKOTA ARCHITECTURAL LICENSE CONSTITUTED SURPRISE UNDER SDCL 15-6-59(a)(3).

VI. THE TRIAL COURT ERRONEOUSLY FAILED TO GRANT DGR'S MOTION IN LIMINE CONCERNING EVIDENCE OF DAMAGES ATTRIBUTABLE TO MID-WESTERN'S LOSS OF BONDING CAPACITY AND FURTHER FAILED TO GRANT DGR'S MOTION FOR A CONTINUANCE.

VII. THE COURT ERRED IN GIVING INSTRUCTIONS 14, 14A AND 14B REGARDING LICENSURE AND CERTIFICATION OF PLANS AND SPECIFICATIONS AND FAILED TO GIVE DGR'S REQUESTED INSTRUCTION 101 WHICH SOUGHT TO AMELIORATE CABLE'S LACK OF A SOUTH DAKOTA LICENSE.

I. & II.

DGR asserts it owed no duty to Mid-Western due to lack of privity of contract. This assertion is based on the traditional tort rule that privity of contract is required to show a duty. Without breach of a duty owed to Mid-Western, DGR would not be liable for any damages Mid-Western incurred. It is conceded by both parties there is no contractual privity between them. Therefore this cause of action rests on a claim of professional negligence which damages a foreseeable third party.

The strict requirements of privity of contract to maintain an action for damages began to blur in the landmark case of MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916). "We have put aside the notion that the duty to safeguard life and limb, when the consequences of negligence may be foreseen, grows out of contract and nothing else." MacPherson, 217 N.Y. 382, 111 N.E. at 1053. The early negligence cases were founded on recovery for physical injury. See Paxton v. Alameda...