Securities-Intermountain, Inc. v. Sunset Fuel Co.

Decision Date14 May 1979
Docket NumberSECURITIES-INTERMOUNTAI,No. A7605,INC,A7605
Parties, Appellant, v. SUNSET FUEL CO. and Cy Stadsvold, Respondent. 06171; CA 11004.
CourtOregon Court of Appeals

Rudy R. Lachenmeier, Portland, argued the cause for appellant. With him on the briefs was Vergeer, Roehr & Sweek, Portland.

Donald J. Friedman, Portland, argued the cause for respondent Sunset Fuel Co. With him on the brief was Black, Kendall, Tremaine, Boothe & Higgins, Portland.

Elizabeth K. Reeve, Portland, argued the cause for respondent Cy Stadsvold. With her on the brief were Kenneth E. Roberts, Ridgway K. Foley, Jr., and Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland.

Before SCHWAB, C. J., and BUTTLER and JOSEPH, JJ.

JOSEPH, Judge.

Securities-Intermountain, Inc., brought this action to recover damages from a subcontractor and an architect who had contracted in writing with plaintiff's assignors to provide specific services in the construction of an apartment complex. The assignors were general contractors, and plaintiff was the mortgagee. The trial court allowed defendants' motions for summary judgment on the ground that the action was barred by the statute of limitations. Plaintiff appeals.

ORS 12.135(1) provides:

"An action to recover damages for injuries to a person or to property arising from another person having performed the construction, alteration or repair of any improvement to real property or the supervision or inspection thereof, or from such other person having furnished the design, planning, surveying, architectural or engineering services for such improvement, shall be commenced within two years from the date of such injury to the person or property; provided that such action shall be commenced within 10 years from substantial completion of such construction, alteration or repair of the improvement to real property."

This action was brought more than two, but less than six years after defendants last rendered services. The parties stipulated that plaintiff began to suffer damages more than two years prior to the commencement of this action. Plaintiff argues that its action was for breach of contract (for which the statute of limitations is ORS 12.080(1)), and that ORS 12.135(1) applies only to tort actions. 1 Defendants argue that ORS 12.135(1) was intended to apply to contract actions as well as torts. They also argue that, although the action was pleaded in form as arising from the contract, the "gravamen" was tort, and therefore a two-year limitation period should apply, whether or not ORS 12.135(1) applies to contract actions.

The material substance of the pleadings are set out in the margin. 2 The fact that the causes of action were pled in form as contract actions does not determine their nature for statute of limitations purposes. Lindemeier v. Walker, 272 Or. 682, 538 P.2d 1266 (1975); Bales for Food v. Poole, 246 Or. 253, 424 P.2d 892 (1967); Dowell v. Mossberg, 226 Or. 173, 355 P.2d 624 (1961); See also Ashley v. Fletcher, 275 Or. 405, 550 P.2d 1385 (1976). As the court noted in Lindemeier :

"(I)t is the gravamen or the predominant characteristic of the action, not plaintiff's election, which governs whether the action is one in contract or in tort." 272 Or. at 685, 538 P.2d at 1267.

In that case the court summarized its holdings in Dowell and Bales for Food as follows:

"In Dowell v. Mossberg, 226 Or. 173, 355 P.2d 624, 359 P.2d 541 (1961), a malpractice case against a physician, plaintiff alleged a cause of action in contract in order to avoid the tort statute of limitations. We held that the implied contract between a patient and a physician is a matter of inducement and not the contractual relationship which gives rise to a cause of action of malpractice. Basically, a malpractice action sounds in tort. 'Failure to exercise due care in the treatment of a patient is a breach of a legal duty which arises, not out of contract, but out of the relationship of physician and patient.' Dowell v. Mossberg, supra, at 190, (355 P.2d 624,) 359 P.2d (541,) 543.

"We followed the same rule in Bales for Food v. Poole, 246 Or. 253, 424 P.2d 892 (1967), a malpractice action against an engineer-architect for failure to properly prepare the plans for a shopping center. The complaint there alleged an agreement between plaintiff and defendant, which agreement defendant breached by failing to exercise due care in drafting the plans and supervising the construction. Plaintiff contended that he alleged a cause of action in contract and that the six-year statute of limitations, ORS 12.080, applied. We held that the gravamen of plaintiff's cause of action sounded in tort and the two-year statute applied. The substance of the opinion in Bales is clearly that whether the action is in contract or in tort must be determined on the basis of the predominant characteristic of the action and, further, that the time within which actions must be commenced cannot depend upon the form in which the action is brought." 272 Or. at 683-84, 538 P.2d at 1267.

The first particular of the first cause of action against Sunset Fuel is that it failed to provide the required mechanical details and drawings of the heating system. That appears, on its face, to be the type of allegation which must be contractual. The predominant characteristic is a total failure to perform a specific duty which was established solely by contract and which does not fall within any standard of care imposed by law to govern any contractual undertakings. The prayer for damages, 3 however, contains nothing specifically relating directly to the failure to furnish the drawings. While that was not fatal to the cause of action, it does reveal that the gravamen of the cause of action is actually the unworkmanlike manner in which the system was designed.

Given the alleged inadequacy of the design, the only conceivable harms that could have resulted to plaintiff from the failure of Sunset Fuel to deliver the drawings were that plaintiff was not able to detect the design inadequacies earlier and that the lack of drawings describing what Sunset Fuel had done may have made it more difficult for the necessary corrections to be made. Both of those possible types of damage, however, are incidental to the design inadequacies. We conclude that the gravamen of the first cause of action is contained in the second particular, I. e., that the system was designed in an unworkmanlike manner, and if completed as designed it would not meet FHA or any reasonable standards. That is tort. Summary judgment was properly granted for defendant Sunset Fuel on that cause of action.

As a second cause of action against Sunset Fuel, plaintiff alleged that Sunset Fuel "fail(ed) to complete the heating system, in that it was never made operational." 4

Although the complaint on its face contained a claim of damages consistent with a cause of action for breach of contract and the rules long applicable under Hadley v. Baxendale, 156 Eng.Rep. 145 (1845), and the myriad cases since, we are persuaded that the nature of the non-performance alleged is so closely akin to the other causes pleaded and to the claims reviewed and held tortious in Bales for Food, supra, and the other cases cited Supra, pages 1309-1310, that we are constrained to say that the gravamen of the second cause of action against Sunset Fuel is tort. Summary judgment was properly allowed.

With respect to the first cause of action against Stadsvold, we conclude that the gravamen of each of the alleged particulars was tort. Although the first half of the first particular and the second particular were cast in terms of a failure to do something, that form of allegation is almost always possible and cannot be determinative. See Lindemeier v. Walker, supra. The substance of each of those allegations was that Stadsvold did not exercise due care in performing his supervision, inspection and authorization-of-disbursements duties. The contractual undertaking to render those services merely provided the occasion (or inducement) for the alleged misfeasance. See Lindemeier v. Walker, supra.

We recognize that plaintiff alleged in the first particular against Stadsvold a failure to secure and review drawings of the heating system. Although such an allegation could be considered contractual, the particular duty in this instance was within the standard of care governing the more basic undertaking to provide necessary supervision. That the parties specifically provided in promissory language for an act the performance of which would be under the standard of care derived from the whole contractual undertaking should not make contract the gravamen of a complaint based on the failure to perform that duty.

The third particular under the first cause of action against Stadsvold, I. e., that "the heating system as designed by Sunset Fuel Company was inadequate," is merely another way of stating the result of the first two particulars. The trial court properly granted summary judgment for Stadsvold on the first cause of action against him.

Three of the five particulars under the second cause of action against Stadsvold are the same as those under the first cause of action. The gravamen of those is tort. In addition, plaintiff alleged that Stadsvold breached the contract

"(i)n turning over the responsibility for designing the heating system to Sunset Fuel without first obtaining the acceptance of the mortgagee of said course of action."

We conclude that the gravamen of that particular is also tort. The essence of the claim is that Stadsvold's delegee, Sunset Fuel, designed the heating system in a unworkmanlike manner. 5

Plaintiff alleged finally that Stadsvold breached the contract

"(i)n stopping all inspections of the heating system without first obtaining the acceptance of the mortgagee of said course of action."

That allegation, stripped of the irrelevant...

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