SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs.

• Citation: 2001 Utah 54,2001 UT 54,28 P.3d 669
• Decision Date: 26 June 2001
• Docket Number: No. 990869.,990869.
• Parties: SME INDUSTRIES, INC., a Utah corporation, Plaintiff and Appellant, v. THOMPSON, VENTULETT, STAINBACK AND ASSOCIATES, INC.; Robert Norman Veale; Gillies, Stransky, Brems & Smith; Jonathan Bradshaw; Reaveley Engineers & Associates, Inc., a corporation; Earl S. Eppich; and Does 1-40 inclusive, Defendants and Appellees.
• Court: Supreme Court of Utah

28 P.3d 669

2001 UT 54

2001 Utah 54

SME INDUSTRIES, INC., a Utah corporation, Plaintiff and Appellant, v. THOMPSON, VENTULETT, STAINBACK AND ASSOCIATES, INC.; Robert Norman Veale; Gillies, Stransky, Brems & Smith; Jonathan Bradshaw; Reaveley Engineers & Associates, Inc., a corporation; Earl S. Eppich; and Does 1-40 inclusive, Defendants and Appellees.

No. 990869.

Supreme Court of Utah.

June 26, 2001.

Rehearing Denied July 26, 2001.

Harold C. Verhaaren, D. Scott Crook, Salt Lake City, for plaintiff.

John N. Braithwaite, Salt Lake City, for TVSA defendants.

Craig R. Mariger, Edward R. Munson, Salt Lake City, for GSBS defendants.

Craig C. Coburn, Bastiaan K. Coebergh, Salt Lake City, for Reaveley defendants.

RUSSON, Associate Chief Justice:

¶ 1 Plaintiff SME Industries, Inc., brought this action against numerous defendants, seeking delay damages and other economic losses it allegedly incurred while working on a construction project. The trial court granted defendants' motions for summary judgment, and SME appeals.

BACKGROUND

¶ 2 On May 20, 1992, Salt Lake County (the "County") entered into a contract for architectural and consulting services with Thompson, Ventulett, Stainback and Associates, Inc., and Robert Norman Veale¹ (collectively, "TVSA"). Pursuant to TVSA's contract with the County (the "County-TVSA contract"), TVSA agreed to provide, inter alia, "designs, drawings, and specifications" for a construction project to renovate and expand the Salt Palace Convention Center in Salt Lake City, Utah (the "project"). The County-TVSA contract also provided that TVSA would be assisted by other design professionals approved by the County (the "design team") in performing its responsibilities under the contract. Accordingly, TVSA contracted with Gillies, Stransky, Brems & Smith and Jonathan Bradshaw² (collectively, "GSBS") to provide local architectural services for the project (the "TVSA-GSBS contract"),³ and Reaveley Engineers & Associates, Inc., and Earl S. Eppich⁴ (collectively, "Reaveley") to provide structural engineering services for the project (the "TVSA-Reaveley contract"). Neither GSBS nor Reaveley contracted directly with the County.

¶ 3 In early 1994, the County advertised the construction of the project for bids. Hughes-Hunt, a joint venture, submitted a bid to the County to become the general contractor and, in furtherance of that purpose, received a bid from SME Industries, Inc. ("SME"), to furnish, fabricate, and erect the structural steel for the project. Hughes-Hunt was awarded the contract and subsequently entered into a subcontract agreement with SME. Neither SME nor Hughes-Hunt contracted directly with any member of the design team.

¶ 4 Shortly after beginning work on the project, SME encountered problems with the structural steel portions of the plans and specifications prepared by the design team. These problems continued over the course of SME's work on the project and necessitated the preparation and submittal of more than 450 requests for information ("RFIs"). Moreover, the problems with the structural steel portion of the project also necessitated the submittal of numerous requests for change orders for clarifications of the plans and specifications.

¶ 5 Accordingly, after the project was completed, SME submitted to Hughes-Hunt a request for recovery of extraordinary costs in the amount of $2,193,000. SME claimed it was entitled to recover the extraordinary costs because the design team's responses to its RFIs and change orders were consistently late, were internally inconsistent, conflicted with the plans and specifications, and often failed to address the issues raised by SME. As a result, SME alleged that its fabrication and erection of structural steel for the project were substantially disrupted and its schedules for fabrication and erection of steel on other unrelated projects were also adversely affected.

¶ 6 After receiving SME's claim, Hughes-Hunt forwarded it to the County. At the County's request, the design team reviewed the claim and submitted a written statement recommending that the County reject it, which the County did. Nevertheless, the County reached a settlement with Hughes-Hunt. The settlement included payment to Hughes-Hunt of $150,000 and the assignment of all rights, causes of action, and claims the County had against the design team related to the structural steel portion of the project. Thereafter, Hughes-Hunt reached a settlement with SME, paying SME the $150,000 and assigning SME all of its direct and assigned rights, causes of action, and claims against the design team.

¶ 7 On April 24, 1998, SME filed a complaint in the district court against TVSA, GSBS, and Reaveley, seeking delay damages and other economic losses it allegedly sustained as a result of its work on the project.⁵ SME's lawsuit asserted its direct claims against TVSA, GSBS, and Reaveley, as well as the assigned claims that the County and/or Hughes-Hunt had against defendants. Specifically, SME sought recovery under a total of five legal theories: (1) breach of the County-TVSA contract; (2) breach of express and implied warranties allegedly contained in the County-TVSA contract; (3) negligent interference with advantageous economic interests against TVSA; (4) professional negligence against TVSA, GSBS, and Reaveley; and (5) breach of third-party beneficiary claims arising out of the County-TVSA, TVSA-GSBS, and TVSA-Reaveley contracts.

¶ 8 None of defendants answered SME's complaint. Instead, TVSA, GSBS, and Reaveley each filed separate motions to dismiss, which the trial court treated as motions for summary judgment. At the conclusion of oral argument held April 9, 1999, the trial court granted each of defendants' motions, dismissing SME's claims against all defendants as a matter of law. An order to that effect was entered on September 21, 1999. In its order, the trial court concluded that (1) SME's County-assigned breach of contract claims against TVSA failed because the County-TVSA contract prohibited the assignment of the County's "interest in [the] Agreement" and, as a matter of law, such language prohibited not only the assignment of the performance of the contract, but also the assignment of a cause of action arising out of a breach of the contract; (2) TVSA made no express warranties regarding its plans and specifications for the project; (3) the implied warranty claim against TVSA failed because design professionals cannot be liable under a theory of implied warranty as a matter of law; (4) the economic loss rule barred SME's direct and assigned negligence claims against all members of the design team; and (5) the respective contracts did not evidence an intent on the part of the contracting parties to confer a separate and distinct benefit upon SME, the County, or Hughes-Hunt and that, therefore, SME's direct and assigned third-party beneficiary claims failed as a matter of law. SME appeals each of the trial court's determinations.

STANDARD OF REVIEW

¶ 9 Our standard of review when considering challenges to a summary judgment is well settled. Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Utah R. Civ. P. 56(c); Franco v. Church of Jesus Christ of Latter-day Saints, 2001 UT 25, ¶ 32, 21 P.3d 198. In determining whether the trial court correctly found that there was no genuine issue of material fact, "we accept the facts and inferences in the light most favorable to the [nonmoving] party." Winegar v. Froerer Corp., 813 P.2d 104, 107 (Utah 1991). In deciding whether the trial court correctly granted judgment as a matter of law, "we give no deference to the trial court's view of the law; we review it for correctness." Ron Case Roofing & Asphalt Paving, Inc. v. Blomquist, 773 P.2d 1382, 1385 (Utah 1989).

ANALYSIS

I. SME'S BREACH OF CONTRACT CLAIM AGAINST TVSA

¶ 10 SME's first claim for relief is based upon an alleged breach of the County-TVSA contract. SME was not a party to the County-TVSA contract and therefore is pursuing its breach of contract claim under a purported assignment by the County of its rights, causes of action, and claims against TVSA to Hughes-Hunt, and Hughes-Hunt's subsequent assignment of such interests to SME. In dismissing the claim, the trial court ruled that SME's breach of contract cause of action failed because an anti-assignment clause contained in the County-TVSA contract prohibited the assignment by the County to Hughes-Hunt, and subsequently to SME, of a breach of contract cause of action against TVSA.

¶ 11 As a general rule, a contract provision prohibiting the assignment of the contract itself, or of rights and privileges under the contract, does not, unless a different intention is manifested, prohibit the assignment of a claim for damages on account of breach of the contract. See, e.g., U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1234 (10th Cir.1988)

; Rosecrans v. William S. Lozier, Inc., 142 F.2d 118, 124 (8th Cir.1944); Paley v. Cocoa Masonry, Inc., 433 So.2d 70, 70-71 (Fla.Dist.Ct.App.1983); Grady v. Commers Interiors, Inc., 268 N.W.2d 823, 825 (S.D.1978); Ford v. Robertson, 739 S.W.2d 3, 5 (Tenn.Ct.App.1987); Restatement (Second) of Contracts § 322 (1981); 6 Am.Jur.2d Assignments §§ 22, 59 (1999). This rule was adopted by the Utah Supreme Court in Fuller v. Favorite Theaters Co., 119 Utah 570, 230 P.2d 335 (1951) (per curiam). In Fuller, the defendant argued that the plaintiff was prohibited from asserting an assigned breach of contract claim against the defendant because the contract expressly prohibited the assignment of the contract without the written consent of the defendant. 119 Utah at 571,

230 P.2d at 336. In rejecting the defendant's argument, this court held that "the provision prohibiting the assignability of the contract itself does not affect the assignability of a cause of action which has arisen...