Tarin's, Inc. v. Tinley, 19,945.

Decision Date03 November 1999
Docket NumberNo. 19,945.,19,945.
Citation129 N.M. 185,3 P.3d 680,2000 NMCA 48
PartiesTARIN'S, INC., Plaintiff-Appellant, v. Bob TINLEY, Investment Company of the Southwest, and Advanced Mechanical Inc., d/b/a Total Service Company, Defendants-Appellees.
CourtCourt of Appeals of New Mexico

John B. Speer, Albuquerque, for Appellant.

Lester C. Cannain, Albuquerque, for Appellee Advanced Mechanical, Inc.

Richard D. Barish, Albuquerque, for Appellees Investment Company of the Southwest, Inc. and Bob Tinley.

OPINION

BUSTAMANTE, Judge.

{1} Plaintiff Tarin's, Inc. (Tarin), appeals the dismissal of its suit against Defendants. Tarin argues that its suit against Advanced Mechanical, Inc., doing business as Total Service Company (Advanced), should not have been dismissed because it was a third-party beneficiary of the contract between Advanced as subcontractor and the general contractor. Tarin also argues that Investment Company of the Southwest (ICSW), the closely-held corporation of Bob Tinley (Tinley), and Tinley individually, should not have been dismissed as defendants because ICSW and Tinley improperly revoked a license they granted to Tarin to draw utilities from connections to their property. We reverse.

{2} Before discussing the case in more detail, we address a motion pending before this Court. After Tarin filed its appeal, ICSW and Tinley filed a motion to dismiss the appeal as to them for lack of a final order. The basis of the motion was the district court's failure to rule on a counterclaim ICSW included in its answer to Tarin's complaint. Nowhere in the district court's judgment is there any mention of the counterclaim. We therefore grant the motion and dismiss the appeal as to ICSW only. See Alcala v. St. Francis Gardens, 116 N.M. 510, 511, 864 P.2d 326, 327 (Ct.App.1993) (indicating judgment is not final unless "all issues of law and of fact necessary to be determined have been determined, and the case has been completely disposed of to the extent the court has power to dispose of it"). We nonetheless refer to ICSW in our discussion because our disposition may affect ICSW on remand.

FACTS

{3} Tarin operates a dry cleaning and tuxedo rental business in northeast Albuquerque. Early in 1995, Tarin moved its business to a new location adjacent to the building where it had been a tenant of Defendants ICSW and Tinley. Tarin hired Defendant R.L. Encinio (Encinio) to serve as general contractor to alter and prepare the new building to meet Tarin's needs. Encinio, in turn, hired Defendants Advanced and On Line Electric, Inc. (On Line), as subcontractors, to install and upgrade the gas and electrical connections to the new building.

{4} The contractors apparently performed most of the work to Tarin's satisfaction. There were, however, problems with the electrical and gas connections. Rather than establishing a new electrical connection for Tarin's building, On Line improperly connected Tarin's electricity to the electric meter on the adjacent building, which Tarin previously rented from ICSW and Tinley. Similarly, Advanced connected Tarin's gas to the meter on ICSW's building instead of installing an independent gas source for Tarin. It is unclear from the record whether Tarin knew the connections were improper at the time of installation. It is also unclear whether Tinley was aware of or objected to the connections. And there is no indication in the record what the billing arrangements were for the connections. Tarin used the improper connections for approximately two years without problem or incident.

{5} On May 31, 1997, Tarin's boiler began malfunctioning. He hired a boiler service to diagnose the problem and learned that Tinley had shut off the gas to Tarin's building at the meter. Tinley would not allow Tarin to reconnect to the meter, so Tarin hired a contractor to install a new gas line. Tarin lost two days of business as a result of the problem with its boiler and the work to correct the gas connection.

{6} About a month later, Tarin lost electricity to its business when Tinley shut off the power supply and locked the switch. To rectify the problem, Tarin rented a mobile generator, had Public Service Company of New Mexico install a pole and equip it with transformers, and hired a contractor to install new electrical connections between Tarin's buildings and the new transformers. Tarin was forced to close its business for one day while work was being done to correct the problems with its electrical service.

{7} Shortly after correcting its utility connections, Tarin filed a complaint against Tinley, ICSW, Encinio, Advanced, and On Line, seeking damages for interruption of its business and for the costs of the new service. Advanced filed an answer denying most of Tarin's allegations and asserting that the complaint failed to state a cause of action against it because Tarin was not in privity of contract with Advanced. Advanced then filed a motion to dismiss the complaint as to it because of the lack of privity between it and Tarin. Tinley also answered, but before he did the district court heard argument on Advanced's motion to dismiss. The court granted the motion but gave Tarin ten days to file an amended complaint.

{8} Tarin's first amended complaint was substantially similar to the original complaint, except that it sought to explain more fully the relationship between Advanced and Encinio and specifically alleged that Tarin was a third-party beneficiary of the contract between Advanced and Encinio. Once again, Advanced filed an answer and a motion to dismiss, arguing that Tarin failed to make factual arguments to support a third-party beneficiary claim. ICSW and Tinley each filed nearly identical motions to dismiss and for sanctions, arguing in part that neither had a duty to allow Tarin to continue to use the improper utility connections or to notify Tarin of the possibility that his utility service would be cut off. The district court ordered the first amended complaint dismissed and gave Tarin thirty days to file another amended complaint.

{9} Three days after the district court entered its order dismissing Tarin's complaint, Tarin filed a response to Tinley's motion to dismiss. Tarin then filed a second amended complaint. This complaint was largely unchanged from the first amended complaint (and in turn from the original complaint). As had become the pattern by this point in the litigation, Advanced filed an answer and a motion to dismiss the complaint. Tinley and ICSW (jointly this time) filed a motion to dismiss or in the alternative for summary judgment and for sanctions. Tinley and ICSW also jointly filed an answer in which, as noted, ICSW counterclaimed against Tarin and both ICSW and Tinley sought to enjoin Tarin from parking its vehicles so as to obstruct an easement of ingress and egress that borders their respective lots.

{10} After a hearing, the district court ordered that the second amended complaint be dismissed with prejudice as to Advanced and that ICSW and Tinley be dismissed with prejudice as defendants. Tarin appeals that order. (We note that neither Encinio nor On Line ever answered any of the complaints—nor, apparently, did Tarin seek default judgments against either—thus, neither is a party to this appeal.)

DISCUSSION
Advanced's Motion to Dismiss

{11} In its motion to dismiss the second amended complaint, Advanced admitted that it entered into an oral contract with Encinio to perform certain work on Tarin's building but argued that the complaint failed to state a claim against it because Tarin was neither in privity of contract with Advanced nor a third-party beneficiary of the contract between Advanced and Encinio. A motion to dismiss tests the legal sufficiency of the complaint. See Kirkpatrick v. Introspect Healthcare Corp., 114 N.M. 706, 709, 845 P.2d 800, 803 (1992). "A motion to dismiss should be granted only when it appears that the plaintiff is not entitled to recover under any facts provable under the complaint." Id. We treat all of the complaint's well-pleaded allegations as true but disregard conclusions of law and unwarranted factual deductions. See Saenz v. Morris, 106 N.M. 530, 531, 746 P.2d 159, 160 (Ct.App.1987).

{12} "Ordinarily, the obligations arising out of a contract are due only to those with whom it was made; a contract cannot be enforced by a person who is not a party to it or in privity with it ...." 17A Am.Jur.2d Contracts § 425 (1991) (footnotes omitted). Privity of contract is "[t]hat connection or relationship which exists between two or more contracting parties." Black's Law Dictionary 1199 (6th ed.1990). Privity of contract has also been defined as "the name for a legal relation arising from right and obligation," or the "legal relationship to the contract or its parties." La Mourea v. Rhude, 209 Minn. 53, 295 N.W. 304, 307 (1940). "In construction contracts, in the absence of an express agreement otherwise, a subcontractor is not in privity with the owner and must look to the general contractor, while the owner is liable only to the general contractor." Jensen Constr. Co. v. Dallas County, 920 S.W.2d 761, 772 (Tex.App.1996); see also Waterford Condominium Ass'n v. Dunbar Corp., 104 Ill.App.3d 371, 60 Ill.Dec. 110, 432 N.E.2d 1009, 1011 (1982) (affirming dismissal of complaint against subcontractors for lack of privity); Mariacher Contracting Co. v. Kirst Constr., Inc., 187 A.D.2d 986, 590 N.Y.S.2d 613, 614 (1992) (mem.) (reversing judgment in favor of subcontractor against landowner for lack of privity). Absent privity, a subcontractor owes no duty to a property owner. See Grgic v. Cochran, 689 S.W.2d 687, 690 (Mo.Ct.App.1985).

{13} Even if Tarin was not in privity of contract with Advanced, an issue we do not decide here given our standard of review, it might still have enforceable rights under the contract between Encinio and Advanced as a third-party beneficiary. See Casias v. Continental Cas. Co., 1998-NMCA-083, ¶ 11, 125 N.M. 297, 960...

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