Opinion
Hearing Granted Jan. 24, 1979.
Opinion on pages 492-505 omitted.
[150 Cal.Rptr. 330]Timothy J. Crowley, Santa Rosa, for plaintiff and appellant.
James C. Monroe, Santa Rosa, for defendant and respondent.
Retired judge of the superior court assigned by the Chairperson of the Judicial Council.
Appellant, J'Aire Corporation, appeals from a judgment dismissing its complaint against respondent, Craig A. Gregory, after Gregory's demurrer to a third amended complaint was sustained without leave to amend. The first cause of action in said complaint alleged that Gregory, a licensed contractor, had entered into a contract with Sonoma County to renovate the heating and air conditioning, insulate, lower ceilings and paint premises at the county airport in a building leased by appellant who was operating a restaurant therein; that the lease required Sonoma County to provide heat and air conditioning for the restaurant and the construction contract was executed for appellant's benefit; that the work was to be performed within a reasonable time as defined by trade custom and usage; that respondent breached the contract by failing to complete the work within such reasonable time with consequent interruption of appellant's restaurant operations, loss of business revenues and other damages amounting to $50,000. A second cause of action incorporated the allegations relating to the contract and alleged that respondent [150 Cal.Rptr. 331] commenced work thereon for appellant's implied benefit and thereby incurred a duty toward appellant to complete the work within a reasonable time; that said duty was breached by a negligent failure to complete the work within a reasonable time with resulting loss of business revenue and other foreseeable damages in the sum of $50,000.
The contract contained a provision that time was of the essence and for completion on a fixed date, subject to extension for delays beyond contractor's control as approved by the county. However, the space for insertion of the completion date was left blank.
Appellant does not appeal from the dismissal of its first or contract (third party beneficiary) cause of action: Consequently, the sole issue before us is whether a contractor who undertakes construction work under contract with a lessor-owner is responsible in tort to a third party lessee who is operating a going business at the job site for failure to complete the construction within a reasonable time. Restated: Is such contractor responsible to such lessee for business losses caused by disruptions and delays attributable to a contractor's negligence in performing the work with reasonable diligence?
Appellant argues that the second cause of action pleaded all of the essential elements of a "run of the mill" negligence claim. But claims of unintentional or negligent loss of expected economic advantage give rise to cases which are Sui generis rather than of ordinary negligence. Prosser's Law of Torts (4th ed.) at page 952 states that "the tort began with 'malice' and it has remained very largely a matter of at least an intent to interfere." It is there noted that the cause of action runs parallel with that of negligent interference with contracts. As to the latter cause of action the California Supreme Court's most recent statement of rule is in Fifield Manor v. Finston (1960) 54 Cal.2d 632 at page 636, 7 Cal.Rptr. 379, 377, 354 P.2d 1073, 1075: "(W)ith the exception of an action by the master for tortious injuries to his servant, thus depriving the master of his servant's services, which traces back to medieval English law (citations), the courts have quite consistently refused to recognize a cause of action based on negligent, as opposed to intentional, conduct which interferes with the performance of a contract between third parties or renders its performance more expensive or burdensome. (Citations.)" In Adams v. Southern Pac. Transportation Co. (1975) 50 Cal.App.3d 37, at page 40, 123 Cal.Rptr. 216, at page 217, this holding was characterized as "an expression of a general doctrine prevailing in American courts which bars recovery for negligent interference with profitable economic relations."
The complaint herein is not couched in terms of interference with or loss of the benefit of the lease contract but seeks recovery for loss of prospective economic advantage, i. e., revenues lost due to negligently caused business disruptions.
Respondent argues that because there can be no recovery for negligent interference with economic expectancies it is unnecessary to decide whether respondent owed appellant a duty of care. But as Prosser points out, "There are, however, a few situations in which recovery has been permitted, all of them apparently to be justified upon the basis of some special relation between the parties." (Prosser, Op. cit. supra.) As examples of where recovery is permissible, Prosser cites two California cases, both of which held that the negligent preparation of a will results in liability to the intended beneficiaries. (Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16; Lucas v. Hamm (1961) 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685.)
Biakanja held that a notary public who had prepared an improperly attested and therefore invalid will was responsible in damages to legatees who thereby were deprived of their legacies. Lucas held that the beneficiaries of a testamentary trust which was invalid because it contained restraints on alienation and violated the rule against perpetuities could recover from the attorney who had negligently drafted the will. Biakanja states: "The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are (1) the extent to which the transaction was intended to affect the plaintiff, [150 Cal.Rptr. 332] (2) the foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm. (Cf. Prosser, Torts (2d ed. 1955), §§ 36, 88, 107, pp. 168, 172, 544-545, 747; 2 Harper and James, Torts (1956), § 18.6, p. 1052.)" (49 Cal.2d at p. 650, 320 P.2d at p. 19, numerical subdivisions added.)
The Supreme Court's citation to Harper and James is to one of the concluding paragraphs of the authors' discussion beginning on page 1049 of tort obligations which may arise out of "negligent nonperformance of duties assumed by contract" where injury over and above the mere withholding of the benefit of the contract is a result. The authors conclude that liability should be imposed where injury to the plaintiff is foreseeable and where the contract is an incident to an enterprise of the defendant and there are adequate policy reasons for imposing a duty of care to avoid the risk. (Id., at p. 1053.) The Supreme Court apparently rejected this rule in favor of the balancing formula just quoted.
In Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 73 Cal.Rptr. 369, 447 P.2d 609, it was held that the defendant lending institution which financed and shared in the control of a housing tract development under an elaborate financing agreement with the developer was responsible in tort to the buyers of improperly built tract homes. Applying the Biakanja criteria, the court found that the lender's transactions were intended to significantly affect the interests of such purchasers; that the risks of injury were reasonably foreseeable; that they were closely connected with the lender's conduct (nonfeasance by failure to see that soil tests recommended by project engineers were made prior to construction); and, finally, that such conduct warranted substantial moral blame.
In Adams v. Southern Pac. Transportation Co., supra, 50 Cal.App.3d 37, 123 Cal.Rptr. 216, it was alleged that Southern Pacific had negligently caused an explosion in the railroad's freight yards, resulting in the destruction of the adjacent plant at which plaintiffs were employed. Plaintiffs sought recovery of lost wages and other economic detriment. They suffered a judgment of dismissal after refusing to amend their complaint following Southern Pacific's demurrer. (Id., at p. 39, 123 Cal.Rptr. 216.) Justice Friedman, writing for the majority, reluctantly affirmed but sharply delineated the doctrinal discord between Fifield Manor and later decisional developments in California tort law, and described the asymmetrical and paradoxical results.
Justice Puglia's concurring opinion abstained from joining in these sections of the decision because he could not subscribe to the implicit "exhortation . . . to extend further the reach of legal liability to encompass negligent interference with economic relations" (Id., at p. 47, 123 Cal.Rptr. at p. 222) an exhortation unheeded by the Supreme Court, although Justices Tobriner and Mosk voted to grant the petition for hearing. However, he joined in the conclusion that the Fifield rule was the state Supreme Court's last utterance in point and that an intermediate appellate court is bound thereby.
In the case at bench the spatial relationship between appellant and respondent is much closer than existed in Adams. The job site of respondent's contract is identical with appellant's business operations. This fact must have been known to respondent when he commenced construction if not at the time of the contract's execution. In these circumstances we must determine whether a balancing of the Biakanja criteria will justify the imposition of a duty on the part of respondent owed to appellant and existing independently of contract to complete construction within a reasonable time. The pros and cons are as follows: (1) The contract was intended to affect appellant and could not have been performed without some inconvenience to and interruptions of the conduct of the restaurant. (2) Injury by way of decreased patronage and lost revenues during periods of reasonably [150 Cal.Rptr. 333] necessary interruptions of business due to construction was readily foreseeable. (3) There was a reasonable certainty that such injuries would also accrue from any unnecessary interruptions attributable to respondent's failure to prosecute construction with reasonable diligence. In this connection we may note the allegation that appellant protested the alleged delays and demanded that respondent complete the work with diligence. (4) The allegations of the complaint show a fairly close connection between the alleged negligence and the harm suffered. However, as to moral blame inherent in respondent's conduct (5th item) the Golden Rule has not been adopted as a rule of law and where, as here, the conduct is inaction or failure to use due diligence we cannot assess serious moral blame. As to policy considerations (6th item): With the authority of Fifield Manor undiminished, we are reluctant to weigh the possible prevention of business injury to commercial tenants who become incidentally involved with a construction contract against possible increased construction costs if contractors were made liable in tort to such third parties as well as in contract to an owner for mere negligent delay of completion. Although the spatial relationship here present furnishes a more compelling reason than existed in Adams for a departure from the rule of Fifield Manor, we agree with the Adams court that internment or qualification of that rule is not the province of an intermediate appellate court.
Contractual negligence may give rise to a cause of action in tort (Eads v. Marks (1952) 39 Cal.2d 807, 810-811, 249 P.2d 257), but there can be no liability in tort unless the law imposes upon the contracting party an independent duty of care which arises ex delicto and not ex contractu. "The question is: Has the defendant broken a duty apart from the contract? If he has merely broken his contract, none can sue him but a party to it, but if he has violated a duty to others, he is liable to them." (Prosser, Op. cit. supra, p. 622, fn. 19, quoting from Peters v. Johnson (1902) 50 W.Va. 644, 41 S.E. 190; cf., Jones v. Kelly (1929) 208 Cal. 251, 255, 280 P. 942.) We have found no case in which a court has recognized a duty to third parties to complete a contract within a reasonable time. The obligation arises under and has been confined to the law of contracts. Civil Code section 1657 is its genesis and it appears to have been imposed solely for the benefit of a promisee.
"If no time is specified for the performance of an act required to be performed, a reasonable time is allowed. If the act is in its nature capable of being done instantly as, for example, if it consists in the payment of money only it must be performed immediately upon the thing to be done being exactly ascertained."
We do not rest our decision upon the tenuous distinctions between misfeasance and nonfeasance or active and passive negligence which can have no meaning to an injured victim. Our case is not one wherein a contractor may be held to be under a duty to perform his work with care so as to prevent harm to an owner or third persons who may foreseeably be injured as a result of a dangerous condition negligently created. (See 4 Witkin, Summary of Cal.Law (8th ed. 1974) Torts, § 616, pp. 2896-2897; Prosser, Op. cit. supra; Valdez v. J. D. Diffenbaugh Co. (1975) 51 Cal.App.3d 494, 506-507, 124 Cal.Rptr. 467.) In that situation, the duty of care exists independently of the contract and rests on general principles of negligence. But here, the nature of the duty asserted and lack of clear cut public policy to justify a departure from the rule of Fifield Manor precludes liability in tort. Accordingly, the demurrer was properly sustained without leave to amend.
The judgment is affirmed.
CALDECOTT, P. J., and CHRISTIAN, J., concur.