OSCN Found Document:ABERCROMBIE & FITCH STORES INC. v. PENN SQUARE MALL LIMITED PARTNERSHIP
DEBORAH B. BARNES, PRESIDING JUDGE:
¶1 This case arises from a water leak in a roof drain line running above the ceiling of leased premises in a shopping mall. Abercrombie & Fitch Stores, Inc., the occupant of the leased premises, filed suit against Penn Square Mall Limited Partnership alleging Penn Square "had a contractual duty to maintain the mall's plumbing lines in good order, condition, and repair," and that Penn Square breached this duty. Abercrombie asserted theories of breach of contract and negligence against Penn Square, asserted that as a result of the water leak it "incurred substantial damages in cleanup, repair, lost merchandise, lost profits, and interruption to its business," and sought damages in excess of $300,000.1
¶2 Following a jury trial, the jury found in Abercrombie's favor, though it also found Abercrombie to be contributorily negligent. The trial court's order memorializing the decision of the jury states:
After hearing the evidence and due deliberation, the jury returned with a unanimous verdict as follows:
1. Contribution negligence as to [Abercrombie] 40% and [Penn Square] 60%. Damages set in the sum of $243,000. The Court [therefore reduces] the damages by 40% of [Abercrombie's] contributory negligence and [finds] [Abercrombie's] damages to be $145,800.
2. Breach of contract in favor of [Abercrombie]. Damages set in the sum of $0.00.
The order concludes by stating that "judgment in all respects is awarded and entered in favor of [Abercrombie] as to its claim for negligence in the amount of $145,800, [and] its claim for breach of contract in the amount of $0.00[.]"
¶3 Penn Square appeals. In particular, Penn Square challenges the trial court's denial of its motion for directed verdict, and Penn Square also asserts on appeal that the trial court erred in its approval of certain jury instructions.
STANDARD OF REVIEW
¶4 In determining whether a trial court erred in denying a motion for directed verdict, "[w]e consider as true all evidence favorable to the non-moving party together with all inferences that may be reasonably drawn therefrom, and we disregard all conflicting evidence favorable to the moving party"; such a motion "should not be granted unless there is an entire absence of proof on a material issue." First Nat. Bank in Durant v. Honey Creek Entm't Corp., 2002 OK 11, ¶ 8, 54 P.3d 100 (citation omitted).
¶5 "When reviewing jury instructions, we look at whether the probability arose that the jurors were misled and reached a different conclusion due to an error in the instruction given." CNA Ins. Co. v. Krueger, Inc., of Tulsa, 1997 OK 142, ¶ 14, 949 P.2d 676 (citation omitted).
In reviewing the propriety of given instructions, the instructions are to be viewed in whole rather than separately. And, where it appears that instructions taken as a whole do not establish that the jury was misled or that complaining parties' rights were prejudiced, the verdict will not be set aside. Instructions are sufficient when, considered as a whole, they present the law that is applicable to the issues.
Id. ¶ 15 (citation omitted).
ANALYSIS
I. A duty derived from a contractual relationship may properly form the basis of a negligence theory.
¶6 Penn Square asserts that the elements of duty and breach of duty in a negligence action2 cannot be founded upon a duty derived from a contractual relationship. For example, Penn Square asserts that "to maintain a claim for negligence, a claimant must establish the breach of a duty that exists at common law" and that is "independent of the breach of contract." Penn Square asserts that if the duty in question would not exist apart from a contract or contractual relationship, then the only available theory is breach of contract. In this regard, Penn Square states that "Abercrombie utterly failed to introduce any evidence that Penn Square breached a duty independent of the breach of contract," and further states that
Abercrombie repeatedly makes reference [in its Answer Brief] to the contractual duty to keep plumbing lines in good order, condition, and repair -- a duty that arises solely out of the Lease. If Penn Square failed to keep the lines in good order and repair, Abercrombie's only remedy would be under a breach of contract action.
Penn Square summarizes its argument as follows: "While Abercrombie's assertion that Penn Square failed to comply with the contractual obligation to keep the [water] lines in good order and repair may give rise to a claim for breach of contract, the breach of that contractual duty does not give rise to a tort claim."
¶7 However, the Oklahoma Supreme Court has explained that "[a]ccompanying every contract is a common-law duty to perform it with care, skill, reasonable experience and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of contract." Keel v. Titan Const. Corp., 1981 OK 148, ¶ 14, 639 P.2d 1228 (emphasis added) (footnote omitted). In Finnell v. Seismic, 2003 OK 35, 67 P.3d 339, the Oklahoma Supreme Court similarly explained:
Oklahoma law has long recognized that an action for breach of contract and an action in tort may arise from the same set of facts. . . . [I]nherent in every contract [is] a common-law duty to perform its obligations with care, skill, reasonable experience and faithfulness. A person injured by the substandard performance of a duty derived from a contractual relationship may rely on a breach-of-contract or tort theory, or both[.]3
Id. ¶ 13 (emphasis added) (footnotes omitted). See also Gaasch v. St. Paul Fire & Marine Ins. Co., 2018 OK 12, ¶ 18, 412 P.3d 1151 ("An action for breach of contract and an action in tort may arise from the same set of facts and a person injured by the substandard performance of a duty derived from a contractual relationship may rely on a breach of contract or tort theory, or both." (citing, inter alia, Finnell)).4 Pursuant to the reasoning in Finnell and Keel, we reject Penn Square's argument that the duty derived from the parties' contractual relationship could not form the basis of Abercrombie's negligence theory.5
¶8 Moreover, the parties' contract expressly provides that claims for negligence are not waived. The contract provides that the parties "shall not be liable for, and the other party waives, all claims for damage to person and property sustained by the other party . . . resulting from any accident or occurrence in or upon the demised premises or any part of the Shopping Center, except for the willful acts, negligence or default under this lease of a party or its agents and employees, and except for a party's failure to make repairs . . . ." (Emphasis added.)
¶9 Consequently, we conclude the trial court did not err in denying this portion of Penn Square's motion for directed verdict, and we conclude the trial court did not err in providing the jury with a negligence instruction.
II. The provision in the parties' contract excluding certain damages does not apply to damages ex delicto and, even if it did, no error occurred.
¶10 Penn Square points out that the parties' contract contains the following language: "In no event shall either party be liable for indirect or consequential damages." Cf. Black's Law Dictionary (10th ed. 2014) (Defining consequential damages as "[l]osses that do not flow directly and immediately from an injurious act but that result indirectly from the act. -- Also termed indirect damages."). Penn Square asserts that all of the damages claimed by Abercrombie were consequential damages and that only the costs required "to stop the leak are considered direct damages[.]" Penn Square asserts Abercrombie should therefore not have been awarded any damages.
¶11 Indeed, it appears Penn Square may have been successful in this regard because the jury awarded zero damages to Abercrombie for breach of contract. However, the jury did award damages for negligence, and we disagree with Penn Square to the extent it is arguing the limitation on damages contained in the parties' contract applies to the award of damages for negligence.
A breach of contract is a material failure of performance of a duty arising under or imposed by agreement. Although torts may be committed by parties to a contract, a tort is a violation of a duty imposed by law independent of contract. If the contract is merely the inducement which creates the occasion for the tort, the tort, not the contract, is the basis of the action. A common law duty to perform with care, skill, reasonable expediency, and faithfulness accompanies every contract. Negligent failure to observe any of these conditions will give rise to an action ex delicto as well as an action ex contractu.
Lewis v. Farmers Ins. Co., 1983 OK 100, ¶ 5, 681 P.2d 67 (citing Okla. Nat. Gas Co. v. Pack, 1939 OK 475, 97 P.2d 768).6 As in the present case, "there may be a duty imposed by law, by reason of the relation of the parties," and "although the relation was created by contract," there remains "a broad distinction between causes of action arising ex contractu and ex delicto[.]" Pack, ¶ 11 (citation omitted). With regard to the latter, "damages may be recovered for all injuries of which the breach was the proximate cause." Id. ¶ 17 (citations omitted).
¶12 Nevertheless, contractual provisions may, under certain circumstances, restrict tort recovery. Indeed, in Oklahoma, parties may contract to avoid any and all liability for ordinary negligence. See Combs v. W. Siloam Speedway Corp., 2017 OK CIV APP 64, ¶ 7, 406 P.3d 1064 ("The Oklahoma Supreme Court has long recognized that exculpatory contracts, i.e., a contract to avoid liability for damages . . . , may be valid and enforceable." (citation omitted)). However, in the context of exculpatory contracts, the "language must evidence a clear and unambiguous intent to exonerate the would-be defendant from liability for the sought-to-be-recovered damages[.]" Combs, ¶ 8 (quoting Schmidt v. United States, 1996 OK 29, 912 P.2d 871). Similarly, agreements to indemnify a party against its own negligence are enforceable in Oklahoma, but the intent to do so must be expressed "in unequivocally clear language." See Am. Energy-Permian Basin, LLC v. ETS Oilfield Servs., LP, 2018 OK CIV APP 44, ¶ 18, 417 P.3d 1282.
¶13 In confronting circumstances similar to those presented here, where a contract contains a provision prohibiting certain kinds of damages and the issue raised is whether that limitation applies to tort recovery, other jurisdictions have similarly concluded that such language may be applicable to tort recovery, but only if the provision in question unambiguously and clearly signals the parties' intent to restrict tort recovery. See, e.g., Kaste v. Land O'Lakes Purina Feed, LLC, 392 P.3d 805, 811 (Or. Ct. App. 2017). We find this approach to be consistent with Oklahoma law.
¶14 Turning to the provision itself,
[a]s other courts have recognized, the phrase "consequential damages" ordinarily refers to contract damages, not tort damages. Berwind Corp. v. Litton Industries, Inc., 532 F.2d 1, 7 (7th Cir. 1976) ("[T]he use of the words 'consequential damages' refers to contract rather than tort damages."); Starr v. Dow Agrosciences LLC, 339 F. SupP.2d 1097, 1101 (D. Or. 2004) (concluding that contractual limitations on recovery of consequential damages did not bar recovery on negligence claims).
Kaste, 392 P.3d at 811. See also Macal v. Stinson, 468 N.W.2d 34, 35-36 (Iowa 1991) ("Two types of damages may be awarded in breach of contract actions, general damages and special or consequential damages."). By contrast, in tort actions, "[w]hen there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed," Restatement (Second) of Torts § 903 cmt. a (1979), and, in tort actions, "[t]he recovery of damages for pecuniary harm is restricted by the rules as to causation," id. at § 906 cmt. a. See also Black's Law Dictionary (10th ed. 2014) (Defining compensatory damages as "[d]amages sufficient in amount to indemnify the injured person for the loss suffered."). In the present case, the limitation in the parties' contract refers to contract damages, not tort damages, and the language in question does not unambiguously and clearly signal an intent to restrict tort recovery. Consequently, we conclude the language does not apply.
¶15 Finally, even assuming, arguendo, the "indirect or consequential damages" limitation applies to the negligence claim, here the jury was instructed to award only those damages which were "directly caused" by the negligence. For example, the jury was instructed that "when a lessor/Landlord fails to keep in good order, condition or repair the plumbing the lessor is then liable for injuries directly caused by its failure to maintain." (Emphasis added.) The jury was also provided with an instruction on direct damages, and the jury was not instructed to award indirect or consequential damages. Thus, no error occurred in this regard.7
III. The statute of repose is inapplicable to the issues.
¶16 Finally, Penn Square argues that any claim for negligence based on the construction of the drain line is barred by the statute of repose. Penn Square bases this argument on 12 O.S. 2011 § 109, which bars tort actions "for any deficiency in the design, planning, supervision or observation of construction or construction of an improvement to real property" brought more than ten years after the completion of the construction, as well as on the fact that Abercrombie appears to have alleged in its petition, filed more than ten years after construction of the drain line, that Penn Square was negligent in, among other things, the construction and installation of the plumbing line.
¶17 However, in the pretrial conference order, Abercrombie merely asserted that Penn Square breached its duty to maintain the mall's plumbing lines, and no mention is made in the pretrial conference order, or in the subsequent jury instructions, that Penn Square was negligent in the construction or installation of the drain line. See Okla. Dist. Ct. R. 5(I), 12 O.S. Supp. 2013, ch. 2, app. (The pretrial conference order "shall control subsequent course of the action unless modified by a subsequent order," and "[t]he contents of the pretrial order shall supersede the pleadings and govern the trial of the case unless departure therefrom is permitted by the Court to prevent manifest injustice." (emphasis added)); Corman v. H-30 Drilling, Inc., 2001 OK 92, ¶ 13, 40 P.3d 1051 ("Under Rule 5(I) any issue not identified in the pretrial order will not be considered unless it is permitted to prevent 'manifest injustice.'" (emphasis added)).
¶18 Indeed, it is undisputed that the drain line was installed in 1995, and that the leak did not occur until approximately eighteen years later in 2013. As Abercrombie asserts its claims concern Penn Square's failure to maintain and inspect its plumbing lines, not the construction or installation of the drain lines, and the statute of repose is inapplicable. See also CNA Ins. Co., 1997 OK 142, ¶ 15 ("Instructions are sufficient when, considered as a whole, they present the law that is applicable to the issues.").
¶19 We are not persuaded that the statute of repose is applicable. Consequently, we conclude the trial court did not err in failing to grant Penn Square's motion for directed verdict on the basis of the statute of repose, or in failing to provide the jury with a statute of repose instruction.
CONCLUSION
¶20 We conclude the trial court did not err in denying Penn Square's motion for directed verdict, and we also conclude the trial court adequately instructed the jury. Consequently, we affirm.
¶21 AFFIRMED.
RAPP, J., and GOODMAN, J., concur.