Mill-Mar, Inc. v. Statham

420 A.2d 548, 278 Pa. Super. 296, 1980 Pa. Super. LEXIS 2603

• Court: Superior Court of Pennsylvania
• Decided: May 23, 1980
• Docket: 2174
• Status: Published

Opinions

LIPEZ, Judge:

Appellee Mill-Mar, Inc. (Mill-Mar), a land developer, hired¹ a surveyor to survey its property and prepare a subdivision plan for recording, as required by Lancaster County ordinance.² The surveyor’s negligence in executing the plan resulted in the incorrect plotting of a road constructed by Mill-Mar through the subdivision. Mill-Mar then conveyed various parcels of land fronting on the road to one John C. Myers, a builder. Myers, after constructing a house on each lot, sold one to appellants Statham and another to appellants Keena. Some time after appellants had settled with Myers and moved into their new homes, they discovered that the descriptions of the lots in the deeds from the builder did not agree with the boundaries of the properties as actually occupied.

In order to clear the way for dedication of the road to the municipality, Mill-Mar brought an action to quiet title against the appellants (and numerous other purchasers and mortgagees). Appellants counterclaimed, seeking money damages. They alleged that 1) the deeds overstated the area of their respective lots; 2) as a result of the faulty survey, the Statham’s house encroached upon a pipeline company’s right-of-way; and 3) that the “confusion and uncertainty” engendered by the incorrect descriptions of the properties left appellants unable to convey good and marketable title thereto. The court below granted summary judgment in Mill-Mar’s favor on its complaint and on appellants’ counterclaims.

Summary judgment may be granted only when there be no issue of material fact. Granthum v. Textile Machine Works, 230 Pa.Super. 199, 326 A.2d 449 (1974). All inferences must be drawn against the moving party. Husak v. Berkel, Inc., 234 Pa.Super. 452, 458, 341 A.2d 174, 177 (1975).

The trial court held that appellants had no cause of action against Mill-Mar because the parties had not been in contractual privity inter se. The record clearly shows, and appellants admit in their brief, that no contractual privity between Mill-Mar and them existed. However, appellants claim, on this appeal, that Mill-Mar is liable to them under Restatement of Torts 2d § 552, which provides:

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

(c) The liability of one who is under public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.

Although we agree that section 552 should govern actions in this jurisdiction whose facts fall within its provisions, we affirm the order of the court below because appellants’ counterclaim does not allege facts sufficient to raise a claim thereunder.

I.

Cases similar to the present one have traditionally been considered in terms of contractual warranties (recovery being denied to those not in privity of contract with the breaking party), see, e. g., Bilich v. Barnett, 103 Cal.App.2d Supp. 921, 229 P.2d 492 (1951), but the modern trend has been to follow section 552. Thus, although we have been unable to find any prior Pennsylvania appellate cases on this issue, the Supreme Court of Illinois has held that “lack of direct contractual relationship between the parties is not a defense in a tort action in this jurisdiction. . . . [T]ort liability will henceforth be measured by the scope of duty owed rather than the artificial concepts of privity.” Rozny v. Marnul, 43 Ill.2d 54, 250 N.E.2d 656, 660, 35 A.L.R.3d 487, 496 (1969). Although section 552 had not been formally approved when Rozny was decided, the court held therein that the section was “apposite[.]” 250 N.E.2d at 662-63, 35 A.L.R.3d at 499. The Rozny court ably summarized the development of the law of recovery, by persons not party to a certain contract, for negligent performance of contractual duties:

The principle that performance of a private contract can give rise to duties in tort seems to have been first articulated in the 19th Century. While attempts to recover by third parties injured by negligent performance of contractual duties had generally failed because of lack of privity, this restriction in cases involving physical injuries was lifted in cases such as MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050, and Heaven v. Pender, 11 Q.B.D. These extensions of liability, however, generally involved negligence resulting in tangible physical harm and not merely loss to intangible economic interests. Further extension to the intangible economic interests soon resulted. (Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275, 23 A.L.R. 1425.) There, liability was predicated upon the fact that the public weigher of beans at a seller’s request was liable to the buyer damaged by negligent overstatement of the weight because the weigher knew the buyer would rely on the erroneous weight statement. While the later case of Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139, held an auditing firm which negligently certified an inaccurate audit not liable to one who, in reliance upon the audit, loaned money to the actually insolvent firm, the court carefully distinguished Glanzer on the grounds that there the weight statement was “primarily” for the use of the purchaser while the Ultramares audit statement was only “incidently” for the use of third parties. However, the facts of the two cases are such that it seems clear that the more persuasive factor was the existence in Ultramares of potential “liability in an indeterminate amount for an indeterminate time to an indeterminate class.”

It is apparent that many of the courts which have considered analogous situations have thought the potential liability of one who negligently supplies inaccurate information to be such as to militate against imposing liability when the person ultimately damaged was one whose reliance on the information might have been called “foreseeable,” [citations omitted], but have been willing to impose liability when the reliance of the third person might have been said to be “known.” [citations omitted] Although the absence of privity may have been the stated reason for denying liability, it seems likely that the virtually unlimited and unknown potential responsibility of the defendant weighed heavily in the court’s thinking. (Some courts in addition to Ultramares candidly state this reason, e. g., Anderson v. Boone County Abstract Co. (Mo.1967), 418 S.W.2d 123, 127.)

An excellent article by Dean Prosser, Misrepresentation and Third Persons (1966), 19 Vand.L.Rev. 231, discusses a number of factors which have affected the decisions in the third-party misrepresentation cases. In the class of cases where “plaintiff is an unidentified member of a group or class [and] defendant has special reason to expect that any member of it may be reached and influenced” by his representation, the liability for negligent misrepresentation resulting in pecuniary loss has been mixed. (19 Vand.L.Rev. at 246.) The article discusses the Ultramares case and notes that other decisions concerning accountants are in accord.

250 N.E.2d at 660-62; 35 A.L.R.3d at 496-98.

Such cases must be decided individually, each on its own facts. Particular care must be taken that what is being sought is not, in the words of Chief Judge Cardozo, “liability in an indeterminate amount for an indeterminate time to an indeterminate class.” Ultramares Corp. v. Touche, 255 N.Y. 170, 178, 174 N.E. 441, 444, 74 A.L.R. 1139, 1145 (1931).

II.

The Pennsylvania Rules of Civil Procedure require that material facts on which a cause of action is based be stated in the pleadings. Pa.R.Civ.P. 1019(a). Pleadings “are limited to a complaint, an answer thereto, a reply if the answer contains new matter or a counterclaim, a counter-reply if the reply to a counterclaim contains new matter, a preliminary objection and an answer thereto.” Pa.R.Civ.P. 1017(a). A party is limited to the theory and issues framed by the pleadings. Bucci v. R. J. Reynolds Tobacco Co., 439 Pa. 302, 268 A.2d 88 (1970).

Analyzing appellants’ counterclaims in terms of section 552, we conclude that appellants have not alleged all of the elements of a cause of action thereunder. Although the counterclaim alleges that Mill-Mar “was negligent in engaging and hiring a surveyor not qualified to do the work properly[,]” and that “the improper legal descriptions [were] furnished for the deeds of the Defendants[,]” there is no assertion, explicit or implicit, that survey results were obtained by Mill-Mar, or communicated to appellants, “in the course of [Mill-Mar’s] business, profession or employment,” as is required by paragraph (1) of section 552. In addition, subparagraphs (2)(a) and (2)(b) of the section allow recovery against a supplier of incorrect information only to “persons for whose benefit and guidance [the supplier] intends to supply the information, or knows that the recipient intends to supply it” or who have relied upon it “in a transaction that [the supplier] intends the information to influence or knows that the recipient so intends[.]” (Emphasis added.) Nowhere do the counterclaims allege that Mill-Mar was possessed of the requisite intent or knowledge; a court therefore could not properly find that they fall within the class of persons to whom Mill-Mar may be liable.³

Since appellants have failed to allege material facts on which a court could properly find in their favor on Mill-Mar’s motion for summary judgment, the order of the court below must be

Affirmed.

SPAETH, J., files a dissenting opinion.

1 . Whether the position of the surveyor vis-a-vis Mill-Mar was that of independent contractor or employee was disputed below, but, in view of our resolution of this appeal, this issue is immaterial.

2 . The ordinance was adopted pursuant to the provisions of the “Pennsylvania Municipalities Planning Code” 53 P.S. § 10101 et seq. applicable to various municipalities enabling them in general to plan their development, and “to govern the same by ... land development ordinances..... (See Historical Note under 53 P.S. § 10101); and under the grant of power at § 10501 to enact such ordinances.

3 . We point out also that the allegation in the counterclaims that the incorrect plan was recorded on Mill-Mar’s behalf as its plat, even when considered in conjunction with Mill-Mar’s admission thereof in its Complaint, and its further admission therein that the legal descriptions in appellants’ deeds were derived therefrom, is insufficient as an assertion of the proper intent or knowledge, since the purpose of the statute authorizing recording is only to exercise the state’s and municipality’s police power by governing the kind of land development that may be permitted. See 53 P.S. § 10105. Any reliance thereon by subsequent purchasers is only an incident of the recordation required by the ordinance. Any other interpretation of the legal consequences of the recordation of such plans could, and very well might, result in the limitless liability envisioned by Chief Judge Cardozo in Ultramares.