MILL-MAR, INC. v. Frаnk and Alma STATHAM, James E. and Harriet J. Keena, Ronald V. and Bonita L. Kalwara, John C. and Anna M. Myers, Walter T. and Henrietta J. Hynicka, George P. and Sharon J. Olsen, Richard D. and Patricia A. Claffey, Mary Lorene Fox, Daniel J. and Madelyn E. Ward, Richmond Hills Savings Bank, Crockett Mortgage Co., Federal Mortgage Assoc., Fulton National Bank, Commonwealth National Bank and First Federal Savings and Loan Assoc., their heirs and assigns and all successors in title to a parcel of real estate situate in East Hempfield Township, Lancaster County, Pennsylvania.
Superior Court of Pennsylvania
May 23, 1980
July 28, 1980
420 A.2d 548
Appeal of Frank and Alma STATHAM and James E. and Harriet J. Keena. Argued March 19, 1979. Reargument Denied July 28, 1980.
D. Patrick Zimmerman, Lancaster, for James E. Keena and Harriet J. Keena, appellants.
David E. Wagenseller, III, Lancaster, for Mill-Mar Inc., appellee.
Before PRICE, SPAETH and LIPEZ, JJ.
Appellee Mill-Mar, Inc. (Mill-Mar), a land developer, hired1 a surveyor to survey its property аnd 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
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 seсtion 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 beаns 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 “рrimarily” 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 hаve 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 absencе 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 unidentifiеd 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 оn 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.
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]
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.
SPAETH, Judge, dissenting:
I believe the lower court acted too quickly in entering summary judgment, for as I read the record, a genuine issue
Section 552 of the Restatement (Second) of Torts states:
552. Information Negligently Supplied for the Guidance of Others
(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 reasonablе care or competence in obtaining or communicating the information.
(2) 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.
(3) 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.
Comment (h) points out that this section subjects the negligent supplier of misinformation to liability only to persons whom he intends his information to benefit or guide, either directly or indirectly; thе supplier is not liable to persons whom he did not intend his information to benefit or guide but who might foreseeably rely upon it. Thus, in Illustration 12, it is said:
In 1934, A Company, a firm of surveyors, contracts with B to make a survey and description of B‘s land. A Company is not informed of any intended use of the survey report
but knows that survey reports are customarily used in a wide variety of real estate transactions and that it might be relied upon by purchasers, mortgagees, investors аnd others. The survey is negligently made and misstates the boundaries and extent of the land. In 1958 C, relying upon the report that B exhibits to him, purchases the land from B, and in consequence suffers pecuniary loss. A Company is not liable to C.
Section 552 and Illustration 12 reflects the decision reached in Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931), which is one of the seminal cases in the law of negligent representation. In Ultramares, an accounting company prepared an inaccurate balance sheet for one of its clients. Another company relied upon the balance sheet when it loaned money to the accounting company‘s client. Although the company relying on the balance sheet suffered loss, the New York Court of Appeals, per CARDOZO, J., held that it could not recover against the accounting company because the accounting company had prepared the balancе sheet for the use of its client, and not specifically for the company that had loaned money to the client. The court acknowledged that the accounting company knew that in the usual course of its client‘s business, banks, creditors, stockholders, purchasers and sellers might all rely on its balance sheet. Nevertheless, the court refused to hold the accounting company liable on that basis, reasoning that to do so wоuld create the danger that the others in the position of the accounting company might be held liable “in an indeterminate amount for an indeterminate time to an indeterminate class.” 255 N.Y. at 178, 174 N.E. at 444. But see Rusch Factors, Inc. v. Levin, 284 F.Supp. 85 (D.R.I.1968).
In Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969), the court held that the defendant could be held liable for negligent misrepresentation where, in contrast to the evidence in Ultramares, it appeared that the defendant had intended to inform the plaintiff specifically. In Rozny, a surveyor did a
Here, the majority believes that appellants should not recover from appellee because they have not alleged in their counterclaim that appellee intended to supply the inaccurate subdivision plan to them or knew that John Myers intended to do so. At 552. In this regard, the majority states that appellee‘s admission in its complaint that the legal descriptions in appellants’ deeds were derived from the incorrect subdivision plan was not a proper substitute for an allegation by appellants in their counterclaim that appellee had intended to supply this information to appellants. At 552, n. 3. The majority also believes that appellee cannot be liable to appellants merely because it recorded an inaccurate subdivision plan since the purpose of the recording requirement is only to permit state and local authorities to govern land development. At 552, n. 3.
Initially, I submit, the majority should not hаve confined itself to the parties’ pleadings in deciding the propriety of the lower court‘s entry of summary judgment, particularly where, as here, the pleadings are quite ambiguous.
From these facts it may be seen that the question of appellee‘s liability is much closer than the majority acknowledges. This case does not turn on whether appellee can be held liable to appellants merely because appellee had recorded an incorrect subdivision plan that appellants relied on to their detriment. Instead, it turns upon how “determinate”
It is quite true that Martin‘s testimony does not go so far as to demonstrate such knowlеdge. However, given what Martin did testify to, it is difficult to tell whether this case is within the principle of Rozny v. Marnul, supra, or of Ultramares Corp. v. Touche, supra, and Illustration 12 of the Restatement. It is axiomatic that in deciding a motion for summary judgment, “all doubts as to the existence of a genuine issue as to a material fact must be resolved against the party moving for summary judgment.” Ritmanich v. Jonnel Enter., Inc., 219 Pa. Super. 198, 203, 280 A.2d 570, 573 (1971). See also Schacter v. Albert, 212 Pa. Super. 58, 239 A.2d 841 (1968). When all doubts regarding the extent of Martin‘s knowledge are resolved against appellee as the party moving for summary judgment, this cаse becomes a case of determinate liability within the principle of Rozny. Accordingly, the lower court should not have entered summary judgment in favor of appellees but should instead have ordered the case to trial, leaving it to the jury to decide the issue of whether Martin did or did not know that Myers
I should reverse the order of the lower court.