those persons the information is intended to benefit. See Bily, 92 Daily Journal D.A.R. at 11986, 1992 Cal. LEXIS at *83.
In addition, Orsetti presents no authority for the notion that the suppliers of contamination reports are liable to both parties in an agreement to sell a piece of property, regardless of privity. The facts underlying this case are not unique. The preparation of a professional's report -- such as a contamination report or an engineer's report -- is frequently a condition of sale. Therefore, if both parties to the transaction are ordinarily beneficiaries of such reports, it is quite remarkable that there are no cases on this issue. And the parties cite none.
Moreover, Orsetti has not presented sufficient facts to prove the duty factors set out in Biakanja. She has been able to conduct discovery with Lincoln and yet has not come up with any facts to show that Lincoln's contract with Beta was intended to affect Orsetti. She also has not alleged that she even read the report before selling the property. In addition, as the court in Bily pointed out, Orsetti could have hired her own environmental consultant to prepare a contamination report for her use. A broad rule of liability is of dubious benefit when an efficient means of self-protection is available. See Bily, 92 Daily Journal D.A.R. at 11985, 1992 Cal. LEXIS at *74.
B. "Tort Of Another" Theory
Orsetti alternatively relies on the theory of the "tort of another" to support her negligence claim. This theory is set out in Prentice v. North American Title Guaranty Corp., 59 Cal. 2d 618, 30 Cal. Rptr. 821, 381 P.2d 645 (1963). In Prentice, an escrow holder's negligence in closing a land sale forced the sellers to bring a quiet title action against third parties. As part of the same suit, the sellers recovered the attorneys' fees incurred in the action from the negligent escrow holder. This shifting of attorneys' fees was an exception to the general rule that attorneys' fees are to be paid by the party employing the attorney. The exception provides that "[a] person who through the tort of another has been required to [bring or defend an action] against a third person is entitled to recover compensation for . . . attorneys' fees, and other expenditures thereby suffered or incurred." Id. at 620.
Prentice involved the question of awarding attorneys' fees as a measure of damages wrongfully caused by the defendant's improper actions. Id. at 621. But a legal duty of care is still required in order to recover the attorneys' fees under the theory of a "tort of another." In Sooy v. Peter, 220 Cal. App. 3d 1305, 270 Cal. Rptr. 151 (1990), the plaintiffs brought suit against an attorney for allegedly false representations he made to their attorney. The defendant attorney filed a cross-complaint against the plaintiffs' attorney for his fees incurred in defending the suit on the theory that these costs were attributable to the plaintiffs' attorney's professional negligence in failing to keep the plaintiffs informed. The court refused to award attorneys' fees because the plaintiffs' attorney's professional duty of care did not extend to the attorney/defendant. Id.
Therefore, the application of the "tort of another" theory does not replace the need to find a legal duty in a negligence claim. This theory only comes into question after the duty has been found and liability has been assessed. Orsetti's reliance on this theory is, therefore, misplaced. In any claim for negligence, the plaintiff must prove that the defendant owed her a legal duty of care.
Orsetti has failed to create a genuine issue of material fact as to whether Beta owed her a duty. Accordingly, Beta's motion for summary judgment regarding the negligence cause of action is GRANTED.
III. Intended Beneficiary Argument
In order to recover under a theory of breach of contract and warranty, Orsetti must be an intended beneficiary of the contract between Beta and Lincoln. "For a third party to qualify as a beneficiary under a contract, the contracting parties must have intended to benefit that third party, and their intent must appear from the terms of the contract." Kirst v. Silna, 103 Cal. App. 3d 759, 763, 163 Cal. Rptr. 230 (1980) (citing Cal. Civ. Code § 1559). The third party beneficiary must show that the contract was made "expressly" for her benefit. R. J. Cardinal Co. v. Ritchie, 218 Cal. App. 2d 124, 135, 32 Cal. Rptr. 545 (1963). Therefore, Orsetti must show that the contract between Beta and Lincoln was clearly intended to inure to her benefit.
Orsetti argues that since the contract between Beta and Lincoln is not before the court, Beta has not proven that Orsetti was not an intended beneficiary. But there is no written contract between Beta and Lincoln. The contract was oral and its relevant terms have been provided in the Shafer Declaration. According to this declaration, Orsetti was not an intended beneficiary. Beta and Lincoln never discussed the report being produced for the benefit of Orsetti, nor did they intend it to benefit her.
From the available facts, therefore, it is clear that the contract was not made "expressly" for her benefit. Orsetti has had the opportunity to conduct discovery with Lincoln but has not provided any facts to consider Beta's assertion that Orsetti was not an intended beneficiary of the contract. Even if she now says she relied on the contamination report, she has not presented any facts to prove that Lincoln and Beta intended for her to rely on it.
Orsetti also argues that Beta's agreement to test her property included a "warranty of workmanlike service that is comparable to a manufacturer's warranty." Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp., 350 U.S. 124, 133-34, 100 L. Ed. 133, 76 S. Ct. 232 (1956). Ryan, however, involved an action brought by a shipowner against the stevedoring contractor for indemnity on injuries sustained by an employee of the stevedoring contractor from improperly stored cargo. The court found that a "warranty of workmanlike service" was implied into the contract between the shipowner and the contractor. Id. Ryan is not analogous to the present case because, unlike the parties in Ryan, Beta and Orsetti do not have a contractual relationship. Since there is no contract between Beta and Orsetti, a warranty cannot be implied.
Accordingly, Beta's motion for summary judgment regarding the breach of contract and warranty cause of action is GRANTED.
IV. Fraud/Misrepresentation Argument
One who fraudulently makes a misrepresentation for the purpose of inducing another to act in reliance upon it is liable for the loss caused by the justifiable reliance on the misrepresentation. Rest. 2d Torts § 525. The elements which the plaintiff must prove in order to recover on a claim of fraud include: (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) justifiable reliance, and (5) resulting damage. Cicone v. URS Corp., 183 Cal. App. 3d 194, 200, 227 Cal. Rptr. 887 (1986).
Similarly, the elements of negligent misrepresentation include: (1) misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the misrepresentation, (4) ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed, and (5) resulting damage. Fox v. Pollack, 181 Cal. App. 3d 954, 962, 226 Cal. Rptr. 532 (1986). In both of these actions, therefore, Orsetti must prove that Beta intended to induce her reliance on the contamination report and that she did in fact justifiably rely on the report to her detriment.
The "class of persons entitled to rely upon the representations is restricted to those to whom or for whom the misrepresentations were made. Even though the defendant should have anticipated that the misinformation might reach others, he is not liable to them." 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 721 at 820. In Bily v. Arthur Young Co., the California Supreme Court adopted the Restatement approach to determine whether there was an "intent to benefit". The Bily court reasoned that the language of the Restatement:
"creates an objective standard that looks to the specific circumstances (e.g., supplier-client engagement and the supplier's communications with the third party) to ascertain whether a supplier has undertaken to inform and guide a third party with respect to an identified transaction or type of transaction. If such a specific undertaking has been made, liability is imposed on the supplier. If, on the other hand, the supplier 'merely knows of the ever-present possibility of repetition to anyone, and possibility of action in reliance upon [the information] on the part of anyone to whom it may be repeated,' the supplier bears no legal responsibility."
Bily, 92 Daily Journal D.A.R. at 11986, 1992 Cal. LEXIS at *81-82 (emphasis in original). Liability is limited to those whom the engagement is designed to benefit in order to allow the supplier of information to ascertain the potential scope of its liability and make rational decisions regarding the undertaking.
Therefore, in order to recover under a theory of negligent misrepresentation, the plaintiff must be an intended beneficiary of the contract. Her reliance on the report is otherwise not justified. As argued in the previous section, Beta was hired by Lincoln, and Lincoln alone, to perform the testing on the property. Lincoln and Beta never discussed the possibility that Orsetti would be relying on the report and Orsetti herself never informed Beta that she would rely on the report. Since Beta was not informed that Orsetti would rely on the report, it would not have been able to include its potential liability to Orsetti in its assessment of whether to prepare the report. Orsetti has not presented any facts to contradict Shafer's declaration as to the specific circumstances surrounding the agreement to prepare the report. Therefore, there is no triable issue of fact regarding Beta and Lincoln's intent to benefit her through the preparation of the contamination report.
Accordingly, Beta's motion for summary judgment regarding the misrepresentation cause of action is GRANTED.
The court GRANTS the third-party defendant's motion for summary judgment
IT IS SO ORDERED.
Dated: SEP 29 1992
MARILYN HALL PATEL
United States District Judge
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