Keystone Airpark Authority v. Pipeline Contractors, Inc., a Florida etc. , 266 So. 3d 1219 ( 2019 )

FIRST DISTRICT COURT OF APPEAL
STATE OF FLORIDA
_____________________________
No. 1D17-2897
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KEYSTONE AIRPARK AUTHORITY,
Appellant,
v.
PIPELINE CONTRACTORS, INC., a
Florida corporation; THE
HANOVER INSURANCE COMPANY,
a New Hampshire corporation;
and PASSERO ASSOCIATES, LLC,
a Florida limited liability
company,
Appellees.
_____________________________
On appeal from the Circuit Court for Clay County.
Don H. Lester, Judge.
January 25, 2019
WOLF, J.
On consideration of appellee’s motion for clarification and
appellant’s response, this Court grants the motion, withdraws the
opinion filed on November 27, 2018, and substitutes the following
opinion in its place.
Keystone Airpark Authority, appellant, challenges a partial
final summary judgment entered in favor of Passero Associates,
LLC, appellee. The Airpark argues the trial court erred in
determining that the damages it sought to repair an airplane
hangar and taxiways that deteriorated after Passero allegedly
failed to meet its obligations under a construction contract were
consequential damages, which were excluded by the parties’
contract. We affirm but certify a question of great public
importance.
FACTS
The Airpark brought causes of action against Passero, an
engineering firm, for breach of contract and negligence. The
Airpark entered into an agreement with a contractor to construct
airplane hangars and taxiways, and it contracted separately with
Passero to provide engineering services that included “part-time
resident engineering and inspection, [and] material testing.”
Specifically, the contract required Passero to “inspect,” “observe”
and “monitor” the construction work to ensure compliance with
the plans and to ascertain the need for correction or rejection of
the work, including determining the suitability of materials used
by the contractor:
Observe the work to determine conformance to the
contract documents and to ascertain the need for
correction or rejection of the work.
....
Arrange for, conduct, or witness field, laboratory or shop
tests of construction materials as required by the plans
and specifications.
Determine the suitability of materials on the site, and
brought to the site, to be used in construction.
Interpret the contract plans and specifications and
monitor the construction activities to maintain
compliance with the intent.
Prepare and submit inspection reports of construction
activity and problems encountered . . . .
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....
[M]onitor[] periodic construction activities on the project
and document[] their observations in a formal project
record . . . .
The Airpark alleged that the contractor used substandard
material for stabilization underneath the structures, which
Passero failed to detect, causing the concrete hangar slabs and
asphalt taxiways to prematurely deteriorate. The Airpark sought
to recover from Passero the cost to remove, repair, and replace
the hangars, taxiways, and underlying subgrade. It sought the
same relief from the contractor.
Passero moved for summary judgment, arguing the damages
the Airpark sought to recover were not a direct result of Passero’s
alleged failure to perform under the contract. Instead, Passero
argued the need for repair resulted from a combination of
Passero’s alleged failure to perform construction inspection
services under the contract and the contractor preparing the
subgrade improperly. Thus, Passero argued the repair costs were
not direct or general damages, but instead were consequential
damages, which were excluded by a provision in the parties’
contract that stated, “Passero shall have no liability for indirect,
special, incidental, punitive, or consequential damages of any
kind.” Passero argued the only direct or general damages that the
Airpark could seek to recover against Passero were the costs of
the services provided by Passero. The trial court agreed and
entered partial final summary judgment in favor of Passero.
ANALYSIS
The Airpark argues the cost of repair to the hangars and
taxiways constitutes general damages and not consequential
damages because those damages were foreseeable. It relies on an
English case from 1854 called Hadley v. Baxendale, 9 Exch. 341,
156 Eng. Rep. 145 (1854), which defined the general measure of
damages as those damages “arising naturally . . . from such
breach of contract itself, or such as may reasonably be supposed
to have been in the contemplation of both parties, at the time
they made the contract.” However, if there were “special
circumstances” that were “communicated by the plaintiffs to the
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defendants, and thus known to both parties,” the plaintiff could
recover for “injury which would ordinarily follow from a breach of
contract under these special circumstances.” Id.
Here, the Airpark argues it was foreseeable that Passero’s
failure to perform under the contract could have resulted in
construction defects going undetected, which could later require
repair. It reasons these damages arose naturally from the breach
of its contract with Passero and did not involve special
circumstances about which it would have been required to give
Passero actual notice. Thus, the Airpark argues these damages
are general and not special or consequential.
Foreseeability is not at issue here. Passero does not dispute
it was foreseeable that if it failed to perform its duties under the
contract, that could result in the need for repairs. It is thus
necessary for us to explore the definition of general, special, and
consequential damages and how the question of foreseeability
affects the nature of the damages incurred in this case.
“General damages are ‘those damages which naturally and
necessarily flow or result from the injuries alleged. . . .’”
Hardwick Properties, Inc. v. Newbern, 711 So. 2d 35, 39 (Fla. 1st
DCA 1998) (quoting Hutchison v. Tompkins, 259 So. 2d 129, 132
(Fla. 1972)). General damages “‘may fairly and reasonably be
considered as arising in the usual course of events from the
breach of contract itself.’” Id. (quoting Fla. E. Coast Ry. v. Beaver
St. Fisheries, Inc., 537 So. 2d 1065, 1068 (Fla. 1st DCA 1989)).
Stated differently, “[g]eneral damages are commonly defined as
those damages which are the direct, natural, logical and
necessary consequences of the injury.” Fla. Power Corp. v. Zenith
Indus. Co., 377 So. 2d 203, 205 (Fla. 2d DCA 1979) (emphasis
added).
“In contrast, special damages are not likely to occur in the
usual course of events, but ‘may reasonably be supposed to have
been in contemplation of the parties at the time they made the
contract.’” Hardwick, 711 So. 2d at 40 (quoting Fla. E. Coast Ry.,
537 So. 2d at 1068). They “consist of items of loss which are
peculiar to the party against whom the breach was committed
and would not be expected to occur regularly to others in similar
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circumstances.” Id. (citing Johnson v. Monsanto Co., 303 N.W.2d
86 (N.D. 1981)). “In other words, ‘general damages are awarded
only if injury were foreseeable to a reasonable man and . . .
special damages are awarded only if actual notice were given to
the carrier of the possibility of injury. Damage is foreseeable by
the carrier if it is the proximate and usual consequence of the
carrier’s action.’” Fla. E. Coast Ry., 537 So. 2d at 1068 (quoting
Hector Martinez & Co. v. S. Pac. Transp. Co., 606 F.2d 106, 109
(5th Cir. 1979)).
“[C]onsequential damages ‘do not arise within the scope of the
immediate buyer-seller transaction, but rather stem from losses
incurred by the non-breaching party in its dealings, often with
third parties, which were a proximate result of the breach, and
which were reasonably foreseeable by the breaching party at the
time of contracting.’” Hardwick, 711 So. 2d at 40 (emphasis
added) (quoting Petroleo Brasileiro, S.A., Petrobras v. Ameropan
Oil Corp., 372 F. Supp. 503, 508 (E.D.N.Y. 1974)). “The
consequential nature of loss . . . is not based on the damages being
unforeseeable by the parties. What makes a loss consequential is
that it stems from relationships with third parties, while still
reasonably foreseeable at the time of contracting.” Bartram, LLC
v. Landmark Am. Ins. Co., 864 F. Supp. 2d 1229, 1240 (N.D. Fla.
2012) (emphasis added) (citing Hardwick Properties, Inc. v.
Newbern, 711 So. 2d at 40).
We agree with the Airpark that the damages in this case
were not special damages. The contract required Passero to
inspect, observe and monitor the construction work, including
determining the suitability of materials used by the contractor,
and to report any problems. It cannot be said that repairs
stemming from improperly inspected and monitored construction
work are unlikely to occur in the usual course of business. The
damages in this case were not particular to the Airpark and did
not involve special circumstances for which the Airpark would
have been required to give Passero actual notice. Instead, these
types of damages would be expected to occur to other parties in
similar circumstances. Thus, they were not special damages.
However, the cost of repair here did not constitute general
damages, either, because the damages were not the direct or
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necessary consequence of Passero’s alleged failure to properly
inspect, observe, monitor, and report problems with the
construction work. The contractor could have completed the job
correctly without Passero performing its duties under the
contract. Thus, the need for repair did not arise within the scope
of the immediate transaction between Passero and the Airpark.
Instead, the need for repair stemmed from loss incurred by the
Airpark in its dealings with a third party – the contractor. While
these damages “were reasonably foreseeable,” they are
consequential and not general or direct damages.
The parties agree there is no case law directly on point
involving damages stemming from the failure to inspect and
monitor construction work; however, we find this case is
analogous to others that have found the cost to repair or replace
property damaged following deficient inspections or other
services constituted consequential damages. See Urling v. Helms
Exterminators, Inc., 468 So. 2d 451, 454 (Fla. 1st DCA 1985)
(finding the cost to repair extensive termite damage to a home
purchased after a termite inspection company erroneously
certified that the home was free of damage constituted
consequential damages, whereas the cost of the termite
inspection constituted actual damages); Rollins, Inc. v. Heller,
454 So. 2d 580, 585 (Fla. 3d DCA 1984) (finding where a home
was burglarized following the installation of a deficient security
system, the actual damages constituted the cost of the defective
system, not the value of the items stolen during the burglary).
See also Mosteller Mansion, LLC v. Mactec Eng’g & Consulting of
Georgia, Inc., 661 S.E.2d 788, n.2 (N.C. Ct. App. 2008) (finding a
builder’s claim for damages to repair and recondition soil after an
engineering firm erroneously conducted soil testing were
consequential and indirect damages because they “do not flow
directly and immediately from any action of” the engineering
firm); Fed. Reserve Bank of Richmond v. Wright, 392 F. Supp.
1126, 1131 (E.D. Va. 1975) (finding a property owner’s cost to
correct structural defects that resulted from defective plans
prepared by an architect constituted indirect damages);
McCloskey & Co., Inc. v. Wright, 363 F. Supp. 223, 226 n. 1, 230
(E.D. Va. 1973) (finding the cost to repair a leaking roof caused
by an architect’s defective plans constituted consequential or
incidental damages); Richmond Redevelopment & Hous. Auth. v.
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Laburnum Const. Corp., 80 S.E.2d 574, 579-80 (1954), superseded
by statute on other grounds (finding damages caused by the
explosion of a faulty gas line were consequential).
We acknowledge the case at hand is distinguishable because
here, the contract between the Airpark and Passero expressly
required Passero to inspect, observe, and monitor the
construction work and to determine the suitability of the
materials used by the contractor. Thus, we certify the following
question as one of great public importance:
WHERE A CONTRACT EXPRESSLY REQUIRES A PARTY TO
INSPECT, MONITOR, AND OBSERVE CONSTRUCTION WORK
AND TO DETERMINE THE SUITABILITY OF MATERIALS USED
IN THE CONSTRUCTION, BUT THE PARTY FAILS TO DO SO
AND INFERIOR MATERIALS ARE USED, ARE THE COSTS TO
REPAIR DAMAGE CAUSED BY THE USE OF THE IMPROPER
MATERIALS GENERAL, SPECIAL, OR CONSEQUENTIAL
DAMAGES?
Finally, we reject the Airpark’s argument that all limitations
on liability for special or consequential damages in contracts
involving professional service corporations such as Passero
should be declared void pursuant to public policy. There is no
public policy that would prohibit sophisticated parties such as
Passero and the Airpark, which is a governmental entity, from
negotiating a contract that limits liability for consequential
damages. Thus, we AFFIRM but CERTIFY a question of great
public importance.
LEWIS, J., concurs; ROWE, J., concurs in part and dissents in part
with opinion.
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ROWE, J., concurring in part, and dissenting in part.
I concur in affirmance of the partial final summary judgment
appealed. However, I dissent from the decision to certify a
question to the supreme court.
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_____________________________
James J. Taylor Jr. and Katelyn J. Taylor of Taylor Law Firm,
P.A., Keystone Heights, for Appellant.
Curtis L. Brown and Mark T. Snelson of Wright, Fulford,
Moorhead & Brown, P.A., Altamonte Springs, for Passero
Associates, LLC, Appellee.
John E. Oramas of Oramas & Associates, P.A., Miami, Amici
Curiae in support of Appellee, Passero Associates, LLC.
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