Quail Hollow East Condominium Association v. Donald J. Scholz Co.

268 S.E.2d 12 (1980)

47 N.C. App. 518

QUAIL HOLLOW EAST CONDOMINIUM ASSOCIATION, Plaintiff, v. DONALD J. SCHOLZ COMPANY and Harold Cooler, Defendants. Harold COOLER, Third-Party Plaintiff, v. INDOOR COMFORT OF RALEIGH, INC., a corporation and Holland Construction Company, Inc., a corporation, Third Party Defendants. Harold COOLER, Third-Party Plaintiff, v. REA BROTHERS, INC., Additional Third-Party Defendants.

No. 7926SC558.

Court of Appeals of North Carolina.

July 15, 1980.

*15 Jones, Hewson & Woolard by Hunter M. Jones and Harry C. Hewson, Charlotte, for defendant and third party plaintiff-appellee Harold Cooler.

Weinstein, Sturges, Odom, Bigger, Jonas & Campbell by Allan W. Singer and L. Holmes Eleazer, Jr., Charlotte, for plaintiff-appellant.

MORRIS, Chief Judge.

Plaintiff preserves only one assignment of error on appeal: The trial court improperly granted summary judgment in favor of defendant Cooler. In order for defendant to prevail on his motion, the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any [must] show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." G.S. 1A-1, Rule 56(c); Moore v. Fieldcrest Mills, Inc., 296 N.C. 467, 251 S.E.2d 419 (1979). Plaintiff contends that there are genuine issues of material fact concerning the negligence of defendant Cooler in the performance of his professional obligations as an architect employed by Quail Hollow East Condominiums.

I. Architect Liability

The primary question raised by this appeal is whether a homeowner's association may sue an architect for the negligent design and preparation of plans and specifications and the negligent supervision of construction of a condominium complex where there exists no contractual privity between the architect and the homeowner's association. Recently becoming an area of enormous concern within the legal community, the scope of liability of an architect for the negligent performance of his professional duties has undergone considerable expansion. This broadening of scope has been seen principally in the relaxation of the traditional requisite of contractual privity. As a general proposition of the law of torts, it is settled that, under certain circumstances, one who undertakes to render services to another which he should recognize as necessary for the protection of a third person, or his property, is subject to liability to the third person for injuries resulting from his failure to exercise reasonable care in such undertaking. Restatement (Second) of Torts § 324A (1965); W. Prosser, Handbook of the Law of Torts § 93 (4th ed. 1971). This principle was applied in the recent decision of Davidson and Jones, Inc. v. County of New Hanover, 41 N.C.App. 661, 255 S.E.2d 580 (1979), cert. den. 298 N.C. 295, 259 S.E.2d 911 (1979), wherein Judge Erwin wrote for this Court the following:

The law imposes upon every person who enters upon an active course of conduct the positive duty to exercise ordinary care to protect others from harm and calls a violation of that duty negligence. Council v. Dickerson's, Inc., 233 N.C. 472, 64 S.E.2d 551 (1951); Stroud v. Transportation Co., 215 N.C. 726, 3 S.E.2d 297 (1939). The duty to protect others from harm arises whenever one person is by circumstances placed in such a position towards another that anyone of ordinary sense who thinks will at once recognize that if he does not use ordinary care and skill in his own conduct with regard to those circumstances, he will cause danger of injury to the person or property of the other. Insurance Co. v. Sprinkler Co., 266 N.C. 134, 146 S.E.2d 53 (1966); Honeycutt v. Bryan, 240 N.C. 238, 81 S.E.2d 653 (1954). The duty to exercise due care may arise out of contractual relations. However, a complete binding contract between the parties is not a prerequisite to a duty to use due care in one's actions in connection with an economic relationship, *16 nor is it a prerequisite to suit by a contractor against an architect. See Detweiler Bros., Inc. v. John Graham & Co., 412 F. Supp. 416 (E.D.Wash.1976); see also 57 Am.Jur.2d, Negligence, § 49, p. 398. An architect, in the performance of his contract with his employer, is required to exercise the ability, skill, and care customarily used by architects upon such projects. 5 Am.Jur.2d, Architects, § 8, pp. 669-70. Where breach of such contract results in foreseeable injury, economic or otherwise, to persons so situated by their economic relations, and community of interests as to impose a duty of due care, we know of no reason why an architect cannot be held liable for such injury. Liability arises from the negligent breach of a common law duty of care flowing from the parties' working relationship.

41 N.C.App. at 666-67, 255 S.E.2d at 584. In a more recent case, Industries, Inc. v. Construction Co., 42 N.C.App. 259, 257 S.E.2d 50, cert. denied, 298 N.C. 296, 259 S.E.2d 301 (1979), we stated that "the position and authority of a supervising architect are such that he ought to labor under a duty to the prime contractor [third party] to supervise the project with due care under the circumstances, even though his sole contractual relationship is with the owner." 42 N.C.App. at 266, 257 S.E.2d at 55. We concluded there as follows:

The additional defendant (architect) here entered upon performance of an undertaking and, by doing so, entered into a relation with the contractor and others giving rise to a duty to those who must reasonably rely upon his professional performance. The arrangement presented here of an architect having general supervisory responsibility over the contractor and other subcontractors on a construction project of this nature is a normal one in this commercial age. Each of the various participants must, to some degree, rely upon the professional performance of the other and each therefore has the responsibility of performing his task with due care. Clearly, the incidental fact of the existence of the contract between the architect and the property owner should not negative the responsibility of the architect when he enters upon a course of affirmative conduct which may be expected to affect the interest of third parties.

42 N.C.App. at 271-72, 257 S.E.2d at 59.

In Browning v. Levien & Co., 44 N.C.App. 701, 262 S.E.2d 355 (1980), we applied Davidson and Jones, Inc. and Industries, Inc. in again considering the scope of architect liability. In Browning, plaintiffs were members of a limited partnership formed to build an apartment complex, having obtained a construction loan from the First National City Bank of New York. First National employed defendant and his architectural firm to inspect the construction at the time of each progress payment request and to certify the progress according to the applicable plans and specifications. Upon default by the building contractor under the loan agreement, the limited partners brought suit against defendants, alleging that defendants had been negligent in certifying the work done by the contractor. As a cross assignment of error on appeal, defendants argued that the action was improper because there was no contractual privity between plaintiffs and defendants. This Court rejected that contention and held that "when the defendants undertook to perform services for the bank, it could be reasonably foreseen that the owners of the property, the plaintiffs in this case, might rely on the certification of defendants." 44 N.C.App. at 705, 262 S.E.2d at 358. In so holding, we recognized the general rule evolving from recent decisions that "an architect who contracts to perform services is liable for damages proximately caused by his negligence to anyone who can be reasonably foreseen as relying on that architect's performing services in a reasonable manner." 44 N.C.App. at 704-5, 262 *17 S.E.2d at 358. This rule is applicable to actions arising both from negligent supervision and from the negligent preparation of plans and specifications. Industries, Inc. v. Construction Co., supra.

We must now determine whether these particular plaintiffsan association of condominium purchasersmay maintain this action for damages resulting from negligent design and supervision. We find language from United Leasing Corp. v. Miller, 45 N.C.App. 400, 263 S.E.2d 313, 318 (1980), instructive:

Whether . . . a party has placed himself in such a relation with another so that the law will impose upon him an obligation, sounding in tort and not in contract, to act in such a way that the other will not be injured calls for the balancing of various factors: (1) the extent to which the transaction was intended to affect the other person; (2) the foreseeability of harm to him; (3) the degree of certainty that he suffered injury; (4) the closeness of the connection between the defendant's conduct and the injury; (5) the moral blame attached to such conduct; and (6) the policy of preventing future harm. (Citations omitted.)

Proper application of these factors requires that we consider the materials presented by both plaintiff and defendant on motion for summary judgment. From our review of those materials, it is evident that plaintiff's members fall within the range of potential plaintiffs contemplated by our earlier decisions abolishing the privity requirement. It is obvious that any architect's involvement in residential construction is intended to affect the ultimate consumer-purchaser in that the buyer anticipates and expects sound construction and solid workmanship. In addition, it is certainly foreseeable that any defect in design or negligence in supervision may bring harm to the homeowner, who is met daily with any deficiencies that may develop. Further, in this case, it is certain that the homeowners have suffered injury, as evidenced by the exhibits showing the water damage caused to the various condominium units and the extensive repairs that have already taken place, within the condominium complex. We find that the allegations are sufficient to bring defendant within the purview of holdings in Davidson and Jones, Inc., Industries, Inc., and Browning. The allegations are supported, at least nominally, by evidence presented on hearing of the motion for summary judgment. Although Davidson and Jones, Inc., and Industries, Inc., involved plaintiffs who were directly involved with the architect during the construction phases of the structures in those cases, in Browning plaintiffs were the owners of the property on which the construction took place. Under Browning, although the plaintiff's members did not purchase the units until after the allegedly defective pipe system had been installed, it seems entirely appropriate that third party purchasers would rely on the architect's certifications during construction as evidence that proper construction materials and methods were utilized. We therefore, hold that, under the decisions previously discussed, plaintiff has standing to sue for damages resulting from the alleged negligence of an architect in the design and supervision of the construction of Quail Hollow East Condominiums.

Defendant argues, however, that plaintiff is barred from suit because this action involves economic loss rather than damage to property, relying on Drilling Co. v. Nello L. Teer Co., 38 N.C.App. 472, 248 S.E.2d 444 (1978). We find such a distinction neither dispositive nor persuasive. In Industries, Inc. v. Construction Co., supra, we distinguished Drilling Co. on this precise point, stating that "we do not believe the action is one for mere `loss of profits'. Assuming, arguendo, that there is validity to that subtle distinction, the cause of action here is for an economic loss as a result of alleged property damages." 42 N.C.App. at 271, 257 S.E.2d at 58. We find this decision applicable to the facts before us, and accordingly dismiss defendant's contention.

*18 II. Statute of Limitations

We now consider whether plaintiff's claim is barred by the statute of limitations applicable to an action in tort against an architect for negligence arising out of a construction project. Plaintiff cites several statutes which it argues are controlling in this instance, which we discuss below.

The statute limiting tort actions in this State is G.S. 1-52(5), which provides that actions involving "any other injury to the person or rights of another, not arising on contract and not hereafter enumerated" must be brought within three years from the time the right of action accrues. G.S. 1-15(b), as it read at all times pertinent to this appeal, provided:

Except where otherwise provided by statute, a cause of action, other than one for wrongful death, having as an essential element bodily injury to the person or a defect in or damage to property which originated under circumstances making the injury, defect or damage not readily apparent to the claimant at the time of its origin, is deemed to have accrued at the time the injury was discovered by the claimant, or ought reasonably to have been discovered by him, whichever event first occurs; provided that in such cases the period shall not exceed 10 years from the last act of the defendant giving rise to the claim for relief.

G.S. 1-50(5), allowing for a six-year period of limitation for actions to recover for damages to realty applicable to architects and building contractors, provides:

No action to recover damages for any injury to property, real or personal, or for an injury to the person, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of such injury, shall be brought against any person performing or furnishing the design, planning, supervision of construction or construction of such improvement to real property, more than six (6) years after the performance or furnishing of such services and construction. This limitation shall not apply to any person in actual possession and control as owner, tenant or otherwise, of the improvement at the time the defective and unsafe condition of such improvement constitutes the proximate cause of the injury for which it is proposed to bring an action.

The effect of these statutes is that date of the accrual of a cause of action is deemed to be the date of discovery of the defective or unsafe condition of a structure, and that the action must be brought within three years thereafter. Finally, G.S. 1-50(5) sets an outside limit on the right to sue, requiring that the action be brought within six years after construction is completed, except that it is not applicable "to any person in actual possession and control as owner, tenant or otherwise, of the improvement at the time the defective and unsafe condition of such improvement constitutes the proximate cause of the injury for which it is proposed to bring an action." See generally Smith v. American Radiator & Standard Sanitary Corp., 38 N.C.App. 457, 248 S.E.2d 462 (1978), cert. denied, 296 N.C. 586, 254 S.E.2d 33 (1979). The defects were discovered for the first time on or about 9 October 1974. This action was instituted on 13 June 1977. It is evident that plaintiff brought its action, at least with respect to its claim for negligent supervision, within the limits prescribed in these sections, and defendant properly does not contend otherwise.

Defendant does, however, dispute the timeliness of this action with respect to plaintiff's claim based on defendant's allegedly negligent design of the plans and specifications used in the construction project. Plaintiff's claim here is based on an amendment to its complaint filed on 1 February 1979, alleging that defendant "failed to design adequate piping systems as to both plans and specifications." The date of the commencement of this claim is *19 well beyond the three years allowed by G.S. 1-52(5), and the six years allowed by G.S. 1-50(5). Plaintiff contends, however, that the claim is timely in that it relates back to the date of the original complaint under G.S. 1A-1, Rule 15(c) of the North Carolina Rules of Civil Procedure. Defendant argues, on the other hand, that this amendment introduces "a new cause of action essentially in conflict with the the cause of action previously alleged and that the previous pleadings gave no notice of the transactions and occurrences to be proved pursuant to the proposed amendment," contrary to the requirements of G.S. 1A-1, Rule 15(c).

Without deciding whether plaintiff's amendment to its complaint constitutes a new cause of action, it is our opinion that the amendment was properly allowed and that it relates back to the original complaint under Rule 15(c). In Humphries v. Going, D.C., 59 F.R.D. 583 (1973), the Court recognized that in North Carolina even a new cause of action can relate back to the original complaint so as to defeat the effect of a statute of limitations. The test is whether defendant ought to have known from the original complaint the facts which plaintiff attempts to add by its amendment. "A claim asserted in an amended pleading is deemed to have been interposed at the time the claim in the original pleading was interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences to be proved pursuant to the amended pleading." (Emphasis added.) G.S. 1A-1, Rule 15(c). See also Comment, Section (c) to Rule 15. We hold that in this case defendant was afforded notice of the "transactions, occurrences, or series of transactions or occurrences" contemplated by plaintiff's lawsuit.

III. Evidence Presented on Motion for Summary Judgment

Finally, defendant argues that summary judgment was properly entered because plaintiff's evidence is insufficient to present a genuine issue as to any material fact concerning negligent supervision and negligent design. In the materials presented on motion for summary judgment, we find some evidence which tends to show that defendant Cooler drew the plans for the piping system; that he had the authority, if not the responsibility, to interrupt the construction process so that design and construction errors could be remedied; that defendant knew or should have known that the piping system would deteriorate if proper methods of sealing the pipes were not followed; that defendant knew at the time of construction that certain prescribed methods of construction were not being followed; and that defendant did not exercise his authority to prevent or correct the problems that appeared on the construction site. These assertions are denied by defendant, who asserts he was never obligated by contract or otherwise to oversee the construction in a supervisory capacity, and that the plans and specifications drawn and approved by him were in all respects proper. Thus, the evidence presents questions of fact as to the duties arising between the parties to this lawsuit. This question is one for the jury to resolve in its sound discretion, and in light of the standard of reasonableness previously set forth in this opinion and the decisions cited herein.

Reversed and remanded.

HARRY C. MARTIN and HILL, JJ., concur.