Motion for Reconsideration Denied June 6, 1989., for No. 37 only.
The Council of Unit Owners of Harper House Condominium sued the Village of Cross Keys, Inc. (VCK) and the Rouse Company (Rouse), contending that VCK and Rouse, as developers of the Harper House building, were responsible for damages resulting from defective exterior walls. VCK and Rouse, hereinafter referred to collectively as the developer,
This appeal presents interesting and difficult questions concerning potential liability for negligence. In this case, petitioners' claim that a tort duty must be imposed upon one who has erred generates the specter of "liability in an indeterminate amount for an indeterminate time to an indeterminate class," a liability that concerned Justice Cardozo in Ultramares Corporation v. Touche, 255 N.Y. 170, 174 N.E. 441, 444 (1931), and continues to concern courts today. We are asked to consider the sometimes subtle difference between a cause of action for negligence in general and one for negligent misrepresentation, and whether the difference is material here. Additionally, we are asked to revisit the question of economic loss versus risk of physical harm, and the impact of each type of damage upon the question of how far a duty should extend. See Council of Co-Owners v. Whiting-Turner, 308 Md. 18, 517 A.2d 336 (1986). For a better understanding of the context in which these questions arise, we set forth a more detailed description of the underlying facts.
The building in question is a 15 story, 194 unit, luxury high-rise condominium. The developer began planning for construction in the late 1960's, and construction specifications were issued in March 1974. Shortly after completion of the building in 1976, water leaks were reported in various units throughout the building, and to date at least 50 units have shown evidence of intrusion of water from the outside. The developer attempted several corrective measures, but was not successful. The exterior wall system was examined by a number of experts, who predictably came to somewhat different conclusions concerning the cause of the problem. There is substantial evidence, however, to support the contention of the developer that the only adequate means of correcting the defective conditions that now exist involve the complete removal of the brick veneer, replacement or correction of the backup wall system as required, and installation of new brick. This work has begun, and according to the developer will cost 15-20 million dollars, in addition to the 3 million dollars already expended in the initial remedial measures.
The extensive record already developed in this case suggests there may be multiple causes of the exterior wall problem, including deficiencies in materials, workmanship, supervision, design, and specifications. Petitioners contend that at least a substantial cause of the problem may be the design of the brick veneer, steel stud, curtain wall system used in the building — a design they say was developed, published and promoted by USG.
Curtain wall systems have been employed by the building industry for some time. A curtain wall is not a part of the structural skeleton of the building, as would be a weight bearing wall. It simply spans an upper and lower deck (or floor) of the building, enclosing that floor. A wall system consists of the exterior surface, such as brick or stucco, the interior surface, such as plaster, gypsum board, or paneling, and the core or "backup" to which each surface is in some manner connected. The curtain wall used in this building consists of an exterior surface of one wythe of laid-up 4 inch brick, and a backup of 2-1/2 inch steel studs fastened into steel runners at the top and bottom. Exterior sheathing is attached to the outside of the steel studs, and interior gypsum board (wallboard) is attached to the inside. The exterior wall of brick for each floor rests on an angle iron that is fastened to the concrete deck at the base of each floor, and is laid so that there is an air space of approximately 1 inch between the brick and the sheathing. To provide additional support for the brick wall, and apparently to transfer some part of the forces exerted on the brick wall to the backup structure, metal ties, called wall ties or brick ties, are placed at specified intervals. In this system, the ties used are corrugated metal strips, 1 inch wide and several inches long, with a galvanized coating. These ties are supposed to be securely screwed to the steel studs at the same time as or after the exterior sheathing is attached, and the free end of each tie is then to be inserted into a bed of mortar between the bricks as the wall is laid.
Brick veneer walls are not new. Until the mid-1960's, however, metal stud systems had not been used as a backup for brick veneer on high-rise buildings. Rather, concrete or other masonry walls were used as backup in such cases. For low-rise commercial and residential buildings, a wooden stud system often served as the backup for a brick veneer wall. As metal stud systems proved increasingly popular for use in constructing interior non-load bearing walls, the manufacturers of those systems turned their attention to the potential of utilizing steel studs as a backup for exterior walls in high-rise buildings. USG's interest is documented by an internal report dated 14 July 1964, which stated:
Six years later, another USG internal report evaluated the market in these terms:
Using their own architects and engineers, USG in the late 1960's or early 1970's developed and issued specifications for a brick veneer, steel stud, gypsum board curtain wall system. There is evidence that USG sales representatives reported difficulty in selling the system because architects were having trouble defining the system from the limited specifications given up to that time. As a result USG developed a more comprehensive 24-page publication known as System Folder SA-805, USG Curtain Wall Systems (hereinafter, the "805"). The first 805, issued in 1973, was later described by USG as providing "complete details and specifications for the USG Brick Veneer Curtain Wall System, including wind load limiting height tables."
The 805, which petitioners insist was the document relied upon by the architect in designing the curtain wall system for Harper House, contained several parts. In addition to the narrative portions which described and extolled the system in its several applications, there were photographs of buildings built with the system; detail drawings of the system in several different applications; technical data charts, including structural properties of the studs, fire ratings, heat transfer characteristics, and height limitations correlated to wind load requirements and size and spacing of studs; and, proposed written specifications.
Although there is evidence that the developer had decided to use a steel stud backup system before USG's 805 was seen by the developer or architect, and there is evidence that brochures of other major steel stud and gypsum board manufacturers were obtained and considered before a decision was made, we find the evidence sufficient to support petitioners' contention that the Harper House plans and specifications issued on 29 March 1974, relied heavily upon the 805 for the curtain wall system. Section 3.07 of the Harper House specifications, entitled "exterior walls," provides: "install all of components in accordance with the drawings and the applicable portions of U.S. Gypsum Curtain Wall System Specification SA 805." However, with the exception of the joint tape, joint compound, and corner beading to be used in the installation of the interior dry wall, the Harper House specifications did not require the use of USG products.
Petitioners offered evidence that the 805 design was defective in several important respects, and that the 805 contained misrepresentations. Specifically, they contend that the design: permitted excessive infiltration of water; did not make adequate provision for the handling of infiltrating water; and did not provide a wall that would withstand the wind loads represented. Petitioners contend that the representations made in the 1973 and 1974 editions of the 805 concerning air and water infiltration were false. The 1973 representation was that "the systems meet air and water infiltration standards set by FHA and NAAMN." The 1974 representation was the same, with the addition of the words "and have been successfully tested at 90 mph wind pressure."
Petitioners claim as a result of deficiencies in the system, excess water has infiltrated the curtain wall of the Harper House, causing not only leaks into the interior of the units, but also rust and corrosion of the brick ties, the steel studs, the metal runners into which the studs fit, and the bolts that are supposed to anchor the runners to the concrete deck. These conditions, they claim, have substantially undermined the structural integrity of the backup system, further diminishing its ability to provide the required stability for the brick wall.
The evidence produced by pretrial discovery shows that there is a dispute among the experts concerning the ability of the 805 system to actually carry the wind load specified in the 805 tables. Petitioners point out, however, that they have produced evidence which would permit a trier of fact to find that the 805 system built to USG's specifications with USG materials will not perform adequately. Specifically, they say, the inadequacy of the brick anchors and the lack of inherent structural integrity of the steel stud system as specified would permit the brick veneer wall to flex four times as much as it should, thus causing severe cracking in the brick veneer and mortar joints, and over stressing the backup system at critical points.
These factors, petitioners claim, have had a compounding effect on the wall at Harper House, allowing more and more water infiltration, and thus more rusting and loss of structural integrity to the point where anticipated wind loading could suck entire sections of the brick veneer wall off the face of the building.
USG has vigorously defended these claims, insisting that the 805 system was properly designed, and will perform to specifications when properly constructed. It points out that specification 1.2 of the 805, entitled "Qualifications," provides that "all materials, unless otherwise indicated, shall be manufactured by United States Gypsum Company, and shall be installed in accordance with its current printed directions," but that no USG materials were used in the structural portions of the Harper House curtain wall system. Additionally, USG says that the Harper House design and specifications contain significant deviations from the 805 system, and that various inspections have discovered material and construction deficiencies that are sufficiently serious to have caused the current problems.
Among the more significant of the design deviations to which USG points, and which the record undeniably shows exist, are as follows. The 805 detail drawings call for reinforcement of steel runners at the tops and bottoms of windows more than 4 feet wide by "nesting" two steel studs together, or reinforcing or nesting the runners at those points. The Harper House plans did not specify this requirement, nor were the steel studs actually used in Harper House construction designed to permit nesting.
The alleged deficiencies in construction were also numerous, including: use of the wrong bricks; improper mortar; inadequate mortar to fill the head joints; use of the wrong brick ties, (galvanized before fabrication); brick ties completely missing, or too few in number, or connected improperly or not at all; bed mortar protruding into the air space; mortar allowed to accumulate at the base of the air space; inadequate weep holes to allow water to leave the interior of the wall; inadequate or nonexistent installation of flashing to direct interior water to weep holes; failure to use foil backed sheathing; inadequate fastening of exterior sheathing to studs; insufficient and inadequate fastening of steel runners to concrete decks; and, inadequate or non-existent fastening of steel studs to steel runners at top and bottom.
Although we have set forth the alleged construction deficiencies to give a more complete picture of the controversy, we point out that if USG has potential liability to the petitioners, and if it is guilty of a negligent design or misrepresentation that is a legally cognizable cause of the current defective condition, the fact that the negligence of others may have contributed to the loss would not ordinarily excuse USG. See Cincinnati Riverfront Coliseum v. McNulty Co., 28 Ohio St.3d 333, 504 N.E.2d 415, 419 (1986).
We return, then, to the pressing question of whether USG may be liable under the circumstances of this case. Because petitioners' claims sound in negligence, we look first to whether USG owed a tort duty to these petitioners. As this Court said in W. Va. Central R. Co. v. Fuller, 96 Md. 652, 666, 54 A. 669 (1903):
We discussed the concept of duty at some length in Jacques v. First Nat'l Bank, 307 Md. 527, 515 A.2d 756 (1986). Quoting from Prosser & Keeton on The Law of Torts § 53, at 357 (5th ed. 1984), we said that a tort duty "is ... an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection," and that a tort duty is not necessarily coextensive with a moral duty. Jacques, supra, 307 Md. at 533-34, 515 A.2d 756. We also discussed the question of duty in Ashburn v. Anne Arundel County, 306 Md. 617, 627, 510 A.2d 1078 (1986), and there agreed with the observation of the Supreme Court of California that among the variables to be considered in determining whether a tort duty should be recognized are:
In Jacques, and more recently in Council of Co-Owners v. Whiting-Turner, supra, we discussed the relationship of the parties and the nature of the actual or foreseeable harm in a given case as additional factors to be considered in determination of the existence of a duty. In Jacques, a case involving only economic loss, we said at 307 Md. 534-35, 515 A.2d 756:
In Whiting-Turner, which involved a claim for the cost of correcting a construction defect which presented a clear danger of death or personal injury, we said at 308 Md. 32-35, 517 A.2d 336:
For other discussions of the extent to which there should be liability for negligence or negligent misrepresentation when economic loss alone has resulted, see Archer, Architects' Liability to Third Party Contractors for Economic Loss Resulting from Faulty Plans and Specifications, 27 Ariz. L.Rev. 139 (1985); Craig, Negligent Misstatements, Negligent Acts and Economic Loss, 92 Law Q. Rev. 213 (1976); James, Limitations on Liability for Economic Loss Caused by Negligence: A Pragmatic Appraisal, 25 Vand. L.Rev. 43 (1972); Note, A Framework for Determining Liability for Negligently Caused Economic Losses, 1986 B.Y.U.L. Rev. 177.
Although Whiting-Turner concerned negligent conduct, similar principles apply when negligent misrepresentation is involved. See Restatement (Second) of Torts § 311 comment a (1965), noting that the rule pertaining to negligent misrepresentation involving the risk of physical harm represents a somewhat broader liability than the rule relating to liability for pecuniary loss resulting from negligent misrepresentation.
Whether we should treat this claim as one of negligent misrepresentation or as one of negligent conduct is a matter of disagreement between the parties. Federal courts have been required to wrestle with the sometimes difficult problem of distinguishing one from the other because the federal Tort Claims Act permits claims for negligence but bars claims "arising out of — misrepresentation." 28 U.S.C. § 2680(h). In United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614 (1961), the purchasers of a home who had suffered loss when they relied on a negligently excessive FHA appraisal sought to avoid the strictures of the misrepresentation exclusion by contending that the appraiser had negligently inspected and appraised the property when he failed to notice cracks in the ceilings and walls of the house. The Supreme Court held the claim to be one of negligent misrepresentation, notwithstanding the presence of underlying negligent conduct in making the inspection and in preparing the appraisal.
Neustadt, 366 U.S. at 706, 81 S.Ct. at 1300. It is true, of course, that where the plaintiff would have a cause of action based on the underlying negligence independent of the misrepresentation, that cause of action survives and is not merged into the later misrepresentation. Block v. Neal, 460 U.S. 289, 296-98, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983).
The gravamen of the action here is negligent misrepresentation. It is the alleged misinformation that USG published in the 805 of which petitioners complain. Even if petitioners were able to demonstrate that USG was guilty of underlying acts of negligence in their computations, testing, failure to test, or the like, that would be negligence in a vacuum, unconnected to these petitioners in the absence of the publication of the 805.
The history of the tort of negligent misrepresentation in Maryland was set forth in Weisman v. Connors, 312 Md. 428, 443-48, 540 A.2d 783 (1988), and Martens Chevrolet v. Seney, 292 Md. 328, 439 A.2d 534 (1982). The principal elements of the tort were set forth in Weisman at 312 Md. 444, 540 A.2d 783:
We have made it clear that the tort will lie for the recovery of pecuniary losses, as well as for physical harm. Martens Chevrolet, supra, 292 Md. at 336, 439 A.2d 534; Brack v. Evans, 230 Md. 548, 187 A.2d 880 (1963).
Sections 552 and 311 of the Restatement (Second) of Torts (1965) dealing with negligent misrepresentation are reproduced in the margin.
The close interrelationship of the concepts of duty and reliance is evident in this statement of the Court of Appeals of New York in International Products Co. v. Erie R. Co., 244 N.Y. 331, 155 N.E. 662, 664 (1927), speaking of a claim for negligent misrepresentation:
In the case before us, USG contends that even if the information it published in the 805 is erroneous in material respects, USG cannot be liable for its gratuitous publication to persons with whom USG had no dealings, but who were only a part of the "general universe" or "vast, faceless crowd of Sweet's Catalog users."
We harbor grave doubts concerning the vitality of that argument advanced by USG. It is true that USG did not directly "sell" this system or any component parts of it to the developer or to the architect. It did, however, develop a system under circumstances from which the trier of fact could find a specific intent that architects and perhaps engineers, builders, or developers would adopt it. The record discloses that the 805 and similar manufacturers' publications receive wide distribution in the trade by inclusion in Sweet's Catalog. Additionally, the 805 was directly available from USG or any of its sales staff. Although USG did not design the system for a fee from a particular client, or attempt to "sell" it for direct compensation, it is safe to say it did not develop and publish these detailed drawings, specifications, and technical data tables for some altruistic motive. As one of a relatively few major manufacturers of the component parts of the system, it reasonably expected that acceptance and use of the system generally would translate into significant increased sales of its merchandise. It may reasonably be said, then, that the development and distribution of the 805 was for the purpose of earning a profit, albeit somewhat indirectly, and therefore publication was effected for USG's pecuniary interest.
Although the group of persons who may be expected to rely upon information of this kind may be large, they are identifiable, particularly if the group is limited to architects and structural engineers. That their names cannot be known in advance is of no consequence. Henley v. Prince George's County, 305 Md. 320, 334-36, 503 A.2d 1333 (1986). A trier of fact could find that the architects and engineers are the very persons whom USG intended to act on the information supplied. We think it clear that in some circumstances it is the practice of the industry that architects and engineers depend upon technical information supplied by manufacturers. We doubt that the industry standard requires that each architect and engineer "reinvent the wheel" for each project. Projected liability for error may be great when technical information is published under these circumstances, but apparently the potential for profits may also be great, and a decision of whether to publish in this fashion, and how much care to use in research, testing, conformation, proof reading, and the like may simply be business decisions. We need not, however, and do not decide this issue, leaving to another day the question of whether a manufacturer may, under certain circumstances, be responsible for negligent publication of information in this manner. Rather, we rest our decision on the more narrow grounds made possible by the specific facts of this case.
The information published by USG in the 805 clearly applied to USG products. The specifications set forth in the 805 called for the use of USG products "unless otherwise indicated." The principal structural components of the backup system shown in the 805, including the metal studs, metal runners, screws, and gypsum boards, were specified to be USG products. The plans called for the "nesting" or "boxing" of studs and runners at critical places and the USG studs and runners, unlike others and unlike those actually used in this construction, were specially designed and fabricated so that they could be so joined. The technical data in the 805 either expressly or implicitly related to the system as built with USG products. Tables giving structural properties of the studs were entitled "structural properties — 20 GA. USG metal studs." Wind loading tables, which provided information concerning the size of the stud to be used, the spacing of studs, the spacing for attachment of runners, and limitation of height of the wall, all depending upon the wind pressure which had to be accommodated, were entitled "limiting height, USG metal stud and runner fastener spacing." Heat transfer characteristics were given for "USG metal stud system."
In the construction of the Harper House, USG products were neither specified nor used in the structural portions of the curtain wall system. The trial judge found this to be a fact not in dispute, and we concur. The USG joint tape, joint compound, and corner beading that may have been used on the interior walls simply do not play a part in the structural integrity of the curtain wall. Under these circumstances, we hold that petitioners' claimed reliance upon the information contained in the 805 was not reasonable within the meaning of the "reasonable reliance" requirement of the tort of negligent misrepresentation. Assuming, arguendo, that a claim might lie against USG if all, or substantially all, of the critical USG components had been used, we find that the trial judge was correct in deciding as a matter of law that the claim could not lie under the facts not in dispute in this case.
The same result could be expressed as well in terms of the absence of a duty, for we believe that as a matter of policy it would be inappropriate to impose a tort duty upon USG under these circumstances. Assuming the possible existence of a tort duty upon USG as a result of the publication of the 805, that duty should extend to those who seek to challenge a system they have used, and not to those who do not. While USG might reasonably be called upon to defend the system it espoused, that is not the case here, nor is it sufficiently close to that case to make it a jury issue.
The developer has also presented, without much force, an alternative argument that publication of the 805 amounted to a promise which the developer and architect accepted when it used the 805, so that the developer now has a claim for breach of contract or warranty. We fail to perceive a glimmer of merit in the argument.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY AFFIRMED; COSTS TO BE PAID BY THE PETITIONERS, ONE-HALF BY THE DEVELOPER AND ONE-HALF BY THE ARCHITECT.
§ 311. Negligent Misrepresentation Involving Risk of Physical Harm