COURT OF APPEALS DECISION DATED AND RELEASED August 01, 1995 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-0834
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
GRAEBNER ENTERPRISES,
INC.,
THOMAS GRAEBNER
and NANCY GRAEBNER,
Plaintiffs-Respondents,
v.
FIREMAN'S FUND
INSURANCE
COMPANY OF WISCONSIN,
Defendant-Appellant.
APPEAL from a judgment
of the circuit court for Milwaukee County: LOUISE M. TESMER, Judge. Reversed and cause remanded with
directions.
Before Wedemeyer, P.J.,
Sullivan and Fine, JJ.
PER
CURIAM. Fireman's Fund Insurance Company of Wisconsin appeals from a
judgment entered in favor of Graebner Enterprises, Inc., and its sole
shareholders and managers, Thomas and Nancy Graebner (collectively,
Graebner). The lawsuit arose out of
construction of a hotel. Water leaked
into the building through the walls.
Fireman's Fund provided comprehensive general liability insurance to
Leppin Services, Inc., the subcontractor responsible for constructing the
exterior walls.
Fireman's Fund raises
several issues relating to insurance coverage and several issues arising out of
the trial of the case. Fireman's Fund
contends that Graebner's claim is for breach of contract and not tort. Fireman's Fund also contends that the loss
claimed was not covered by the insurance policy it issued. It argues that the claim was not a covered
occurrence, that the damages claimed were excluded from coverage because they
were for repair and replacement of the insured's product, or alternatively,
that other exclusions to coverage apply.
Fireman's Fund also contends that the release of Leppin was ineffective
to preserve any claims against Fireman's Fund.
Challenging the court's trial rulings, Fireman's Fund contends that the
trial court erroneously relieved Graebner of the burden of proving the
insurance policy covered the loss claimed and that the trial court erred by not
including in the verdict's comparative negligence question the negligence of
parties previously released by Graebner.
Finally, Fireman's Fund contends that the evidence was insufficient to
support the jury's finding that work supervised by its insured was improperly
performed.
We conclude that the
damages claimed by Graebner were the result of a breach of Leppin's contractual
obligations and not a violation of common law tort duty. Graebner has released all contract claims
against Leppin. Therefore, we reverse
the judgment on this basis and do not address the additional issues raised by
Fireman's Fund. See Gaertner v.
880 Corp., 131 Wis.2d 492, 496 n.4, 389 N.W.2d 59, 61 n.4 (Ct. App.
1986) (if decision on one point disposes of appeal, we do not reach other
issues raised). On remand, the trial
court shall enter a judgment dismissing Graebner's complaint.
This case arose out of
the construction of a Hospitality Suites Hotel. Graebner Enterprises was the owner, Christine Jenks was the
architect, and Korndoerfer Corporation was the general contractor for the
project.
Korndoerfer hired Leppin
to construct a portion of the exterior walls.
The contract between Korndoerfer and Leppin provided that Leppin would
provide all labor, materials, equipment and supervision to complete “light
gauge metal framing, structural studs, sound insulation, exterior wall finish
systems and gypsum wallboard work” required by the contract plans and
specifications. The exterior wall
finish was a stucco-like product called Dryvit. The Dryvit product was applied to rigid foam boards that were
affixed to the gypsum wall boards.
Leppin subcontracted the actual application of the Dryvit finish to Paint
Maintenance Systems, Inc.
To allow for expansion
and contraction of the walls, a horizontal three-fourth-inch gap was left
between the gypsum boards, with one horizontal expansion gap per floor. Korndoerfer was responsible for contracting
to have the expansion gaps caulked with a flexible caulk.
The north and south
walls of the hotel leaked when it rained.
Fireman's Fund contends that the problem occurred because Korndoerfer
did not have the expansion gaps caulked timely and because the subcontractor
who did the caulking did it incorrectly.
Graebner contends that the leakage occurred because Leppin negligently
cut and applied the gypsum and foam boards and negligently supervised the
application of the Dryvit. Graebner
claimed that the foam boards were cut to meet at, rather than bridge, the seams
in the gypsum layer. In areas where
shifting and stress were most likely to occur, e.g., under windows, the
shifting of both the gypsum and foam boards caused the Dryvit finish to crack.
Because of the leakage
problems, Graebner did not pay Jenks.
Jenks sued Graebner for her fee and also named Korndoerfer as a
defendant. Korndoerfer filed
third-party actions against Leppin, Fireman's Fund, and various other
subcontractors and their insurance carriers.
Leppin, in turn, filed a third-party complaint against Paint Maintenance
and its insurer.
Ultimately all parties
to the lawsuit, except Fireman's Fund, settled their disputes and entered into
mutual releases. The releases Graebner
and Korndoerfer executed in favor of Leppin specifically excluded any tort
claims against Leppin that were covered by Fireman's Fund's insurance
policy. During trial, Graebner's
attorney acknowledged that all contract claims against Leppin had been
released.
The case proceeded to
trial on the theory that Graebner had a claim against Leppin for damages in
tort. Fireman's Fund was the named
defendant because of its insurance policy.
Graebner presented evidence supporting its claim for damages for repair
or replacement of the interior drywall and wall and floor coverings damaged by
water seepage and mold, as well as damages for repair or replacement of
Leppin's work product, i.e., the insulation, gypsum and foam boards, and Dryvit
finish.
The dispositive issue in
this appeal is whether Graebner's claim was for breach of contract or for
damages in tort. Fireman's Fund
contends that Graebner had only a claim against Leppin for breach of
contract. Fireman's Fund premises its
argument on the theory that Leppin had no common law duty in tort to oversee
the work of Paint Maintenance. If
correct, Graebner's claim against Leppin is for breach of contract, which has
been released.
Graebner argues that the
negligent performance or nonperformance of a contractual duty to use due care is
actionable in tort. See Colton v.
Foulkes, 259 Wis. 142, 146-47, 47 N.W.2d 901, 903-04 (1951). In Colton, the plaintiff
claimed that the defendant contractor negligently performed its contract
because its employee had negligently repaired a porch railing. The court held that the negligent
performance of a contractual duty is itself a tort. Id.
Fireman's Fund correctly
asserts that Landwehr v. Citizens Trust Co., 110 Wis.2d 716, 329
N.W.2d 411 (1983), significantly restricted Colton. Landwehr held that although
the contract may create the “state of things” that furnishes the basis for a
tort action, the contract may not be used to create the underlying duty of care
necessary for a tort claim. Id.
at 723, 329 N.W.2d at 414. A tort claim
arises out of a breach of contract only if there exists an independent,
common-law duty of care. Id. In applying this standard, a court ignores
the existence of the contract when determining if a duty of care exists. Dvorak v. Pluswood Wisconsin, Inc.,
121 Wis.2d 218, 220, 358 N.W.2d 544, 545 (Ct. App. 1984).
When a building is
constructed for sale, however, a duty of care exists independently of any
contract, and the general contractor may be liable to the purchaser for latent
defects resulting from the contractor's negligent construction. Fisher v. Simon, 15 Wis.2d
207, 216, 112 N.W.2d 705, 710 (1961) (a vendor/contractor who contracted to
oversee construction of a building was
liable in tort for negligent back-filling of area around basement walls). Fisher suggests that Graebner
would have a tort claim against Leppin, independent of any contract, for
Leppin's own negligence while constructing the walls.
Although the summons
alleged that Leppin installed the Dryvit improperly and not according to the
Dryvit specifications, it does not clearly identify whether it is referring to
the Dryvit “system,” including the gypsum and foam boards and finish, or only
the finish. As previously noted, there
was testimony that the manner in which Leppin installed the foam boards
contributed to the system's failure.
Using the special verdict questions submitted by Graebner, however, the
trial court only asked the jury to find whether Leppin was “negligent in
overseeing the installation of the Dryvit exterior wall finish.” The special verdict did not ask whether
Leppin's own work was negligently completed.
Consequently, Graebner cannot claim tort liability on the basis of the
installation of the foam boards.
Graebner's brief does
not address whether Leppin, a subcontractor, had a common law duty in tort,
separate and distinct from any contractual relationship, to supervise the work
of Paint Maintenance. The crux of Fireman's
Fund's argument is that there is none.
In light of the deficiency in its own brief, Graebner cannot complain if
Fireman's Fund's argument, however weak, is deemed admitted. See Charolais Breeding Ranches,
Ltd. v. FPC Sec. Corp., 90 Wis.2d 97, 108-09, 279 N.W.2d 493, 499 (Ct.
App. 1979). Therefore, any claim
against Leppin was based solely on contract and was released when Graebner
executed the release of Leppin.
Because we conclude that
Graebner has failed to refute Fireman's Fund's claim that Graebner's claim was
not actionable in tort, any potential liability of Leppin was released. Therefore, Fireman's Fund cannot be liable
to Graebner under its insurance coverage of Leppin. Accordingly, we reverse the trial court judgment against
Fireman's Fund and remand the case to the trial court with directions to
dismiss Graebner's complaint.
By the Court.—Judgment
reversed and cause remanded with directions.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.