Opinion
24A-PL-134
12-27-2024
Victor C. Cao, Fun F/X II, Inc., Cao Enterprises, LLC, and CAO Enterprises II, LLC, Appellants-Plaintiffs v. Legacy Fire Protection Services, LLC, Appellee-Defendant
ATTORNEYS FOR APPELLANTS MICHAEL L. SCHULTZ COURTNEY L. DARCY INDIANAPOLIS, INDIANA ATTORNEYS FOR APPELLEE RICHARD K. SHOULTZ JOHN J. DEROSS, JR. INDIANAPOLIS, INDIANA
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the St. Joseph Superior Court The Honorable Mark P. Telloyan, Judge Trial Court Cause No. 71D07-2008-PL-262
ATTORNEYS FOR APPELLANTS MICHAEL L. SCHULTZ COURTNEY L. DARCY INDIANAPOLIS, INDIANA
ATTORNEYS FOR APPELLEE RICHARD K. SHOULTZ JOHN J. DEROSS, JR. INDIANAPOLIS, INDIANA
MEMORANDUM DECISION
Altice, Chief Judge
Case Summary
[¶1] Victor C. Cao (Victor), Fun F/X II, Inc., Cao Enterprises, LLC, and Cao Enterprises II, LLC (collectively, Fun F/X) appeal the trial court's grant of summary judgment in favor of Legacy Fire Protection Services, LLC (Legacy) on Fun F/X's complaint for negligence and breach of contract. Cao presents two issues for our review, which we restate as:
1. Did the trial court err in concluding that Fun F/X's negligence claim failed as a matter of law because the designated evidence showed that Legacy did not owe a duty to Fun F/X?
2. Did the trial court err in concluding that the designated evidence established that Legacy did not breach its contract with Fun F/X?
[¶2] Legacy cross-appeals and argues that the trial court erred in concluding that a contract existed between Fun F/X and Legacy. Specifically, Legacy claims that there was no consideration to support the formation of a contract.
[¶3] We reverse and remand for further proceedings.
Facts &Procedural History
[¶4] Victor is the sole member of Cao Enterprises and Cao Enterprises II and the sole shareholder of Fun F/X II, a costume and theatrical supply retailer. In 1999, Victor purchased a 70,000 square foot industrial warehouse in South Bend to store inventory and materials for Fun F/X. The warehouse was equipped with a sprinkler fire suppression system. After purchasing the warehouse, Victor replaced all the sprinkler heads on the system and confirmed that the system was fully functional.
[¶5] In 2015, Victor contracted with Legacy to repair a frozen pipe in the warehouse. The following year, Bob Slabaugh of Legacy contacted Victor about Legacy's testing and inspection services for the sprinkler system and fire extinguishers in the warehouse. Victor had been using a different company for such services but decided to transition to Legacy.
[¶6] On August 24, 2016, Brandon Bumpus, a Legacy employee, inspected the sprinkler system and fire extinguishers at Victor's warehouse and found all to be in working order. In September 2017, Bumpus returned to the warehouse to conduct the annual inspection but this time he discovered there was no water pressure to the system. Bumpus did not tag the system as being inoperable but he did notify Victor of the impairment and advise him to call South Bend Water Works. Bumpus assisted Victor by calling Eric Kuczmanski, one of Bumpus's contacts with South Bend Water Works, to inquire on behalf of Victor about the lack of water pressure to the system. Kuczmanski found no record of the water being shut off and provided no other explanation. Legacy did not charge Victor for inspection of the sprinkler system.
[¶7] Between September 28 and November 15, 2017, Victor made additional calls to South Bend Water Works and to the City of South Bend Fire to try and ascertain why the water had been turned off and how to get water pressure restored to the sprinkler system. Bob Krizmanich with the City of South Bend Fire Department told Victor that the issue was with the water company, not the fire department. Krizmanich also shared with Victor that water to a neighboring property had been shut off for purposes of demolition. Victor was eventually informed by someone with South Bend Water Works that they would look into the matter and get it resolved. Victor never confirmed that water pressure to his system was restored.
[¶8] In the fall of 2018, Legacy contacted Fun F/X about performing its annual inspection of the sprinkler system and fire extinguishers, and they scheduled it for September 12. Victor could not be there for the inspection, but his girlfriend was present to let Steve Yoder, an inspector for Legacy, into the warehouse. When Yoder completed his work, he said nothing to Victor's girlfriend about there being no water pressure to the sprinkler system. Following the 2018 inspection, Legacy sent Fun F/X an invoice for testing and inspection of the fire extinguishers, but the invoice did not set out a separate line item for testing and inspection of the sprinkler system. Legacy also sent Fun F/X an email referencing only a fire extinguisher inspection report.
[¶9] On July 26, 2019, a fire broke out in the warehouse resulting in a total loss of the building and the contents therein. At the time of the fire, the sprinkler heads activated but because there was no water pressure the system failed. Subsequent to the fire, Victor confirmed that the City of South Bend (the City) had disconnected water service to the neighboring property in April 2017, which in turn resulted in water service being shut off to the sprinkler system in his warehouse. Victor was informed by Darric Cole of South Bend Water Works that it had mistakenly believed that Victor's warehouse was set to be demolished along with others nearby, which is why the water line servicing the warehouse's sprinkler system was "cut and capped." Appellant's Appendix Vol. 3 at 24.
[¶10] Subsequent to the 2017 inspection, Bumpus received training on the National Fire Protection Association 25-Standard for the Inspection, Testing, and Maintenance of Water-Based Fire Protection Systems (NFPA). In his deposition testimony, Bumpus stated that after having received training on NFPA, he would tag a system if he found an impairment such as the one he discovered at Fun F/X's warehouse and notify the owner of his findings.
[¶11] On August 18, 2020, Fun F/X filed a complaint for negligence and breach of contract against Legacy and the City. On December 2, 2022, Legacy filed a motion for summary judgment. Specifically, Legacy argued (1) that it did not owe a duty to Fun F/X and therefore it could not be negligent as a matter of law and (2) that there was no contract between Legacy and Fun F/X on which to base the Fun F/X's breach of contract claim. After a hearing, the trial court entered an order granting summary judgment in favor of Legacy on both claims on April 28, 2023. On December 18, 2023, the trial court directed entry of final judgment in favor of Legacy pursuant to Ind. Trial Rule 54(B). Fun F/X now appeals, and Legacy cross-appeals.
Discussion &Decision
Standard of Review
[¶12] When reviewing a grant or denial of a motion for summary judgment our well-settled standard of review is the same as it is for the trial court: whether there is a genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. Goodwin v. Yeakle's Sports Bar &Grill, Inc., 62 N.E.3d 384, 386 (Ind. 2016); Ind. Trial Rule 56(C). The party moving for summary judgment has the burden of making a prima facie showing that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012). Once these two requirements are met by the moving party, the burden then shifts to the non-moving party to show the existence of a genuine issue by setting forth specifically designated facts. Id. Any doubt as to any facts or inferences to be drawn therefrom must be resolved in favor of the non-moving party. Id. In determining whether summary judgment is proper, we consider only the evidentiary material specifically designated by the parties to the trial court and construe all factual and reasonable inferences in favor of the nonmoving party. Ebert v. Illinois Cas. Co., 188 N.E.3d 858, 863 (Ind. 2022). Further, we are not bound by the trial court's findings and conclusions, and we will affirm if the trial court's entry of summary judgment can be sustained on any theory or basis in the record. Kumar v. Bay Bridge, LLC, 903 N.E.2d 114, 116 (Ind.Ct.App. 2009).
1. Existence of Contract
[¶13] We first consider the threshold issue raised by Legacy in its cross-appeal. Specifically, Legacy argues that there was no exchange of consideration and as a result no contract, express or implied, was ever formed for inspection and testing services in 2017 and 2018.
[¶14] To have a legally binding contract there must be generally an offer, acceptance, and consideration. Monarch Beverage Co. v. Ind. Dep't of State Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax Ct. 1992). "To constitute consideration, there must be a benefit accruing to the promisor or a detriment to the promisee." Paint Shuttle, Inc. v. Cont'l Cas. Co., 733 N.E.2d 513, 523 (Ind.Ct.App. 2000) (quoting A&S Corp. v. Midwest Commerce Banking Co., 525 N.E.2d 1290, 1292 (Ind.Ct.App. 1988)), trans. denied. A benefit is a legal right given to the promisor to which the promisor would not otherwise be entitled. DiMizio v. Romo, 756 N.E.2d 1018, 1023 (Ind.Ct.App. 2001), trans. denied. A detriment on the other hand is a legal right the promisee has forborne. Id. "The doing of an act by one at the request of another which may be a detrimental inconvenience, however slight, to the party doing it or may be a benefit, however slight, to the party at whose request it is performed, is legal consideration for a promise by such requesting party." Harrison-Floyd Farm Bureau Coop. Ass'n v. Reed, 546 N.E.2d 855, 857 (Ind.Ct.App. 1989). In the end, "consideration-no matter what its form-consists of a bargained-for exchange." Horseshoe Hammond, LLC v. Ind. Dep't of State Revenue, 865 N.E.2d 725, 729 (Ind. Tax Ct. 2007).
[¶15] Legacy acknowledges that there was a contract between Legacy and Fun F/X in 2016 pursuant to which Legacy tested and inspected the fire suppression system and Fun F/X paid Legacy for its services. Legacy also admits in its brief that the parties "intended to enter into an agreement under the same terms in 2017 and 2018." Appellee's Brief at 32 (emphasis supplied). Legacy maintains, however, that such an agreement never came to fruition because the lack of water pressure to the system prevented the testing and inspection of the system. According to Legacy, valid consideration for a contract would not have been exchanged until Legacy performed its service and received a legal right to payment for its performance.
[¶16] Legacy's argument is unavailing as it mischaracterizes the consideration in this case-an exchange of mutual promises. That is, in 2017 and 2018, there was a bargained-for exchange between Legacy and Fun F/X for the inspection of the sprinkler system. Specifically, in both years, Legacy agreed to test and inspect the sprinkler system in the warehouse, and in exchange, Fun F/X promised to pay for such services. Part and parcel of the testing and inspection of the sprinkler system is the obligation to determine whether water was flowing through the system. There is no dispute that Legacy sent inspectors to the warehouse and that, at least in 2017, advised Victor about the lack of water pressure when it set out to test and inspect the system. That the testing and inspection could not be completed in its entirety because there was no water flowing through the system does not negate the existence of the contract to perform such services. Contrary to Legacy's argument, a legal right to payment upon completion of the testing and inspection of the sprinkler system was not required for consideration to exist. See, e.g., Dep't of State Revenue v. Belterra Resort, 935 N.E.2d 174, 179 (Ind. 2010) (noting that "Indiana has long held that consideration in the form of money is not essential to a binding contract"); Kelley, Glover &Vale, Inc. v. Heitman, 44 N.E.2d 981, 984 (Ind 1942) (holding that consideration in the form of money is not essential to a binding contract).
Indeed, pursuant to the exchange of promises, Legacy sent an employee to conduct testing and inspections of the sprinkler system and fire extinguishers at the warehouse in 2017 and 2018.
[¶17] Here, Legacy promised to test and inspect the sprinkler system and Fun F/X promised to pay for such service. This exchange of mutual promises is sufficient consideration to support the existence of a contract. See Hamlin v. Steward, 622 N.E.2d 535, 539 (Ind.Ct.App. 1993) (noting that a promise is valuable consideration); Monarch Beverage, 589 N.E.2d at 1212 (stating that "[a] mere promise is sufficient as consideration if it is the result of a bargained for exchange").
2. Negligence - Duty
[¶18] We now turn to Fun F/X's argument that, separate from any contractual obligations, Legacy had a legal duty under Indiana common law to advise Fun F/X that there was no water pressure to the fire suppression system. "[T]o prevail on a claim of negligence the plaintiff must show: (1) duty owed to plaintiff by defendant; (2) breach of duty by allowing conduct to fall below the applicable standard of care; and (3) compensable injury proximately caused by defendant's breach of duty." Goodwin, 62 N.E.3d at 386 (quoting King v. Ne. Sec., Inc., 790 N.E.2d 474, 484 (Ind. 2003)); accord Ford Motor Co. v. Rushford, 868 N.E.2d 806, 810 (Ind. 2007). Absent a duty there can be no negligence or liability based upon the breach. Peters v. Forster, 804 N.E.2d 736, 738 (Ind. 2004). Whether a duty exists is a question of law for the court to decide. Id. In the absence of a statute or clear contractual language, Indiana courts determine whether a duty exists by using a three-part balancing test: "(1) the relationship between the parties; (2) the foreseeability of harm; and (3) public policy concerns. Goodwin, 62 N.E.3d at 387 (citing Webb v. Jarvis, 575 N.E.2d 992, 995-97 (Ind. 1991)).
[¶19] The parties take opposing views as to the first factor in the duty analysis. Fun F/X maintains that there was a relationship between the parties as evidenced by the fact that Legacy reached out to Fun F/X on an annual basis in 2016, 2017, and 2018 and sought to perform testing and inspection services for Fun F/X. Legacy argues that there was no special relationship because there was no valid contract between the parties and because Legacy was not the designated representative for Fun F/X under NFPA.
[¶20] As discussed above, there was consideration and a valid contract between the parties. Further, we note that Legacy reached out to Fun F/X offering its testing and inspection services and in three consecutive years, arrived at the warehouse to perform its services for Fun F/X. We think these facts clearly demonstrate that there was a relationship between the parties, regardless of whether Legacy was a designated representative under NFPA.
[¶21] To evaluate the second factor in the duty analysis-foreseeability of harm -we are tasked with engaging in a general analysis of the broad type of plaintiff and harm involved without regard to the facts of the actual occurrence. Goodwin, 68 N.E.3d at 394. Fun F/X argues that foreseeability weighs in its favor in light of Legacy's expertise, training, and experience as a service provider in testing and inspection of fire suppression systems. Indeed, Fun F/X maintains that this expertise is precisely why it hired Legacy to perform such services. Fun F/X maintains that it was reasonably foreseeable that it could experience a fire loss if Legacy did not inform it of the lack of water pressure to the system.
[¶22] Legacy argues that foreseeability weighs in its favor because it was not able to inspect the system due to the lack of water pressure. Legacy also asserts that because Fun F/X had actual and constructive knowledge of such impairment, as well as the duty, as the owner of the building, to maintain the system with adequate water pressure, Legacy did not have a duty to warn of any potential dangers associated with lack of water pressure to the system.
[¶23] In conducting a general analysis of the broad type of plaintiff and the harm involved, we agree with Fun F/X's analysis, which the trial court adopted. Indeed, it would be remarkable that a provider of testing and inspection services for fire suppression systems would not find it reasonably foreseeable that Fun F/X could suffer harm due from an impaired fire suppression sprinkler system. The foreseeability factor thus weighs in favor of imposition of a duty.
[¶24] Finally, we consider the public policy concerns. The public policy factor of the duty analysis focuses on "who is, or should be, in the best position to prevent injury and how society should allocate the costs of such injury." Estate of Staggs v. ADS Logistics Co., LLC, 102 N.E.3d 319, 326 (Ind.Ct.App. 2018). Fun F/X argues that it would be contrary to public policy for the court to find that Legacy did not have a duty as a contracted service provider to fulfill its duties and to comply with the provisions of NFPA. Legacy responds that Fun F/X was in the best position to prevent the fire. Legacy points out that Fun F/X was the owner of the building and had ongoing duties to monitor the fire suppression system and ensure that any impairments were remedied appropriately.
[¶25] The trial court agreed with Legacy. Specifically, the trial court declined to find a duty owed by fire system inspectors to "continually warn property owners that their systems are not working," finding that this "would cause fire inspections to become prohibitively expensive" and serve as a disincentive for fire inspectors to perform such services. Appellant's Appendix Vol. 2 at 156. Under the facts of this case, we think this improperly characterizes the public policy at issue.
[¶26] Here, Legacy contacted Fun F/X and sought to perform testing and inspection services of the sprinkler system in its warehouse. The parties came to an agreement. In 2016, Legacy completed its services and found the system to be in working order. In 2017, Legacy reached out again to Fun F/X to perform its annual inspection. At the start of this second annual inspection, it was discovered that there was no water pressure to the system. Legacy advised Fun F/X of the impairment and even assisted in helping Fun F/X identify the source of the impairment. Fast forward to 2018. Legacy contacted Fun F/X about coming out for a third straight year to test and inspect its system. As in 2017, there was no water pressure to the sprinkler system. Yet Legacy did not advise Fun F/X of the impairment this time. And, only hindsight informs Legacy that the impairment identified in 2017 was never corrected.
[¶27] Under these circumstances, we find that the public policy sought to be protected is that of an expert not properly advising property owners of its findings. Contrary to the trial court's view, there is no suggestion here that an inspector of fire suppression systems has to continually warn property owners of an impairment to a system. The public policy at issue pertains to advising the property owners of such impairment. Public policy weighs in favor of finding a duty.
[¶28] Having determined that Legacy owed a duty to advise Fun F/X of the impairment to its system, we reverse the trial court's entry of summary judgment in favor of Legacy on Fun F/X's negligence claim.
3. Breach of Contract
[¶29] Fun F/X argues that the trial court erred in granting summary judgment in favor of Legacy on its breach of contract claim. To succeed on a breach of contract claim, a party must prove the existence of a contract, the defendant's breach thereof, and damages. Fowler v. Campbell, 612 N.E.2d 596, 601 (Ind.Ct.App. 1993). Having concluded herein that there was sufficient consideration to support the formation of a contract, we turn now to whether Legacy was entitled to summary judgment on the matter of breach.
[¶30] We begin by noting that the parties agree that the authoritative standard for the testing and inspection of the fire protection systems is NFPA. NFPA "establishes the minimum requirements for the periodic inspection, testing, and maintenance of water-based fire protection systems" to "ensure a reasonable degree of protection for life and property from fire." Appellant's Appendix Vol. 3 at 68. NFPA provides for delegation of those tasks to a "qualified contractor or qualified property owner's representative." Id. at 71. In the event an impairment to a system is identified, NFPA provides that the property owner or designated representative is responsible to "correct or repair deficiencies or impairments." Appellant's Appendix Vol. 3 at 74. Chapter 15 of NFPA calls for the property owner to "assign an impairment coordinator," or take on such role. Under NFPA, specific duties of an impairment coordinator include placing a tag on the system indicating that the system is not in service, and/or taking additional action, such as advising the owner to remove inventory or implement a fire watch, if circumstances so require.
NFPA provides examples of who can serve as a designated representative, including "the occupant, management firm, or managing individual through specific provisions in the lease, written use agreement, or management contract." Appellant's Appendix Vol. 2 at 153-54.
[¶31] In its complaint, Fun F/X asserted that Legacy breached its contract with Fun F/X by failing to provide the testing and inspection services for which they contracted in 2017 and 2018. Appellant's Appendix Vol. 2 at 40. Fun F/X maintains that NFPA provisions need not be considered in making the breach determination. Specifically, Fun F/X notes that in 2017, Legacy arrived at the warehouse to do the testing and inspection of the system and in so doing, Legacy discovered that there was no water pressure. The inspector, Bumpus, informed Fun F/X of the impairment and even tried to help Victor determine why there was no water pressure to the system. Legacy returned to the warehouse to conduct the annual testing and inspection of the system in 2018. Again, a lack of water pressure prevented full testing and inspection of the system. Unlike the prior year, however, Legacy did not inform Fun F/X of the impairment, let alone take other action to highlight the impairment. In light of these facts, Fun F/X argues that a reasonable trier of fact could conclude that Legacy breached its contract to test and inspect the system and advise it of the continued impairment.
[¶32] Legacy, on the other hand, points to NFPA and argues that it was not contracted to provide maintenance services and was never made the designated representative or impairment coordinator for Fun F/X. Legacy thus argues that it had no obligation to comply with the requirements of NFPA as relating to the impairment of the system, such as tagging the system or otherwise. Legacy also maintains that Fun F/X received notification of the continued impairment in 2018 when Legacy did not separately bill Fun F/X for the inspection of its system. Fun F/X responds arguing that, even if NFPA is applicable, there is a genuine issue of material fact as to whether Legacy was a designated representative or an impairment coordinator considering the duties delegated to it to test and inspect the system.
[¶33] Generally, "whether a breach of contract has occurred is a question of fact to be determined by the trier of fact." Rogier v. Am. Testing &Eng'g Corp., 734 N.E.2d 606, 621 (Ind.Ct.App. 2000), trans. denied (2001). Given the circumstances presented here, we find that to be true in this case. A reasonable trier of fact could draw conflicting inferences from the designated evidence.
[¶34] For example, the course of conduct between the parties reflects that Legacy acted inconsistently in how it handled the information regarding the lack of water pressure. In 2017, Legacy expressly informed Fun F/X of the impairment to its system and its inspector also assisted with determining the cause. The following year, Legacy sought to test and inspect the system and again the lack of water pressure prevented Legacy from completing the tasks. This time, however, Legacy did not directly inform Fun F/X about the continued impairment. Further, we note that in the years the testing and inspection of the sprinkler system could not be completed, Legacy did not separately bill Fun F/X for such services.
[¶35] There are also questions about the applicability of NFPA under the circumstances. Fun F/X asserts that if NFPA applies, it delegated its duty thereunder to test and inspect the sprinkler system to Legacy and this necessarily required Legacy to comply with the requirements of NFPA, specifically, the tagging of the system upon discovery of the impairment. In this vein, we note there is the deposition testimony of Bumpus, Legacy's inspector, who stated after receiving NFPA training subsequent to the 2017 inspection of the Fun F/X warehouse, that he would take additional steps such as tagging a system if he identified an impairment such as lack of water pressure. But then there is designated evidence that Legacy was not the designated representative and that it had no obligation as an impairment coordinator. Thus, the question becomes what Legacy's contractual duties were. Taking all this together, it is clear that there are genuine issues of material fact as to whether Legacy breached the contract. Accordingly, Legacy was not entitled to summary judgment on Fun F/X's breach of contract claim.
[¶36] Judgment reversed and remanded for further proceedings.
Bailey, J. and Mathias, J., concur.