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Bi-petro Ref. Co. v. Hartness Paint.

OPINION FILED DECEMBER 29, 1983.

BI-PETRO REFINING COMPANY, INC., PLAINTIFF-APPELLANT,

v.

HARTNESS PAINTING, INC., DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Macon County; the Hon. John L. Davis, Judge, presiding.

JUSTICE GREEN DELIVERED THE OPINION OF THE COURT:

Plaintiff brought a two-count complaint, later amended, in the circuit court of Macon County. The first amended count sought recovery in contract and the second amended count sought recovery in tort. The first amended count was dismissed with leave granted to file a further amended count. The second amended count was dismissed with prejudice on the grounds that plaintiff was seeking recovery solely for economic losses. The trial court found there was no just reason for delaying enforcement or appeal of the dismissal of count II as provided in Supreme Court Rule 304(a) (87 Ill.2d R. 304(a)). Plaintiff appeals and we reverse.

Plaintiff's complaint alleges that (1) prior to November 1981, defendant entered into an oral contract with it to "dismantle, move, repair and reassemble" a 50,000-barrel oil tank from one of plaintiff's premises to another of plaintiff's premises; (2) as a proximate result of defendant's negligent acts in fulfilling the contract, on November 12, 1981, the tank "suddenly and violently ruptured" while being filled with water; (3) during the rupture components of the tank collided with external objects endangering the safety of person and property; and (4) the rupture caused damage to the tank itself, other tanks, and other of plaintiff's property on the premises as well as the loss of the rental income of the tank and other lost profits.

The trial court dismissed the count as seeking recovery in tort solely for economic losses, which the Illinois Supreme Court precluded in its decision in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443. Plaintiff argues that Moorman does not forbid recovery here because: (1) The contract was a service contract and Moorman does not apply to service contracts; (2) Moorman does not bar recovery in tort when there is physical harm to property other than the product itself; and (3) Moorman does not bar recovery for damages caused by a sudden and dangerous occurrence which is tortious in nature, such as the occurrence here. We hold that the facts alleged here describe a sudden and dangerous occurrence that is tortious in nature which under Moorman states a cause of action. We therefore do not consider plaintiff's other arguments.

• 1-3 Under Moorman there is no recovery in tort for solely economic losses. The inquiry then is whether the damages alleged are "physical harm or property damage" recoverable in tort or nonrecoverable economic losses. The discussion in Moorman indicates that the characterization of damages flows not from what is damaged, but rather what defect caused the damage and how the damage occurred.

"The demarcation between physical harm or property damage on the one hand and economic loss on the other usually depends on the nature of the defect and the manner in which the damage occurred. [Citation.] As one commentator observed in applying the definition of economic loss with respect to damage to the product:

`When the defect causes an accident "involving some violence or collision with external objects," the resulting loss is treated as property damage. On the other hand, when the damage to the product results from deterioration, internal breakage, or other non-accidental causes, it is treated as economic loss. * * *'" (91 Ill.2d 69, 82-83, 435 N.E.2d 443, 449; see also Vaughn v. General Motors Corp. (1983), 118 Ill. App.3d 201, 203, 454 N.E.2d 740, 741, and Bertschy, The Economic Loss Doctrine In Illinois After Moorman, 71 Ill. B.J. 346 (1983).)

Moorman quotes with approval the reasoning of Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165, 1173:

"`* * * [T]he items for which damages are sought, such as repair costs, are not determinative. Rather, the line between tort and contract must be drawn by analyzing interrelated factors such as the nature of the defect, the type of risk, and the manner in which the injury arose. These factors bear directly on whether the safety-insurance policy of tort law or the expectation-bargain protection policy of warranty law is most applicable to a particular claim.'" Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 85, 435 N.E.2d 443, 450.

• 4 Thus, the distinction between property damage and economic loss delineates between the types of duties and recovery provided by tort as opposed to contract.

"Tort theory is appropriately suited for personal injury or property damage resulting from a sudden or dangerous occurrence of the nature described above. The remedy for economic loss, loss relating to a purchaser's disappointed expectations due to deterioration, internal breakdown or nonaccidental cause, on the other hand, lies in contract." (91 Ill.2d 69, 86, 435 N.E.2d 443, 450.)

Economic loss then is closely allied to the contractual concept of loss of the benefit of the bargain (Vaughn), and there is no recovery in tort for a product's failure to meet a consumer's expectations. Fireman's Fund American Insurance Cos. v. Burns Electronic Security Services, Inc. (1980), 93 Ill. App.3d 298, 417 N.E.2d 131.

• 5 With the discussion of Moorman in mind, we examine the nature of the defect, the manner in which the injury arose, and the risk involved in the incident alleged here. These factors are interrelated and not easily separated for discussion. However, each provides a distinctive insight into the definitional problem presented by Moorman.

Here, the count alleged that the tank "suddenly and violently ruptured" while being filled with water and that components of the tank collided with external objects endangering the safety of persons and property. The count also alleged that the rupture not only caused damage to the tank itself but also damage to other property. On the other hand, in Moorman the court described the complaint as allegedly that over a course of months, a crack had developed in a steel tank but was not discovered until the contents of the tank had been emptied. The ...


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