ERIC PROE MICAH PROE BART PATTERSON SHONNA PATTERSON v. DIAMOND HOMES GLENN DENNIS EMERY DENNY EMERY DIAMOND HOMES MIKE EMERY DIAMOND HOMES (2025)

¶1 Eric and Micah Proe and Micah's parents Bart and Shonna Patterson (collectively the Proes) appeal from judgments in favor of Glenn Dennis Emery (Denny Emery) d/b/a Diamond Homes and Mike Emery in this residential home construction dispute. The Proes alleged that the defendants breached the construction contract and were negligent in constructing their home. The case was tried to the district court without a jury. With respect to the Proes’ breach of contract claim, the district court found in favor of the Proes against the builder, Denny Emery d/b/a Diamond Homes. That judgment was not appealed and is final.

¶2 The district court found that Mike Emery was a contract employee of his brother, Denny Emery, and was not doing business as and was not a partner with his brother in Diamond Homes. The judgment in favor of Mike Emery on the Proes’ breach of contract claim is supported by competent evidence and is affirmed.

¶3 The court also found in favor of the defendants as to the Proes’ negligence claim. Because the Proes failed to prove any damages from the defendants’ breach of a tort duty, the judgment in favor of the defendants on the Proes’ tort claim is affirmed.

BACKGROUND

¶4 On July 19, 2017, Diamond Homes, through Mike Emery, provided the Proes with an estimate for the construction of a home.  ¹ The estimate was provided on a form titled “DIAMOND HOMES COST ESTIMATE.” Bart Patterson testified that the estimate was left in his daughter's car. In October of 2017, Micah Proe and the Pattersons purchased property on which to build a home. “[T]he Proes and Defendant Diamond Homes entered into a contract to build a home on land owned by the Plaintiffs.”  ² Diamond Homes was responsible for constructing the home “in a workmanlike manner, free from defects” and “was responsible for the design and supervision of the preparation of the concrete slab.” Denny Emery was doing business as Diamond Homes and agreed that he is financially responsible for any liability incurred by Diamond Homes.

¶5 Diamond Homes hired Mike Emery to supervise construction of the Proes’ residence. For this work, Mike Emery was paid $1,000 per week by Denny Emery. There were no deductions or withholdings from Mike Emery's check and he was responsible for paying all taxes associated with the payments he received for his work on the Proes’ home. Further, “the material and labor [for the Proes’ home was] furnished by Diamond Homes, Denny Emery contractor.” Mike Emery was “merely a contract employee of Diamond Homes.”  ³ The Proes failed to prove “that Mike Emery was [doing business as] Diamond Homes.”

¶6 The construction defect at the center of the Proes’ suit is the home's foundation. The district court found that before completion of the house, construction issues developed with the concrete foundation which required repairs. Diamond Homes hired Edens Structural Solutions to examine the slab. Edens proposed two options: inject high density foam under the foundation or install piers. Diamond Homes chose the foam solution but that did not correct the problem. Diamond Homes then hired Mike Herndon of Herndon Engineering to investigate the problem. Herndon determined that the foundation problem resulted from water under the concrete slab. Herndon made several recommendations to improve drainage away from the slab, including installing French drains. Diamond Homes installed French drains but did not implement Herndon's other recommendations.  ⁴ Despite “substantial defects,” the Proes moved into the home on July 5, 2018, and began to correct the construction defects on their own.

¶7 As stated in the Pretrial Order and the district court's judgment, the Proes’ case was tried to the court on four theories of recovery: breach of contract, breach of the implied warranty of fitness/habitability, breach of the implied warranty of workmanlike construction, and negligence.  ⁵ The Proes sought the same damages for their contract and tort claims: “cost to repair the defects in the Residence.” In their trial brief, the Proes argued that for their breach of contract claim, the measure of damages was the amount necessary to place them in the position they would have been in had the breach not occurred, citing Sun Ridge Invs., Ltd. v. Parker, 1998 OK 22, 956 P.2d 876. For their tort damages, they cited Allied Hotels, Ltd. v. Barden, 1964 OK 16, 389 P.2d 968, for the proposition that when negligent injury to property is temporary, as in their case, “the cost of restoration or repairing is the proper measure of damages.” Id. ¶ 19, 389 P.2d at 972. Nonetheless, for both theories of liability, they sought the same dollar amount of damages: $169,727.62.

¶8 The district court found, based on the “overwhelming evidence,” that Denny Emery breached the construction contract and the implied warranty of construction in a workmanlike manner. The court determined that the appropriate measure of damages was the cost to repair the construction defects because those defects could be remedied by repair. The district court also found that there was “competent evidence that the cost of repairs to cure the defects in construction are [sic] in the amount of $169,727.62.” The court entered judgment against Denny Emery d/b/a Diamond Homes for that amount on the Proes’ breach of contract theory, less $33,295.08 remaining due on the contract. Neither party has appealed the judgment against Denny Emery. Consequently, for purposes of this appeal, $169,727.62 is the total amount of the Proes’ loss. See Bank of Oklahoma v. Red Arrow Marina Sales & Serv., 2009 OK 77, ¶ 42, 224 P.3d 685, 701 (footnote omitted) (“An issue settled by the trial court and not urged as error on appeal becomes the settled law of the case.”).

¶9 The district court entered judgment in favor of Mike Emery on the Proes’ breach of contract and warranty theories asserted against him. The court found that Mike Emery was a “contract employee” of Diamond Homes and not liable for Diamond Homes’ breach of contract. The Proes have appealed that judgment.

¶10 Finally, the district court found that the Proes “failed to establish a legal claim for the tort of negligence” against either Mike or Denny Emery. The Proes have appealed the judgment in favor of Mike and Denny Emery on their tort theory.

STANDARD OF REVIEW

¶11 In an action at law, “the trial judge's determination of the facts bears the force of a verdict rendered by a well-instructed jury. It must be affirmed if supported by any competent evidence.” Bradley v. Clark, 1990 OK 73, ¶ 3, 804 P.2d 425, 427. Issues of law are reviewed pursuant to the de novo standard of review. Brown v. Nicholson, 1997 OK 32, n.1, 935 P.2d 319. De novo review involves a plenary, independent, and non-deferential examination of the trial court's rulings of law. Neil Acquisition, L.L.C. v. Wingrod Inv. Corp., 1996 OK 125, n.1, 932 P.2d 1100.

ANALYSIS

¶12 The Proes raise only two issues in this appeal. First, they argue that the district court erred in finding that Mike Emery was not a co-owner of Diamond Homes or a partner with his brother Denny. That is the basis of their appeal of the judgment in Mike Emery's favor on their breach of contract theory against him. Second, they argue that the district court erred in finding that Mike and Denny Emery were not negligent and in entering judgment for those defendants on their tort theory. Neither argument requires reversal.

I. The Proes’ Breach of Contract Claim Against Mike Emery

¶13 As stated in the district court's findings of fact: the Proes entered into a contract with Diamond Homes to build their home; Denny Emery is an individual who was doing business as Diamond Homes; Denny Emery does not deny that he “is legally responsible for any liability incurred by Diamond Homes.” The district court is correct. “Doing business under another name does not create an entity distinct from the person operating the business. The individual who does business as a sole proprietor under one or several names remains one person, personally liable for all his obligations.” Bishop v. Wilson Quality Homes, 1999 OK 60, ¶ 8, 986 P.2d 512, 515.

¶14 In addition, the district court found that Mike Emery supervised construction of the Proes’ home on behalf of Diamond Homes. The court found that Mike Emery was not doing business as Diamond Homes. There is competent evidence to support these findings. Mike Emery was paid a lump sum on a weekly basis without any deductions or withholding. Mike Emery was responsible for paying all taxes associated with the payments he received from Diamond Homes. Mike Emery did not sign the material and labor affidavits submitted to receive the periodic payments earned by Diamond Homes during the construction of the Proes’ home. Those documents were signed by Denny Emery. Mike Emery did not employ others or pay for materials used to construct the Proes’ home from the money he received from Diamond Homes.

¶15 Nonetheless, the Proes argue that Mike and Denny Emery were “partners” in the construction business. They cite settled Oklahoma authority for the proposition that individuals who associate themselves “for the profit of both” are partners whether they intended that partnership or not. Title 54 O.S.2021 § 1-101(6) defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.” Id. To support their argument that Mike and Denny Emery shared the profits from Diamond Homes, the Proes first cite a question by opposing counsel during Micah Proe's trial testimony in which counsel asked if it did not make “sense” that Denny was the “owner” and Mike was “the employee ․ the superintendent on the job” because of their different roles and the amount of time each spent on this project. They next cite Denny Emery's testimony regarding an advertisement for Diamond Homes listing both Denny and Mike's names and their telephone numbers. Denny denied that he and Mike advertised together under the name “Diamond Homes.” Denny testified that he added Mike's name to the advertisement a couple of times so customers could call either one. This testimony does not refute the undisputed fact that Mike was paid a pre-determined amount, not a share of Denny Emery's “profits.”

¶16 To recover on their breach of contract theory, the Proes “needed to prove: 1) formation of a contract; 2) breach of the contract; and 3) damages as a direct result of the breach.” Digital Design Grp., Inc., v. Info. Builders, 2001 OK 21, ¶ 33, 24 P.3d 834, 843 (citing Oklahoma Uniform Jury Instructions (OUJI) -- Civil No. 23.1). “One bringing an action upon a contract has the burden of showing that the other is a party to it.” Restatement (Second) of Agency § 320 (quoted with approval in Shebester v. Triple Crown Insurers, 1992 OK 20, n.21, 826 P.2d 603). The Proes proved that they entered into a contract with Denny Emery d/b/a Diamond Homes. They failed to prove that Mike Emery was also doing business as Diamond Homes or that he was a party to that contract, an essential element of their breach of contract theory against Mike Emery. The district court's judgment in favor of Mike Emery as to the Proes’ breach of contract theory is affirmed.

II. The Proes’ Tort Claim

¶17 In addition to their breach of contract theory, the Proes claimed that both defendants were negligent in constructing their home, and they contend that the district court erred in finding that Mike and Denny Emery were not liable on their negligence theory.  ⁶ They argue that the district court misconstrued applicable tort law when it “stated” in its judgment that the defendants owed no contractual duty other than the duty to construct the home in a workmanlike manner and that there was no recovery in tort for a breach of that duty. That is not the basis on which the district court entered judgment against the Proes on their negligence theory.

¶18 The district court's judgment, quoting Tyree v. Cornman, 2019 OK CIV APP 66, ¶ 11, 453 P.3d 497, 504 (cert. denied Oct 14, 2019), states:

36․ Absent some special circumstance, “[a]ny neglect or lack of diligence on the part of the defendants is simply proof of their breach of the implied duty to deal fairly and in good faith, and not an independent theory of recovery.”․ “In ordinary commercial contracts, a breach of [the duty of good faith and fair dealing implied in every contract] merely results in damages for breach of contract, not independent tort liability.” Wathor v. Mutual Assurance Administrators, Inc., 2004 OK 2, ¶ 5, 87 P.3d 559. “Without an independent basis to support a tortious wrongdoing, there is nothing more than an alleged breach of that contract.” Rodgers v. Tecumseh Bank, 1988 OK 36, ¶ 18, 756 P.2d 1223.

37. The claims and disputes in this case arise out of an oral contract to construct a home. The Plaintiffs failed to establish a legal claim for the tort of negligence.

Clearly, the district court recognized the possibility of “an independent basis” for the Proes’ negligence theory but found that the Proes failed to establish the legal basis for that negligence. The district court is correct, and its judgment in favor of the defendants on the Proes’ negligence theory is consistent with controlling Oklahoma Supreme Court case law.

A. The Negligence Claim Against Mike Emery

¶19 Mike Emery was not a party to the Proes’ construction contract; he was an employee of Diamond Homes. Nonetheless, the Proes argue that Mike Emery is personally liable for his alleged negligent breach of his duty to construct their home in a workmanlike manner. Oklahoma law does not support their argument in this case for two reasons.

¶20 First, as an employee, Mike Emery was the agent of Denny Emery d/b/a Diamond Homes with respect to the construction of the Proes’ home. See Restatement (Second) of Agency § 2 (“A servant is an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master.”).  ⁷ His contractual duty was to his employer, not to the Proes. And an agent for a disclosed principal is not liable for the principal's breach of contract. Shebester v. Triple Crown Insurers, 1992 OK 20, n.21, 826 P.2d 603(quoting Restatement (Second) of Agency § 320). Further, “[a]n agent is not liable for harm to a person other than his principal because of his failure adequately to perform his duties to his principal, unless physical harm results from reliance upon performance of the duties by the agent ․” Restatement (Second) of Agency § 352. This is the rule even when it is the agent's conduct which constitutes the breach of contract.

[Diamond Homes], who has agreed to build a house for [the Proes], employs [Mike Emery] to build it. [Mike Emery] is careless in the construction of the house, so that the house does not conform to the contract. [Mike Emery is] not thereby liable to [the Proes] for the failure to construct the house in accordance with the contract.

Id. at cmt. a, illus. 2 (1958). Consequently, “[a]n agent's breach of a duty owed to the principal is not an independent basis for the agent's tort liability to a third party.” Restatement (Third) of Agency § 7.02 (2006).  ⁸

¶21 The Proes did not separately contract for Mike Emery to be a party to their contract with Diamond Homes, nor do they contend that they are third-party beneficiaries of the employment contract between Mike Emery and Diamond Homes. Therefore, Mike's status as an agent for Diamond Homes insulates him from liability to the Proes for Diamond Homes’ breach of the construction contract.

¶22 And, because Mike is not a party to the Proes’ contract with Diamond Homes, the Proes’ negligence claim against Mike cannot be derived from a breach of any express or implied duty imposed by the contract between the Proes and Diamond Homes, including the duty to construct the home in a workmanlike manner. The tort of “negligence ‘is ․ a term of relation’ where the existence of a legal duty must be owed by the defendant to the particular plaintiff bringing the action ․” Hensley v. State Farm Fire and Cas. Co., 2017 OK 57, ¶ 16, 398 P.3d 11, 17 (quoting Palsgraf v. Long Island Ry. Co., 248 N.Y. 339, 345, 162 N.E. 99, 101 (1928)). In the context of this case, Mike's relationship was with Denny d/b/a Diamond Homes and the contract-based duties he owed were to him, not the Proes.

¶23 Second, to prevail on their negligence claim, the Proes must prove that Mike breached some duty that Mike owed to them, independent of any contractual duty that he owed to Diamond Homes. Rodgers v. Tecumseh Bank, 1988 OK 36, ¶ 18, 756 P.2d 1223, 1227 (without independent basis to support tortious wrongdoing, there is nothing more than a breach of contract). The general rule is stated in Shebester v. Triple Crown Insurers, 1992 OK 20, n.21, 826 P.2d 603(citing Bane v. Anderson, Bryant & Co., 1990 OK 140, 786 P.2d 1230) (“One who commits a tortious act while acting as agent for another within the scope of his authority is individually liable.”). “An agent is subject to tort liability to a third party harmed by the agent's conduct only when the agent's conduct breaches a duty that the agent owes to the third party.” Restatement (Third) of Agency § 7.02 (2006).

¶24 Oklahoma recognized this potential tort theory of liability in Lisle v. Anderson, 1916 OK 92, 159 P. 278(general contractor liable for personal injuries to employee of subcontractor resulting from faulty construction of work area despite absence of privity of contract between general contractor and employee). Where there exists an independent duty of care, Oklahoma tort law provides a remedy for the breach of that duty. “The law imposes upon a person engaged in the prosecution of any work an obligation to use ordinary care to perform it in such a manner as not to endanger the property of others.” Union Bank of Tucson, Arizona v. Griffin, 1989 OK 47, ¶ 13, 771 P.2d 219, 222.

[Oklahoma has] long recognized that without regard to the relationship of the parties, a person owes a duty of care to another person whenever the circumstances place the one person in a position towards the other person such that an ordinary prudent person would recognize that if he or she did not act with ordinary care and skill in regard to the circumstances, he or she may cause danger of injury to the other person.

Lowery v. Echostar Satellite Corp., 2007 OK 38, ¶ 13, 160 P.3d 959, 964 (citing Lisle v. Anderson, 1916 OK 92, 159 P. 278). But the question is not whether Mike owed a duty of care to the Proes; the question is what conduct, “independent” of the contractual relationship between the Proes and Diamond Homes, do the Proes rely on to prove that Mike breached that duty of care.

¶25 Although Mike had a general duty to act with ordinary care and skill towards the Proes, that duty is no different than his duty to everyone. “Every person is bound, without contract, to abstain from injuring the person or property of another, or infringing upon any of his rights.” 76 O.S.2021 § 76. However, that statute “does not provide a separate statutory basis for a tort claim.” Snow v. TravelCenters of Am., 2023 OK CIV APP 8, ¶ 32, 527 P.3d 741, 751 (citing Tucker v. Tucker, 1964 OK 89, ¶ 8, 395 P.2d 67, 69). Oklahoma law recognizes the difference between the contract-based “duty” to do what one agrees to do in a contract, and the tort-based “duty” imposed by law to “exercise care commensurate with the situation in order to avoid ․ injury” to another. Union Bank of Tucson, Arizona v. Griffin, 1989 OK 47, ¶ 13, 771 P.2d 219, 222. It is the difference between failing to perform one's contractual obligations with the requisite degree of skill resulting in a product or service that was less than what was bargained for and failing to perform one's work with the requisite degree of care resulting in injury to the person or property of another. That distinction is the foundation of the holding in Rodgers v. Tecumseh Bank, 1988 OK 36, 756 P.2d 1223. “The duty alleged in the [plaintiffs’] alternative theory of recovery for tortious breach arises solely from contract. Without an independent basis to support a tortious wrongdoing, there is nothing more than an alleged breach of that contract.” Id. ¶ 18, 756 P.2d at 1227.

¶26 Mike Emery could not drive onto the work site and fail to exercise the degree of care necessary to avoid a collision with the Proes’ automobile, for example. But he had that same duty whether he was on the worksite or on the public roads and whether it was the Proes’ automobile or anyone else's. Most importantly, that is not the negligence theory that the Proes assert against Mike. Their negligence theory of liability sought only to recover the cost of repairing the damage to their home caused by the failure to construct the home in a workmanlike manner, and nothing more. The damage caused by those defects was caused by a breach of the construction contract, not a breach of the duty to act with the care “commensurate with the situation” to avoid injury to the Proes or their other property. Absent privity of contract, Mike is not liable for those damages and the district court's judgment in favor of Mike Emery is affirmed.

B. The Negligence Claim Against Denny Emery

¶27 The district court found that Denny Emery d/b/a Diamond Homes was the general contractor and in privity of contract with the Proes regarding the construction of their home. The district court found that Denny's conduct breached that contract and the implied warranty of construction in a workmanlike manner and that the Proes were entitled to recover the costs of repairing the construction defects. As the district court found, in the absence of any tort damages, the proper measure of damage for breach of a construction contract is the cost of the necessary repairs. “Where a contractor and builder has breached his contract by defective construction, which defects may be remedied by repair to compliance with the terms of the contract, the measure of damages is the cost of the repairs.” Smith v. Torr, 1957 OK 73, ¶ 0, 310 P.2d 378, 379 (Syllabus 2). Accord Cox v. Curnutt, 1954 OK 150, 271 P.2d 342(measure of damages for contractor's breach of implied warranties of fitness and construction in a workmanlike manner in construction of driveway was cost of repairing and replacing defectively installed concrete).

¶28 Embry v. Innovative Aftermarket Sys. L.P., 2010 OK 82, 247 P.3d 1158, and Wathor v. Mutual Assurance Administrators, Inc., 2004 OK 2, 87 P.3d 559, cited in the district court's judgment, addressed tort aspects of the duty of good faith and fair dealing arising from the “special relationship” between an insurer and its insured. Christian v. Am. Home Assur. Co., 1977 OK 141, 577 P.2d 899. That duty is derived from the common law.

The common law imposes this implied covenant upon all contracting parties, that neither party, because of the purposes of the contract, will act to injure the parties’ reasonable expectations nor impair the rights or interests of the other to receive the benefits flowing from their contractual relationship.

First Nat'l Bank & Trust v. Kissee, 1993 OK 96, ¶ 24, 859 P.2d 502, 509. However, a tort-based cause of action based on breach of the duty of good faith and fair dealing has yet to be recognized outside the insurance context, absent “[g]ross recklessness or wanton negligence on behalf of a party.” Rodgers v. Tecumseh Bank, 1988 OK 36, ¶ 16, 756 P.2d 1223, 1227 (refusing to extend the Christian tort to a commercial loan transaction between bank and its customer). Accord Beshara v. S. Nat'l Bank, 1996 OK 90, ¶ 27, 928 P.2d 280, 288. And the principle announced in Wathor remains the law in Oklahoma. See James v. Tyson Foods, Inc., 2012 OK 21, n.16, 292 P.3d 10(in ordinary commercial contracts, breach of the implied contractual duty of good faith and fair dealing results in a breach of contract, not independent tort liability).

¶29 Further, the duty of good faith and fair dealing is not the contractual duty on which the Proes rely; they contend that Denny Emery breached the duty to construct their home in a workmanlike manner, implied as a term of the oral construction contract. Citing Woolard v. JLG Industries, Inc., 210 F.3d 1158 (10th Cir. 2000), a decision applying Oklahoma law, the Proes argue that “Oklahoma allows liability for the breach of [the duty to perform a contract in a workmanlike manner] based in both breach of contract and a tort such as negligence ․” Id. The Proes are correct, in theory. “An action for breach of contract and an action in tort may arise from the same set of facts and a person injured by the substandard performance of a duty derived from a contractual relationship may rely on a breach of contract or tort theory, or both.” Gaasch v. St. Paul Fire and Marine Ins. Co., 2018 OK 12, ¶ 18, 412 P.3d 1151, 1156. The problem here is that the Proes failed to prove that both theories of liability were available. “ ‘Conduct that is merely a breach of contract is, of course, not a tort.’ ” Woolard v. JLG Indus., Inc., 210 F.3d at 1168 (quoting Hall Jones Oil Corp. v. Claro, 1969 OK 113, ¶ 9, 459 P.2d 858, 861) (intentional breach of duty implied in oil and gas lease to prevent unequal drainage of lessor's minerals constitutes a tort).

¶30 In Woolard, the federal Court, citing Keel v. Titan Construction Corp., 1981 OK 148, 639 P.2d 1228, found that the injured plaintiff was a third-party beneficiary of the maintenance contract between a product manufacturer and its distributor and could sue the distributor for negligent performance of that contract. The federal Court also relied on Delbrel v. Doenges Bros. Ford, Inc., 1996 OK 36, 913 P.2d 1318, for the proposition that “one who is paid to repair [chattels] owes a duty of care to both the owner ․ and to the general public to assure that the repair is properly performed ․” Woolard, 210 F.3d at 1170 (citing Delbrel, 1996 OK 36, ¶ 11, 913 P.2d at 1322). In both Oklahoma cases, the plaintiff was found to be a third-party beneficiary of a contract, and tort liability was premised on the breach of the general “common-law duty to perform [a contract] with care, skill, reasonable experience and faithfulness the thing agreed to be done ․” Keel v. Titan Constr. Corp., 1981 OK 148, ¶ 14, 639 P.2d at 1232.

¶31 In addition, the Delbrel Court noted the traditional rule: “at common law ․ privity of contract was required before a cause of action in tort arose from a breach of duty created by contract, but now this restriction in cases involving physical injury to third persons has in many instances been eliminated or modified.” Id. ¶ 9, 913 P.2d at 1321.

Historically, when an action is a claim which seeks to recover for unliquidated damages for a personal injury caused by negligence, although the negligence complained of amounts to a breach of contract on the part of the defendant, the action is one ex delicto and the law of torts governs that claim.

Gaasch v. St. Paul Fire and Marine Ins. Co., 2018 OK 12, ¶ 17, 412 P.3d 1151, 1155. Privity of contract is not an issue regarding the Proes’ negligence theory against Denny Emery, and the Proes have not sued for physical injuries like those suffered by the plaintiffs in Woolard and Delbrel.

¶32 However, the absence of physical injury does not preclude a negligence theory of recovery if the other elements of the claim are present. No physical injury to the plaintiffs/homeowners was alleged in Keel. Nonetheless, the Court held that the homeowners’ petition stated a claim for breach of contract as well as a tort claim against the architect hired by the homeowners’ general contractor. In the contract claim, the homeowners asserted that they were third-party beneficiaries of the contract between the general contractor and the architect. In a different part of their petition, they asserted a tort claim based on negligent design of a solar heating system. Their negligence claim relied on the implied duty to perform a contract “with care, skill, reasonable experience and faithfulness ․” Keel, 1981 OK 148, ¶ 14, 639 P.2d at 1232. Because the case was decided at the pleading stage, the “monetary damages” pled in the homeowners’ petition were sufficient to withstand a motion to dismiss. However, it is clear from subsequent cases discussed in this Opinion, that physical injury and/or damage to property beyond the subject of the contract is required for a negligence claim.

¶33 For example, in Hobbs v. Smith, 1911 OK 32, 115 P. 347, decided when election of remedies was required, the jury found that the defendant knowingly delivered diseased hogs pursuant to a contract for the purchase of healthy hogs. The Supreme Court affirmed the plaintiff's tort-based judgment: “although the relation between the parties may have been established by contract ․ if the law imposes certain duties because of the existence of that relation, the contract obligation may be waived and an action in tort maintained for the violation of such imposed duties.” Id. ¶ 9, 115 P. at 350. The duties “impose[d]” by law in Hobbs were the breach of a “common-law obligation not to afflict plaintiffs, to their damage, with [ ] diseased animals,” a breach described in Hobbs as a “tort of the highest character.” Id. ¶ 10.

¶34 The distinction between the duties imposed independent of contract and duties imposed solely by contract was addressed in Flint Ridge Development Co. v. Benham-Blair & Affiliates, Inc., 1989 OK 48, 775 P.2d 797. As discussed in Great Plains Federal Savings and Loan Ass'n v. Dabney, Flint Ridge holds:

[I]f the alleged contract of employment merely incorporates by reference or by implication a general standard of skill or care which a defendant would be bound independent of the contract[,] a tort case is presented governed by the tort limitation period ․ However, where the parties have spelled out the performance promised by defendant and defendant commits to the performance without reference to and irrespective of any general standard, a contract theory would be viable, regardless of any negligence on the part of a professional defendant.

1993 OK 4, ¶ 7, 846 P.2d 1088, 1092.

¶35 The duty to construct a home in a workmanlike manner on which the Proes rely is distinct from the “general standard of care.” The contractual duty requires “that degree of skill, efficiency, and knowledge which is possessed by those of ordinary skill, competency, and standing in the particular trade or business for which he is employed ․” Keel v. Titan Constr. Corp., 1981 OK 148, ¶ 8, 639 P.2d 1228, 1231 (defining the contract-based duty to perform work or services). However, the failure to perform contractual duties with that requisite degree of skill and care “is merely a breach of contract ․ not a tort.” Hall Jones Oil Corp. v. Claro, 1969 OK 113, ¶ 9, 459 P.2d 858, 861.

¶36 A tort arises when one does not conform to the “common-law duty to perform [work] with care, skill, reasonable experience and faithfulness” in any circumstance, including while performing contractual duties. Keel v. Titan Constr. Corp., 1981 OK 148, ¶ 14, 639 P.2d 1228, 1232. The actor may fail to meet the common law negligence duty in such a way as to commit a tort and at the same time breach an obligation imposed by the contract. However, the duties are distinct, and the resulting damages are different. See Carris v. John R. Thomas and Assocs., P.C., 1995 OK 33, n.19, 896 P.2d 522, 529 (“The damages recoverable in contract and tort actions differ.”); Finnell v. Jebco Seismic, 2003 OK 35, n.29, 67 P.3d 339, 345 (distinguishing the damages available for breach of a “promise-based obligation[ ]” and “[t]ort reparations.”); Flint Ridge Dev. Co. v. Benham-Blair and Affiliates, Inc., 1989 OK 48, ¶ 12, 775 P.2d 797, 801 (it is for the district court to “appropriately limit the scope of damages available” in cases brought under both contract and tort theories).

¶37 That distinction is evident in the hypothetical discussed in Flint Ridge: “if a fireplace collapses, the purchaser [of a residence] can sue in contract for the cost of remedying the structural defects and sue in tort for damage to personal property or personal injury caused by the collapse.” Flint Ridge, 1989 OK 48, ¶ 11, 775 P.2d 797, 801 (quoting Woodward v. Chirco Constr. Co., Inc., 141 Ariz. 514, 687 P.2d 1269, 1270-71 (1984)). The Oklahoma Supreme Court found the Woodward Court's view consistent with prior Oklahoma cases:

In prior cases in which an action based on negligence arising in the context of contract has been involved, the damages alleged have been injury to person or to property resulting from the negligence․ [I]n each case there has been a breach of a general standard of care which has resulted in injuries beyond the particular matter of the contract.

Flint Ridge, 1989 OK 48, ¶ 11, 775 P.2d at 801 (emphasis added).  ⁹ Consequently, if there is no damage “to person or property ․ beyond the particular matter of the contract,” there is no tort.  ¹⁰ Here, the Proes did not sue for “injuries beyond the particular matter of the contract.” Id. Their evidence only proved that Denny Emery d/b/a Diamond Homes “failed to construct the residence in a workmanlike manner” and that “the cost of repairs to cure the defects in construction are in the amount of $169,727.62.” (Findings of Fact and Conclusions of Law -Decision, nos. 39 and 41, ROA 467).

¶38 Other jurisdictions addressing this issue in construction defect cases have adopted the original products liability measure of damages, i.e., the economic loss rule. “The economic loss rule is a court-created doctrine that bars recovery under manufacturer's product liability for purely economic injury to the product itself.” Mills v. J-M Mfg. Co. Inc., 2025 OK 23, ¶ 15, ___ P.3d ___ (holding, in a defective-product case, that the economic loss rule does not bar an indemnity claim for damages to other property where the indemnitee could have recovered those damages directly from the tortfeasor). “This rule is based on the principle that damages confined to the product itself are more appropriately addressed through contract law ․” Id. Courts applying the economic loss rule outside the products liability context have found its products liability origin equally sound in breach of contract cases.

Although originally born from products liability law, the application of the economic loss rule is broader, because it serves to maintain a distinction between contract and tort law. The essential difference between a tort obligation and a contract obligation is the source of the duties of the parties.

․ Tort law is designed to protect all citizens from the risk of physical harm to their persons or to their property.

In contrast, contract obligations arise from promises made between parties.

Town of Alma v. Azco Constr. Inc., 10 P.3d 1256, 1262 (Colo. 2000).  ¹¹ Cf., Mills, 2025 OK 23, ¶ 20, ___ P.3d __, (“[T]he purpose of the economic loss rule is to preserve the boundary between tort and contract by precluding recovery for purely economic losses where contract remedies exist ․”).

¶39 When applicable, the economic loss rule precludes a negligence claim for construction defects against the general contractor.

Contract law is intended to enforce the expectancy interests created by the parties’ promises so that they can allocate risks and costs during their bargaining. Limiting tort liability when a contract exists between parties is appropriate because a product's potential nonperformance can be adequately addressed by rational economic actors bargaining at arms length to shape the terms of the contract.

Id. at 1262.  ¹² Cf., Rodgers v. Tecumseh Bank, 1988 OK 36, ¶ 16, 756 P.2d 1223, 1226-27 (“Where, as here, there is no special relationship, parties should be free to contract for any lawful purpose and upon such terms as they believe to be in their mutual interest.”). Based on this fundamental contract principle, the Colorado Supreme Court held “that a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.” Town of Alma, 10 P.3d at 1264 (footnote omitted). Cf., Tusch Enters. v. Coffin, 740 P.2d 1022(1987) (damage to duplex caused by defective foundation limited to economic loss barring negligence action for recovery of lost profits).

¶40 “The phrase ‘economic loss rule’ necessarily implies that the focus of the inquiry under its analysis is on the type of damages suffered by the aggrieved party.” Town of Alma, 10 P.3d at 1262-63 (footnote omitted). “Economic loss is defined generally as damages other than physical harm to persons or property.” Id. at 1264 (footnote omitted). In addition, any property damage for which tort recovery can be had must be damage to property other than the property which is the subject of the contract. Gunkel v. Renovations, Inc., 822 N.E.2d 150, 153 (Ind. 2005) (economic loss doctrine only permits tort recovery for personal injury or damage to “other property). See also W. Prosser, Handbook on the Law of Torts, p. 665, § 101 (4th ed. 1971) (economic loss is loss which does not involve personal injury or physical harm to other property). According to the Indiana Supreme Court, “property acquired separately from the defective good or service is ‘other property.’ ” Gunkel, 822 N.E.2d at 155.

¶41 “In the context of construction, ‘economic loss’ includes the cost to repair or replace defective materials, damage to a structure, diminution in value of a damaged structure not repaired, loss of use or delay in utilizing property for its intended purposes, and related lost profits, lost revenue, and costs.” 6 Philip L. Bruner & Patrick J. O'Connor, Jr., Bruner & O'Connor on Construction Law, Limitation on Tort Damages -- Doctrine of Economic Loss § 19:10 (West Grp. 2002, updated 2024) (footnotes omitted). To the extent it is in their “mutual interest,” rational economic actors are free to and often do contractually exclude these types of losses from the effect of the economic loss rule. Rodgers v. Tecumseh Bank, 1988 OK 36, ¶ 16, 756 P.2d 1223, 1227. For example, if completion of construction by a certain time is important, parties can include a delay damage provision in the construction contract. These are matters “appropriately addressed through contract law ․” Mills v. J-M Mfg. Co. Inc., 2025 OK 23, ¶ 15, ___ P.3d ___. Underlying the necessity for the economic loss rule is the “principal that parties must be able to confidently allocate their risks and costs in a bargaining situation ․” Town of Alma, 10 P.3d at 1261 (citing East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S. Ct. 2295 (1986)). The Proes did not do so in their contract with Diamond Homes.

¶42 Oklahoma has not adopted the economic loss rule, by name, outside the manufacturer's products liability context. Mills, 2025 OK 23, ¶ 16, ___ P.3d ___ (recognizing, in that context, exceptions to the economic loss rule for personal injury or damage to other property). Nonetheless, that legal principle is consistent with Oklahoma law on the damages available for breach of contract in the absence of personal injury or damage to other property. See Smith v. Torr, 1957 OK 73, ¶ 0, 310 P.2d 378(Syllabus 2); Cox v. Curnutt, 1954 OK 150, 271 P.2d 342. The only damages the Proes claimed that Denny Emery caused, and the only damages they sought and received, were the costs to repair the construction defects in their home. The Proes’ brief in chief discusses various construction deficiencies but concedes all were “repaired” at a cost of $169,727.62, the amount they were awarded on their breach of contract claim.

¶43 The independent basis for a tort is lacking in this case, not because Denny Emery owed no ex delicto duty to the Proes while constructing their home, but because the Proes failed to produce evidence of personal injury or injury to property “beyond the particular matter of the contract.” Flint Ridge Dev. Co. v. Benham-Blair & Affiliates, Inc., 1989 OK 48, ¶ 11, 775 P.2d 797, 801. Those types of damages are an essential element of the Proes’ tort claim. Fargo v. Hays-Kuehn, 2015 OK 56, ¶ 13, 352 P.3d 1223, 1227. The district court's judgment in favor of Denny Emery d/b/a Diamond Homes on the Proes’ tort claim is affirmed.

CONCLUSION

¶44 The Proes recovered a judgment against Denny Emery d/b/a Diamond Homes for breach of the construction contract to build their home. The amount of that judgment was the cost necessary to repair the construction defects. The Proes were unable to prove that Mike Emery was also doing business as Diamond Homes or that he was a partner with Denny in the home building business. The judgment in favor of Mike Emery on the Proes’ breach of contract claim is affirmed.

¶45 The Proes also sued Mike and Denny Emery for negligence in constructing their home. However, they did not prove any personal injury or damage to their property not covered by the construction contract. Consequently, they failed to prove an essential element of their tort claim. The judgment in favor of Denny and Mike Emery on the Proes’ tort claim is affirmed.

¶46 AFFIRMED.

¶1 I agree with the Majority that the district court's judgment in favor of Mike Emery as to the Proes’ breach of contract theory should be affirmed. I further agree that the district court's judgment in favor of Denny and Mike Emery on the Proes’ tort claim should be affirmed. I write separately to explain why I must respectfully concur in result.

¶2 As stated by one commentator, “[c]ontractual performance always takes place within a matrix of other legal obligations, including those imposed by the law of torts.”  ¹³ Nevertheless, an Oklahoma district court judge may well be confounded when confronting this “matrix.” As stated by one federal district court, “[t]he circumstances under which Oklahoma law permits contracting parties to sue each other in tort are not perfectly defined.”  ¹⁴ Thus, one question that arises is whether there are any clear guidelines or doctrines upon which a district court judge might rely in this area.

FOOTNOTES

1.   Diamond Homes was not organized as a separate legal entity but is only the name Denny Emery used when conducting his home construction business. “Denny” and “Diamond Homes” were used interchangeably by the district court and are so used in this Opinion.

2.   The facts quoted in this section are from the district court's findings of fact, incorporated into its judgment.

3.   In a post-trial motion, the Proes sought “clarification” regarding Mike Emery's status. The district court responded: “Mike Emery is an independent contractor.” This was not the position of the defendants, who had always maintained that Mike Emery was an employee of Diamond Homes. We review the district court's conclusion of law de novo because the evidence necessary to decide the issue is undisputed. World Publ'g Co. v. Smith, 1945 OK 231, ¶ 0, 161 P.2d 861(Syllabus 2). The record does not support the conclusion that Mike Emery was an independent contractor. An independent contractor is “one who engages to perform a certain service for another (i.e. the hirer) according to his or her own method and manner, free from control and direction of the hirer in all matters connected with the performance of the service except as to the result.” Hammock v. United States, 2003 OK 77, ¶ 11, 78 P.3d 93, 97. Mike Emery was hired to supervise construction of a residence designed by Diamond Homes, with material and labor purchased by Diamond Homes and pursuant to the terms of a contract between Diamond Homes and the Proes. He was not free to construct the residence “according to his ․ own method and manner.” See also footnote 8, infra.

4.   The Plaintiffs did not sue Edens Structural Solutions or Herndon Engineering, and there is no evidence that either Edens or Herndon was not qualified to make their evaluations or that their recommended solutions were known to be inadequate. The evidence merely shows that the choices Diamond Homes made based on those recommendations did not work and the defects in the foundation had to be repaired by others.

5.   Breach of the implied warranty of habitability was not raised as an issue in the Proes’ petition in error against Mike Emery nor was it addressed in their appellate briefing. Generally, appellate courts only address “those issues properly and timely presented, argued and supported with authority.” McCorkle v. Great Atl. Ins. Co., 1981 OK 128, ¶ 10, 637 P.2d 583, 585. See also Okla. Sup. Ct. R. 1.11(k)(1), 12 O.S.2021, ch. 15, app. 1. Any alleged breach of the implied warranty of habitability will not be addressed.

6.   In anticipation of an expected defense to their negligence claim, the Proes devoted part of their brief in chief to arguing against application of the “accepted work doctrine” and noting that fraud was an exception to application of the doctrine. The defendants did not assert the accepted work doctrine as a defense and the Proes did not argue that the defendants had engaged in fraud in the district court. We will not consider this issue, raised for the first time on appeal. Evers v. FSF Overlake Assocs., 2003 OK 53, ¶ 18, 77 P.3d 581, 587.

7.   “The Restatement has long been recognized as a material source of the common law.” Am. Bank of Oklahoma v. Wagoner, 2011 OK CIV APP 76, ¶ 23, 259 P.3d 841, 850 (approved for publ'n by Okla. Sup. Ct.).

8.   Even if, as the Proes argue, Mike Emery was an independent contractor, he was still the agent of Denny Emery d/b/a Diamond homes because he did not agree to build the Proes’ home for a “stipulated price,” and he did not reserve any “direction over the conduct of the work.” Restatement (Second) of Agency § 2, cmt. b (1958). The Proes’ home was built according to the Diamond Homes Cost Estimate, the Diamond Homes design and the contract between the Proes and Diamond Homes. Cf., Diamond Sevens, L.L.C. v. Intelligent Home Automation, Inc., 2010 OK CIV APP 131, ¶ 19, 245 P.3d 1260, 1265 (“Working as a subcontractor, without more, does not bring about a contractual relationship with the homeowners ․”) (citing Cox v. Curnutt, 1954 OK 150, 271 P.2d 342, 344) (judgment against subcontractor for negligent construction of concrete driveway reversed in the absence of privity of contract with homeowners).

9.   The Flint Ridge Court distinguished prior cases that had focused on the “gravamen of the action,” like Jackson v. Central Torpedo Co., 1926 OK 434, 246 P. 426, which affirmed the dismissal of a petition as barred by the shorter tort statute of limitations, noting that it was decided when the plaintiff had to elect remedies and that the plaintiff in that case had only sued to recover tort damages. “There the Court did not hold that the defendant might nevertheless have been liable for some damages for breach of his agreement.” Flint Ridge, 1989 OK 48, ¶ 9, 775 P.2d at 800. Accord Great Plains Fed. Sav. and Loan Ass'n v. Dabney, 1993 OK 4, ¶ 6, 846 P.2d 1088, 1091 (Finding that Funnell v. Jones, 1985 OK 73, 737 P.2d 105, does not hold that a legal malpractice case cannot also assert a breach of contract theory.).

10.   In addition to the cases discussed in the body of this Opinion, cases asserting a negligence claim in the context of a contractual relationship have been authorized only where physical injury or damage to other property was alleged or proven. See, e.g., Lisle v. Anderson, 1916 OK 92, 159 P. 278(contractor liable for negligent construction causing physical injury to employee of subcontractor); Oklahoma Nat. Gas Co. v. Pack, 1939 OK 475, 97 P.2d 768(gas company liable for illness suffered by customer for negligent maintenance of gas line causing failure to deliver gas during winter); Smith v. Johnston, 1978 OK 142, 591 P.2d 1260(contractor and subcontractor liable for cost of correcting dangerous fire hazard caused by negligent installation of electrical wiring, but not for cost of conforming the electrical wiring to that specified by the contract); Boren v. Thompson & Assocs., 2000 OK 3, 999 P.2d 438(architect liable for loss to unpaid subcontractors for negligence in approving payments to general contractor without confirming that general contractor had obtained statutorily required bond to ensure payment to subcontractors); Iglehart v. Bd. of Cnty. Comm'rs of Rogers Cnty., 2002 OK 76, ¶ 10, 60 P.3d 497, 502 (utility company potentially liable for physical injury to driver allegedly caused by negligent maintenance of utility's easement); Bradford Sec. Processing Servs., Inc. v. Plaza Bank & Trust, 1982 OK 96, 653 P.2d 188(attorney potentially liable for negligence in drafting legal opinion for bond-seller/client relied on by bond purchasers); Wofford v. Eastern State Hosp., 1990 OK 77, 795 P.2d 516(psychiatrist has tort-based duty to prevent physical injury to third-parties by exercising reasonable professional care when deciding to discharge mental health patient); Finnell v. Jebco Seismic, 2003 OK 35, ¶ 13, 67 P.3d 339, 344, cert. denied, 484 U.S. 853, 108 S. Ct. 158 (1987) (seismic company liable for damage to land beyond that contemplated by the contract); Abercrombie & Fitch Stores, Inc. v. Penn Square Mall Ltd. P'ship, 2018 OK CIV APP 56, 425 P.3d 757(damage to tenant's merchandise caused by landlord's negligent maintenance of waterline); Coryell Roofing & Constr., Inc. v Burgess Farms, Inc., No. 121,275 (COCA Div. IV Aug. 27, 2024) (cert. granted and pending) (damage to personal property caused by defectively installed roof) . No case has held that the plaintiff may recover for negligence on the part of a party to the contract in the absence of physical injury or damage to personal property not covered by the contract.

11.   Jurisdictions applying the economic loss rule in non-products liability cases include Sterling Chemicals, Inc. v. Texaco, Inc., 259 S.W.3d 793, 796 (Tex. App. 2007); Kalahari Dev., LLC v. Iconica, Inc., 811 N.W.2d 825 (Wis. 2012); Indianapolis-Marion Cnty. Pub. Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010); ASC Constr. Equip. USA, Inc. v. City Comm. Real Estate, Inc., 693 S.E.2d 559 (2010), and Valles v. Pima Cnty., 642 F.Supp.2d 936 (D. Ariz. 2009).

12.   Colorado has recognized exceptions to the economic loss rule: “some torts are expressly designed to remedy pure economic loss (e.g., professional negligence, fraud, and breach of fiduciary duty).” Town of Alma v. Azco Constr. Inc., 10 P.3d 1256, 1263 (Colo. 2000). The Plaintiffs have not based their tort claim on any of these theories of recovery. But see A.C. Excavating v. Yacht Club II Homeowners Ass'n, Inc., 114 P.3d 862, 867 (Colo. 2005) (distinguishing Town of Alma v. Azco Constr. Inc., and affirming reversal of judgment for subcontractor). The Yacht Club court found the property owner was a third-party beneficiary to the contract between the general contractor and the subcontractor, and that the subcontractor owed an independent tort duty to the property owner that would support the property owners’ negligence claim based on construction defects, because “the economic loss rule has no application where there exists an independent duty of care ․” Id.

13.   Vincent R. Johnson, The Boundary-Line Function of the Economic Loss Rule, 66 Wash. & Lee L. Rev. 523, 559 (2009).

14.   Miller v. EOG Res., Inc., CIV-19-1033-G, 2020 WL 592339, at *2 (W.D. Okla. Feb. 6, 2020).

JOHN F. FISCHER, JUDGE:

WISEMAN, P.J., concurs, and BARNES, C.J., concurs in result.