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State v. United States Steel Corp.6/24/1996
nd plaintiffs did purchase the premises, accepting a warranty deed.
Thus, under the record of this case, we find no difficulty in imposing a duty and we hold that defendant title company owed plaintiffs a duty to use reasonable care in making the search and in the preparation of the certificate of title search for the premises.
We believe that it would be contrary to the rule of fair play to hold that the defendant company did not owe the Honolulu Savings and Loan Association and the plaintiffs a duty to use reasonable or ordinary care in the preparation of the certificate of title search because the very purpose of the document was to show to both of them, as well as the seller, that the seller had good marketable title, free and clear of all encumbrances.
Id. at 464-65, 462 P.2d at 906-07 (footnote omitted). In so holding, the Chun court adopted the formulation of the tort of negligent misrepresentation as ultimately framed by Restatement (Second) of Torts § 552 (1977) (section 552), which provides in pertinent part:
Information Negligently Supplied for the Guidance of Others
(1) One who, in the course of his [or her] business, profession or employment, or in any other transaction in which he [or she] has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he [or she] fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he [or she] intends to supply the information or knows that the recipient intends to supply it; and
(b) through reliance upon it in a transaction that he [or she] intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transaction in which it is intended to protect them.
Id. See also Shaffer v. Earl Thacker Co., 6 Haw. App. 188, 716 P.2d 163 (1986) (applying Restatement position).
The duty imposed by section 552 is therefore to exercise reasonable care or competence in obtaining or communicating information for the guidance of others in their business transactions. This duty, however, is distinct from the duty eliminated by the economic loss rule. As noted by the court in East River, the economic loss rule absolves manufacturers in commercial relationships from a duty "under either a negligence or strict products-liability theory to prevent a product from injuring itself." 476 U.S. at 871. Utilization of the economic loss rule to dismiss a claim for negligent misrepresentation, therefore, would be incongruous.
The Supreme Court of Tennessee, in John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428 (Tenn. 1991), offered an especially lucid Discussion of the distinction between a claim for economic loss based on a cause of action sounding in negligent misrepresentation and a claim for economic loss based on a cause of action sounding in products liability. In John Martin, a subcontractor brought an action against a construction manager and on-site superintendent, alleging that the construction manager negligently approved shop drawings t
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