This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40
On Appeal from Superior Court, Rutland Unit, Civil Division. William D. Cohen, J.
John Paul Faignant of Miller Faignant & Robbason, P.C., Rutland, for Plaintiff-Appellee/Cross-Appellant.
Philip C. Woodward of Woodward & Kelley, PLLC, South Burlington, for Defendant-Appellant/Cross-Appellee.
Present: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ. 
[¶1] This is an unusual dispute that arose from the failure of plaintiff Kathleen Langlois, owner of a building with commercial space on the first floor and an apartment on the second floor, to pay her water bill
for the property to defendant Town of Proctor, and from the Town's alleged failure to turn the water off pursuant to the parties' agreement. Plaintiff alleged, in pertinent part, that she arranged with a representative of the Town that it would disconnect the water service so she would not incur further water expenses, but that the Town failed to do so. She further alleged that in reliance on the Town's promised undertaking she discontinued heating the building, causing the pipes containing water to freeze and split under the first floor of the building, which, in turn, flooded the first floor and basement, causing extensive damage to the building. The jury found the Town negligent and awarded plaintiff damages of $64,918.44. We reverse and remand because of the trial court's failure to instruct on comparative negligence, but affirm in all other respects.
I. Procedural History
[¶2] Plaintiff brought this action with four counts: negligence, breach of contract, consumer fraud, and negligent misrepresentation. The main count involved in this appeal alleged that the Town was negligent for failure to turn off the water and that its negligence was the proximate cause of plaintiff's damages. Another count alleged that the parties had a contract with respect to the supply of water and that the Town breached the contract by sending a false notice that it had disconnected the water and by failing to remediate its inaction once it was discovered. In the breach-of-contract count, plaintiff also claimed that the Town had breached its obligation of good faith and fair dealing.
[¶3] The Town moved for summary judgment. With respect to the negligence count, the Town argued that it had no duty to disconnect the water service or to disconnect the service with reasonable care or, alternatively, that any duty was based on its contractual obligations and could not give rise to tort liability. With respect to the contract claim, the Town argued that it had no contractual obligation to disconnect the water service and that it was exercising its right under a statutory delinquency collection procedure. It further argued that the contractual relationship between plaintiff and the Town was terminated when plaintiff failed to pay her water bill.
[¶4] The superior court eventually dismissed the consumer fraud and negligent misrepresentation counts, but denied the Town's motion for summary judgment on the tort and contract claims. The court found that there was a material issue of fact with respect to whether the Town employee actually turned off the water at the time he said he did. Moreover the court concluded:
Plaintiff's claims are rooted in the Town's ordinance governing the relationship between the Town as water supplier and Plaintiff as ratepayer. The ordinance describes itself as " a contract between each ratepayer and the Town." This contractual relationship contained in the ordinance, coupled with Town's alleged negligence in failing to actually disconnect Plaintiff's water and alleged misrepresentations in informing Plaintiff that her water had in fact been disconnected when it had not, provides a sufficient legal basis for Plaintiff's claims. Defendant is not entitled to judgment as a matter of law.
[¶5] The case was then tried before a jury, which rendered a verdict for plaintiff. In answering the special interrogatories, the jury found that there was a contract between plaintiff and the Town " regarding the turning off of her water service," but that the Town had not breached that contract. It found that the Town was negligent,
that its negligence was a proximate cause of harm to plaintiff, and that plaintiff's damages were $64,918.44.
[¶6] On appeal, the Town argues that it had no tort duty to properly turn off plaintiff's water service, that the court should have instructed the jury to apply comparative negligence, and that the instructions on damages were erroneous because the proper measure of damages is the diminution in value of the building and, in any event, there was no evidence of that diminution. Plaintiff cross-appeals, arguing that the jury instructions improperly failed to allow the jury to find that the Town breached its duty of good faith and fair dealing.
[¶7] We begin with the question of duty. As we held recently in Buxton v. Springfield Lodge No. 679, Loyal Order of Moose, Inc., an action for negligence fails in the absence of a duty of care. 2014 VT 52, ¶ 7, ___ Vt. ___, 99 A.3d 171. Whether a duty was present, as well as the scope of any duty, is primarily a question of law. Id. The Town argues that it had no duty to turn off the water, or to turn the service off in a particular way, for nonpayment of water charges. It further argues that the tort duty plaintiff asserted arose out of the contractual relationship between plaintiff and the Town, but that plaintiff's assertion is invalid because a tort duty must arise independent of any contractual obligations.
[¶8] In response, plaintiff argues that the Town's tort duty arose from its undertaking to disconnect the water service and plaintiff's reliance upon that undertaking. She bases this argument on the Restatement (Second) of Torts § 323 (1965).
[¶9] In addressing these arguments, we recognize that theories of duty significantly morphed during the course of this litigation, and those changes in theories affect the way the issue is framed on appeal. The trial judge made no mention of duty in the instructions to the jury, saying in essence that negligent failure to properly disconnect the water service was actionable. Nor did the summary judgment decision contain a clear specification of the court's theory of duty. Rather, it stated simply that " this contractual relationship contained in the ordinance, coupled with misrepresentations in informing Plaintiff that her water had in fact been disconnected when it had not, provides a sufficient legal basis for Plaintiff's claims." We note, however, that the Town did not preserve an objection to the jury instructions, so the issue on appeal is solely whether plaintiff made out a duty to support her claim of negligence, not what the scope or nature of that duty was or whether the trial court properly instructed the jury on duty.
[¶10] In considering that issue, we start with the Restatement section relied upon by plaintiff on appeal. Section 323 provides:
Negligent Performance of Undertaking to Render Services
One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of the other's person or things, is subject to liability to the other for physical harm resulting from his failure to exercise reasonable care to perform his undertaking, if
(a) his failure to exercise such care increases the risk of such harm, or
(b) the harm is suffered because of the other's reliance upon the undertaking.
Restatement (Second) of Torts § 323. This Court has applied § 323, and its cousin, § 324A, which governs harm to a third person, in a number of cases. See Sabia v. State,
164 Vt. 293, 302-04, 669 A.2d 1187, 1194 (1995); Smyth v. Twin State Improvement Corp., 116 Vt. 569, 570-71, 80 A.2d 664, 665 (1951); see also Derosia v. Liberty Mut. Ins. Co., 155 Vt. 178, 182-83, 583 A.2d 881, 883 (1990) (adopting § 324A). Thus, we have recognized and chosen to follow this Restatement section.
[¶11] Without saying so directly, the Town challenges the application of § 323 by claiming that its underlying obligation is contractual. The Town relies on a sentence from Springfield Hydroelectric Co. v. Copp, in which this Court stated that a tort duty of care must be " 'independent of any contractual obligations.' " 172 Vt. 311, 316, 779 A.2d 67, 71-72 (2001) (emphasis omitted) (quoting Grynberg v. Agri Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000)). The Town argues that there is no recognizable tort duty because plaintiff is basing the Town's duty on the breach of a contract to turn off the water. The short answer to the Town's argument is that although the jury found that the Town had a contractual duty to disconnect the water, it also found that the Town did not breach that contractual duty. Thus, the jury's award was not based on breach of any contractual duty. We do not rely upon the jury determination alone in rejecting the Town's argument, however, because neither the judge nor the jury defined the duty on which the tort liability was based.
[¶12] We conclude that the Town reads too much into Springfield Hydroelectric. The issue in that case was whether the plaintiff could obtain a tort recovery for purely economic losses in the absence of physical damage. Thus, the sentence on which the Town relies was part of the overall holding that negligence liability, even if based on a contractual duty, could not give rise to recovery for intangible economic loss in the absence of accompanying physical harm. Id. at 314-15, 779 A.2d at 70-71. We did not hold that the duty on which plaintiff relies for a tort action can never be contractual.
[¶13] In fact, many of our duty cases are based on undertakings involving contractually assumed duties. For example, in Perry v. Green Mountain Mall, the defendant had a contract with a mall owner to maintain the parking lot and roads around the mall. 2004 VT 69, 177 Vt. 109, 857 A.2d 793. The plaintiff was an employee of a mall store who was injured when her car skidded on ice in the parking lot, and she sued defendant for negligent failure to remove the ice. We found that the plaintiff's complaint alleged a duty recognized under § 324A of the Restatement. Id. ¶ 10. Neither § 323 nor § 324A suggest that the duty stemming from the undertaking cannot be contractually based. Both apply to an undertaking " for consideration," which is one way to describe a contract. Indeed, the only case we have directly on this point involved a defendant who argued that a § 323 duty had to be contractual. See Smyth, 116 Vt. at 570-71, 80 A.2d at 665.
[¶14] The evidence in this case was sufficient for a factfinder to find that the elements of § 323 were established. Plaintiff testified that the agent of the Town responsible for utility disconnections promised to disconnect the water service to the building. The Town's witnesses established that a Town worker went to the site in May 2009 and believed he had turned off the water at the " curbstop," a valve in the right of way. Thus, there was adequate evidence of an undertaking, whether gratuitous or contractual. See Sabia, 164 Vt. at 303, 669 A.2d at 1194 ( " [C]ourts generally require very little action on the part of defendants to find an undertaking." ).
[¶15] Further, there was evidence that Town workers were aware of the ...