Aetna Casualty & Surety Co. v. Kemp Smith Co.

• Decision Date: 12 April 1965
• Docket Number: No. 3579.,3579.
• Citation: 208 A.2d 737
• Parties: AETNA CASUALTY & SURETY CO., Spencer, White & Prentis, Inc., a corporation, and George A. Fuller Co., Inc., Appellants, v. KEMP SMITH CO., Inc., Appellee.
• Court: D.C. Court of Appeals

Page 737

208 A.2d 737

AETNA CASUALTY & SURETY CO., Spencer, White & Prentis, Inc., a corporation, and George A. Fuller Co., Inc., Appellants, v. KEMP SMITH CO., Inc., Appellee.

No. 3579.

District of Columbia Court of Appeals.

Argued November 23, 1964.

Decided April 12, 1965.

Edgar A. B. Spencer, New York City, pro hac vice, by special leave of court, with whom Arthur C. Elgin and F. Granville Munson, Washington, D. C., were on the brief, for appellants.

Louis Ginberg, Washington, D. C., for appellee.

Before HOOD, Chief Judge, and QUINN and MYERS, Associate Judges.

HOOD, Chief Judge.

In November 1960, appellant Spencer, White & Prentis, Inc. entered into a contract, hereafter "the foundation contract," with International Land Corporation which obligated appellant to perform certain foundation work in connection with the construction of an office building. Thereafter, Spencer, White & Prentis engaged W. H. Nicholson Associates, Inc. to undertake excavation work pertinent to the foundation construction, and Nicholson, in turn, on February 14, 1961, contracted with plaintiff-appellee Kemp Smith Co., Inc. for the performance of machine excavation at the job site.

On March 17, 1961, pursuant to a separate contract entered into between International Land and appellant George A. Fuller Co., Inc., under which Fuller became the general contractor on the project, the foundation contract was assigned to Fuller with the consent of Spencer, White & Prentis. Subsequently, on March 27, 1961, appellant Fuller as principal and appellant Aetna Casualty & Surety Co. as surety executed a Labor and Material Payment Bond for the protection of International Land.

Appellee Smith completed its work on May 5, 1961, and on May 31, notified Aetna of its claim for payment, Nicholson having in the meanwhile defaulted on its contract with Spencer, White & Prentis. Smith then filed suit against Aetna, Fuller, and Spencer, White & Prentis, and a trial was had which resulted in the judgment appealed from.¹

THE CLAIM AGAINST SPENCER, WHITE & PRENTIS

Under Article 9 of the General Conditions attached to the foundation contract, Spencer, White & Prentis, as contractor, agreed that

"Unless otherwise stipulated, the Contractor shall provide and pay for all materials, labor, water, tools, equipment, light, power, transportation and other facilities necessary for the execution and completion of the work."

On this appeal, it is argued that that promise, running from Spencer, White & Prentis to International Land, will not support an action for payment by the appellee as a third party beneficiary. In support of that argument, appellant contends that except where surety contracts are involved, the District of Columbia has not adopted the third party beneficiary doctrine, and that in any event, appellee is at most an incidental beneficiary, and would, accordingly, be without enforceable rights even in those jurisdictions where the doctrine prevails.

Our research reveals no case in this jurisdiction expressly adopting or rejecting the third party beneficiary rule. However, in Marranzano v. Riggs Nat. Bank of Washington, D. C., 87 U.S.App.D.C. 195, 196, 184 F.2d 349, 350 (1950), there was a recognition that there are exceptions "to the general rule that a stranger to a contract may not sue to enforce its terms or to recover damages for a violation thereof"; and there are other cases indicating that the third party beneficiary rule would be applied in a proper case. Hall v. Gardiner, 75 U.S.App.D.C. 226, 126 F.2d 227 (1942); Schwartz v. Brown, D.C.Mun.App., 64 A.2d 298 (1949).² In Guinn Company v. Mazza, 111 U.S.App. D.C. 319, 296 F.2d 441 (1961), the rule was recognized, but that case was controlled by the law of New York.

Turning to other jurisdictions we find that a large majority of the states have adopted the rule. "The great weight of authority recognizes a direct enforceable right, both at law and in equity, arising from a contract promising performance for either of the first two types of beneficiaries — the donee beneficiary and the creditor beneficiary * * *." 2 Williston, Contracts § 356 (3d ed. Jaeger 1959).³ Restatement Contracts §§ 133-147 (1932) also recognizes the rule, and it has been said that the Restatement "is entitled to particular respect when authorities are in conflict * * *." Bailey v. Zlotnick, 80 U. S.App.D.C. 117, 118, 149 F.2d 505, 506 (1945). We perceive no reason why this jurisdiction should not adopt the rule followed by the majority of jurisdictions in this country.

In Nash Engineering Co. v. Marcy Realty Corporation, 222 Ind. 396, 54 N.E. 2d 263 (1944), it was held that Article 9, as quoted above, afforded unnamed materialmen a remedy as third party beneficiaries against the contractor. As the Maryland court stated in a case reaching a similar result under the same provisions:

"We find the obligation assumed by the general contractor in the case before us was just what he wrote that

it would be, read literally, namely, to pay for all of the materials necessary for the doing of the job." Kirby v. Board of Ed. of Cecil County, 210 Md. 383, 123 A.2d 606, 610 (1956).

Save for the fact that materials were furnished rather than labor, in both the cases cited the plaintiffs stood in precisely the same position vis a vis the contractor as the appellee here. It follows that appellee is entitled to recover for the work it performed, and the judgment against Spencer, White & Prentis is, accordingly,...