Fasse v. Lower Heating and Air Conditioning, Inc.

• Decision Date: 01 May 1987
• Docket Number: No. 59997,59997
• Citation: 736 P.2d 930,241 Kan. 387
• Parties: , 28 Wage & Hour Cas. (BNA) 412, 10 A.L.R.5th 993 Dean FASSE, Appellee, v. LOWER HEATING AND AIR CONDITIONING, INC., Appellant.
• Court: Kansas Supreme Court

Page 930

736 P.2d 930

241 Kan. 387, 28 Wage & Hour Cas. (BNA)

412, 10 A.L.R.5th 993

Dean FASSE, Appellee, v. LOWER HEATING AND AIR CONDITIONING, INC., Appellant.

No. 59997.

Supreme Court of Kansas.

May 1, 1987.

Syllabus by the Court

1. Where a person makes a promise to another for the benefit of a third person that third person may maintain an action to enforce the contract even though he had no knowledge of the contract when it was made and paid no part of the consideration.

2. Both K.S.A. 44-201 and the Davis-Bacon Act (40 U.S.C. § 276a et seq. [1982] were enacted not for the benefit of contractors but to protect employees by fixing a floor under wages on public projects.

3. Courts do not require explicit statutory authorization for familiar remedies to enforce statutory obligations. When the legislature has left the matter at large for judicial determination, the court's function is to decide what remedies are appropriate in light of the statutory language and purpose and the traditional modes by which courts compel performance of legal obligations.

Stewart L. Entz, of Entz, Anderson and Chanay, of Topeka, argued the cause and Jeffrey A. Chanay, of the same firm, was with him on the brief for appellant.

Thomas H. Marshall, of Blake and Uhlig, P.A., of Kansas City, argued the cause and Michael T. Manley, of the same firm, was with him on the brief for appellee.

LOCKETT, Justice:

The plaintiff, Dean Fasse, brought this action for additional wages due him and 15 other former employees of the defendant, Lower Heating and Air Conditioning, Inc., (Lower). Fasse contends he is the intended third party beneficiary of a construction contract entered into between Lower and Washburn University. The trial court entered judgment for the plaintiff, and Lower appealed. We affirm.

Lower entered into a construction contract with Washburn University to perform the mechanical work on the Allied Health Center building on the Washburn campus. An addendum to the contract provided that Lower must comply with provisions of K.S.A. Chapter 44, Labor and Industries, and in particular the provisions of K.S.A. 44-201. The addendum, which included 44-201 in its entirety, concluded:

"The 'current rate of per diem wages,' for purposes of this project, shall be defined as and synonymous with the required wages and benefits for each job classification in federal and federally assisted construction projects in Shawnee County, Kansas as determined by the Secretary of Labor of the United States Government, pursuant to the Davis-Bacon Act, (42 U.S.C. 276a et seq.), current and effective upon the date of execution of the contract."

Lower began working on the project in June of 1982. During the construction, questions were raised concerning the wages being paid on the project. Representatives of Washburn met with Lower and others regarding the wages. At this meeting, Lower produced a document reflecting the wage scales paid employees on the construction project. Subsequently, Kenneth Hackler, attorney for Washburn, wrote a letter to Lower stating that, while the labor unions and the contractors each construed the effect of Addendum No. 1 differently, the university would not interpret the contract because contract construction was a function of the court.

Lower continued to pay the wages set forth in the schedule. Plaintiff filed this action alleging that, as an intended third party beneficiary under the contract, he was to be paid wages as set by the Davis-Bacon Act (40 U.S.C. § 276a et seq. [1982].

The trial court determined that Lower had violated the terms of the contract by failing to pay the "current rate of per diem wages" as provided in the contract addendum. After taking judicial notice of the Davis-Bacon wage scale published in the Federal Register, the trial court ordered Lower to pay the difference between the wages actually paid and the wages required under Davis-Bacon, plus prejudgment interest. Lower appeals.

Lower contends that neither the Kansas and federal wage and hour laws nor the contract intend that the workers should be third party beneficiaries. Prior to examining the applicable state and federal law and the contract, we must determine who are third party beneficiaries.

Generally, where a person makes a promise to another for the benefit of a third person, that third person may maintain an action to enforce the contract even though he had no knowledge of the contract when it was made and paid no part of the consideration. Anderson v. Rexroad, 175 Kan. 676, 266 P.2d 320 (1954); Burton v. Larkin, 36 Kan. 246, 13 Pac. 398 (1887). But it is not everyone who may benefit from the performance of a contract between two other persons, or who may suffer from its nonperformance, who is permitted to enforce the contract by court action. Beneficiaries of contracts to which they are not parties have been divided into three classes: Donee beneficiaries, creditor beneficiaries, and incidental beneficiaries. Only those falling within the first two classes may enforce contracts made for their benefit. 17A C.J.S., Contracts § 519(4)b, p. 964; accord Burton v. Larkin, 36 Kan. 246, 13 Pac. 398. In more recent analyses of third party beneficiary law, beneficiaries have been divided into two general classes--intended beneficiaries and incidental beneficiaries. Third party beneficiaries are discussed in 2 Williston on Contracts, § 356 (3d ed. 1959).

To be a third party beneficiary to a contract, the contract must be made for the third party's benefit as its object, and he must be the party intended to be benefited in order to be entitled to sue upon it. Burton v. Larkin, 36 Kan. 246, 13 Pac. 398. The third-party beneficiary can enforce the contract if he is one who the contracting parties intended should receive a direct benefit from the contract. Contracting parties are presumed to act for themselves and therefore an intent to benefit a third person must be clearly expressed in the contract. Ronnau v. Caravan International Corporation, 205 Kan. 154, 159, 468 P.2d 118 (1970). It is not necessary, however, that the third party be the exclusive beneficiary of all the promisor's performance. The contract may also benefit the contracting parties as well. Martin v. Edwards, 219 Kan. 466, 473, 548 P.2d 779 (1976); 17 Am.Jur.2d, Contracts § 306, pp. 731-32; 17A C.J.S., Contracts § 519(4)f, p. 983.

K.S.A. 44-201 requires contractors employing workers, laborers, or mechanics on public construction projects in Kansas to pay not less than the "current rate of per diem wages" in the locality where the work is to be performed. It also requires that all contracts made by or on behalf of the State of Kansas or any governmental subdivision, which involve the employment of laborers, workers, or mechanics, contain provisions requiring the payment of per diem wages for services on the project.

Under K.S.A. 44-201, the "current rate of per diem wages" is the "rate of wage paid in the locality" to workers in the same trade or work of a similar nature. The statute sets a floor below which wages paid by contractors on public projects may not fall. Andersen Construction Co. v. City of Topeka, 228 Kan. 73, 612 P.2d 595 (1980).

The Davis-Bacon Act, originally passed in 1931, 40 U.S.C. § 276a et seq. (1982), requires the Secretary of Labor to determine the minimum wages to be paid laborers and mechanics employed by contractors on federal or federally funded construction projects. Under published regulations, the Secretary compiles wage rate information, determines the prevailing wage scales, and publishes them periodically in the Federal Register. Davis-Bacon wages must be paid by all contractors on state and local construction projects when any federal financial assistance is utilized.

The Act directs the Secretary to determine not only the hourly wage but the prevailing fringe benefit payments as well. Section 276a(b) defines "minimum wages" to include both the employee's basic hourly rate of pay and the amount paid by the contractor in fringe benefits. Fringe benefits include medical insurance, pension benefits, unemployment benefits, life insurance, disability or accident insurance, vacation and holiday pay, workers' compensation insurance, and apprenticeship and training programs or "other bona fide fringe benefits."

The Secretary of Labor has established two different types of wage determinations under the Act. The first type of determination is made when a federal agency awards a contract and requests the Secretary to determine the prevailing wage. The Secretary then determines wages for the work classifications involved and issues a determination for that particular project. See 29 C.F.R. § 1.5(a) (1986). The second type of determination is made by the Secretary for a particular area where large amounts of construction may be expected. These determinations are published, and once published, a contracting agency may use them without further notifying the Department of Labor. See 29 C.F.R. § 1.5(b).

For purposes of the Davis-Bacon Act wage scales, Kansas is divided into five wage areas. Ritchie Paving, Inc. v. Kansas Dept. of Transportation, 232 Kan. 346, 348, 654 P.2d 440 (1982). At trial in the present case, the plaintiff presented evidence showing that an area wage determination was prepared by the Department of Labor for the Shawnee County area. This area wage determination at the time that Washburn and Lower contracted was contained in Exhibit No. 5, which Kenneth Hackler, Washburn legal counsel, testified he had determined was the most recent wage determination for the Shawnee County area.

Both K.S.A. 44-201 and the Davis-Bacon Act were enacted not for the benefit of contractors but to protect employees by fixing a floor under wages on public projects. Andersen Construction Co. v. City of Topeka, 228 Kan. at 81, 612 P.2d 595. K.S.A. 44-201 clearly intends that for each day a worker labors on a contract covered by the statute,...