Harris v. Board of Water and Sewer Com'rs of City of Mobile

• Decision Date: 10 July 1975
• Citation: 320 So.2d 624,294 Ala. 606
• Parties: Cliff B. HARRIS v. The BOARD OF WATER AND SEWER COMMISSIONERS OF the CITY OF MOBILE, a Public Corporation. SC 851.
• Court: Alabama Supreme Court

Page 624

320 So.2d 624

294 Ala. 606

Cliff B. HARRIS v. The BOARD OF WATER AND SEWER COMMISSIONERS OF the CITY OF MOBILE, a Public Corporation.

SC 851.

Supreme Court of Alabama.

July 10, 1975.

As Corrected on Denial of Rehearing Oct. 2, 1975.

Conrad & Hammond, Mobile, for appellant.

Gaillard, Wilkins, Smith, Little & Druhan, Mobile, for appellee.

JONES, Justice.

This appeal results from the trial Court's granting of The Board of Water and Sewer Commissioners of Mobile's (defendant-appellee) motion to dismiss Cliff Harris's (plaintiff-appellant) two-count amended complaint.

Harris, a resident and taxpayer of Mobile, owned and operated a motel and restaurant in Mobile County. The Board is a public corporation organized pursuant to Tit. 37, § 402(28--46), Code of Alabama 1940 (Recomp. 1958). By virtue of a contract with the City of Mobile, the Board is charged exclusively with the water and sewer system responsibilities for Mobile County. As part of its contractual obligation to the City, the Board is to provide fire hydrants and to maintain an adequate supply of water for the proper functioning of those hydrants.

On August 28, 1971, Harris's motel and restaurant caught fire; and firemen, according to the complaint, were unable to extinguish the fire because the hydrants were dead (dry). Consequently, the motel and restaurant were totally destroyed.

Harris's amended complaint, alleged, inter alia:

(1) The defendant had the exclusive contract for water distribution with the City of Mobile, who acts as an agent for all of its taxpaying citizens.

(2) In said contract, defendant agreed to provide water and fire protection and properly functioning fire hydrants.

(3) It breached this contract in that it caused or allowed an inadequate water supply to exist in the fire hydrant closest to plaintiff's property, and, as a direct and proximate result of said breach, plaintiff's motel and restaurant were needlessly destroyed by fire.

(4) The defendant negligently maintained the fire hydrant which caused the water failure in the hydrant; and, as a direct and proximate cause of this negligence, city firemen were unable to contain the blaze which resulted in the loss of plaintiff's property.

Two issues confront us:

(1) Is there sufficient privity of contract between Harris and the Board to allow his cause of action to lie for breach of contract?

(2) Whether the Board, a public corporation, enjoys the traditional defense of sovereign on governmental immunity, and thus incurs no liability for its failure to maintain an adequate water supply in the hydrants?

We reverse the order of dismissal entered by the trial Court. We hold that the Board does not now enjoy such immunity and there is sufficient privity to allow the contract action. We remand this cause for further proceedings not inconsistent with this opinion.

I. Count One: Breach of Contract

As to the existence vel non of privity of contract, this Court has twice held that the property owner cannot maintain an action against a water company for the loss of property proximately resulting from its failure to provide sufficient water or water pressure for fire purposes, as is required by its contract with the municipality--there being a want of privity between such property owner and the water company. Ellis v. Birmingham Water Works Company, 187 Ala. 552, 65 So. 805 (1914); Lovejoy v. Bessemer Waterworks Company, 146 Ala. 374, 41 So. 76 (1906).

At this point, we note that through the years there has been a substantial degree of confusion as to the distinction in these situations (if, indeed, such distinction exists) between the requirements that a party be in privity of contract or be a third party beneficiary to the contract. See Murray, Murray On Contracts, § 278 (1974). This distinction was clearly delineated by Justice Stone in La Mourea v. Rhude, 209 Minn. 53, 295 N.W. 304, 306 (1940):

'Many cases dealing with recovery by a third party beneficiary have also required and discussed the element of privity as prerequisite to recovery. Those dealing with promises to a public corporation for the benefit of its citizens have found that factor in the 'obligation to protect its inhabitants' resting on a governmental unit in making public contracts . . . Under the rule as we view it, such obligation is immaterial. Privity, in the law of contracts, is merely the name for a legal relation arising from right and obligation. For example, A, by contract, secures a promise from B. A may transfer his right of enforcement to C. C thereby succeeds to A's right of action, and, in consequence, comes into the relationship with A and B which we call privity of contract. Instead of waiting to do it by assignment, A may, at the outset, exact from B the same promise in favor of C. It is enforceable by C, who thereby has come directly into the legal relationship with B. That illustrates the normal course of things resulting in privity of contract, which is but a descriptive term, designating effect rather than cause. In short, privity of contract is legal relationship to the contract or its parties. To affirm one's right under a contract is therefore to affirm his privity with the party liable to him.

'That simple truth removes the difficulty arising from the complicated notions expressed by judges and text writers concerning privity of contract. The term has been much misused. In consequence, we have the process referred to by Judge Cardozo in Ultramares Corp. v. Touche, 255 N.Y. 170(180), 174 N.E. 441, 445, 74 A.L.R. 1139, when he said: 'The assault upon the citadel of privity is proceeding in these days apace. How far the inroads shall extend is now a favorite subject of juridical discussion.' Mr. Page, in respect to the right of a beneficiary of a contract, asserts that the true explanation is that no privity is necessary between beneficiary and promissor. 4 Page, Law of Contracts, 2d Ed. 1920, p. 4211, § 2388. It is said, concerning the right of a beneficiary to recover: 'The very essence of the American rule is that such privity is not necessary.' Annotation, 81 A.L.R. 1289. The truth is, says Mr. Williston, 'that through this travail (of the conflicting notions of judges and text writers) the common law has given birth to a distinct, new principle of law which takes its own place in the family of legal principles, and gives not only to a donee beneficiary, but also to a creditor beneficiary, the right to enforce directly the promise from which he derives his interest.' 2 Williston, Contracts, Rev.Ed., § 357, p. 1049.

'Our submission is that all such discussion (including this) has no more Alabama law is clear to the effect that one for whose benefit a valid contract has been made, although that person is not a party thereto and does not furnish any consideration therefor, may maintain an action on the contract against the promissor. Anderson v. Howard Hall Company, 278 Ala. 491, 179 So.2d 71 (1965); Mutual Benefit Health & Accident Association of Omaha v. Bullard, 270 Ala. 558, 120 So.2d 714 (1960); Tennessee Coal, Iron & Railroad Co. v. Sizemore, 258 Ala. 344, 62 So.2d 459 (1952); Employers Ins. Co. of Alabama v. Rhodes, 240 Ala. 226, 198 So. 616 (1940); Employers Ins. Co. of Alabama v. Johnston, 238 Ala. 26, 189 So. 58 (1939); Barlowe v. Employers Ins. Co. of Alabama, 237 Ala. 665, 188 So. 896 (1939). The only condition being that the third person must have been intended to be directly and not incidentally benefited. Anderson v. Howard Hall Company, supra; Brown v. Fogarty, 221 Ala. 283, 128 So. 376 (1930).

than academic value because, the beneficiary's right to recover established, with the resulting obligation of the promissor in his favor, there arises the relation we call privity. Anyway, privity or no privity, the overwhelming weight of authority and the entire weight of all [294 Ala. 611] inherent factors of the problem speak for recovery by this beneficiary.'

The third party beneficiary rule has also been the basis of recovery under similar factual situations in other jurisdictions. Royal Indemnity Co. v. City of Erie, 326 F.Supp. 571 (W.D.Pa.1971); Doyle v. South Pittsburgh Water Company, 414 Pa. 199, 199 A.2d 875 (1964); Potter v. Carolina Water Company, 253 N.C. 112, 116 S.E.2d 374 (1960); Pineville Water Company v. Bradshaw, 266 S.W.2d 305 (Ky.1953).

In our present situation, how can it be said that Harris is not the very party for whose benefit the contract was made? We agree that the City itself enjoys some degree of direct benefit from their contract with the Board since its own property is protected. But, in the end, the most direct benefit inures to the people of the City, like Harris, who rely on these city-provided services for the protection of their property. This is not to say that the Board is an insurer against all fire losses, but it should be answerable to all those who are injured by its breach of the contract to supply water or its negligent maintenance of nonfunctioning fire hydrants where damage results proximately therefrom. We find that the facts alleged are sufficient to show that benefits of the contract in question flow to Harris, and thus make him a third-party beneficiary entitled to sue on the contract for its breach.

II. Count Two: Negligent Maintenance

The negligence count, though based in tort rather than contract, is also an acceptable ground under which Harris may elect to sue the Board. As set forth in Tennessee Coal, Iron & Railroad Co. v. Sizemore, supra, 258 Ala. at 349, 62 So.2d at 463:

'A complaint for the breach of a contract in not performing the obligation there expressed, or not doing it in the way specified, is not in tort, and cannot be unless the non-performance is by reason of a failure to exercise the care required by law in attempting to perform If defendant omits to enter upon the duty to perform, however negligent that might be, that is not a negligent performance and not a tort. But if he does undertake...