Howell v. Worth James Const. Co.
| Decision Date | 26 April 1976 |
| Docket Number | No. 75--367,75--367 |
| Court | Arkansas Supreme Court |
| Parties | Robert HOWELL and Tall Timber Development Corporation, Appellants, v. WORTH JAMES CONSTRUCTION COMPANY, Appellee and Cross-Appellant. |
Spitzberg, Mitchell & Hays by Beresford L. Church, Jr., Little Rock, for appellant Tall Timber Development Corp.
Smith, Williams, Friday, Eldredge & Clark, Little Rock, for Worth James Construction Co.
The appellant Tall Timber Development Corporation is the owner and developer of Tall Timber subdivision. In March, 1973, Tall Timber Development Corporation entered into a contract with the appellee Worth James Construction Company. Pursuant to this contract, the appellee constructed water and sewer lines for the subdivision. The appellee was fully paid the contract price of $363,672.22. In October, 1973, the appellant Tall Timber entered into a separate contract with appellant Howell (who does not favor us with a brief) under which Howell did the trenching for the installation of the underground power cables for the subdivision. The appellee brought suit against both appellants for damages in the sum of $8,961.88 which it allegedly suffered as a result of broken water lines in the course of Howell's trenching operations. The trial court, sitting as a jury, awarded judgment against both appellants, jointly and severally, in the amount of $7,000, holding, inter alia, that:
By so providing in its contract, the owner became in effect the bonding company for Howell and is liable to the plaintiff as one of the utility contractors which was intended to be protected by the provision in its contract requiring the retainage of 40% of the contract price. * * * This judgment shall also be against Tall Timber Development Corporation on the basis that its president, John D. 'Doug' Toney, made a verbal assurance to the plaintiff on May 28, 1974, that it would stand behind Robert Howell.
Appellant Tall Timber first argues for reversal that the trial court erred in holding that it was liable to appellee by virtue of the provisions of its contract with Howell. That contract provides in pertinent part:
Performance Bond Provisions as set out in paragraph 4 or any other part of this contract is hereby waived provided the owner shall retain 40% of any amounts due contractor until all damages, if any, to other utility lines have been repaired and installation accepted by Arkansas Power & Light Company. Then, owner shall release to contractor all of the retainage except 10% which shall be retained by the owner until the installation has been accepted by all appropriate governmental and utility agencies, at which time the 10% shall be paid to the contractor.
Appellant Tall Timber asserts that apparently the trial court's holding was based on a third-party beneficiary theory and argues that there is absolutely nothing in the record to indicate that the quoted provision was intended by either party to the contract, Tall Timber or Howell, to benefit the appellee or anyone else other than the contracting parties. Also there was no provision for payment by Tall Timber to any damaged utility contractor or any other person and there was no existing obligation from Howell to the appellee at the date of the contract. Tall Timber argues further that the clear intent of the provision was to protect it, not some third party like the appellee. We cannot agree with appellants' contentions.
It is true, as Tall Timber asserts, the presumption is that parties contract only for themselves and a contract will not be construed as having been made for the benefit of a third party unless it clearly appears that such was the intention of the parties. Walker v. Wittenberg, Delony & Davidson, Inc., 242 Ark. 97, 412 S.W.2d 621 (1967). In the case at bar, there is substantial evidence that it was the clear intention of the parties to contract for the benefit of appellee and that appellee was a beneficiary of their contract. We have repeatedly held that a contract made for the benefit of a third party is actionable by such third party. Freer v. J. G. Putman Funeral Home, Inc., 195 Ark. 307, 111 S.W.2d 463 (1937); Spears Mining Co. v. Shinn, 93 Ark. 346, 124 S.W. 1045 (1910); and H. B. Deal & Co., Inc., v. Head, 221 Ark. 47, 251 S.W.2d 1017 (1952). See Restatement, Contracts, § 135. Also Comment, Enforceability of Third-Party Beneficiary Contracts in Arkansas, 5 Ark.L.Rev. 66 (1950--51). In Freer, supra, we said:
The intentions of the parties, so far as these may be determined, may be examined to gain understanding of the meaning of the parties by the language employed, and their conduct in relation thereto may help to clarify what might otherwise be doubtful.
In 17 Am.Jur.2d, § 314, it is said:
It is not essential, in order to enable a third person to recover on a contract made and intended for his benefit, that he knew of the contract at the time it was made. The fact that he did not act upon the faith of, or in reliance upon, the contract does not defeat his recovery.
In Carolus v. Arkansas L&P Company, 164 Ark. 507, 262 S.W. 330 (1924), we said:
Where, from the language of the contract itself, or the testimony aliunde, it could be said that it was the intention of the parties to the contract to confer a direct benefit upon a third person, then such person may sue on the contract. It is not necessary that the person be named in the contract, if he is otherwise sufficiently described or designated, he may be one of a class of persons if the class is sufficiently described or designated.
Here the contract provides that Tall Timber will retain 40% of any amount due Howell until all damages to other utility lines have been repaired. By the terms of the contract, Tall Timber agreed to waive performance bonds for Howell and in effect became the surety for Howell. Clearly, the intent of the retainage provision of the Tall Timber-Howell contract was to provide bonding for Howell for damages he might cause to other utility lines. Therefore, it could logically be found that appellee Worth James is a third party beneficiary for whom this provision was specifically designed. This result is also buttressed by the testimony of a witness that the president of Tall Timber assured appellee that 'as far as he was concerned that Howell was their contractor and they would stand behind him.'
Since we hold the trial court's finding, that Tall Timber is jointly liable to a...
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