Just's, Inc. v. Arrington Const. Co.

• Citation: 583 P.2d 997,99 Idaho 462
• Decision Date: 30 June 1978
• Docket Number: No. 12078,12078
• Parties: JUST'S, INC., a corporation, Plaintiff-Appellant, v. ARRINGTON CONSTRUCTION COMPANY, INC., a corporation, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 997

583 P.2d 997

99 Idaho 462

JUST'S, INC., a corporation, Plaintiff-Appellant, v. ARRINGTON CONSTRUCTION COMPANY, INC., a corporation, Defendant-Respondent.

No. 12078.

Supreme Court of Idaho.

June 30, 1978.

Rehearing Denied Oct. 4, 1978.

C. Timothy Hopkins and Gregory L. Crockett, of Hopkins & French, Idaho Falls, for plaintiff-appellant.

Terry L. Crapo, of Holden, Holden, Kidwell, Hahn & Crapo, Idaho Falls, for defendant-respondent.

BAKES, Justice.

In 1972 defendant respondent Arrington Construction Company and the City of Idaho Falls entered into a contract for the renovation of a five and one-half block portion of the downtown Idaho Falls business area in accordance with Project No. 4B-42, of Local Improvement District (LID) No. 42. The work to be done included the removal and replacement of all streets and sidewalks; the location, removal and replacement of all sewer and water lines; the removal and replacement of electrical services; the removal and replacement of light and traffic control systems; and the addition of trees, shrubs, and other beautification devices. The contract required the defendant to take certain precautions to limit the disruption to the businesses within the area to be renovated. The plaintiff appellant Just's, Inc., operated a retail business in leased premises located within the renovation area.

The plaintiff brought this action alleging in Count I of its complaint that it was a third party beneficiary of the contract and that its business had been damaged by the defendant's failure to complete the project in a timely manner and to provide continuous access to plaintiff's business as required by the terms of the contract. The second count of the complaint alleged similar damage because of the defendant's negligent performance of the contract. The district court initially denied the defendant's motion to dismiss Count I, ruling that the plaintiff was a third party beneficiary of the contract. However, when the district court later learned that the plaintiff was a lessee and not an owner of property within the LID, it dismissed Count I. After denying defendant Arrington's motion for summary judgment on Count II, the negligence issue was tried to a jury, which returned a verdict in favor of the defendant. On appeal, plaintiff assigns as error the dismissal of Count I of its complaint, and as to the trial of Count II, the refusal to admit certain items into evidence and the giving of certain jury instructions.

I

Absent a manifested intent to the contrary, construction contracts between a contractor and a public body are not generally considered as being for the benefit of third parties, but as being for the benefit of the public entity in the performance of its public duties and the contractor. Davis v Nelson-Deppe, Inc., 91 Idaho 463, 424 P.2d 733 (1967) (highway construction contract). However, if the provisions of a contract additionally express an intention to benefit third parties, the fact that a public body is a party to the contract does not Ipso facto deny such intended third party beneficiaries the right to enforce the terms of the contract. See, e. g., Bush v. Upper Valley Telecable Co., 96 Idaho 83, 524 P.2d 1055 (1974); Yellowstone Pipe Line Co. v. Grant Construction Co., 95 Idaho 794, 520 P.2d 249 (1974). The ascertainment of the contracting parties' intent requires a careful review of the contract documents and the circumstances surrounding the contract's formation. Stewart v. Arrington Construction Co., 92 Idaho 526, 446 P.2d 895 (1968).

The test which must be satisfied before a third party may enforce the terms of a contract between a private contractor and a public body was clearly set forth in the Arrington case:

"In order to recover as a third party beneficiary, it is not necessary that the individual be named and identified as an individual although that is usually sufficient; a third party may enforce a contract if he can show he is a member of a limited class for whose benefit it was made. (Citation omitted). The class may be limited either by a narrow description of the injuries to be guarded against and the damages to be paid (citation omitted), or by a similar description of the class to be protected. (Citations omitted)." 92 Idaho at 532, 446 P.2d at 901 (1968).

Application of this test to the instant case raises two issues: (1) Was the contract between the City of Idaho Falls and the defendant, particularly the provisions requiring the defendant to take specified measures to lessen the disruption to the businesses in the area, for the benefit of a limited class? (2) If so, is the plaintiff a member of that class?

II

At the outset it is important to note that the contract involved in this case is not the typical public works contract, but a contract for the construction of improvements in a local improvement district (LID). Improvements made pursuant to an LID are generally financed in whole or in part by special assessments imposed on the property within the district and benefited by the improvements. See I.C. § 50-1717 (repealed in 1976). See generally, Butler v. City of Blackfoot, 98 Idaho 854, 574 P.2d 542 (1978). Though not precisely stated, it is evident from the affidavit of Charles J. Just, president and chief executive officer of the plaintiff, that special assessments for the expenses of the improvements made pursuant to this contract have been or will be levied against the property which the plaintiff leases and that "through the provision of its lease, currently being renegotiated, (plaintiff) will be paying the expenses of such improvements directly."

The essence of the theory justifying special assessments in connection with an LID as a means of financing all or part of such public improvements is that the improvements confer special benefits to the property within the LID. This principle has been summarized as follows:

"Laws recognize a distinction between public improvements which benefit the entire community, and those local in their nature which benefit particular real property or limited areas. The property benefited is usually required to pay the expense of the latter. A local improvement is a public improvement which, although it may incidentally benefit the public at large, is made primarily for the accommodation and convenience of the inhabitants of a particular locality, and which is of such a nature as to confer a special benefit upon the real property adjoining or near the improvement." 14 E. McQuillin, The Law of Municipal Corporations § 38.11 (3d ed.rev.vol.1970).

"The foundation of the power to lay a special assessment or a special tax for a local improvement of any character . . . is the benefit which the object of the assessment or tax confers on the owner of the abutting property, or the owners of property in the assessment or special taxation district, which is different from the general benefit which the owners enjoy in common with the other inhabitants or citizens of the municipal corporation. . . .

"Special assessment or special taxation, therefore, is lawful and constitutional only when founded upon special benefits accrued from the improvement for which the tax or assessment is laid." Id., § 38.02.

Accord, C. Rhyne, Municipal Law, § 29-3 (1957). If the improvements in this 5 1/2 block area were intended primarily for the benefit of the general public and only incidentally for the benefit of downtown businessmen such as the plaintiff, the city could not have financed these improvements by means of an LID and special assessments.

The extent to which the property owners within the LID may control the creation and termination of the district further supports the conclusion that the improvements were intended primarily for the benefit of those within the LID. The Idaho statutes applicable to this case provided that 60% Of the "resident owners" of property within the LID could cause its creation, I.C. § 50-1711 (repealed in 1976), and that protests by more than 2/3 of the property owners within the LID would halt all work within the district unless a 3/4 majority of all the members of the city council voted in favor of its continuance. I.C. § 50-1715 (repealed in 1976).

In order to finance improvements by means of special assessments in connection with an LID, the law requires that the improvements constitute a direct and special benefit to the property within the district, not merely an incidental benefit shared by the general public. Members of an LID have unique statutory rights regarding the initiation and termination of the LID and the construction of the improvements, rights not shared by the general public. The property within the LID, not the city or the general public, will be directly liable for the special assessments imposed to finance the construction of the improvements. I.C. § 50-1730 (repealed in 1976); Hughes v. Village of Wendell, 47 Idaho 370, 275 P. 1116 (1929). Accordingly, the subject matter of this contract improvements made pursuant to an LID project is a factor, though not controlling, in determining whether the contract was intended for the benefit of a limited class of third parties.

III

The parties included among the special provisions of the contract the following terms:

"DUST ABATEMENT

"The Contractor shall continuously and conscientiously take whatever action is necessary to eliminate any dust problems created by his work or operations on the project. This continuous and conscientious dust abatement action is to include sprinkling the excavation piled along the trench(es), sweeping and sprinkling the streets, and any other such related work needed to eliminate the dust problem.

"BUSINESS ACCESS

"The Contractor shall keep the Businesses within the project area continuously advised of his proposed schedule of operations. Access to and from the Various businesses shall be continuously and courteously provided. Movable pedestrian bridges, sturdily constructed and with...