Montgomery v. Spencer

• Decision Date: 13 October 1897
• Docket Number: 824
• Citation: 15 Utah 495,50 P. 623
• Court: Utah Supreme Court
• Parties: NATHANIEL MONTGOMERY, RESPONDENT, v. RIEF, SPENCER AND DEE, APPELLANTS

50 P. 623

15 Utah 495

NATHANIEL MONTGOMERY, RESPONDENT, v. RIEF, SPENCER AND DEE, APPELLANTS

No. 824

Supreme Court of Utah

October 13, 1897

Appeal from the Second district court, Weber county. Ogden Hiles Judge.

Action by Nathaniel Montgomery against Anton Rief and others. From a judgment for plaintiff, defendants Hiram Spencer and Thomas Dee appeal.

Reversed and remanded.

Evans &amp Rogers and Moyle, Zane & Costigan, for appellants.

Richards & Macmillan and A. E. Pratt, for respondent.

That Spencer and Dee were liable to material men by the terms of the bond, see: Shamp v. Myer, 20 Neb. 223; Cooper v. Foss, 15 Neb. 515; Stewart v Snelling, 15 Neb. 502; Sample v. Hale, 34 Neb. 220.

The court erred in sustaining the demurrer. Lyman v. City of Lincoln, 57 N.W. 532-3; Barker v. Bryan (Iowa) 21 N.W. 83.

In this country, the preponderance of authority is to the effect that a plaintiff may bring suit on a simple contract to which he is not a party when it contains provision for his benefit. 2 Wharton on Contracts, sec. 785; See note to Linemann v. Morriss, 39 Am. St. 531-2-3; Mann v. Corrigan, 28 Kan. 141; Merriman v. Moore, 90 Pa. St. 78; Society of Friends v. Haines, 25 N.E. 119; Lawrence v. Fox, 20 N.Y. 268; Burr v. Beers, 24 N.Y. 178; Hendrick v. Lindsay, 93 U.S. 143; 1 Pars. Cont. (8 ed.) 468; Kaufman et al. v. U. S. Bank, 48 N.W. 738; Miliani v. Rognini, 19 Nev. 133; Ruhling v. Hackell, 1 Nev. 360; Alcada v. Morales, 3 Nev. 132; Bishop v. Stewart, 13 Nev. 25; Baker et al. v. Elgin, 8 P. 280 and note; Snyder v. White et al., 8 P. 652; Ehow v. Simonton et al., 3 Colo. 348; Follansbe v. Menage et al., 9 N.W. 838 and cases; Pomeroy's Code Remedies, secs. 139-140; 1 Rapalje's Dig. Am. Dec. p. 280, pars. 5-6; 1 Rapalje's Dig. Am. Dec. p. 852, pars. 158-159; Notes to 43 Am. Dec. 739; Notes to 35 Am. Dec. 621-624; Notes to 92 Am. Dec. 349; Todd v. Weber, 95 N.Y. 184; 4 Am. and Eng. Enc. of Law, (2 ed.) p. 651, sec. 4, Beneficial Obligees and note 2, p. 652 and cases; Wright v. Terry, 2 So. Rep. 10, see note; Jeffries v. Myers, 9 Ind.App. 563; Fatout v. Board, 102 Ind. 223.

BARTCH, J. ZANE, C. J., and MINER, J., concur.

OPINION

BARTCH, J.:

This is an action on a bond, brought against Rief, as principal, and Spencer and Dee, as sureties, to recover the sum of $ 2,576.69. It appears from the complaint that Rief was the original contractor for the erection of the building for the Agricultural College of Utah; that he executed an agreement with the trustees of the college to erect the building, and, with the appellants as bondsmen, executed and delivered to the trustees a bond for the faithful performance of his contract; that one William Bailey furnished certain material for the construction of the building; and that, after a portion of his claim for materials had been paid him, Bailey assigned the balance thereof to the plaintiff, which, upon the default of the contractor, the sureties refused to pay. The defendants Spencer and Dee demurred to the complaint on the ground that it did not state a cause of action. The demurrer was overruled, whereupon they answered, and the cause was tried, and judgment rendered in favor of the plaintiff in the sum of $ 2,231.13. This appeal is from the judgment.

The demurrer raised the question whether, under the contract and bond, the obligations of the sureties extended to persons who furnished material for the construction of the building. It may be observed that the respondent claims no liability by virtue of any statute, but relies solely on the terms of Rief's contract and bond. The contract was executed for the erection of a public building. It provided, inter alia, that Rief should furnish all the material and perform the labor necessary to complete the building according to the plans and specifications furnished by Thompson & Wiegel, architects, and turn the same over to the trustees ready for use, with the exception of the steam heating; that the contract price was to be $ 71,000, which he was to receive in partial payments, from time to time, as the work progressed, based upon estimates to be furnished by the architects or superintendent, showing the value of the material and labor in the building, less 20 per centum thereof; that at the completion of the building the 20 per centum of the contract price should not be due and payable until 10 days after the completion of the work, and then "only in the event that there shall be no liens or incumbrances upon said property for labor done or materials furnished by or through said party of the second part"; that Rief should furnish a bond for the faithful performance of his contract; and that upon the completion of the work, and its acceptance by the trustees, at any time when Rief should show to the satisfaction of the trustees, "by the production of pay rolls, receipts, and releases, that all labor performed and materials furnished" by or through Rief had been fully paid for, "the retained twenty per centum" should be due and payable. The bond was made to "the territory of Utah, for the use and benefit of the Agricultural College." Such are the provisions relied upon by the respondent in this case. As will be observed upon examination, neither in the contract nor bond is the name of the plaintiff or of his assignor mentioned. Nor is there any express covenant which expressly requires the contractor to pay material men and laborers for their material and labor before turning over the building to the trustees, and discharging his bondsmen; and yet, in support of the ruling and judgment of the court below, the respondent invokes the doctrine of those cases in which a promise to one person, for the benefit of another, has been enforced at the suit of the latter. This doctrine, although originally an exception to the rule that, to enable a party to sustain an action upon a contract, it must be a contract between the parties, has become so far-reaching in its application and consequences that, within certain limitations, it has become recognized as an affirmative rule. It would be useless, however, to attempt to reconcile the cases upon the doctrine and the application of the rule. This question has been the subject of much controversy in the courts, and as a result the prevailing doctrine in this country, as shown by the weight of authority, doubtless is that, where a promise or contract has been made between two parties for the benefit of a third, an action will lie thereon at the instance and in the name of the party to be benefited, although the promise or contract was made without his knowledge, and without any consideration moving from him. Pars. Cont. 467; Hendrick v. Lindsay, 93 U.S. 143, 23 L.Ed. 855; Lawrence v. Fox, 20 N.Y. 268; Howsmon v. Water Co., 119 Mo. 304, 24 S.W. 784; Ellis v. Harrison, 104 Mo. 270, 16 S.W. 198; AEtna Nat. Bank v. Fourth Nat. Bank, 46 N.Y. 82; Sayward v. Dexter, Horton & Co., 19 C. C. A. 176; Linneman v. Moross, 39 Am. St. Rep. 528; Miliani v. Tognini, 19 Nev. 133, 7 P. 279; Lumber Co. v. Wagner, 67 Cal. 293, 7 P. 705; Parker v. Jeffery, 26 Ore. 186, 37 P. 712; Phillips v. Van Schaick, 37 Iowa 229; Stevens v. Flannagan, 131 Ind. 122, 30 N.E. 898; McDowell v. Lacy, 35 Wis. 171; Maxcy v. Insurance Co., 54 Minn. 272, 55 N.W. 1130. The rule has also been recognized in this state. Clark v. Fisk, 9 Utah 94, 33 P. 248; Thompson v. Cheesman, 15 Utah 43, 48 P. 477.

One of the most fruitful sources for the application of this rule is where, under contract between two parties, assets or funds have come into the hands or under the control of the promisor, which in equity constitute a trust fund for the benefit of a third party. In such event the beneficiary may sue in his own name. In this class of cases, however, the implied undertaking which the law raises from the possession of the fund, rather than an express provision, appears to be the foundation of the suit. So, where the vendee assumes and agrees with the vendor to pay a mortgage, the payee, although not aware of the agreement or promise at the time it was made, and without any new consideration moving from him, may upon default, bring an action in his own name against the vendee. Likewise in cases of official bonds, where the statute confers the right on a stranger to the bond; and there are other instances where the doctrine may be invoked, but it cannot be applied to every contract the performance of which may benefit a third party who is a stranger to it. If mere strangers to a contract could maintain an action thereon because of any indirect or incidental benefit which might accrue to them through its performance, there could be no certain limit respecting the number and character of actions which might be maintained thereon. No such application of the doctrine, however, has been intended, and he who invokes it must show something more than incidental and indirect benefit. To entitle a third party, who may be benefited by the performance of a contract, to sue, there must have been an intention on the part of the contracting parties to secure some direct benefit to him, or there must be some privity and some obligation or duty from the promisor to the third party which will enable him to enforce the contract, or some equitable claim to the benefit resulting from the promise or the performance of the contract, and there must be some legal right on the part of the third party to adopt and claim the benefit of the promise or contract. "To entitle him to an action," said Mr. Justice Rapallo in Garnsey v. Rogers, 47 N.Y. 233, "the contract must have been made for his benefit. He must be the party intended to be benefited." In Sayward v. Dexter, Horton & Co., supra, it was said: "But it is not every contract for the benefit of a third person that...