Olney v. Hutt

• Decision Date: 18 October 1960
• Docket Number: No. 50104,50104
• Citation: 105 N.W.2d 515,251 Iowa 1379
• Parties: William B. OLNEY et al., Appellees, v. Ray F. HUTT, Appellant.
• Court: Iowa Supreme Court

Page 515

105 N.W.2d 515

251 Iowa 1379

William B. OLNEY et al., Appellees, v. Ray F. HUTT, Appellant.

No. 50104.

Supreme Court of Iowa.

Oct. 18, 1960.

Will J. Hayek, Iowa City, and A. E. Baldridge, Washington, for appellant.

Ries & Osmundson, Iowa City, for appellees.

GARRETT, Justice.

Ben S., W. W. and Ben E. Summerwill owned a 40 acre tract of land near Iowa City. In October 1952 they sold the southwest quarter of said tract to the Independent School District of Iowa City for a school house site and in November they sold the North 20 acres to the defendant, Ray F. Hutt. The contracts with these purchasers contained a provision that they would dedicate land from the edge of their properties to make a street, each to pay one-half the cost of construction. Defendant Hutt subdivided and platted the west ten acres of his land, dedicated the portion necessary for the street and graded and ditched it so that it was usable as a dirt street. He then sold certain lots of Birchwood Builders, Inc. and these lots were later purchased by plaintiffs. After this addition was taken into Iowa City, plaintiffs petitioned for and brought about the paving of said street between the two ten acre tracts. The cost of the paving was assessed against plaintiffs' properties and was paid by them. They brought this action for a declaratory decree seeking to hold Hutt for the cost of the paving on the ground that they were third party beneficiaries under Hutt's contract with Summerwills.

The trial court allowed plaintiffs $608.34 being the estimated cost of grading and surfacing said street with four inches of rock, and defendant has appealed.

I. The appellees, in their written argument say: 'The only real question in this case is whether or not the Plaintiffs are third party beneficiaries under the Hutt-Summerwill contract. If they are, they are entitled to judgment; if not, they are not entitled to judgment.'

Appellant contends he dedicated the land and constructed the street within the terms of the contract and that, in any event the plaintiffs were not third party beneficiaries.

The Summerwill contract with the school district contained this provision: 'It being understood and agreed that both parties hereto shall dedicate a strip at least thirty (30) feet wide from the edge of their property to make a street which will coincide with DeForest Street if extended, the eastwest distance of the tract herein purchased, each to pay one-half the cost of construction.'

The Hutt-Summerwill contract provided that as a part of the consideration therefor Hutt assumed the obligations contained in the above quoted paragraph of the school district contract.

When the contracts were entered into the entire tract was in pasture. In May 1953 Hutt platted the land immediately north of the school house site as Highland Development Addition, including the north half of DeForest Street. His obligation was to pay one-half the cost of construction necessary 'to make a street which will coincide with DeForest.' Hutt testified, 'I had bulldozers there and I hired someone to bulldoze out the ditches. The several loads of rock were put at the ends of Franklin Street and Ash street and at places where there were soft spots. People on Franklin or Ash would use DeForest Street. I frequently drove from one street to the other by way of DeForest. I used DeForest in both dry weather and wet weather and never got stuck.'

Mr. Gartzke, city engineer, testified: 'I knew this particular street before the city attempted to do anything about bringing it to grade. At that time, it could have been used in a convenient and safe manner for traffic. Q. All kinds of weather? A. I wouldn't say all kinds of weather. It would get pretty muddy. It wasn't surfaced to be all-weather.' He further testified, 'I think DeForest Street west from the present paving is temporary. It had been in temporary use for 40 years. It is a dirt road, a constructed dirt road. * * * East from the paving is a dirt road. It has been used a few years. The city pays all expense of excess excavation and expense of bringing a street to permanent grade. * * * If it were a matter of an all weather rock road, we would have simply layed four inches of rock over the road as already bladed and ditched.'

The defendant, having constructed a dirt road or street which was ditched, bladed, rocked in some troublesome spots and which coincided with DeForest Street, denied liability for the cost of the paving. The plaintiffs had no contract, agreement or writing of any kind with Hutt or the Summerwills and cannot prevail unless they are third party beneficiaries under the Hutt-Summerwill contract. When Summerwills sold the property to Hutt they had no further interest in it and certainly no reason to contract for the benefit of subsequent purchasers of this pasture land. So far as this short strip of pavement is concerned the school district paid for the south half and the successors in title to Hutt paid for the north half.

The plaintiffs' rights can rise no higher than those of the promisee Summerwills and it seems quite obvious that had the latter had any intention of benefiting the plaintiffs they would have indicated it in their contract. The Birchwood Builders' Inc., contract with Hutt contained this provision: 'Purchaser is assuming no obligation of the vendor in connection with the construction of DeForest Street.' It will be noted it contained no affirmative requirement that Hutt construct, improve or pay for the street which indicates paying for such improvement by Hutt was not within the contemplation of the parties. It was stipulated that none of the deeds conveying the property involved contained any covenant to construct any part of DeForest Street or any reference thereto.

We find no support in the record for plaintiffs' claim that they are third party beneficiaries. In 12 Am.Jur. Sec. 281, Contracts, page 833 it is said: 'A third person for whose direct benefit a contract was entered into may sue for breach thereof; but if the benefit is only incidental, he may not. It has been asserted that before a stranger can avail himself of the exceptional privilege of suing for a breach of agreement to which he is not a party, he must at least show that it was intended for his direct benefit. It must appear, in order that a third person may derive a benefit from a contract between two other parties, that the contract was made and entered into directly or primarily for the benefit of such third person. Whether a contract by which a third person is benefited was entered into for his direct benefit depends upon the intention of the parties as gleaned from a consideration of the contract and the circumstances surrounding the parties at the time of its execution.'

Appellees cite Johnson v. Collins, 14 Iowa 63; Johnson v. Knapp, 36 Iowa 616; Re Youngerman's Estate, 136 Iowa 488, 114 N.W. 7; Durband v. Nicholson, 205 Iowa 1264, 216 N.W. 278, 219 N.W. 318; Chicago & N. W. R. Co. v. Kramme, 244 Iowa 944, 59 N.W.2d 204; Reeves v. Better Taste Popcorn Co., 246 Iowa 508, 66 N.W.2d 853. None of these cases sustain appellees' position, the intention in each case to contract for the benefit of named or sufficiently designated third party beneficiaries being clear. The benefit was more than incidental.

One for whose benefit a contract is made may, although not a party thereto and although furnishing no consideration therefor, maintain an action thereon against the promissor. Nor is it essential, in order to enable a third party to recover on a contract made for his benefit, that he know of the contract at the time it was made. Baker v. Bryan, 64 Iowa 561, 21 N.W. 83; Annotation 81 A.L.R. 1286.

'That the parties must have clearly intended the contract to be for the benefit of the third person to enable him to sue thereon is one of the most commonly expressed limitations on the rule, * * *. The intent to benefit the third person must clearly appear from the language of the agreement, in light of the circumstances under which it was entered into.' 17 C.J.S. Contracts § 519(c), pages 1127, 1128, 1129, 1130.

In the German State Bank v. N. W. Water and Light Co., 104 Iowa 717, 74 N.W. 685, 686, this court said: 'No man will be held liable in law to different parties for the same cause of action. The principle is therefore confined to cases where the person for whose benefit the promise is made has the sole, exclusive interest in its performance.'

'We are well aware that contracts made between two parties for the benefit of a third are enforceable by the latter under certain conditions. Among these conditions is one which appellant has failed to...