Paragon Sales Co., Inc. v. New Hampshire Ins. Co., C-8665

• Decision Date: 28 June 1989
• Docket Number: No. C-8665,C-8665
• Citation: 774 S.W.2d 659
• Parties: PARAGON SALES CO., INC., Petitioner, v. NEW HAMPSHIRE INSURANCE COMPANY, Respondent.
• Court: Texas Supreme Court

Page 659

774 S.W.2d 659

PARAGON SALES CO., INC., Petitioner, v. NEW HAMPSHIRE INSURANCE COMPANY, Respondent.

No. C-8665.

Supreme Court of Texas.

June 28, 1989.

H.C. McCracken, Carrollton, for petitioner.

James Brandon Bradley, Dallas, for respondent.

PER CURIAM.

Paragon Sales Company (Paragon), a distributor of gas barbeque grills, filed suit against New Hampshire Insurance Company seeking recovery for the value of goods lost in transit on a public motor carrier, Arkansas Express, Inc. During April of 1981, Paragon ordered nearly $3,000 worth of assorted barbeque equipment from Arkla Industries, Inc., who shipped the goods via Arkansas Express. The equipment never reached its destination. Paragon reordered the goods and filed a claim for reimbursement from Arkansas Express. Arkansas Express maintained insurance coverage on the freight it carried with respondent, New Hampshire Insurance Company (New Hampshire). Arkansas Express subsequently filed Chapter 11 bankruptcy, but at all times listed Paragon as a creditor.

After submitting the claim directly to the insurance company and receiving no action, Paragon filed this action alleging the right to recover as a third party beneficiary of the insurance contract. A bench trial ensued at which the trial court rendered a take-nothing judgment against Paragon, holding that the applicable statute of limitations barred the recovery.

On appeal, Paragon argued that its claim was not barred by the statute of limitations. The court of appeals, in an unpublished opinion, without addressing the statute of limitations issue, affirmed the trial court on a ground never argued by either party--the failure of Paragon to establish standing to bring a direct action suit as a third party beneficiary. The court of appeals held that Paragon failed to present any evidence of an indemnity contract between New Hampshire and Arkansas Express. The court of appeals concluded that "because the insurance policy was never introduced into evidence, the evidence is legally insufficient to establish Paragon's standing to bring a direct action suit as a third party beneficiary."

A third person not a party to a contract may have a cause of action to enforce the contract if the contract was made for that person's benefit. See, e.g., Dairyland County Mut. Ins. v. Childress, 650 S.W.2d 770, 775 (Tex.1983); Quilter v. Wendland, 403 S.W.2d 335, 337 (Tex.1966); Knox v. Ball, 144 Tex. 402, 191 S.W.2d 17, 21 (1946). In such a case, the third party must establish the existence of a contract and his right to recover thereunder.

During discovery, New Hampshire answered affirmatively when queried whether Arkansas Express was its policyholder, and such answer was read into evidence at trial. In addition, although the entire insurance contract is not contained in the record, an indemnity endorsement and a notice to the Interstate Commerce Commission were introduced into evidence without objection by New Hampshire. Both documents refer to a policy, MC96-65-27, issued by New Hampshire to Arkansas Express. The endorsement recites February 8, 1979 as the effective date of the coverage included therein, and the notice to the ICC states that coverage was...