Pennsylvania Cement Co. v. Bradley Contracting Co.

• Decision Date: 18 May 1925
• Docket Number: No. 211.,211.
• Citation: 7 F.2d 822
• Parties: PENNSYLVANIA CEMENT CO. v. BRADLEY CONTRACTING CO.
• Court: U.S. Court of Appeals — Second Circuit

7 F.2d 822 (1925)

PENNSYLVANIA CEMENT CO. v. BRADLEY CONTRACTING CO.

No. 211.

Circuit Court of Appeals, Second Circuit.

May 18, 1925.

Paul Englander, of New York City, for appellant.

Leo Oppenheimer, of New York City (Samuel H. Kaufman and Theodore Miller, both of New York City, of counsel), for respondent.

Before ROGERS, MANTON, and HAND, Circuit Judges.

ROGERS, Circuit Judge (after stating the facts as above).

The question presented in this proceeding is as to the claimant's right to have his claim, as filed, paid out of the assets of the Bradley Company in the hands of its receivers. We must determine whether the order entered in the court below, disallowing and dismissing the claim, was erroneous. The claim as filed stated no cause of action in tort, but was based solely upon the contract between the city of New York and the Bradley Company. The essential part of Bolger's statement of claim may be found in the margin.¹

After this claim was filed, the attention of the claimant's counsel was called to the form of the claim, and that it was based on contract, and he was given every opportunity to move to amend it. But no advantage of the opportunity to amend the statement of the claim was taken. As we think it clear that the claim as filed was based on the contract between the city of New York and the contractor, and specifically upon the provisions contained in articles 38 and 40 thereof, which articles are found in the margin, we must dispose of the matter according to whether or not those articles give to the claimant the contractual right which he asserts. That is the sole question which is now presented for our determination.

It is not claimed that the case as submitted discloses any cause of action at common law, or independent of the contract. It is conceded that, if the facts fail to show the claimant's right to recover for a breach of the contract relied upon, the claim must be disallowed. The claimant's right is based solely on the proposition that, as an abutting owner, he is one of the persons for whose benefit the provisions alleged to have been breached were made.

In England and in this country in some of the states it is held, subject to some exceptions, that where two parties enter into a contract, in which one of them promises to do something for the benefit of a third person, the only persons who can sue upon the contract are the parties who made it. Price v. Easton, 4 B. & Ad. 433; Atwood v. Burpee, 77 Conn. 42, 58 A. 237; George H. Sampson Co., 202 Mass. 326, 88 N. E. 911; First M. E. Church v. Isenberg, 246 Pa. 221, 92 A. 141; Edwards v. Thoman, 187 Mich. 361, 153 N. W. 806. But the English rule to its full extent does not prevail in the United States, and the prevailing rule in this country allows a third person to sue on such a contract, subject, however, to qualifications. In Hendrick v. Lindsay, 93 U. S. 143, 149, 23 L. Ed. 855 (1876), the Supreme Court, discussing the proposition that a third person not a party to a contract made for his benefit could not sue upon it, said: "This would be true, if the promise were under seal, requiring an action of debt or covenant; but the right of a party to maintain assumpsit on a promise not under seal, made to another for his benefit, although much controverted, is now the prevailing rule in this country."

But the weight of authority in the United States is that an action cannot be maintained by one not a party simply because he will be incidentally benefited by performance. The contract must have been entered into for his benefit, and he must have some legal or equitable interest in its performance. Constable v. National Steamship Co., 154 U. S. 73, 14 S. Ct. 1062, 38 L. Ed. 903; Davis v. Patrick, 122 U. S. 138, 7 S. Ct. 1102, 30 L. Ed. 1090; St. Louis Second National Bank v. Grand Lodge, 98 U. S. 123, 25 L. Ed. 75; In Pennsylvania Steel Co. v. New York City Ry. Co., 198 F. 721, 749, 117 C. C. A. 503, 531, this court, referring to the right of one not a party to the contract to sue thereon, said: "It is not enough that the contract may operate to his benefit. It must appear that the parties intend to recognize him as the primary party in interest and as privy to the promise."

The leading case on this subject in the state of New York is the well-known case of Lawrence v. Fox, 20 N. Y. 268. That case was decided in 1859. The facts were that A. loaned $300 to B., stating to him at the time that he owed that amount to X. Thereupon it was agreed between A. and B. that the latter was to pay the sum loaned to X. This was not done, and X. brought an action against B. It was held that the action could be maintained. In Vrooman v. Turner, 69 N. Y. 280, 25 Am. Rep. 195, the court explained the principle upon which Lawrence v. Fox was decided and said: "In either case there must be a legal right, founded upon some obligation of the promisee, in the third party, to adopt and claim the promise as made for his benefit."

A contract which appears to have been the identical one now before this court was before the New York courts in 1918 in Schnaier v. Bradley Contracting Co., 181 App. Div. 538, 169 N. Y. S. 88. It was held in that case that the abutting property owner was in such privity with the city of New York that he could maintain an action against the contractor upon the contract and recover damages for injuries to the foundations of the plaintiff's apartment house which had been shaken and made insecure by the defendant in the construction of the subway on Lexington avenue. There was no allegation in the complaint of negligence upon the part of the defendant. The court below dismissed the complaint. But the Appellate Division in a unanimous opinion reversed the judgment and ordered a new trial. Commenting on article 47 of the contract, the court held that the covenant of the contractor that he would, at his own expense, make good any damage done to any foundations, walls, or other parts of adjacent buildings or structures, and the further covenant that the contractor would be solely responsible for all physical injuries to persons or property occurring on account of or during the performance of the work under the contract, whether or not caused by his negligence, was a direct promise to pay to the injured abutter. The court then went on to hold that there was such privity between the city and the contractor and the abutting owner as to authorize the latter to sue upon the contract made in his behalf. After reviewing the New York cases — Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211, 1 L. R. A. (N. S.) 958, 5 Ann. Cas. 504; Smyth v. City of New York, 203 N. Y. 106, 96 N. E. 409; Rigney v. New York Central & Hudson River R. R. Co., 217 N. Y. 31, 111 N. E. 226 — the court said: "Within these authorities it would seem clear that there was such privity between the city, the party to the contract, and the abutter as would authorize the abutter to sue upon the contract made in his behalf."

Such is the law of the place where the contract was made, and where it was to be performed, and it must be accepted by this court as settling the right of the plaintiff to assert his claim against the Bradley Contracting Company, although not a party to the contract, if the contractor has breached the contract as respects the claimant Bolger. But this does not determine the right of the claimant to have his claim allowed in this proceeding. The receivers, who are in this court insisting that the claim was properly disallowed, do not deny the doctrine of Lawrence v. Fox, supra, and of Schnaier v. Bradley Contracting Company, supra. They concede the right of an abutting property owner, in a proper case, to sue upon the contract, although he was not himself a party to it. Their objection rests upon other grounds, which it is necessary now to consider.

In article 38, heretofore set forth in the margin, the contractor expressly covenanted that the plans and specifications, if the work was done without fault or negligence on his part, did not involve "any danger to the foundations, walls, or other parts of adjacent buildings." He also expressly covenanted that he would at his own expense make good any damage that should, in the course of construction, be done "to any such foundations, walls, or other parts of adjacent buildings." Then, in article 40, which also has been set forth heretofore in the margin, the contractor agreed that he would be solely responsible for all physical injuries to persons or property occurring on account of and during the performance of the work.

But in ascertaining the meaning of a contract the intention is to be ascertained from examining the whole contract and not detached portions of it. And it was provided in article 24 of the contract that "every question which may arise relative to the fulfillment of this contract on the part of the contractor" shall be determined by the engineer, and further that "his determination shall be final and conclusive upon the contractor, and in case any question shall arise between the parties hereto, touching this contract, such determination and estimate shall be a condition precedent to the right of the contractor to receive any money under this contract." This constituted the engineer² a kind of court to determine "every question" relative to whether or not the contractor had fulfilled his contract.

As his contract...