Strauss v. Belle Realty Co.

• Decision Date: 27 December 1983
• Parties: Julius STRAUSS, Respondent, v. BELLE REALTY COMPANY, Defendant, Consolidated Edison Company of New York, Inc., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 948

469 N.Y.S.2d 948

98 A.D.2d 424

Julius STRAUSS, Respondent, v. BELLE REALTY COMPANY, Defendant, Consolidated Edison Company of New York, Inc., Appellant.

Supreme Court, Appellate Division,

Second Department.

Dec. 27, 1983.

Ernest J. Williams, New York City (Cahill, Gordon & Reindel, New York City [William E. Hegarty, Thomas J. Kavaler, Vincent E. Gentile, Lisa Schilit and Stanley K. Shapiro, New York City], of counsel), for appellant.

Rogovin & Golub, New York City (Benjamin J. Golub and Ira H. Goldfarb, New York City, of counsel), for respondent.

Before DAMIANI, J.P., and GIBBONS, THOMPSON and BOYERS, JJ.

THOMPSON, Justice.

On July 13, 1977, at approximately 9:30 P.M., millions of customers receiving electricity from defendant Consolidated Edison Company of New York, Inc. (Con Ed) found themselves in the dark when the electric power system serving New York City and Westchester County malfunctioned and ceased operation. Plaintiff Julius Strauss, a tenant in an apartment building owned by defendant Belle Realty Company, was unable to obtain running water in his apartment because the water was supplied by electric pumps. On the afternoon of July 14, Strauss, believing there was running water in the basement of the building, descended to this common area of the multiple dwelling. It is alleged in his complaint that the darkness (which resulted from Con Ed's gross negligence), as well as the defective condition of the stairs and railings in the basement, caused him to fall and suffer severe injuries. Strauss concedes that he was not a customer of Con Ed in the basement location where the accident occurred. The question presented on this appeal is whether, assuming that the blackout resulted from Con Ed's gross negligence, Strauss' complaint states a viable cause of action against Con Ed either for negligence or as the third-party beneficiary of Con Ed's contract with Belle Realty Company to supply electricity to the common areas of the apartment building. For the reasons set forth herein, we find that the complaint fails to state a cause of action against Con Ed, and its cross motion for summary judgment dismissing the plaintiff's complaint as against it should have been granted.

Following the commencement of this action against Con Ed in March, 1978, Strauss moved in February, 1982 for partial summary judgment on the ground, inter alia, that Con Ed was collaterally estopped from contesting the issue of its gross negligence in causing the blackout. Con Ed cross-moved, inter alia, for summary judgment dismissing the plaintiff's complaint against it on the ground that its relationship with Strauss with regard to the common areas of the apartment building was such that it did not owe him a duty of care. In opposition to the cross motion, Strauss argued that he was a regular user of the common areas who relied on a constant supply of electricity to those areas and paid rent to a landlord who in turn used part of the rent money to pay for electricity supplied to the common areas. His interest in receiving electricity in the common areas was therefore greater than that of the public generally and was recognized in law. In addition, he asserted that it would be wrong to grant blanket immunity to Con Ed for its gross negligence, and that a public utility was in a position to pass along the cost of any judgment against it to its stockholders or customers in this situation.

Special Term determined that Con Ed was collaterally estopped from litigating the issue of its gross negligence in causing the blackout, and further concluded that Strauss' complaint did state a cause of action. The court reasoned:

"The acts of defendant [Con Ed] alleged herein are not mere negligent omissions, but have been found to have been grossly negligent acts and to have resulted in the blackout. The plaintiff herein is not necessarily just one of an indefinite number of potential beneficiaries of defendant's service. Thus, it cannot be said, as a matter of law, that plaintiff is not within the scope of the duty found to be owed by Con Edison".

We hold that that branch of Con Ed's cross motion which sought summary judgment dismissing the plaintiff's complaint as to it should have been granted as a matter of law because no viable theory of recovery against it was stated.

Plaintiff's complaint and papers in opposition to Con Ed's cross motion for summary judgment fail to raise any factual issue as to whether he was an intended third-party beneficiary of Con Ed's contract with Belle Realty Company to supply electricity to the common areas of the apartment building. The case of Airco Alloys Div. v. Niagara Mohawk Power Corp., 76 A.D.2d 68, 79, 430 N.Y.S.2d 179, contains the following succinct summary of the basic principles governing the law of third-party beneficiaries:

"A third party may sue as a beneficiary on a contract made for his benefit (Lawrence v Fox, 20 NY 268). The intent to benefit a third party must be shown (Port Chester Elec. Constr. Corp. v. Atlas, 40 NY2d 652 [389 N.Y.S.2d 327, 357 N.E.2d 983]; Beveridge v New York El. R.R. Co., 112 NY 1 ) and the benefit must not be merely incidental but immediate to such a degree as to indicate the assumption of a duty to make reparation if the benefit is lost (Associated Flour Haulers & Warehousemen v Hoffman, 282 NY 173 ; Moch Co. v Rensselaer Water Co., 247 NY 160 ). Absent such intent, the third party is merely an incidental beneficiary with no right to enforce the contract (Port Chester Elec. Constr. Corp. v. Atlas, supra; Associated Flour Haulers & Warehousemen v Hoffman, supra; Moch Co. v. Rensselaer Water Co., supra; Flemington Nat. Bank & Trust Co. [N.A.] v. Domler Leasing Corp., 65 AD2d 29 ). An incidental beneficiary is a third party who may derive benefit from the performance of a contract though he is neither the promisee nor the one to whom performance is to be rendered (2 Williston, Contracts [3d ed], § 402). While it is not necessary that a third-party beneficiary be identified or even identifiable at the time that the contract is made, he has no right to enforce the contract himself until such time as he is identified (Matter of Associated Teachers of Huntington v Board of Educ., 33 NY2d 229 [351 N.Y.S.2d 670, 306 N.E.2d 791] ). A party, claiming to be a third-party beneficiary, has the burden of demonstrating that he has an enforceable right (Flemington Nat. Bank & Trust Co. [N.A.] v Domler Leasing Corp., supra )".

Even when the contracting parties specifically intend to confer benefits on a third party, not all consequential damages which flow from a breach of the contract are recoverable by the third party. The contract must evince a discernible intent to allow recovery for the specific damages to the third party that result from a breach thereof before a cause of action is stated (Kornblut v. Chevron Oil Co., 62 A.D.2d 831, 407 N.Y.S.2d 498, affd., 48 N.Y.2d 853, 424 N.Y.S.2d 429, 400 N.E.2d 368). Furthermore, "[a]n intention to assume an obligation of indefinite extension to every member of the public is seen to be the more improbable when we recall the crushing burden that the obligation would impose (cf. Hone v. Presque Isle Water Co., 104 Me. 217, at 232 )" (Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 165, 159 N.E. 896).

Plaintiff has failed to carry his burden of demonstrating that he has an enforceable right. He offers nothing to show that Con Ed and Belle Realty Company intended to allow him to recover for the damages resulting from his entrance into the darkened common areas. That plaintiff relied on a flow of electricity to the common areas and that the landlord may have used the rental income from plaintiff's apartment to pay the landlord's electricity bill, fail to create rights greater than those applicable to the general public. As stated in Moch Co. v. Rensselaer Water Co., supra, at p. 166, 159 N.E. 896: "A promisor will not be deemed to have had in mind the assumption of a risk so overwhelming for any trivial reward." In Shubitz v. Consolidated Edison Co. of N.Y., 59 Misc.2d 732, 734, 301 N.Y.S.2d 926 the court observed that "[t]o hold to the contrary would introduce new parties with new rights and would subject the defendant to a multitude of suits for damages that could not have been intended or in contemplation of the parties at the time the contract was made". With regard to the 1977 blackout, it has been concluded that "[t]o rule otherwise would extend the consequences of a blackout ad infinitum. Such a result is neither warranted nor reasonable" (Crane v. City of N.Y., NYLJ, Aug. 9, 1982, p. 12, col. 6; p. 13, col. 1). Claims similar to that presented herein have consistently been dismissed (Moch Co. v. Rensselaer Water Co., supra; Beck v. FMC Corp., 53 A.D.2d 118, 385 N.Y.S.2d 956, affd., 42 N.Y.2d 1027, 398 N.Y.S.2d 1011, 369 N.E.2d 10; Nicholson v. City of New York, 271 App.Div. 899, 67 N.Y.S.2d 156, affd., 297 N.Y. 548, 74 N.E.2d 477; Kraye v. Long Is. Light. Co., 42 A.D.2d 972, 348 N.Y.S.2d 16; Shubitz v. Consolidated Edison Co. of N.Y., supra; Crane v. City of N.Y., supra ).

The case of Koch v. Consolidated Edison Co. of N.Y. (NYLJ, June 16, 1982, p. 6, col. 4), involving a third-party beneficiary action, is readily distinguishable. In Koch the court relied on specific contractual and statutory language to conclude that specified governmental agencies came within a definable class of beneficiaries to whom a duty was owed. Such specific language is not present in this case.

The complaint also fails to state a cause of action in negligence because Con Ed did not owe a duty to plaintiff in any compensable legal sense (Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 159 N.E. 896, supra ). That Con Ed may have been grossly negligent is not relevant in defining the scope of its duty to supply electric power, but only in determining the consequences which result from the breach of a duty owed. "Without duty, there...