Yellowstone Pipe Line Co. v. Grant Const. Co., Inc.

• Decision Date: 18 March 1974
• Docket Number: No. 11287,11287
• Parties: YELLOWSTONE PIPE LINE COMPANY, a corporation, Plaintiff-Appellant, v. GRANT CONSTRUCTION COMPANY, INC., a corporation, Defendant-Respondent, Goodfellow Brothers Company, Defendant.
• Court: Idaho Supreme Court

Page 249

520 P.2d 249

95 Idaho 794

YELLOWSTONE PIPE LINE COMPANY, a corporation, Plaintiff-Appellant, v. GRANT CONSTRUCTION COMPANY, INC., a corporation, Defendant-Respondent, Goodfellow Brothers Company, Defendant.

No. 11287.

Supreme Court of Idaho.

March 18, 1974.

Rehearing Denied April 11, 1974.

Frank Hayes Johnson of MacGillivray, Jones, Clarke, Schiffner & Johnson, Spokane Wash., and Piatt Hull, of Hull, Hull & Wheeler, Wallace, for plaintiff-appellant.

Joseph J. Rekofke of Winston, Cashatt, Repsold, McNichols, Connelly & Driscoll, Spokane, Wash., and Robert E. Brown of Brown, Peacock, Keane & Boyd, Kellogg, for defendant-respondent.

BAKES, Justice.

This appeal involves an action brought by plaintiff-appellant Yellowstone Pipe Line Company against defendant-respondent Grant Construction Company to recover for damages sustained as a consequence of a break in appellant's underground pipeline on May 19, 1967.

Appellant, a Delaware corporation, is engaged as a common carrier in the transportation of petroleum products from Billings, Montana, to Spokane, Washington, by means of a ten-inch steel underground pipe constructed in 1953. The pipeline crosses the Coeur d'Alene River at various points, one of which-the subject matter of this lawsuit-was near Kingston, Idaho.

In 1961, appellant granted the Idaho State Department of Highways a right of way over its pipeline near Kingston, Idaho, to gain access to a gravel source. The grant provided in part:

'3. The Idaho State Highway Department and its contractors will be responsible for all damages to the pipe line which are caused by the operation of the materials source. This includes vertical or horizontal movement of the line as well as physical damage to the pipe, its coating, or contents.'

In 1966, the State of Idaho contracted with Goodfellow Brothers, Inc., as prime contractors, to construct a portion of Interstate Highway I-90 adjacent to the gravel source mentioned above. Goodfellow Brothers then entered into a subcontract with respondent Grant Construction Co. to supply from the designated source the gravel required for the highway construction. The contract between Goodfellow Brothers and respondent incorporated the provisions of the original contract between the State of Idaho and Goodfellow Brothers, one of which provided as follows:

'107.21 CONTRACTOR'S RESPONSIBILITY FOR UTILITY PROPERTY AND SERVICES. At points where the Contractor's operations are adjacent to properties of railway, telegraph, telephone, irrigation or canal companies and power companies or are adjacent to other property, damage to which might result in considerable expense, loss or inconvenience, work shall not be commenced until all arrangements necessary for the protection thereof have been made.

'The Contractor shall be solely and directly responsible to the owners and operators of such properties for any damage, injury, expense, loss, inconvenience, or delay, or for any suits, actions or claims of any character brought on account of any injuries or damage which may result from the carrying out of the work to be done under the contract.' Standard Specifications for Highway Construction, 1961 Ed., State of Idaho, Dept. of Highways, Boise, Idaho, at p. 57.

Respondent then constructed a dike access road across a secondary channel of the river and used the road to transport gravel from the source to the construction site. The dike cut off the flow of all water from the secondary channel, thereby increasing the flow over appellant's pipeline in the main channel. Appellant contends the increased flow in the main channel scoured away the river bottom protecting appellant's pipeline, thereby causing it to be fully exposed to the force of the river and ultimately to break.

Appellant alleged that respondent was liable for the damages caused by the break in appellant's pipeline on three separate grounds: (1) negligence in constructing the dike access road without regard for the natural flow of the river; (2) strict liability resulting from altering the natural water courses of the Coeur d'Alene River and (3) contractual liability of respondent to appellant who was a third party beneficiary of the original contract and the subcontract.

The issue tried by the jury was limited to liability with the question of the amount of damages reserved. After a jury verdict against appellant and in favor of defendant respondent, and the denial of appellant's motion for a judgment notwithstanding the verdict, appellant brought this appeal.

Appellant mainly argues that by virtue of the contracts set out above it did not have to prove negligence to recover, but it only had to prove that the damage to the pipeline resulted from the operation of the materials source. We agree. Appellant's standing to raise the contract issue results from its status as a third party beneficiary of the main contract between the State of Idaho and Goodfellow Brothers, Inc., and the subcontract between Goodfellow Brothers, Inc., and respondent Grant Construction Co. The trial court concluded as a matter of law that appellant was a third party beneficiary of the contracts between respondent and Goodfellow Brothers, Inc., and the State of Idaho. ¹ This ruling was correct. In Stewart v. Arrington Construction Co., 92 Idaho 526, 446 P.2d 895 (1968), this Court stated:

'In order to recover as a third party beneficiary, it is not necessary that the individual be named and identified as an individual although that is usually sufficient; a third party may enforce a contract if he can show he is a member of a limited class for whose benefit it was made. (Omitting citation). The class may be limited either by a narrow description of the injuries to be guarded against and the damages to be paid, Anderson v. Rexroad, 175 Kan. 676, 266 P.2d 320 (1954), or by a similar description of the class to be protected. Pacific Northwest Bell Telephone Co. v. DeLong Corp., 246 Or. 369, 425 P.2d 498 (1967); Shell v. Schmidt, 126 Cal.App.2d 279, 272 P.2d 82 (1954).' 92 Idaho at 532, 446 P.2d at 901.

In this case the State of Idaho, in accepting the grant of right of way over the pipeline of appellant, specifically agreed that it and its contractors would be responsible for all damages to the pipeline which were caused by the operation of the materials source. In its contract with Goodfellow Brothers and in the subcontract to respondent Grant Construction Co., it specifically provided in section 107.21 of the Standard Specifications that properties adjacent to the contractors' operations were to be protected and that the contractor would be responsible for any damage or injury which may result from carrying out the work to be done under the contract. These circumstances distinguish this situation factually from that which was before the Court in Davis v. Nelson-Deppe, Inc., 91 Idaho 463, 424 P.2d 733 (1967).

The trial court was correct in concluding as a matter of law that appellant was a third party beneficiary of the contract. Having thus attained the status of a third party beneficiary entitling appellant to sue for breach of the contracts, appellant contends that instructions number 8 and 9 submitted to the jury were in error because those instructions, and particularly instruction number 9, in effect eliminated appellant's contract theory by subordinating it to a negligence theory. Instructions number 8 and 9, as submitted to the jury, read as follows:

'INSTRUCTION NO. 8

'You are further instructed that where a contractor performs his work according to the plans and specifications of the contract, the contractor is not liable for damage to property resulting from such construction.

'Therefore, if you find that the defendant performed such construction work in accordance with the plans and specifications, your verdict must be for the defendant.

'INSTRUCTION NO. 9

'You are further instructed that the law will not permit one to build structures in the channel or bed of a stream, or in any other way impede, obstruct or interfere with the flow of the current, or render it necessary for another riparian proprietor to build riprapping, cribbing or breakwater, or other structure in order to protect his property from washing or erosion caused by the additional burden and flow of water cast upon it by reason of the encroachment of such structure.

'Therefore, if you find from the evidence that the plaintiff has proven, by a preponderance of the evidence, that the contractor did materially breach his contract by constructing the access road in the manner or place in which it was constructed, and that the construction of such access road by the defendant was a proximate cause of the rupture of plaintiff's pipeline, and that the defendant has not shown by a preponderance of the evidence that the plaintiff was not guilty of contributory negligence which was a proximate cause of plaintiff's damage, then your verdict must be for the plaintiff.

'On the other hand, if you find from the evidence that the plaintiff has not proven, by a preponderance of the evidence, that the contractor materially breached his contract as above set forth, or has not proven, by a preponderance of the evidence, that the construction of such access road was the proximate cause of the rupture in plaintiff's pipeline, or that the evidence shows, by a preponderance thereof, that the plaintiff was guilty of contributory negligence which was a proximate cause of the damage to the plaintiff's pipeline, then your verdict must be for the defendant.'

While instruction number 9 does mention the contract theory and the riparian theory advocated by the appellant in its separate causes of action, the negligence concept of appellant's first cause of action predominates and overrides the other two theories in that instruction. Thus, instruction number 9 instructed the jury that contributory negligence of plaintiff-appellant would be a defense to respondent Grant Construction Co.'s...