In Marlboro Shirt, the Maryland Court of Appeals ruled that a tenant could not maintain suit on a contract between his landlord and a contractor.Summary of this case from Safer v. Perper
[No. 35, October Term, 1950.]
Decided January 10, 1951.
Contracts — Third Party Beneficiary — Action on Contract Can Be Maintained by — Common Law Rule Requiring Privity between Plaintiff and Defendant Relaxed — Recovery by Such Third Party for Breach of Contract — Parties Must Have Intended to Recognize Him as Primary Party in Interest and as Privy to Promise — Incidental Beneficiary — No Right Acquired by, against Promisor or Promisee — Contract between Lessor and Telegraph Company for Installation and Maintenance of Automatic Signaling Device on Sprinkler System — Lessee Could Not Recover in Action upon, against Company, When Device Failed to Operate, unless It showed That Defendant Owed It a Duty under the Contract — Lessee Was Neither Creditor Nor Donee Beneficiary of Contract, But Incidental Beneficiary — Could Not Maintain Action Grounded in Contract upon — Negligence — Contractor — Duty Owed by — None to General Public, for Which It Is Responsible in Tort Action, If Contract Not Performed — Lessee Could Not Maintain Action in Tort.
The common law rule that privity between the plaintiff and defendant is requisite to maintain an action on a contract, even though the contract is for the benefit of a third party, has been so relaxed in this state that a person for whose benefit a contract is made can maintain an action upon it. p. 569
In order for a third party beneficiary to recover for a breach of contract, it must clearly appear that the parties intended to recognize him as the primary party in interest and as privy to the promise. An incidental beneficiary acquires by virtue of the promise no right against the promisor or promisee. p. 569
For the lessee of premises to recover in an action against a telegraph company, which contracted with the lessor to install and maintain on a sprinkler system an automatic central station signaling device which would signal a leakage of water in the sprinkler system to the telegraph company's office, for damages sustained when a leak occurred in the sprinkler system and the alarm system failed to operate, the lessee must show that the telegraph company owed it a duty under the contract. p. 570
A contractor owes no duty to the general public for which it may be made responsible in an action in tort for negligence, if it does not perform the contract. The duty under such a contract is only to the one with which the contract is made. Thus, the trial court properly sustained a demurrer to the first count of a declaration, sounding in tort, in which plaintiff sought to recover for damages sustained when an alarm system installed and maintained by defendant under a contract with plaintiff's lessor failed to perform. pp. 571-572
A lessee of premises was neither a creditor beneficiary nor a donee beneficiary, but an incidental beneficiary, of a contract not mentioning the lessee in which a telegraph company promised the lessor to install and maintain on a sprinkler system an automatic central station signaling device, which would signal a leakage of water in the sprinkler system to the telegraph company's office, and the trial court properly sustained a demurrer to the second count of the lessee's declaration, which was grounded in contract, in an action for damages sustained when the alarm system failed to operate, there being no allegation that the company, defendant therein, promised the lessee to install an alarm system. pp. 570-572
Decided January 10, 1951.
Appeal from the Superior Court of Baltimore City (TUCKER, J.).
Action in tort and in contract by the Marlboro Shirt Company, a body corporate, against the American District Telegraph Company of Baltimore City, a body corporate, for damages sustained by plaintiff when a discharge of water in its rented premises was not detected. From a judgment entered in favor of defendant, after a demurrer to the declaration as particularized was sustained, plaintiff appeals.
The cause was argued before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON and HENDERSON, JJ.
A. Frederick Taylor, with whom were Harry W. Allers and Allers Cochran on the brief, for the appellant. Joseph T. Brennan, 2nd, with whom was Hilary W. Gans on the brief, for the appellee.
S. Rosenbloom, Inc., owned a building known as 410 W. Lombard Street, Baltimore, Maryland, and rented a part thereof to the Marlboro Shirt Co., Inc. At the time of the lease, the building was equipped with a sprinkler system. On December 18, 1941, the lessor, S. Rosenbloom, Inc., entered into a written contract with the American District Telegraph Co., whereby the latter agreed to install and maintain on the sprinkler system an automatic central station signaling device which would signal a leakage of water in the sprinkler system to the office of the appellee. Some time between the 8th and 10th of February, 1947, a leak occurred in the sprinkler system, causing a discharge of water in the premises rented by the appellant, which continued until discovered on Monday morning, February 10, 1947, and which caused damage to certain stock and equipment of appellant stored therein. The alarm system failed to operate.
The appellant instituted suit in the Superior Court of Baltimore City against the appellee for damages resulting to its stock of goods and equipment. The appellee demanded particulars of the appellant's claim, and to its second amended declaration as particularized the appellee demurred. The demurrer was sustained, and from a judgment entered thereon an appeal was taken to this court.
The declaration contained two counts. After setting out the facts above stated, the first count alleges: "The damage to said stock and equipment owned by the Plaintiff was caused by the negligence of the Defendant, its agents or servants, and there was no negligence on the part of the Plaintiff which directly contributed thereto."
The second count contains the same facts, and alleges: "* * * and for that as a result of the failure of the Defendant to perform the aforesaid contract or detect the aforesaid water flow and notify the proper authorities, the Plaintiff sustained great damage to its stock and equipment, * * *."
It will be noted that the first count sounds in tort and the second count is grounded on the breach of a contract. The question posed by the appellant in this case: "Is the lower court correct in sustaining Appellee's demurrer where the facts alleged show negligence on the part of Appellee and where the facts further show that the contract in question of necessity had to be for the benefit of the Appellant?" The appellee contends that the contract in question was not entered into for the purpose of benefiting the appellant.
It has been stated by this court that at common law privity between the plaintiff and defendant is requisite to maintain an action on a contract, even though the contract is for the benefit of a third party. But that rule has gradually relaxed, so that now, in this State, a person for whose benefit a contract is made can maintain an action upon it. But before one can do so it must be shown that the contract was intended for his benefit; and, in order for a third party beneficiary to recover for a breach of contract it must clearly appear that the parties intended to recognize him as the primary party in interest and as privy to the promise. An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee. "In order to recover it is essential that the beneficiary shall be the real promisee; i.e., that the promise shall be made to him in fact, though not in form. It is not enough that the contract may operate to his benefit. It must clearly appear that the parties intend to recognize him as the primary party in interest and as privy to the promise." (Quoting authorities.) Mackubin v. Curtiss-Wright Corp., 190 Md. 52, 57 A.2d 318, 321.
In Restatement of the Law, Contracts, section 133, a donee beneficiary, creditor beneficiary, and incidental beneficiary are defined as follows:
"(1) Where performance of a promise in a contract will benefit a person other than the promisee, that person is, except as stated in Subsection (3):
"(a) a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise of all or part of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary;
"(b) a creditor beneficiary if no purpose to make a gift appears from the terms of the promise in view of the accompanying circumstances and performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary, or a right of the beneficiary against the promisee which has been barred by the Statute of Limitations or by a discharge in bankruptcy, or which is unenforceable because of the Statute of Frauds;
"(c) an incidental beneficiary if neither the facts stated in Clause (a) nor those stated in Clause (b) exist." Williston on Contracts, Revised Ed., Vol. Two, sec. 356; Mackubin v. Curtiss-Wright Corp., supra.
The appellant's brief cites only four cases, all of which are decisions of this court. In the cases of Small v. Schaefer, 24 Md. 143, Mackenzie v. Schorr, 151 Md. 1, 133 A. 821, and Sterling v. Cushwa, 170 Md. 226, 183 A. 593, the third person beneficiary was specifically named in the undertaking sued on, and in Northern Central Ry. Co. v. United Rys. Co., 105 Md. 345, 66 A. 444, recovery was permitted on the theory that the railroad company had been forced to pay an obligation that was owing by the United Railways Company under its contract to the City of Baltimore. All of these cases are quoted and relied on by the appellant in this case. We do not think that these cases apply to the case at bar.
In order to recover in this case the appellant must show that the appellee owed it a duty under the contract. It seems clear that appellant is not a creditor beneficiary. There is no allegation in either count of the declaration that the appellee promised the appellant to install an alarm system. If such a system had not been installed, certainly the appellant could not have recovered against its lessor for damages claimed in this case. If it is a beneficiary under the contract, it must be a donee beneficiary. In the contract the appellant is not mentioned. In fact, so far as it can be gathered from the provisions of the contract, the appellant was an entire stranger. If A enters into a contract with B and does not know that A intends C to be the beneficiary under the contract, C cannot enforce the promise made by A, for it would not appear that A and B recognize C as the primary party in interest and as privy to the promise, as this court has held. There are cases where the name of the beneficiary is not stated, but where he can recover under the contract. In such cases the facts and circumstances surrounding the transaction show clearly that a particular person (though not named) is the beneficiary. Williston on Contracts, Revised Ed., Vol. Two, sec. 378.
There is nothing in the contract whereby the appellant could be identified as a third person beneficiary. In the case of Mackubin v. Curtiss-Wright Corp., supra, the corporation filed an application to list a $2 non-cumulative Class A ($1 par) stock on the New York Stock Exchange, and in consideration of a listing of the stock it agreed to "publish promptly to holders of listed stock any action in respect to dividends on shares, or allotments of rights for subscription to securities, notices thereof to be sent to the Stock Exchange". [ 190 Md. 52, 57 A.2d 319.] In that case notice was not sent to the Stock Exchange until so late that it was useless to the plaintiff. She sued as a third party plaintiff. We held she benefited only incidentally and could not recover. We think that case governs the case at bar.
As to the tort count, it has been held by this Court that a contractor owes no duty to the general public for which it may be made responsible in an action in tort for negligence, if it does not perform its contract. The duty under such contract is only to the one with which the contract is made.
It cannot be said under the facts alleged in either count of the declaration here considered, established as a matter of law, that the appellant was either a donee beneficiary or a creditor beneficiary under the contract in question. It was only an incidental beneficiary and hence cannot recover.
We have diligently searched for a case similar to the facts of the case at bar — we have found none. This may be the reason the appellant cites none. The judgment will be affirmed.
Judgment affirmed, with costs.