Opinion ID: 1225148
Heading Depth: 1
Heading Rank: 2

Heading: the amended motion for judgment

Text: In support of his second assignment of error, Ward challenges the trial court's decision to strike his evidence and to enter summary judgment against him on the amended motion for judgment. Specifically, he argues that the trial court erred by ruling as a matter of law that he was not a third-party beneficiary of the contract between Hazco and [Ernst & Young]. At common law, the general rule was that, whether the contract was express or implied, by parol or under seal, or of record, the action must be brought in the name of the party in whom the legal interest was vested, and that this legal interest was vested in the person to whom the promise was made, and consequently that he or his privy was the only person who could sue in a court of law upon such contract. Thacker v. Hubard, 122 Va. 379, 387, 94 S.E. 929, 931 (1918); accord, Cemetery Cons. v. Tidewater Fun. Dir., 219 Va. 1001, 1003, 254 S.E.2d 61, 62 (1979). However, in contracts not under seal, it has been held, for two centuries or more, that any one for whose benefit the contract was made may sue upon it. Thacker, 122 Va. at 387, 94 S.E. at 931 (emphasis in original). This exception to the general rule was codified in the 1849 Code of Virginia, ch. 116, § 2. Thacker, 122 Va. at 390, 94 S.E. at 931-32. The current successor to that statute, Code § 55-22, provides: When person not a party, etc., may take or sue under instrument.An immediate estate or interest in or the benefit of a condition respecting any estate may be taken by a person under an instrument, although he be not a party thereto; and if a covenant or promise be made for the benefit, in whole or in part, of the person with whom it is not made, or with whom it is made jointly with others, such person, whether named in the instrument or not, may maintain in his own name any action thereon which he might maintain in case it had been made with him only and the consideration had moved from him to the party making such covenant or promise. In such action the coventor or promisor shall be permitted to make all defenses he may have, not only against the covenantee or promisee, but against such beneficiary as well. This Court enforces third-party beneficiary contracts when [t]he third party ... show[s] that the parties to the contract clearly and definitely intended it to confer a benefit upon him. Professional Realty v. Bender, 216 Va. 737, 739, 222 S.E.2d 810, 812 (1976). A trial court may not enter summary judgment if any material fact is genuinely in dispute. Rule 3:18. And when summary judgment is based upon a motion to strike a party's evidence, we view the evidence and the inferences reasonably raised thereby in the light most favorable to the losing party. Meador v. Lawson, 214 Va. 759, 761, 204 S.E.2d 285, 287 (1974). With that standard in mind, we will consider Ernst & Young's contention that there is nothing in the `four corners' of the only written contract in this case ... that evidence [Ernst & Young's] agreement to perform work in connection with the Chem Waste stock sale, much less its intent to benefit Ward directly in doing so. We look to the entire record before us. [4] The contract between HAZCO and Ernst & Young grew out of a clause in the preliminary agreement with Whitney requiring an audit of HAZCO's financial condition for the year 1986. As the April 24, 1987 letter of intent evidencing that contract shows, the parties contemplated an employment relationship continuing beyond that year. HAZCO's president testified that Ernst & Young was aware from the very first that the audit was crucial to the negotiations with Whitney. Ward testified that he was sure that they knew this was the reason we needed the audit.... Ernst & Young was also aware that Ward, HAZCO's sole stockholder, would receive several hundred thousand dollars from the sale of some of HAZCO's stock. Later that year, Ernst & Young learned about the negotiations with Chem Waste. HAZCO directed Rebecca Pollino, its acting financial controller, to prepare balance sheets and income statements for the fall months. Pollino testified that she contacted Ernst & Young to learn [h]ow to get the deferred revenue and income figures and to obtain a written format to use to back up what they had given ... over the phone. In the process of gathering information needed to close the sale of the HAZCO stock, all of which was then owned by Ward, Pollino held several conversations with Ernst & Young employees. She described one particular telephone conversation in which, in answer to their question, she had read excerpts from the written draft of the stock purchase agreement then under consideration by Ward and Chem Waste. In response to Pollino's request, Ernst & Young supplied a written worksheet which she used to book the monthly deferred revenue and the monthly earned revenue. The worksheet employed the same deferred-revenue formula Ernst & Young had created for the 1986 audit. Ernst & Young conducted a review of Pollino's monthly statements before they were submitted to Chem Waste. Patricia Smallwood, identified as head of HAZCO's financial department, testified that during the period of negotiations with Chem Waste, she had [c]onversations... with [Ernst & Young] in terms of discussing the actual deal with them. Asked if she had personal knowledge of whether [Ernst & Young] and their representatives were aware of the fact that the 1986 audited financial statements and the 1987 November unaudited financial statements were being used as a part of the Chemical Waste transaction, Smallwood answered in the affirmative. Finally, at some point prior to the sale, Smallwood attended a meeting with Kirk Brown of Ernst & Young and representatives of Chem Waste to discuss the issue of deferred revenues. According to Smallwood, the deferred-revenue formula was explained to the Chemical Waste people, and there was some discussion as to why it was relevant to Hazco's business, and discussions of whether it was appropriate or not appropriate, and what generally accepted accounting principles were being used to support the [Ernst & Young] contention of the deferred revenue calculation. As we have said, a third party's right to claim relief as the beneficiary of a contract between others requires evidence that the contracting parties intended to confer a benefit upon that particular claimant. Citing several cases in which we have denied a third-party claimant relief for failure to prove intent to benefit, Ernst & Young argues that Ward was only an incidental and not a direct beneficiary under Virginia law. That argument ignores the fact that the subject of the sale to Chem Waste was the stock, not the assets of the corporation. As the sole owner of HAZCO stock, Ward was the primary beneficiary of the benefits to be conferred upon execution of the Ward-Chem Waste contract. We are of opinion that the evidence, viewed in the light most favorable to Ward, was fully sufficient to raise a jury question whether the parties to the HAZCOErnst & Young contract intended to benefit Ward. Whether it was sufficient to persuade a jury is another question. We hold that the trial court erred in withholding that question from the jury, and we will reverse the judgment in part and remand the case for a new trial on the amended motion for judgment. Affirmed in part, reversed in part, and remanded.