Opinion ID: 2612242
Heading Depth: 2
Heading Rank: 3

Heading: suit against subcontractor

Text: The superior court initially entered a judgment against Farr and A.R.C. for the defective workmanship on the foundation. Upon motion for reconsideration, however, the court vacated the judgment, holding that the damages are properly those of [Bradley & Associates]. The court had expressed concern at the oral arguments on the Findings of Fact and Conclusions of Law that there was no privity between the Church and A.R.C. On appeal, the Church contends that the facts it alleged in its complaint stated a cause of action against Farr and A.R.C. for defective workmanship under the theory of third-party beneficiary liability. We agree. The Church stated in its complaint, As a result of the defects in the materials and construction provided by THOMAS G. FARR and A.R.C. INDUSTRIES, INC... . the plaintiffs have been damaged in a sum or sums to be proved in trial. Farr and A.R.C. contend that owners of real property do not have a cause of action as third-party beneficiaries against subcontractors on the basis of a breach of the subcontract due to defects in materials and workmanship. The one case cited that directly supports this position is Lumber Products, Inc. v. Hiriart, 255 So.2d 783 (La. App. 1972), in which an owner attempted to state a cross-claim against a subcontractor who brought suit on its mechanic's lien. The Louisiana Court of Appeals concluded that there was no privity of contract between the owner and the subcontractor and thus the owner could not maintain an action for breach of contract against the subcontractor. Id. at 787-88. The Supreme Court of Louisiana, however, ruled four years later in State ex rel. Guste v. Simoni, Heck & Associates, 331 So.2d 478 (La. 1976), that an owner may sue a subcontractor directly as a third-party beneficiary to the subcontract when the subcontract was expressly intended to benefit him. Id. at 482-84. Similarly, the Louisiana Court of Appeals held in Tri Parish Heating & Air Conditioning v. Brown, 338 So.2d 126, 129 (La. App. 1976), that an owner could enforce the obligation intended for his benefit and bring a direct action against a subcontractor for the defective installation of an air conditioning system, even though the owner was not in privity of contract with the subcontractor. Most recently, the Oklahoma Supreme Court addressed this issue in Keel v. Titan Construction Co., 639 P.2d 1228 (Okl. 1981). The court held that a property owner, whose exact identity had not been known to the architect at the time of its work, could directly sue the architect as a third-party beneficiary of the architect's contract with the general contractor. The court first acknowledged that before a party may take advantage as a third-party beneficiary to avoid the requirement of privity, the contract must have been entered into `expressly for the benefit of a third person.' Id. at 1231 (quoting Watson v. Aced, 156 Cal. App.2d 87, 319 P.2d 83, 86 (Cal. App. 1957)). The court then stated, A third-party beneficiary of a contract may avail himself of its benefits and maintain an action thereon notwithstanding he was a stranger thereto, had no knowledge of the contract, and was not identified therein when it was made if it appears the parties intended to recognize him as a beneficiary. 639 P.2d at 1231 (footnote omitted). Thus, even though the purchaser of the home was not specifically known to the architect at the time it entered into its contract with the general contractor, the court held that the architect must have known that there would be an owner of the home and that its work was intended to benefit that owner. Id. As indicated by the Church, this court has recognized the rights of a third-party beneficiary to enforce the terms of a contract entered into for his benefit. State v. Osborne, 607 P.2d 369, 371 (Alaska 1980); White v. Alaska Insurance Guaranty Ass'n, 592 P.2d 367, 369 (Alaska 1979). We conclude that the Church properly brought suit directly against Farr and A.R.C., as well as against the general contractor, Bradley & Associates. The contract between A.R.C. and Bradley & Associates was obviously intended to benefit the owner of the building, the Church. Accordingly, the superior court erred in holding that the lack of privity of contract between A.R.C. and the Church precluded the Church's direct action against Farr and A.R.C. The judgment against Farr and A.R.C. on this count should be reinstated by the court. REVERSED and REMANDED for further proceedings consistent with this opinion.