Opinion ID: 1675551
Heading Depth: 1
Heading Rank: 2

Heading: Rumford v. Valley (1910975)

Text: Based on our discussion of these issues in Part I of this opinion, we hold that the Rumfords' negligence, wantonness, and conspiracy claims against Valley are not barred by the statute of limitations. Moreover, we conclude that the Rumfords presented substantial evidence in support of their negligence, wantonness, and conspiracy claims against Valley. Accordingly, the summary judgment in favor of Valley is reversed as to those claims. Valley also claims that the fraud claims against it are barred by the statute of limitations. Based on our discussion of the Rumfords' discovery of the alleged fraud in Part I of this opinion, we conclude that the Rumfords' fraud claims against Valley are not barred, as a matter of law, by the statute of limitations. Moreover, we note that the doctrine of caveat emptor is not a good defense to the fraud claims asserted by the Rumfords against Valley. Valley claims that the Rumfords failed to produce any evidence of actionable fraud by Valley. We disagree. The March 10 termite letter issued by Valley mentioned both the previous termite infestation and the fungus and moisture problem. After being notified that a French drain had been installed, Valley prepared a second letter, omitting any mention of termite damage, moisture, or fungus. We conclude that, from these facts, a jury could reasonably infer that Valley intended to conceal from the Rumfords the fact that the house had previously been infested with termites and that excessive moisture and fungus were present under the house. Finding no other basis upon which we can affirm the summary judgment in favor of Valley on the fraud claims, we must reverse it with regard to those claims. In Count V of their complaint, the Rumfords alleged that they were third-party beneficiaries to the contract between Valley and the Rawlinses wherein Valley agreed to produce a termite letter, and they allege that Valley breached that contract. Where certain conditions are met, a party has a cause of action as a third-party beneficiary for a breach of contract by either party to the contract. These conditions are succinctly set forth in Beverly v. Macy, 702 F.2d 931 (11th Cir.1983): It is well established that the parties to a contract may create rights in a third-party beneficiary by manifesting an intention to do so. `The crucial inquiry involves a determination of intent, and third parties may sue on the contract only if it may be said to have been intended for their direct, as opposed to incidental, benefit.' Ross v. Imperial Constr. Co., 572 F.2d 518, 520 (5th Cir.1978) (applying Alabama law); see Riegel Fiber Corp. v. Anderson Gin Co., 512 F.2d 784, 787-88 (5th Cir.1975) (applying Alabama law); United States Pipe & Foundry Co. v. United States Fidelity & Guaranty Co., 505 F.2d 88, 90 (5th Cir. 1974) (applying Alabama law). According to the Restatement (Second) of Contracts: `A beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of a promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.... An incidental beneficiary is a beneficiary who is not an intended beneficiary.' Restatement (Second) of Contracts § 302. Thus, the key inquiry is whether the claimant was intended to be benefited by the contract provision in question. Further, `[i]t is not essential to the creation of a right in an intended beneficiary that he be identified when a contract containing the promise is made.' Restatement (Second) of Contracts § 308. Finally, when determining whether the parties to the contract intended to bestow a benefit on a third party, a court may look beyond the contract to the circumstances surrounding its formation. 702 F.2d at 940 (citations and footnote omitted). The Rumfords contend that these conditions are met in this case and, therefore, that as third-party beneficiaries they have a valid cause of action against Valley for breach of its contract with the Rawlinses. We agree. In addressing this claim, we must be careful to distinguish between the service contract executed in September 1986 requiring Valley annually to inspect the Rawlinses' house and treat it if necessary in connection with Valley's termite bond, and the post-sales-contract agreement requiring Valley to conduct an unscheduled inspection of the house and issue a letter that would accurately represent the condition of the house at the time of the closing. For the latter contract, the Rawlinses paid a consideration of $30, which was in addition to the annual fee required for maintenance of the service contract. The Rumfords do not claim to be beneficiaries of the service contract, and properly so. The service contract was for the benefit of the Rawlinses while they owned the house and not for the benefit of some hypothetical future buyer. Ray v. Montgomery, 399 So.2d 230 (Ala.1980). By contrast, the contract requiring Valley to produce a letter representing current conditions of the house arose only pursuant to the contract executed by the Rumfords and the Rawlinses for the sale of the property and, therefore, clearly contemplated an imminent sale, after which the Rawlinses would derive no benefit from termite protection. Indeed, the only party calculated to derive a direct, substantial benefit from such a contract is the prospective buyer. See Savage v. Wright, 439 So.2d 120, 123 (Ala.1983) (inferable that the provider of a termite letter knew not only the purpose of his employment but that his `letter of clearance' would be presented to, and was for the benefit of, the purchaser). Therefore, as to the Rumfords' breach of contract claim based on the contract to produce that letter, the summary judgment in favor of Valley is reversed. In Count XIII of their complaint, the Rumfords allege that on March 16, 1988, they entered with Valley into a contract in which Valley agreed to apply treatment where active termites were found on the premises. They further allege that Valley breached that contract. Because the Rumfords failed to make any argument or to cite any authority with regard to this claim, the judgment of the trial court is affirmed as to the breach of contract claim based on that alleged contract. Rule 28(a)(5), A.R.App.P.; Sea Calm Shipping Co. v. Cooks, 565 So.2d 212 (Ala.1990).