Court Opinion

ID: 9771506
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:45:37.92758+00
Date Added: 2024-06-11T07:31:32.141664
License: Public Domain

ELLIS, Chief Justice
(dissenting).
I respectfully dissent from that portion of the majority opinion denying recovery to (1) Booker Hospital District and the subclass of resident taxpayers thereof and (2) the class of residents of the District. I concur with the result reached in the remainder of the majority opinion.
*732As indicated in the majority opinion, a basic matter for determination is whether the plaintiffs, other than the Scholarship Fund, Inc., are third party beneficiaries. It is my opinion that, as a matter of law, Booker Hospital District and the class and subclass of its residents are third party beneficiaries of Suthers’ contract with the Scholarship Fund.
I. STANDING TO SUE
I have reached my conclusions regarding this matter after considering the written contract itself and evaluating the circumstances surrounding its execution, as well as the acts and statements of the parties subsequent to the execution of the contract. I have concluded that the contracting parties intended that these plaintiffs directly benefit from their contract and that they have standing to sue.

Language of the Contract

In my view, the scholarship agreement clearly indicates that the citizens of Booker Hospital District were intended to be benefited by the contract. Although this intent is manifested throughout the contract, several portions are particularly revealing.
(a)Initially, the parties captioned their contract a Scholarship Agreement.” The use of the term “scholarship” instead of “loan” in the caption characterizes the nature of the arrangement, and is persuasive of an overriding purpose and intent to achieve the ultimate goal of having Suthers come as a licensed physician to practice medicine in Booker for at least ten years. Otherwise, under the terms of the agreement, the “scholarship” would have to be repaid. If Suthers fulfilled his obligation, the sum furnished would be regarded as a grant for a scholarship rather than a mere loan to be repaid. The primary objective of the project, as manifested by the caption as well as the entire agreement, was not to assist in Suthers’ education or to generate a profit from a loan to Suthers. The primary objective was to make Suthers’ services available to the community for at least ten years. Only in this event would the Scholarship Fund, Inc. become more than a mere lending agency and grant a “scholarship” to Suthers.
(b) The preamble of the agreement stated:
“. . . the Bulah Peery Memorial Scholarship Fund, Inc. ... is agreeable to furnishing a scholarship to Neal K. Suthers . . . who in turn desires to come to Booker, Texas, upon completion of all educational and other requirements, and practice medicine as a licensed physician. . . .” (emphasis added)
This language expresses the parties’ clear intent that Suthers should come to practice in Booker.
(c) The entire second paragraph of the scholarship agreement represents Suthers’ unambiguous promise to practice in Booker for at least ten years:
“II.
In consideration of scholarship agreement, Student agrees to use his best efforts, talent and ability to complete all of the necessary requirements to secure a license to practice medicine in the State of Texas, and agrees to thereafter immediately move to Booker, Texas, and practice medicine as a licensed physician for a period of not less than ten (10) years.”
(d) Paragraph III expresses the parties’ expectation that medical facilities would be built “so that adequate medical attention may be furnished the citizens of Booker and the surrounding vicinity.” (emphasis added).
(e) Paragraph IV provides an economic inducement for Suthers to fulfill his promise to practice for ten years in Booker.
The other paragraphs of the agreement are not pertinent to a determination of the matter here under consideration. In my view, however, the language analyzed above illustrates that the entire agreement was calculated to obligate Suthers contractually to practice in Booker for ten years. Only the citizens of Booker could benefit from Suthers’ promise to practice in Booker, and it is obvious that the contract was *733intended to benefit them. Suthers’ obligation (set forth in Paragraph II) was not merely “another option” under a loan agreement. On the contrary, the agreement reflects the parties’ intent that “adequate medical attention may be furnished the citizens of Booker and the surrounding vicinity.” This intent becomes even more obvious when the circumstances surrounding the execution of the agreement are examined.

Circumstances

The record reveals that the efforts of the Scholarship Fund in contractually binding Suthers to come to Booker was but one part of a fully integrated plan to make medical services available to the residents of the Booker Hospital District. At the time of contracting, all parties were aware that the Booker community had not had a physician practice in it for approximately twenty-five years. Further, the Booker Booster Club (akin to a Chamber of Commerce) had been making vigorous efforts to secure medical services for Booker for many years. One of these efforts involved channeling community funds into the Bulah Peery Memorial Scholarship Fund so that Suthers could be educated. The Booster Club gave individuals in the Booker community the opportunity to contribute to the Fund. The negotiations with Suthers leading up to the 1966 agreement were conducted by members of the Booster Club. It is apparent that at the time the contract was executed, all parties were aware of the community’s involvement in the effort to secure medical services for the Booker community.
Because the rights of third parties are involved here, the law permits us to consider not only the circumstances surrounding the contract’s execution, but also acts and statements of the parties subsequent to the execution of the contract in determining their intentions. This is true even though the contract was unambiguous on its face. Allison v. Campbell, 117 Tex. 277, 298 S.W. 523 (Tex.Comm’n App.1927, opinion adopted); Guardian Financial Corp. v. Rollins, 312 S.W.2d 553 (Tex.Civ.App.-Beaumont 1958, writ ref’d n. r. e.). See also, Ryan v. Kent, 36 S.W.2d 1007 (Tex.Comm’n App.1931, jdgmt. adopted); 13 Tex.Jur.2d Contracts § 126, at 297. In this case, the conduct of the parties subsequent to the contract’s execution is entirely consistent with our conclusion that the citizens of Booker were intended to benefit from the contract with Suthers. The citizens, according to the plan set forth in the scholarship agreement, activated the Hospital District, voted bonds and built a $140,000 clinic. Furthermore, Suthers’ actions indicate that his promise to practice in Booker was made for the citizens’ benefit. Before the clinic was built, he insisted upon it being a “first class” facility. With anything less, he apparently considered that he could not adequately attend to the community’s medical needs. When the entire record is reviewed, it is apparent that the Scholarship Agreement was only one part of a community project designed to accomplish one goal — providing medical services for the Booker community. From these circumstances and from the written words of the Scholarship Agreement itself, I have concluded that the parties to the contract intended to benefit directly the citizens of the Booker community.
The contracting parties’ intent to benefit the residents of the Booker Hospital District makes those residents third party beneficiaries of the contract. Casey v. Watts, 130 S.W.2d 396 (Tex.Civ.App.-Waco 1939, writ dism’d jdgmt. cor.). See also, Banker v. Breaux, 133 Tex. 183, 128 S.W.2d 23 (Tex.Comm’n App.1939, opinion adopted). Suthers has argued, however, that the plaintiffs lack standing to maintain this suit because they were intended to benefit only incidentally from the Scholarship Agreement. I disagree.
If a contract is executed primarily to benefit a third party, that party has standing to sue on that contract. Republic Nat’l Bank v. Nat’l Bankers Life Ins. Co., 427 S.W.2d 76 (Tex.Civ.App.-Dallas 1968, writ ref’d n. r. e.); Cooley v. Cash, 207 S.W.2d 436 (Tex.Civ.App.-Fort Worth 1947, no writ). Accord Quilter v. Wendland, 403 *734S.W.2d 335 (Tex.1966); Taggart v. Crews, 521 S.W.2d 703 (Tex.Civ.App.-San Antonio 1975, no writ). Cf. Banker v. Breaux, supra; Citizens Nat’l Bank v. Texas & P. Ry. Co., 136 Tex. 333, 150 S.W.2d 1003 (1941). I have concluded that this contract was executed primarily to benefit the citizens of the Booker Hospital District. The citizens were the only ones who could benefit from the doctor’s promise to practice in Booker for ten years; the Bulah Peery Memorial Scholarship Fund received no benefit from that promise. This" fact, coupled with the notion that the contract was but one part of a larger effort to obtain medical services for Booker, supports the conclusion that these plaintiffs have standing to sue under the Scholarship Agreement.
The majority opinion, however, sets forth the proposition that in order for a third party beneficiary to have standing to sue, such party must be either a donee or creditor beneficiary and not merely an incidental beneficiary. Although the distinction between the categories of beneficiaries is not always clearly demonstrated, it is my opinion that, in this case, the furnishing of the scholarship grant by the Scholarship Fund, Inc., as a means for assisting in the education of the doctor, to the end that a licensed physician would be available to practice medicine in the Booker Hospital District, operates to constitute the Booker Hospital District and its class and subclass of residents as donee beneficiaries of the Scholarship Fund project. As previously stated, the project was set up as a means to directly benefit the Booker community by making medical services available to it; the primary beneficiary was not the Scholarship Fund. Thus, the benefits bestowed were for the direct and not incidental benefits of the community and its residents. Under this arrangement a new and beneficial legal relationship was created between the third party beneficiaries and the promissor. In this connection see Cumis Ins. Soc., Inc. v. Republic Nat’l Bank, 480 S.W.2d 762 (Tex.Civ.App.-Dallas 1972, writ ref’d n. r. e.). Additionally, it is well recognized “that a third party who would be benefited by performance of a contractual promise may enforce that promise by suit if he is a donee beneficiary . . .” Id. at 766. Also, see Republic Nat’l Bank v. Nat’l Bankers Life Ins. Co., supra; Restatement of Contracts §§ 133, 147 (1932); 2 S. Williston Treatise on the Law of Contracts § 356 (3d ed. 1959). In view of the foregoing, it is my opinion that the Hospital District and its residents are the direct and not merely incidental beneficiaries of the contract by the Scholarship Fund with Suthers and have standing to sue for damages arising out of the breach of the contract made for their direct benefit.
II. DAMAGES
My view on the standing to sue issue has prompted a consideration of Suthers’ arguments concerning the damages awarded in this case.
Preliminarily, Suthers has argued that Paragraph IY of the Agreement provides for liquidated damages. I agree with the plaintiffs that Suthers waived this argument under Tex.R.Civ.P. 279 and that in any event the provision in Paragraph IV constitutes only an unenforceable penalty. Consequently, actual damages is the appropriate basis for recovery.

Foreseeability of Damages

Suthers has contended that the consequential damages awarded the Hospital District and the class of its citizens were unforeseeable and too remote to be recoverable. I do not agree.
To award consequential damages in a contract case, the fact of injury from a breach must be foreseeable at the time of contracting. If the fact of injury is foreseeable at the time of contracting, it makes no difference that the extent (or amount) of damage is not. Nat’l Bank of Cleburne v. M. M. Pittman Roller Mill, 265 S.W. 1024 (Tex.Comm’n App.1924, holding approved); Restatement of Contracts § 330 (1932). I do not believe that in 1966 Suthers foresaw that he would be liable for the specific sum of $110,000. I do believe that the contract itself and the circumstances surrounding its *735execution all indicate that in 1966 Suthers could foresee that the Hospital District would be injured if he breached his promise to the Scholarship Fund. The parties contemplated that a hospital district would be created; they contemplated that a clinic would be built. Those facts are recited in the written contract which they executed. Suthers also knew that Booker had been trying for almost twenty-five years to get a doctor. From all of these facts, it is reasonable to conclude that Suthers could foresee that the Hospital District would be injured if he breached his contract with the Scholarship Fund. At the trial he admitted that he had considered the possibility that “things would turn out just the way they did,” before he entered into the contract. He knew that if he breached the Hospital District would be left with a new clinic, the bonded indebtedness, no doctor, and little chance of getting one. I believe it has been established that the injury to the Hospital District was foreseeable in 1966. •
Under the same reasoning, the damage to the class of residents of the Hospital District was also foreseeable. The record reveals that Suthers knew in 1966 that residents of Booker were to be benefited by his contract with the Scholarship Fund. The entire arrangement was calculated to benefit them by virtue of the availability of medical services in the community. There is no indication in the record that the services were to be furnished free, but the basic concern was local availability of medical services. It follows then, that in 1966 Suth-ers could foresee that Booker’s residents would be injured if he breached his contract with the Scholarship Fund. Under the authorities cited in the preceding paragraph, the fact that he foresaw the fact of injury is enough to hold him liable for damages; the amount of damages was for the jury to decide from the evidence produced.

Measure of Damages

Suthers has contended that the trial court incorrectly measured the damages to the Hospital District.
In response to Suthers’ contentions, it should be noted that the “universal rule for measuring damages for the breach of a contract is just compensation for the loss or damage actually sustained.” Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952). In this case, as a third party beneficiary, the Hospital District was entitled to rely on Suthers’ promise that he would come to Booker. See Krueger v. Williams, 163 Tex. 545, 359 S.W.2d 48 (Tex.1962). In reliance upon Suthers’ promise to come to Booker if a clinic was built, the Hospital District spent $140,000 on a new clinic. The jury found that such sum represented the fair market value prior to Suthers’ vacation of the clinic. Because Suthers failed to perform, the clinic is worth, according to the jury’s findings, only $30,000. The difference between what was spent and the value of the clinic in its present form accurately reflects the extent of damages to the Hospital District. Damages awarded for injuries sustained in reliance upon a contractual promise should compensate the non-breaching party to the extent that he was damaged by his reliance. Manney v. Burgess, 346 S.W.2d 937 (Tex.Civ.App.-Fort Worth 1961, no writ); C. McCormick, Handbook on the Law of Damages 582-86 (1935). See also, Stewart v. Basey, supra. In the light of the jury’s findings, the award of $110,000 to the Hospital District and its resident taxpayers should be sustained.
Furthermore, the jury finding as to the market value of the clinic after the breach is supported by competent evidence. We note the testimony of James H. Godfrey, who was in the real estate business and an associate member of a real estate appraisal society. Mr. Godfrey described the floor plan and furnishings of the clinic and detailed the clinic’s technical and laboratory equipment. He stated that $140,000 was a fair cost allocation to the clinic and that such dollar figure was, in his opinion, the reasonable cash market value of the clinic occupied by a practicing physician in March, 1974. Mr. Godfrey pointed out that the clinic was a special purpose facility and that it was built to be used as a doctor’s clinic. *736The clinic floors were concrete slab in which the plumbing was set. There were three half baths and one three-quarters bath, but no full baths. Lead sheeting lined the x-ray area. A hallway through the center of the clinic gave access to patient rooms, a pharmacy, an emergency room and the x-ray room. The evidence in the trial shows that considerable effort by the Hospital District to acquire another doctor to replace Doctor Suthers and use the clinic for medical services in the community had been unsuccessful. In connection with the jury’s answer to this damage issue involving the reduced value of the clinic by reason of the doctor’s breach, (along with other damage issues) it is significant that the court instructed the jury as follows:
“. . . you are instructed that you may consider the prospect, if any, of a medical doctor moving to, and practicing medicine in, Booker for any period during the ten years provided for in the Scholarship Agreement.”
Pursuant to a question predicated upon an assumption (supported by evidence of probative force) that it was difficult to get a medical doctor to practice medicine in Booker, Texas, Mr. Godfrey stated that in his opinion the reasonable cash market value of the facility, unoccupied by a practicing physician, was $30,000. Suthers offered no testimony to dispute or offset this appraisal. The weight and credibility of the testimony submitted was for the jury to determine. In my opinion there is sufficient evidence of probative force to support the jury’s finding of the market value of the clinic after Suthers’ breach. The $110,-000 awarded for the damages accruing to the Hospital District and the taxpaying residents of the District represents their tangible monetary detriment by reason of reliance on Suthers’ promise and his failure to practice in Booker in accordance with the agreement.
Suthers has not challenged the sufficiency of the evidence presented at the trial which supports the $1,000 recovery by the residents of Booker Hospital District. He has argued only that these damages were not foreseeable. The reasons for concluding that damages were foreseeable have been previously set forth. Therefore, I would sustain the award.
For the reasons above stated, I would hold that the Booker Hospital District and the subclass of resident taxpayers thereof and the class of residents of the District are third party beneficiaries with standing to bring this suit and that the damages found by the jury should be-sustained. Accordingly, the judgment of the trial court should be affirmed.