Court Opinion

ID: 6293878
Source: CourtListenerOpinion
Date Created: 2022-02-18 17:11:39.516789+00
Date Added: 2024-06-11T09:00:23.508635
License: Public Domain

Dissenting Opinion by
Cercone, J.:
The instant appeal arises from the granting of a judgment on the pleadings in favor of the defendant below, Nyce Crete Company. The basis for the judgment was the court’s conclusion that Hillbrook, Inc. was neither a third party beneficiary nor an assignee under the contract negotiated between Paul S. Vollrath (the President of Hillbrook, Inc.) and Nyce Crete Co. Especially at this stage of the proceedings I find those conclusions wholly unwarranted and would reverse.
In October of 1963, Paul S. Vollrath entered into a contract with Nyce Crete for the installation of flooring in six apartments. All six apartments were the property of Hillbrook, Inc., the plaintiff-appellant herein, whose president was Mr. Vollrath. The letter evidencing the agreement began “Re: Hillbrook, Inc.” and was typed under the letterhead of Nyce Crete Company. The letter was signed by Joseph C. Nyce and J. David Nyce as engineer and president, respectively, of Nyce Crete Company. *578Paul S. Vollrath also signed the agreement without indicating any representative capacity for either Hillbrook, Inc., or Vollrath Associates, another corporation of which he was president.
Between the time of their installation and 1969, according to appellant, the floors and ceilings in the apartment complex began sagging and cracking. The defects required not only the repair of the floors and ceilings, but also necessitated the replacement of electric heating cables located in the ceilings, as well as tiling and flooring throughout the apartment complex.
On November 5, 1969, Paul S. Vollrath, as president, and Daniel Vollrath, as treasurer, executed an assignment of rights of Vollrath Associates under the agreement with Nyce Crete to “Hillbrook Apartments, Inc.”1 Subsequently appellant filed a complaint in assumpsit claiming to be both a third party beneficiary of the contract and an assignee of the contract rights of Vollrath Associates. Based solely upon the pleadings, the court below found that Hillbrook, Inc. was not a third party beneficiary (apparently because the agreement did not specifically refer to it as such), and was not an assignee of the contract (because Vollrath Associates had no cognizable interests in the agreement to assign). Based upon the current state of the record, I disagree that either of those conclusions could be properly drawn.
Long ago, our Supreme Court firmly established that one not a party to a contract may have legally enforceable rights created therein. Thus, in Merriman v. Moore, 90 Pa. 78, 81 (1879), the Court stated: “The right of the plaintiff to recover does not depend upon privity of contract. It is a rudimental principle that a party may sue on a promise made on sufficient consideration for his *579use and benefit, though it be made to another and not to himself.” See also Hoff's Appeal, 24 Pa. 200 (1855).
In the instant case, the question is whether the parties intended that Hillbrook, Inc. be a third party beneficiary to the contract. The principal hurdle for Hillbrook, Inc. in that regard is a line of Pennsylvania cases which the lower court strictly construed. These cases are collected, relied upon and quoted in Van Cor, Inc. v. American Cas. Co. of Reading, 417 Pa. 408 (1965). The leading case in this regard appears to be Spires v. Hanover Fire Ins. Co., 364 Pa. 52, 56-57 (1950), wherein the Court stated the Pennsylvania rule:
“ ‘To be a third party beneficiary entitled to recover on a contract it is not enough that it be intended by one of the parties to the contract and the third person that the latter should be a beneficiary, but both parties to the contract must so intend and must indicate that intention in the contract; in other words, a promisor cannot be held liable to an alleged beneficiary of a contract unless the latter was within his contemplation at the time the contract was entered into and such liability was intentionally assumed by him in his undertaking; the obligation to the third party must be created, and must affirmatively appear, in the contract itself.’ See also Burke v. North Huntingdon Township, 390 Pa. 588 (1957); Silverman v. Food Fair Stores, 407 Pa. 507 (1962).” [Emphasis added.]
So stated, and if strictly applied, that rule seems not so much a statement of the law of third party beneficiaries, as an exposition of an archaic view of the parol evidence rule. The weight of authority agrees with so much of the rule as stated in Spires, and reiterated in Van Cor, that the third party beneficiary relationship must be within the contemplation of the promisor and the promisee at the time of contracting. That was the essence of the suggestion of Professor Corbin which was adopted in the new Restatement of Contracts, §133:
*580“(1) Unless otherwise agreed between promisor and promisee, 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 . . .
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.” [Emphasis added.]
In short, the new Restatement requires the court to ask whether the beneficiary would be reasonable in relying on the promise as manifesting an intention to confer a right on him. If the answer is affirmative, the beneficiary is protected. See Murray on Contracts, §279 (Rev. ed. 1974). The real mischief in the Pennsylvania rule lies in its requirement that the intent to benefit “must be created and affirmatively appear” in the contract. If by this is meant that the precise relationship of the third party beneficiary must be literally prescribed by the contract, it is wholly out of tune with the clear weight of authority. “That a beneficiary may have rights under a contract, although he is not specifically named therein, is clear from the decided cases.” Murray on Contracts, §288 at p. 576 (Rev. ed. 1974).
However, while it is true that the parties in the instant case did not delineate within the four corners of the contract the bundle of rights intended to be created therein for the benefit of Hillbrook, Inc., they did specifically state that the contract concerned Hillbrook, Inc. To bar proof that Hillbrook, Inc. was an intended beneficiary of this contract, therefore, is arbitrary and erroneous. Even the parol evidence rule in its procrustean heyday would have permitted proof of what the parties meant when they captioned their agreement “Re: Hill-brook, Inc.” Certainly their intention was sufficiently open to doubt to preclude awarding a judgment on the pleadings for defendant. Judgment on the pleadings should not be entered “if there is a question of fact, or *581if there remains an ambiguity whose determination is essential to the decision.” 1 Goodrich-Amram §1084 (a) -1 at p. 245. Rather, a judgment on the pleadings may only be entered “in clear cases and where there are no issues of fact.” Id. at §1084 (b)-l.
The error is exacerbated by the fact that the work contracted for constituted a capital improvement on the Hillbrook Apartments, certainly the chief, if not the sole, working asset of Hillbrook, Inc. In other words, performance under the contract involved a direct benefit to Hillbrook, Inc. Considering the fact that the direct obligation or direct benefit test of third party beneT ficiaries, espoused by some writers and employed in some jurisdictions, has been criticized for being too narrow, the error of the lower court in granting defendant’s motion for judgment on the pleadings is all the more clear.2 If under these circumstances the intent to benefit Hillbrook, Inc. did not affirmatively appear, it is difficult to conceive of an agreement in which it would appear, except when the parties have chosen some talismanic form of words “creating” the relationship. If hard and fast rules concerning third party beneficiaries are unworkable,3 the brittle rule espoused by the court below is bound to be broken in those situations where Professor Corbin has said “that refusal of a remedy would [be] out of harmony with generally prevailing ideas of justice and convenience. ...” 4 Corbin on Contracts §772 (1951).
As might be expected, there is some indication that Pennsylvania is retreating from the rule of Spires and Van Cor. Thus, in Line Lexington Lumber & Millwork Co., Inc. v. Pennsylvania Pub. Corp., 451 Pa. 154, 161 (1973), the 'Court stated that Van Cor “merely affirms the rule that, in order for one to be a third party beneficiary, to a contract, the contracting parties must have *582so intended.” Conspicuously absent is a reference to any requirement that the parties’ precise intention must “affirmatively appear” in the agreement. In light of the overwhelming weight of authority eschewing any requirement that the writing affirmatively establish the intent to benefit a third party, the lower court’s entry of judgment on the pleadings for the defendant was error and should be reversed.
I also have some difficulty with the lower court’s conclusion that the question of the assignment of the rights under the contract was also ripe for judgment on the pleadings. Mr. Vollrath’s signature on the original contract of October, 1963, could reasonably have been in any one of the following capacities: as an individual, as president of Hillbrook, Inc., or as president of Vollrath Associates. Since Hillbrook, Inc. did not bring the suit as the promisee, there was justification for the court’s concluding that, in signing the agreement, Vollrath was not acting as its president. On the other hand, there is greater reason to conclude that Vollrath signed in his capacity as president of Vollrath Associates. That would explain the subsequent assignment of Vollrath Associates’ interests in the contract to Hillbrook, Inc. — it would also render valid Hillbrook, Inc.’s cause of action based upon the assignment. An undisclosed principal may sue upon a contract made by his agent for his benefit. W. Seavey, Agency, §4 (1964). Since the pleadings do not contain an averment that Vollrath acted as president of Vollrath Associates in signing the contract, the court’s action in granting the defendant’s motion for judgment on the pleadings on that cause of action is understandable, however.4
In any event, I would also reinstate the cause of action based upon the assignment without considering *583whether the fact of Vollrath’s agency could be validly inferred for the purpose of avoiding a judgment on the pleadings. “When two alternative causes are pleaded and one is sustained as sufficiently pleaded, the court will not consider, on a motion for judgment on the pleadings, the validity of the other. That question will be postponed until the trial which must necessarily take place on the valid claim.” 1 Goodrich-Amram §1034 (b)-l at pp. 252-53. Since the court should have found that the cause of action based upon Hillbrook, Inc.’s being a third party beneficiary was sufficiently pleaded, it should not have reached the question of the sufficiency of the cause of action based on the assignment.
I would therefore reverse the judgment of the lower court and remand for further proceedings consistent with this opinion.
Jacobs, J., joins in this dissenting opinion.

. It has been stipulated that the plaintiff’s proper name is Hillbrook, Inc. and that Hillbrook Apartments, Inc. has been used interchangeably with Hillbrook, Inc.

. Murray on Contracts, §279 at pp. 570-71 (Rev. ed. 1974).

. Id. at §279 at p. 571.

. In this regard it would be instructive to know who actually paid for the floors and ceilings installed under the contract.