Hillbrook Apartments, Inc. v. Nyce Crete Co.

352 A.2d 148, 237 Pa. Super. 565, 1975 Pa. Super. LEXIS 2492

• Court: Superior Court of Pennsylvania
• Decided: December 1, 1975
• Docket: Appeal, No. 1134
• Status: Published

Opinions

Opinion by

Spaeth, J.,

Appellant, Hillbrook Apartments, Inc.,¹ instituted suit in assumpsit as assignee of a contract for the installation of concrete floor systems in six apartment buildings belonging to plaintiff. The complaint alleged that the floors were improperly and poorly installed by appellee, Nyce Crete Company. Appellee moved for judgment on the pleadings on the ground that appellant did not have standing to enforce the underlying contract. After argument before a court en banc, the motion was granted. This appeal followed.

The underlying contract was executed on October 23, 1962, and was between appellee and Paul S. Vollrath. The contract, written on appellee’s stationery, was captioned “Re: Hillbrook Inc.” and was addressed to Mr. Paul S. Vollrath. It was signed “Nyce Crete Company.” Beneath this were the signatures of “Joseph C. Nyce, Engineer” and “J. David Nyce, Pres.” In the lower left hand corner, under the statement, “Agreeed [sm] as contract”, was Vollrath’s signature; it was not accompanied by any indication of representative capacity.²

The construction called for by the contract was completed in October, 1964. On November 5, 1969, Paul S. Vollrath Associates, Inc., assigned all rights in the contract to appellant. Vollrath signed this statement twice, once as President of Vollrath Associates, (this signature was followed by the Secretary-Treasurer’s), and again, in the lower left hand corner, under the word “Approved”, as President of appellant (this signature was followed by the Assistant Secretary’s). On November 10, 1969, appellant brought this action now before this court.

The difficulty, it will be observed, is that there is nothing to show that Vollrath Associates had any interest in the contract to assign to appellant; Vollrath Associates is not mentioned in the contract. It is true that the contract is signed by Vollrath. However, there is no statement of corporate identity accompanying his signature, nor is a corporate seal affixed. See generally, Smiler v. Toll, 373 Pa. 127, 94 A.2d 764 (1953). The manner in which Vollrath signed the contract indicated nothing more than an intention to be bound as an individual. Strauss and Co. v. Berman, 297 Pa. 432, 147 A. 85 (1929). Therefore, on the face of the contract Vollrath Associates did not have any interest in it to assign to appellant. Nevertheless, appellant contends that it can maintain this action as a real party in interest.

“To be the real party in interest one must not merely have an interest in the result of the action but must be in such command of the action as to be legally entitled to give complete acquittance or discharge to the other party, upon performance.” Spires v. Hanover Fire Ins. Co., 364 Pa. 52, 58, 70 A.2d 828, 831 (1950) (emphasis in original) ; Pa. R. C. P. 2002; Goodrich-Amram §2002 (a)-3.

Appellant first contends that it is a real party in interest because it is a third party beneficiary to the contract.

There are three types of third party beneficiaries: donee beneficiary, creditor beneficiary, and incidental beneficiary. They are defined in the Restatement of Contracts, §133 (1932) :³

Ҥ133. Definition of Donee Beneficiary, Creditor Beneficiary, Incidental Beneficiary.

(1) Where performance of a promise in a contract will benefit a person other than the promisee, that person is .... :

(a) a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise of all or part of the performance is to make a gift to the beneficiary or to confer upon him a right against the prom-isor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary;

(b) a creditor beneficiary if no purpose to make a gift appears from the terms of the promise in view of the accompanying circumstances and performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary, or a right of the beneficiary against the promisee which has been barred by the Statute of Limitations or by a discharge in bankruptcy, or which is unenforceable because of the Statute of Frauds;

(c) an incidental beneficiary if neither the facts stated in Clause (a) nor those stated in Clause (b) exist.”

In Spires v. Hanover Fire Ins. Co., supra at 56-57, 70 A.2d at 830 (1950), (emphasis in original) the court said: “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: Klinger v. Wick, 266 Pa. 1, 5, 6, 109 A. 542, 543 (1920); 17 C.J.S. 1127-1130, §519 (c) ; 12 Am. Jur. 831, 832, §280; 833, 834, §281.” [Footnotes omitted].

Appellant contends that the fact that it was identified in the caption of the contract (“Re: Hillbrook Inc.”) shows that the parties intended to confer a benefit upon it. The intention of the parties must be determined from the terms of the contract and the circumstances surrounding it. Mowrer v. Poirier & McLane Corp., 382 Pa. 2, 114 A.2d 88 (1955). Nothing here suggests anything more than a simple construction contract. Appellee undertook

“to manufacture and install the Omnia floor system for first and second floors of the six (6) buildings included in the referenced job.

“The extent of our work will be to install planks, blocks and topping concrete and shore the floors for fourteen days before the topping concrete is poured. We will also form around the patios and lay a piece of %" (or thicker) dryfoam around the exterior of the floor.”

In return, Vollrath agreed to pay, at specified intervals,

“the total price of eighty-four thousand six hundred dollars, $84,600, for 75,951 square feet. Additional area will be supplied for the price of $1,114 per square foot.”

The contract, therefore, “simply purports to set up an intra-party plan.” Burke v. North Huntingdon Twp., 390 Pa. 588, 136 A.2d 310, (1957). As the lower court observed, the caption, “Re: Hillbrook Inc.,” represented nothing more than a means of identifying “the project or jobsite. This interpretation is supported and buttressed in the first paragraph’s allusion to ‘the referenced job’.” Appellant was, therefore, neither a donee nor a creditor beneficiary. At best, it could be considered an incidental beneficiary. However, “[a]n incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee.” Restatement of Contracts, supra, §147, adopted in Mowrer v. Poirier & McLane Corp., supra.

The dissenting opinion urges us to discard the well-entrenched Pennsylvania rule that the intent to benefit the third party must “affirmatively appear in the contract itself,” Spires v. Hanover Fire Ins. Co., supra, and advocates adoption of the more liberal view embodied in the Restatement (Second) of Contracts, §183. Sympathetic as we may be to the dissent’s position, we are not free, as an intermediate appellate court, to overrule the decisional law enunciated by the Supreme Court of Pennsylvania. Crowell Office Equipment v. Krug, 213 Pa. Superior Ct. 261, 263, 247 A.2d 657, 658 (1968); Baier v. Glen Alden Coal Co., 131 Pa. Superior Ct. 309, 318, 200 A. 190, 195 (1938), aff’d, 332 Pa. 561, 3 A.2d 349 (1939).

Line Lexington Lumber & Millwork Co., Inc. v. Pennsylvania Pub. Corp., 451 Pa. 154, 161, 301 A.2d 684, 688 (1973), does not represent a retrenchment from the Pennsylvania rule. In Line Lexington, the lessee of a building applied for fire insurance for the benefit of the plaintiff, the owner of the building. An insurance broker, although knowing of the intent to benefit the plaintiff1, failed to designate the plaintiff as the insured party. The Supreme Court held that the lower court improperly sustained the defendants’ demurrer, and stated that a cause of action for reformation was properly pleaded. The court found inapposite the third party beneficiary cases denying relief to the third party, since in those cases there was no intention to confer a benefit on the third party, whereas in the case before it, the complaint alleged that although the intent to benefit was clearly present, it had not been duly embodied in the written contract of insurance.

Appellant next contends that it is the direct obligee of the contract. It bases this contention on the fact that Vollrath is president of appellant (as appears from his signature to the assignment).

“Individual officers of a corporation can bind the corporation only when they act in their official capacities as officers of such corporation and within the scope of their authority. Their acts as individuals or as officers of another corporation are not binding upon the corporation sought to be charged.” Peterson v. Marianna Borough, 310 Pa. 524, 528, 165 A. 838, 839 (1933). “Corporations necessarily act through agents and if one so acting is to escape personal liability for what he intends to be a corporate obligation, the limitation of his responsibility should be made to appear on the face of the instrument. Otherwise, ‘the individual signature imports a personal liability: Strauss v. Berman, 297 Pa. 432, 435’: Flexlume Corp. v. Norris, 98 Pa. Superior Ct. 530, 533-34.” Watters v. DeMilio, 390 Pa. 155, 159, 134 A.2d 671, 674 (1957).

Consistent with these principles, appellee signed the contract in a manner showing corporate responsibility. (As mentioned above, its name is followed by the signatures of its engineer and president.)' Thus, if Vollrath intended to sign as appellant’s president, he had a clear model to follow. Cf., Van Cor, Inc. v. Am. Cas. Co. of Rdg., 417 Pa. 408, 208 A.2d 267 (1965). Everything in the contract, however, from the inside address⁴ to Vollrath’s two signatures, indicated that Vollrath was to be bound as an individual; no one could tell from the contract that he was appellant’s president.⁵

Appellant next contends that it can maintain the action as the assignee of Vollrath Associates. In order for the assignee of a chose in action to maintain a cause of action, it must in its pleading specifically trace the history of the assignment. Produce Factors Corp. v. Brown, 197 Pa. Superior Ct. 626, 179 A.2d 919 (1962); Brown v. Esposito, 157 Pa. Superior Ct. 147, 42 A.2d 93 (1945); Pa. R. C. P. 2002; Goodrich-Amram, §2002 (a) 15.

“When suit is brought against the defendant by a stranger to his contract, he is entitled to proof that the plaintiff is the owner of the claim against him. This protection must be afforded the defendant. Otherwise, the defendant might find himself subjected to the same liability to the original owner of the cause of action, in the event that there was no actual assignment.” Brown v. Esposito, supra at 149, 42 A.2d at 94.

Here, appellant only alleged, in paragraph 3 of its complaint, that it

“is the assignee of Paul S. Vollrath Associates, Inc. wherein plaintiff is authorized ‘to take legal proceedings to enforce any and all rights’ in regard to a contract between plaintiff’s assignor, Paul S. Vollrath Associates, Inc. and the defendant. A copy of said assignment is attached hereto, made a part hereof and marked Exhibit ‘B’. Within the aforementioned Exhibit ‘B’ is a copy of the contract between plaintiff’s assignor and defendant which is referred to in the assignment as Exhibit ‘A’. That contract is dated October 23, 1962.”

However, as mentioned above, the contract does not appear to be “between plaintiff’s assignor, Paul S. Vollrath Associates, Inc. and the defendant.” Instead, it appears to be between the defendant (appellee)', and Vollrath individually; and nowhere in the pleadings is it explained why Vollrath’s apparently individual signature to the contract was in fact on behalf of Vollrath Associates.

It follows that appellant has not shown that it is a real party in interest. This does not, however, dispose of the case, for appellant finally contends that judgment on the pleadings should not have been entered because an amendment could have cured the defect in its complaint.

“[A] judgment on the pleadings should not be entered unless the right thereto is clear and free from doubt.” Eckborg v. Hyde-Murphy Co., 442 Pa. 288, 286, 276 A.2d 513, 515 (1971); cf., Framlau Corp. v. Delaware Co., 223 Pa. Superior Ct. 272, 276, 299 A.2d 335, 337 (1972) (amendment after demurrer is sustained); Pa. R. C. P. 1033 (liberal right of amendment). However, an amendment

“will not be allowed to the prejudice of the other party, where the statute of limitations has run, by introducing a new cause of action or bringing in a new party, or changing the capacity in which he is sued.” Wright v. Eureka Tempered Copper Co., 206 Pa. 274, 276, 55 A. 978 (1903) (collecting cases).

According to appellant’s complaint, the work “between December, 1963 and October, 1964 was completed.” (Para. 6 of complaint.) “Thereafter, the floors installed by defendant began to sag causing cracking of plaster walls and ceilings in 84 apartment units ...” (Para. 7 of complaint.) By appellant’s own admission, therefore, the cause of action accrued in October, 1964, so that the statute of limitations, which is six years in an action in assumpsit, has expired. Act of March 27, 1713, 1 Sm. L. 76, §1; 12 P.S. §31. It follows that an amendment introducing a new party may not be allowed. However,

“ [i] f the right party was in court as the result of service of process and it was merely his or its designation which was sought to be changed, we would be prone to permit the amendment.” Saracina v. Cotoia, 417 Pa. 80, 84, 208 A.2d 764, 766 (1965) (emphasis in original).

Although, as noted above, appellant failed to plead that Vollrath’s signature to the contract was in fact on behalf of Vollrath Associates, which assigned the contract to appellant, perhaps there was a principal-agent relationship between Vollrath Associates and Vollrath, Smiler v. Toll, supra; Lancaster v. Knickerbocker Ice Co., 153 Pa. , 26 A. 251 (1893); see generally, Restatement, Second, Agency §§292, 302, such as would have entitled Vollrath Associates to sue on the contract, and therefore to assign it to appellant. Here, the contract is somewhat informal, and Vollrath evidently is the president both of Vollrath Associates and of appellant. In the circumstances, the fairer course of action is to give appellant a chance to amend its complaint, if it can, to plead that Vollrath was acting on behalf of Vollrath Associates, and that therefore “the right party” is in court. We do not suggest that every plaintiff that suffers judgment on the pleadings should be allowed to amend; neither, however, should amendment never be allowed.

Reversed with a 'procedendo.

Van der Voort, J., did not participate in the consideration or decision of this case.

1 . Counsel have stipulated that the name of appellant is incorrect in the caption and that the correct name is “Hillbrook, Inc.”

2 . Vollrath’s signature appears in two places. In addition to signing at the bottom of the contract, he also signed a handwritten insertion in the contract.

3 . Section 133 of the Restatement of Contracts has been adopted as the law in Pennsylvania in Keefer v. Lombardi, 376 Pa. 367, 102 A.2d 695 (1954); Commonwealth v. Great Am. Indemnity Co., 312 Pa. 183, 167 A. 793 (1933).

4 . The inside address was:

Mr. Paul S. Vollrath

1 Limekiln Pike

North Hills, Pennsylvania

5 . The significance of appellant’s name in the caption of the contract has been discussed supra.