H.R. Moch Co. v. Rensselaer Water Co.

Brief Fact Summary.

A water company contracted with a city to provide it water.  A fire broke out and an individual's house was destroyed.  The individual whose house was destroyed brought suit against the water company alleging it knew about the fire, but did not provide enough water or water pressure to the area to fight the fire.

Synopsis of Rule of Law.

A member of the public does not have standing to bring an action under [Lawrence v. Fox] "unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise, a householder is without remedy against it."

Facts.

The Defendant, Rensselaer Water Co. (the "Defendant"), made a contract with the city of Rensselaer to supply water for a sum of years.  During the term of the contract, the Plaintiff, H.R. Moch Co. (the "Plaintiff"), owned a warehouse destroyed by a fire.  It was alleged that the Defendant was notified about the fire, but did not supply a sufficient amount of water or water pressure to put out the fire.  The Plaintiff brought suit against the Defendant, and alleged that the Defendant failed "fulfill the provisions of the contract between it and the city of Rensselaer".  Special term dismissed the Defendant's motion to dismiss the complaint.  The Appellate division reversed.

Issue.

Does the Plaintiff have a valid cause of action for breach of contract against the city?

Held.

No.  The city does not have a legal duty to supply its residents with protection against fire.  As such, a member of the public does not have standing to bring an action under [Lawrence v. Fox] with one caveat, "unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise, a householder is without remedy against it."  The court divided the contract into two branches.  First, "a promise to the city for the benefit of the city in its corporate capacity, in which branch is included the service at the hydrants."  A second branch is "a promise to the city for the benefit of private takers, in which branch is included the service at their homes and factories."  More is needed however, for a party to be treated as a third party beneficiary when not a formal party to the agreement.  In other words, the Defendant's obligation does not spread its protection so far. 
•    Thus, based on the law of the state "a contract between a city and a water company to furnish water at the city hydrants has in view a benefit to the public that is incidental rather than immediate, an assumption of duty to the city and not to its inhabitants."  The court also recognizes the realities of what this obligation would entail.  Further, "[t]he consequences invited would bear no reasonable proportion to those attached by law to defaults not greatly different." As such "[a] promisor will not be deemed to have had in mind the assumption of a risk so overwhelming for any trivial reward."
•    In order for the larger burden to be established, there must be the intention to compensate the individual members of the public if there is a breach.  Meaning the covenants made by the contractors were "not merely to indemnify the city, but to assume its liabilities."

Discussion.

It is interesting to read this case alongside [Lawrence v. Fox] and see how the cases coexist with one another.