Scarpitti v. Weborg

Brief Fact Summary.

Plaintiff sued Defendant for damages resulting from Defendant’s arbitrary enforcement of neighborhood restrictions, requiring that 1) the size of the garage built on the land be no larger than two and one-half cars, and 2) any building plans be approved in writing by Defendant. The trial court granted Defendant’s motion for dismissal. The superior court reversed. Defendant appealed.

Synopsis of Rule of Law.

When a third party beneficiary’s right is essential to satisfy a contract, and the beneficiary stands to receive the value of the contracted performance, a third party beneficiary relationship does not need to be specifically intended by the parties to the contract.

Facts.

Scarpitti (Plaintiff) bought a parcel of residential land that was subject to a deed restriction requiring that 1) the size of the garage built on the land be no larger than two and one-half cars, and 2) any building plans be approved in writing by Weborg (Defendant), the authorized architect. Plaintiff’s original building plans called for a three-car garage, which Defendant subsequently rejected. Recognizing the need to conform to the restrictions, Plaintiff went on to build a home in accordance with the deed. Defendant, however, later approved the plans of other lot owners that contained three-car garages. Plaintiff sued Defendant for damages resulting from Defendant’s arbitrary enforcement of the neighborhood restrictions. The trial court granted Defendant’s dismissal of the case and on appeal the superior court reversed. The superior court held that Plaintiff was a third party beneficiary of the implied contract between Defendant and the neighborhood’s developer. Defendant appealed.

Issue.

Whether buyers of land in a residential neighborhood are third party beneficiaries of the implicit agreement between the neighborhood developer and the architect retained to review and approve house construction plans.

Held.

Yes. The court of appeals’ ruling is affirmed. When a third party beneficiary’s right is essential to satisfy a contract, and the beneficiary stands to receive the value of the contracted performance, a third party beneficiary relationship does not need to be specifically intended by the parties to the contract.

Discussion.

Defendant and the development company contemplated third party beneficiaries, because the purpose of their underlying contract was to increase the appeal of the lots by imposing restrictions on the appearance of the homes. Under § 302 of the Restatement Second of Contract, when a third party beneficiary’s right is essential to satisfy a contract, and the beneficiary stands to receive the value of the contracted performance, a third party beneficiary relationship does not need to be specifically intended by the parties to the contract. Homeowners are parties with the strongest interest in consistent enforcement of the deed restrictions, recognizing their interest as a third party effectuates the purpose of Defendant’s contract with the development company. The one and only purpose of Defendant reviewing the plans was to benefit the homeowners in the neighborhood by consistently and uniformly applying the rules of the deed. Plaintiff, although not specifically named, was a homeowner, and thus was a member of the small class of persons who were to benefit from the deed restrictions.