In a case handed down last month, the Missouri Court of Appeals denied an owner of one of three units in a condominium to bring an action against John Beal, Inc. (“Beal“). Beal had contracted with the Raymon Condominium Association to provide brick work on some, but not all, exterior walls and the chimney. The contract, prepared and submitted by Beal to “Raymon Condo Assoc./Helen Becker,” included references to the terms and conditions on the reverse side of the contract form. The first term and condition on the reverse defined “Owner” to mean all of the owners of the property. Furthermore, if less than all of the owners signed this agreement, the person(s) signing the agreement expressly represented that they were authorized by all Owners to sign on their behalf and bind them to the terms.
Following completion of the work, one of the unit owners, the Klencs, took exception to the work and, apparently after the Association disagreed with there being an issue with the performance of the work, the Klencs filed suit themselves against Beal on the basis that Beal failed to perform work as specified in the contract or in a workmanlike manner. However, the owners of the other two condominiums found that Beal’s work was in compliance with the contract. Beal then moved to dismiss the petition on the grounds that the Klencs lacked standing to bring the action and failed to join the Association as a necessary indispensable party. After the Klencs refiled their petition against Beal, Beal moved for summary judgment in its favor, which the trial court granted.
While the appellate court took exception to the procedure followed, finding that the proper procedure should have been dismissal, not a grant of a summary judgment, the appellate court agreed with the ultimate position, that the Klencs lacked standing.
Standing is a concept that a party seeking relief has a personal interest at stake in the dispute, even if that interest is attenuated, slight or remote. The parties seeking relief must show some legally protected interest in the litigation so as to be directly and adversely affected by its outcome.
The Klencs apparently argued in reverse, on the basis of what the Condominium Property Act and what the court on its own found in the Uniform Condominium Act, that “without limiting the rights of any unit owner, actions may be brought in the names of the members of the board of managers on behalf of two or more of the unit owners, as their respective interests may appear, with respect to any cause of action relating to the common elements or more than one unit.” The appellate court noted that reference to the Condominiums Acts was not necessary, as those acts address standing for an association, not individual owners of a condominium.
Thus, the court relied on basic contract law to find that only a party or a third-party beneficiary of the contract may maintain a cause of action for a breach of that contract. If not a signatory, the right to be found a third-party beneficiary must be clearly and directly expressed, intended to benefit that party or an identifiable class of which the party is a member. Without such, there is a strong presumption that the third-party is not a beneficiary under Missouri law.
Finding that an entity, the condominium association, is the party who entered into the Beal contract, such language merely indicates that the individual signing is only representing that it had authority to sign for the entity, in this case the condominium association. The issue of third-party beneficiary does not depend so much on the desire or purpose to confer the benefit on a third person, “but rather on an intent that the promisor assume a direct obligation to him.” Accordingly, the court declined to conclude that the Klencs were third-party beneficiaries for the purpose of standing to sue under the Beal contract.
A complete copy of this decision can be found here.