H.R. Moch Co. v. Rensselaer Water Co.
159 N.E. 896 (N.Y. 1928) (1928)
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Rule of Law:
A member of the public cannot sue a water company for breach of its contract with a city to supply water for fire hydrants, as the individual is an incidental, not an intended, third-party beneficiary. Furthermore, the company's failure to supply adequate water is a nonfeasance that does not create a tort duty to the public.
Facts:
- Rensselaer Water Co. had a contract with the City of Rensselaer to supply water.
- The contract stipulated that the company would furnish water to the city for various purposes, including service at fire hydrants at a specified rate.
- A building in the city caught fire.
- The fire spread to a nearby warehouse owned by H.R. Moch Co., destroying it and its contents.
- Rensselaer Water Co. was promptly notified of the fire.
- The complaint alleged that the water company neglected to supply a sufficient quantity and pressure of water to extinguish the fire before it reached the warehouse.
Procedural Posture:
- H.R. Moch Co. sued Rensselaer Water Co. in a New York trial court (Special Term).
- Rensselaer Water Co. filed a motion, in the nature of a demurrer, to dismiss the complaint for failure to state a cause of action.
- The trial court denied the water company's motion to dismiss.
- Rensselaer Water Co. appealed the denial to the intermediate appellate court (the Appellate Division).
- The Appellate Division, in a divided decision, reversed the trial court's order and dismissed the complaint.
- H.R. Moch Co. appealed the Appellate Division's decision to the New York Court of Appeals, the state's highest court.
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Issue:
Does a water company that contracts with a city to furnish water to public fire hydrants owe a direct duty to an individual member of the public, the breach of which would make the company liable in contract or tort for fire damages resulting from inadequate water pressure?
Opinions:
Majority - Cardozo, Ch. J.
No. A water company that contracts with a city to supply water to fire hydrants does not owe a direct duty to individual members of the public. The court reasoned on three grounds. First, there is no liability for breach of contract because an individual property owner is merely an incidental beneficiary, not an intended third-party beneficiary of the city's contract. For a third party to sue, the benefit must be 'primary and immediate,' not secondary, and the contract did not show an intention for the company to be answerable to individual citizens for fire loss. Imposing such liability would create a 'crushing burden' disproportionate to the contract's reward. Second, there is no common-law tort liability because the company's failure was nonfeasance (omission to act), not misfeasance (acting improperly). The company did not launch an 'instrument of harm'; it merely withheld a benefit, which does not create a tort duty to the public. Third, no duty arises from statute, as the Transportation Corporations Act's requirement to furnish water creates a duty to the party denied service (the city), not to third parties who suffer incidental damages.
Analysis:
This landmark decision by Judge Cardozo significantly limits the scope of liability for both contract and tort claims. It solidifies the requirement that a third-party beneficiary must be an intended, not merely incidental, beneficiary to have standing to sue on a contract. The case is also foundational in tort law for its clear articulation of the distinction between misfeasance and nonfeasance, establishing that a failure to perform a contractual duty (nonfeasance) generally does not give rise to tort liability for third parties. Courts frequently cite the 'crushing burden' or 'liability in an indeterminate amount' rationale to deny the existence of a duty in similar cases involving public contracts.
