Uhl v. City of Sioux City
490 N.W.2d 69 (1992)
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Rule of Law:
A third party is merely an incidental beneficiary, with no right to enforce a contract, if the contract was made primarily for the benefit of the general public, even if the third party would receive a substantial benefit from its performance.
Facts:
- Clarence and Herthel Uhl owned a farm located just outside Sioux City, Iowa.
- The City of Sioux City and the Iowa State Highway Commission signed an agreement for an interstate bypass project that would divide the Uhls' property.
- An addendum to the agreement stated the City would construct a local road under a highway bridge on the Uhls' property within five years of the project's completion to connect to existing and future streets.
- The State initiated condemnation proceedings against the Uhls, taking away two access points but noting that access would be provided via the 'proposed city street under the bridges.'
- The Uhls were compensated for the condemned land, eventually settling for a total of $216,800.
- The highway project, including the bridges, was completed, but the City did not construct the promised connecting local road under the bridges.
Procedural Posture:
- Clarence and Herthel Uhl sued the City of Sioux City and the Iowa Department of Transportation in Iowa district court for damages.
- The district court granted the Department of Transportation's motion for summary judgment, dismissing it from the case.
- The claim against the City of Sioux City proceeded to a bench trial.
- The district court ruled in favor of the City, finding that the Uhls were not intended third-party beneficiaries of the agreement.
- The Uhls (appellants) appealed the district court's judgment to the Court of Appeals of Iowa.
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Issue:
Do landowners become intended third-party beneficiaries of an agreement between a city and a state to construct a road when the agreement's primary purpose is to benefit the general public for future development, even though the road would provide direct access to the landowners' property?
Opinions:
Majority - Habhab, J.
No. Landowners are not intended third-party beneficiaries when the contract's intent is to benefit the general public, not a specific individual. To be an intended beneficiary with enforcement rights under the Restatement (Second) of Contracts § 302, a party must show the contract was made directly and primarily for their express benefit. Here, the court looked to the intent of the promisee (the State) and found that the language of the agreement and surrounding circumstances indicated the road was planned for future public development and to connect the highway system. Any benefit to the Uhls was merely incidental to this primary public purpose. The court also rejected the promissory estoppel claim, finding the City could not have reasonably foreseen the Uhls would rely on its agreement with the State when settling a separate condemnation action with the State, to which the City was not a party.
Concurring - Schlegel, P.J.
Concurred with the majority opinion.
Concurring - Sackett, J.
Specially concurred without a written opinion.
Analysis:
This decision clarifies the application of the third-party beneficiary doctrine, as defined by the Restatement (Second) of Contracts § 302, in the context of public works contracts in Iowa. It establishes a significant hurdle for individuals seeking to enforce government agreements, emphasizing that a benefit must be expressly and primarily intended for them, not merely an incidental consequence of a project designed for the public good. The case reinforces the distinction between intent and motive, making it more difficult for property owners to sue municipalities for failing to complete infrastructure projects that would benefit them. Future litigants will need to present clear evidence from the contract or surrounding circumstances that the contracting governments intended to confer a specific, enforceable right upon them personally.
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