Same - The New York Doctrine

In New York, and in most of the other states, the courts have refused to recognize the doctrine that a person for whose benefit a promise is made cannot sue the promisor unless he was a party to the contract. In a leading New York case a debtor of the plaintiff had loaned money to the defendant, and the defendant had promised him to pay the plaintiff. The plaintiff was not a party to the contract, but it was held by four of the seven judges that he could sue on the promise, as it was considered settled in that state that, where a promise is "made to one for the benefit of another, he for whose benefit it is made may bring an action for its breach." 28 In many cases the rule has been declared broadly as thus stated.29

26 Wilbur v. Wilbur, 17 R. I. 295, 21 Atl. 497; Linneman v. Moross' Estate, 98 Mich. 178, 57 N. W. 103, 39 Am. St. Rep. 528. See "Contracts;' Dec. Dig. (Key-No.) § 187; Cent. Dig. §§ 798-807.

27Exchange Bank of St Louis v. Rice, 107 Mass. 37, 9 Am. Rep. 1; Mar-ston v. Bigelow, 150 Mass. 53, 22 N. E. 71, 5 L. R. A. 43. See "Contracts," Dec. Dig. (Key-No.) § 187; Cent. Dig. §§ 798-807.

28LAWRENCE v. FOX, 20 N. Y. 268, Throckmorton Cas. Contracts, 315. See, also, Schermerborn v. Vanderheyden, 1 Johns. 140, 3 Am. Dec. 304; Todd v. Weber, 95 N. Y. 181, 47 Am. Rep. 20; Stewart v. Trustees, 2 Denio (N. Y.) 403; Gifford v. Corrigan, 117 N. Y. 257, 22 N. E. 756, 6 L. R, A. 610, 15 Am St Rep. 50a See "Contracts," Dec. Dig. (Key-No.) § 187; Cent. Dig. §§ 798-807.

29Bassett v. Hughes, 43 Wis. 319; Bristow v. Lane, 21 I11. 194; Bay v. Williams, 112 I11. 91, 1 N. E. 340, 54 Am. Rep. 209; Mason v. Hall, 30 Ala. 599; Brice v. King, 1 Head (Tenn.) 152; Wood v. Moriarty, 15 R. I. 518, 9 Atl. 427; Small v. Schaefer, 24 Md. 143; Bobanan v. Pope, 42 Me. 93; Coleman v. Whitney, 62 Vt 123, 20 Atl. 322, 9 L. R. A. 517; Kaufman v. Bank, 31 Neb. 661, 48 N. W. 738; Hendrick v. Lindsay, 93 U. S. 143, 23 L. Ed. 855; Flint v. Cadenasso, 64 Cal. 83, 28 Pac. 62; Hecht v. Caughron, 46 Ark. 135; Jones v. Thomas, 21 Grat (Va.) 96; Bobbins v. Ayres, 10 Mo. 538, 47 Am. Dee. 125; Whitehead v. Burgess, 61 N. J. Law, 75, 38 Atl. 802; Enos v. Sanger, 96 Wis. 150, 70 N. W. 1069, 37 L. R. A. 862, 65 Am. St Rep. 38; Marble Sav. Bank v. Mesarvey, 101 Iowa, 285, 70 N. W. 198; Ingram v. Ingram, 172 I11. 287, 50 N. E. 198; Robman v. Gaiser, 53 Neb. 474, 73 N. W. 923; Ransdel v. Moore, 153 Ind. 393, 53 N. E. 767, 53 L. R. A. 753; Gorrell v. Water Supply Co., 124 N. C. 328, 32 S. E. 720, 46 L. R. A. 513, 70 Am. St Rep. 598; Ferris v. Brewing Co., 155 Ind. 539, 58 N. E. 701, 52 L. R. A. 305; Elmer v. Loper, 66 N. J. Law, 50, 48 Atl. 550. Cf. Electric Appliance Co. v. Guaranty Co., 110 Wis. 434, 85 N. W. 648, 53 L. R. A. 609. That the person for whose benefit a promise is made may sue does not prevent the promisee from also suing. Steene v. Aylesworth, 18 Conn. 244; Merriam v. Lumber Co., 23 Minn. 314. But see Seigman v. Hoffacker, 57 Md. 321 See "Contracts," Dec Dig. (Key-No.) § 187; Cent. Dig. §§ 798-807.

According to the decisions in New York and many other states, however, there must be something more than a mere promise for the benefit of the third person. The promise must be for his benefit,30 and there must be between the promisee and the third person seeking to enforce the promise the relation of debtor and creditor, or some such relation as makes the performance of the promise a satisfaction of some legal or equitable duty owing by the promisee to such third person.31 "It is not sufficient that the performance of the promise may benefit the third person. It must have been entered into for his benefit, or at least such benefit must be the direct result of performance, and so within the contemplation of the parties; and, in addition, the promisee must have a legal interest that the promise be performed in favor of the party claiming performance." 32

Thus, where a mortgagor conveys the mortgaged premises to a purchaser, who in his deed assumes and agrees to pay the mortgage, it is generally held that the mortgagee may maintain an action against the grantee upon the covenant to pay;33 but if the grantor is not personally bound to pay a mortgage upon the granted premises, as where he has purchased subject to the mortgage without assuming it, his grantee does not by assuming the mortgage become personally liable to the mortgagee.34 It is very generally held that the promisee can release the promisor from his obligation before the third person for whose benefit the promise was made has assented to and adopted it,86 but not afterwards.38

30 Simson v. Brown, 68 N. Y. 355; Wheat v. Rice, 97 N. Y. 296; Austin v. Seligman (C. C.) 18 Fed. 519; Sayward v. Dexter, Horton & Co., 72 Fed. 758, 19 C. C. A. 176; American Exch. Nat Bank v. Railroad Co. (C. C.) 76 Fed. 130; Greenwood v. Sheldon. 31 Minn. 254, 17 N. W. 478; Wright v. Terry, 23 Fla. 160, 2 South. 6; Burton v. Larkin, 36 Kan. 246, 13 Pac. 398, 59 Ana. Rep. 541; Chung Kee v. Davidson, 73 Cal. 522, 15 Pac. 100; Crandall v. Payne, 154 I11. 627, 39 N. E. 601; Walsh v. Featherstone, 67 Minn. 103, 69 N. W. 811; School Dist. of Beatrice v. Thomas, 51 Neb. 740, 71 N. W. 731; German State Bank v. Light Co., 104 Iowa, 717, 74 N. W. 685; Washburn v. Investment Co., 26 Or. 436, 36 Pac. 533, 38 Pac. 620; Newberry Land Co. v. Newberry, 95 Va. 119, 27 S. E. 899; Thomas Mfg. Co. v. Prather, 65 Ark. 27, 44 S. W. 218; Rowe v. Moon, 115 Wis. 566, 92 N. W. 263. See "Contracts," Dec. Dig. (Keg-No.) § 187; Cent. Dig. §§ 798-807.

31 Durnherr v. Rau, 135 N. Y. 219, 32 N. E. 49; Wheat v. Rice, 97 N. Y. 302; Lorillard v. Clyde, 122 N. Y. 498, 25 N. E. 917, 10 L. R. A. 113; Town-send v. Rackham, 143 N. Y. 516, 38 N. E. 731 (but see Buchanan v. Tilden, 158 N. Y. 109. 52 N. E. 724, 44 L. R. A. 170, 70 Am. St. Rep. 454); Jefferson v. Asch, 53 Minn. 446, 55 N. W. 604, 25 L. R. A. 257, 39 Am. St. Rep. 618; Union Railway Storage Co. v. McDermott, 53 Minn. 407, 55 N. W. 606; Thomas Mfg. Co. v. Prather, 65 Ark. 27, 44 S. W. 218. And see Coleman v. Whitney, 62 Vt. 123, 20 Atl. 322, 9 L. R. A. 517; Lovejoy v. Howe, 55 Minn. 353, 57 N. W. 57; Barnes v. Insurance Co., 56 Minn. 38, 57 N. W. 314, 45 Am. St Rep. 438; Montgomery v. Rief, 15 Utah, 495, 50 Pac. 623; German State Bank v. Light Co., 104 Iowa, 717, 74 N. W. 685; Feldman v. McGuire. 34 Or. 309, 55 Pac. 872; Street v. Goodale, 77 Mo. App. 318; Frerking v. Thomas, 64 Neb. 193, 89 N. W. 1005; Merchants' Union Trust Co. v. New Philadelphia Graphite Co. (Del. Ch.) 83 Atl. 520; Eau Claire-St Louis Lumber Co. v. Banks, 136 Mo. App. 44, 117 S. W. 611. See "Contracts," Dec. Dig (Key-No.) § 187; Cent. Dig. §§ 798-807.

32 Durnherr v. Rau, 135 N. Y. 219, 32 N. E. 49. See "Contracts," Dec. Dig. (Key-No.) § 187; Cent. Dig. §§ 798-807. Clark Cont.(.3d Ed.) - 29

33 Burr v. Beers, 24 N. T. 178, SO Am. Dec. 327; Bay v. Williams, 112 I11. 91, 1 N. E. 340, 54 Am. Rep. 209; Follansbee v. Johnson, 28 Minn. 311, 9 N. W. 882; Flint v. Cadenasso, 64 Cal. 83, 28 Pac. 62; Stephenson v. Elliott, 53 Kan. 550, 36 Pac. 980; Starbird v. Cranston, 24 Colo. 20, 48 Pac. 652; Webster v. Fleming, 178 I11. 140. 52 N. E. 975; Kehoe v. Patton, 23 R. J. 360, 50 Atl. 655. See note 36, infra. See "Mortgages," Dec. Dig. (Key-No.) § 282; Cent. Dig. §§ 740-755.

34Vrooman v. Turner, 69 N. Y. 280, 25 Am. Rep. 195; Brown v. Stillman, 43 Minn. 126, 45 N. W. 2; Nelson v. Rogers, 47 Minn. 103, 49 N. W. 526; Young Men's Christian Ass'n of Portland v. Croft, 34 Or. 106, 55 Pac. 439, 75 Am. St. Rep. 568; Eakin v. Shultz, 61 N. J. Eq. 156, 47 Atl. 274. Contra, Marble Sav. Bank v. Mesarvey, 101 Iowa, 285, 70 N. W. 198; Enos v. Sanger, 96 Wis. 150, 70 N. W. 1069, 37 L. R. A. 862, 65 Am. St. Rep. 38. See "Mortgages," Dec. Dig. (Key-No.) § 282; Cent. Dig. §§ 140-155.

35 Kelly v. Roberts, 40 N. Y. 432; Brewer v. Mauerer, 38 Ohio St. 543, 43 Am. Rep. 436; Gilbert v. Sanderson, 56 Iowa, 349, 9 N. W. 293, 41 Am. Rep. 103; Comley v. Dazian, 114 N. Y. 161, 21 N. E. 135. See "Mortgages," Dec. Dig. (Key-No.) § 282; Cent. Dig. §§ 140-155.

36Bassett v. Hughes, 43 Wis. 319; Gifford v. Corrigan, 117 N. Y. 257, 22 N. E. 756, 6 L. R. A. 610, 15 Am. St. Rep. 508; New York Life Ins. Co. v. Aitkin, 125 N. Y. 660, 26 N. E. 732; Dodge's Adm'r v. Moss, 82 Ky. 441; Etscheid v. Baker, 112 Wis. 129, 88 N. W. 52. And see Clark v. Fisk, 9 Utah, 94, 33 Pac. 248. But some courts hold that the promise invests the third person with an immediate right, which the promisee cannot release. Bay v. Williams, 112 I11. 91, 1 N. E. 340, 54 Am. Rep. 209; Starbird v. Cranston, 24 Colo. 20, 48 Pac. 652; Tweeddale v. Tweeddale, 116 Wis. 517, 93 N. W. 440, 61 L. R. A. 509, 96 Am. St. Rep. 1003. In states which do not recognize the right of a third person for whose benefit the promise is made to enforce the contract, he may sometimes avail himself of the promise in equity by subrogation to the rights of the promisee, as in the case of a mortgagee where a grantee of a mortgagor has assumed the mortgage. Such is the rule in the federal courts. Keller v. Ashford, 133 U. S. 610, 10 Sup. Ct. 494, 33 L. Ed. 667; Knapp v. Insurance Co., 85 Fed. 329, 29 C. C. A. 171, 40 L. R. A. 861. Here the rights of the mortgagee against the grantee are necessarily defeated if the grantor releases the grantee from his covenant, unless the release is in fraud of creditors. See Jones, Mtg. § 763; Crowell v. Hospital, 27 N. J. Eq. 630; Youngs v. Public Schools, 31 N. J. Eq. 290; O'Neill v. Clark, 33 N. J. Eq. 444. See "Mortgages," Dec. Dig. (Key-No.) § 282; Cent. Dig. §§ 140-155.