Washburn v. Interstate Investment Co.

Per Curiam. 1. Where, on a motion to dismiss an appeal because the bill of exceptions was not filed within the time provided by law in which to file a transcript, it appears that such bill was prepared and submitted to the trial judge for allowance within the time allowed by the court below, and before the expiration of the time in which to file a transcript on • appeal, but was not settled and — 441 — signed until after such time had expired, held, that the motion to dismiss should be overruled, and the cross-motion for leave to complete the transcript allowed. Motion overruled. Opinion by Mr. Chief Justice Bean. 2. The only question for decision is as to plaintiff’s right to recover in assumpsit upon defendant’s promise to the leather company to assume and pay its debt to him. The plaintiff not being a party or privy to the contract, and its consideration not moving from him, the case presents another phase of the perplexing question as to the right of a third person to maintain assumpsit upon a contract, the performance of which will inure to his benefit, but to which he is not a party. As we intimated in Parker v. Jeffery, 26 Or. 186, 37 Pac. 712, the cases upon this subject are discordant and irreconcilable. As a general rule, only parties or privies to a contract can maintain an action to enforce its stipulations; and allowing a stranger to do so is an exception to and inconsistent with this rule. It will not be profitable at this time to collate the authorities upon the general question of the right of a stranger to a contract to enforce its stipulations, or to undertake to deduce from them any general rule upon the subject. The prevailing doctrine in this country undoubtedly is that, where one person, as a consideration or part consideration for an executed contract; promises another, for a consideration moving from him, to pay or discharge some legal obligation or debt due from such other to a third person, the latter, although a stranger to the consideration, and not an immediate party to the contract, may maintain an action thereon, if it was made directly and primarily for his benefit. And this, we think, is all that has in fact been held by the former decisions of this court — 442 — in which, such actions have been sustained, although the language of some of the decisions states the rule without qualification that where one person makes a promise to another for the benefit of a third the latter may maintain an action thereon: Baker v. Eglin, 11 Or. 333, 8 Pac. 280: Hughes v. Oregon Railway and Navigation Company, 11 Or. 437, 5 Pac. 206; Schneider v. White, 12 Or. 503, 8 Pac. 652; Chrisman v. State Insurance Company, 16 Or. 283, 18 Pac. 466. After a somewhat exhaustive examination of the question, we have found no case which has gone so far as to hold that such action can be maintained on an executory contract by which one person promises to advance his own money to pay the debts of another, but, on the contrary, the authorities deny the application of the rule to such a contract: Garnsey v. Rogers, 47 N. Y. 233, 7 Am. Rep. 470; Second National Bank v. Grand Lodge, 98 U. S. 123; Pardee v. Treat, 82 N. Y. 385; Berry v. Brown, 107 N. Y. 659, 14 N. E. 289. Where one person receives a fund or property from another, and instead of paying him therefor is allowed to retain the consideration under an agreement to pay it to the creditors of the other party; or when it is agreed between the parties to the contract, there being a valuable consideration therefor, that the promisor may discharge his debt or liability to the promisee by paying it to some third person, to whom the promisee owes some legal duty ©r obligation, it would be just and proper that such third party should have the right to maintain an action on the contract in his own name. But this is on the theory that the contract being for his direct benefit the law invests him with a privity in respect thereto by reason of his interest, and the promisor, in performing the contract, is doing nothing more than to discharge his own debt or obligation in accordance with his agreement. In such case the amount which the promisor agrees to pay is his own — 443 — debt or obligation, which, by an arrangement with the promisee, he is to pay or discharge in a particular manner; and the parties having by their contract thus treated the third party as primarily interested in its performance, they have recognized him as privy in fact to the consideration and contract, and therefore there can be no hardship in allowing him to enforce it by action in his own name, as the parties to the contract contemplated. But where there is no such fund, debt, or obligation in the hands of or owing from the promisor, but only an executory contract by one person to advance his own money to pay the debts of another, who is a party to neither the contract or consideration, it is difficult to see upon what principle the doctrine can be applied. In such case the contract is not made for the direct benefit of the creditor, but of the promisee, to enable him to obtain money with which to discharge his liability, and, if enforcible at all, it is en-forcible by him. The creditors are, of course, indirectly interested in its performance, for, if the contract is complied with, their claims will be paid, and this may be said of any executory contract whereby a debtor expects to receive money with which to pay his debts; but it has never been held, to our knowledge, that such an interest is sufficient to entitle a stranger to maintain an action to enforce the stipulations of the contract. In this case the contract between the defendant and the Boston Shoe and Leather Company, upon which the action was brought, is not an agreement by the defendant to apply the consideration for property conveyed to it, or money due or to become due from it, to the use of a third person, but an agreement to advance its own funds for the purpose of paying the debts of the leather company, which advance, when made, should be repaid by a certain amount of the capital stock of the leather company, and the cancellation of the subsidy contract. It was, in effect, — 444 — an agreement by the defendant to advance to the leather company money with which to pay its debts, and take in satisfaction thereof its stock. If such a contract can be enforced by the plaintiff, then every contract by which one person promises or agrees with another, for a consideration moving from him, to advance money to pay his debts, can be enforced by the parties whose debts were thus to be paid. We do not understand any case to have gone to that extent. If the capital stock referred to in the contract had been in fact sold and transferred to the defendant, and in part consideration therefor it had agreed and promised to pay plaintiff’s claim against the leather company, the case would have been within the principle of Baker v. Eglin and similar cases, as we understand it. But no such sale or transfer was made. In fact, the contract contemplates that the stock was not to be issued or delivered until defendant paid the debts of the leather company with its own funds. The contract is purely ex-ecutory, and has not been complied with by either party. Its object and purpose was not the direct benefit of the creditors, but to enable the leather company to obtain relief from its liabilities, and the defendant to acquire the ownership of the stock of that company. If the defendant had made the advances and paid the debts as agreed, it would have been entitled to the stock which the leather company contracted to issue and deliver to it. But, not having done so, the breach of the covenant is a question between the defendant and the party with whom it contracted, and not between it and the creditors of such party. The creditors may have had, and no doubt did have, an interest in the performance of the contract, as they would have had in the performance of an agreement by which any person should undertake to lend or advance money to the leather company to enable it to pay its debts, but this is a very different thing from the interest necessary to en — 445 — able them to enforce the contract by actions in their own names. It follows that this action cannot be maintained, and the motion for a nonsuit should have been allowed. Reversed.