Austin v. Seligman

• Decision Date: 05 November 1883
• Citation: 18 F. 519
• Parties: AUSTIN v. SELIGMAN and others.
• Court: U.S. District Court — Southern District of New York

18 F. 519

AUSTIN v. SELIGMAN and others.

United States Circuit Court, S.D. New York.

November 5, 1883

North Ward & Wagstaff, for plaintiff.

Bettens & Lilienthal, for defendants.

WALLACE J.

The complaint demurred to alleges that some time prior to April 15, 1883, the plaintiff delivered to the firm of Kempt & Co. certain jeweler's sweepings, to be refined, of the value of $4,292, and agreed to pay that firm for refining the sweepings the sum of $320; that by the terms of the agreement between them the sweepings were to be refined, 'and the product thereof delivered to or accounted for, and the value thereof, less the agreed price for refining the same, paid to the plaintiff within 20 days from the delivery thereof. ' The complaint further alleges that on the thirtieth day of April, 1883, the firm of Kempt & Co. transferred and delivered all the property at the refining works of the firm including the aforesaid sweepings, to the defendants, upon the agreement and undertaking that the defendants should 'fully pay and discharge all the debts, obligations, and liabilities of Kempt & Co.' The complaint then avers that 20 days have elapsed since the delivery of the sweepings to Kempt & Co., and, although the plaintiffs have demanded of them and of the defendants the return of the sweepings, or in default thereof, the delivery of the product or the value, upon payment of the agreed price for refining the same, that defendants and the said firm of Kempt & Co. have neglected and refused to comply with the demand.

Under the rules of pleading which obtain in the courts of this state, if the complaint sets forth a cause of action, either in tort or in assumpsit, it is sufficient, and the plaintiff will recover such a judgment as the facts warrant, irrespective of the form of this action. It is urged for the plaintiff that he can maintain either trover or assumpsit upon the facts alleged. If the delivery of the sweepings was a bailment, trover is an appropriate remedy, because the title to the property remained in the plaintiff, and a demand and a refusal to return it to him by the defendants is sufficient evidence of a conversion, whether defendants were innocent purchasers or otherwise. But the rule is well settled that when, by the terms by the contract under which property is delivered by an owner to another, the latter is under no obligation to return the specific property either in its identical form or in some other form in which its identity may be traced, but is authorized to substitute something else in its place, either money or some other equivalent, the transaction is not a bailment, but is a sale or exchange.

Here the agreement was that Kempt & Co. should return the refined product of the sweepings or account for the value thereof, less the price for refining. They had an option which was inconsistent with the character of a bailment. Hurd v. West, 7 Cow. 752; Smith v. Clark, 21 Wend. 83; Foster v. Pettibone, 7 N.Y. 433; Buffum v. Merry, 3 Mason, 478; Chase v. Washburn, 1 Ohio St. 244; Ewing v. French, 1 Blackf. 353; Schouler, Bailm. 5. The case is not one where they had possession of the plaintiff's property under an executory agreement to purchase, but one where the title passed on delivery, unless the delivery was a bailment. It was not a bailment if they had a right to return money in its place.

Unless the plaintiff can recover in assumpsit upon the promise made by the defendants to Kempt & Co. to assume all the debts, obligations, and liabilities of the latter, the complaint fails to show a cause of action. He was not a party to the contract, nor did its consideration move from him, and there is nothing in its terms to indicate that it was intended to be made for his benefit. The case thus presents the much-vexed question as to the right of a third person to maintain assumpsit upon a contract which may inure to his benefit, but to which he is not a part. It is stated in 1 Hil.Cont. 425, that 'the cases on this subject are very discordant, the earliest decisions holding that such action cannot be maintained, many succeeding cases in England holding the contrary, and some American cases of high authority tending strongly to restore the old doctrine. ' The subject has been recently somewhat considered in two cases in the supreme court of the United States. Mr. Justice DAVIS, delivering the opinion of the court in Hendrick v. Lindsay, 93 U.S. 143, says:

'The right of a party to maintain assumpsit on a promise not under seal made to another for his benefit, although much controverted, is now the prevailing rule in this country.'

Mr Justice STRONG, delivering the opinion of the court in Nat. Bank v. Grand Lodge, 98 U.S. 123, says:

'We do not propose to enter at large upon a consideration of the inquiry how far privity of contract between a plaintiff and defendant is necessary to the maintenance of the action of assumpsit. The subject has been much debated, and the decisions are not at all reconcilable. No doubt the general rule is that such privity must exist. Undoubtedly there are many exceptions to it. * * * But where a debt already exists from one person to another, a promise by a third person to pay such debt being primarily for the benefit of the original debtor, and to relieve him from liability to pay it, (there being no novation,) he has a right of action against the promisor for his own indemnity; and if the original creditor can also sue, the promisor would be liable to separate actions, and therefore the rule is that the original creditor cannot sue. His case is not an exception from the general rule that privity of contract is required.'

There are adjudications which hold broadly that in a case like the present, where one party assumes to pay all the debts of the other, a creditor of the promisee may maintain assumpsit against the promisor.

Such a case is Joslin v. New Jersey Cars Co. 36 N.J.Law, 14. There are others which hold that where the promisor undertakes to pay certain specified creditors or debts of the promisee the creditor can maintain suit against the promisor. Such a case is Brown v. Curran, 14 Hun, 260. Other cases decide that although, by the agreement, one of the parties undertakes in general terms to assume or pay all the debts of the other, if the agreement appears to be primarily intended for the benefit of the promisee he is the only person who can recover upon the promise. Nat. Bank v. Grand Lodge, 98 U.S. 123; Dow v. Clark, 7 Gray, 198; Merrill v. Green, 55 N.Y. 270; Pardee v. Treat, 82 N.Y. 385.

It will not be profitable to attempt to collate the authorities upon the general question. In England it is now distinctly established, so far as any common-law right of action is concerned, that a third person cannot sue on a contract made by others for his benefit, even if the contracting parties have agreed that he may, (Poll. Cont. 196,) while in both Massachusetts and New York the later decisions limit more strictly the exceptions to the general rule that the person must sue to whom the promise is made. Neither in these decisions, nor elsewhere in this country, has the English rule been recognized. It has the merit of simplicity, but is artificial instead of being reasonable. According to good sense and upon principle there is no reason why a person may not maintain an action upon a contract, although not a party to it, when the parties to the contract intend that he may do so. The formal or immediate parties to a contract are not always the persons who have the most substantial interest in its performance. Sometimes a third person is exclusively interested in its fulfillment. If the parties choose to treat him as the primary party in interest, they recognize him as a privy in fact to the consideration and promise. And the result of the better-considered decisions is that a third person may enforce a contract made by others for his benefit, whenever it is manifest from the nature or terms of the agreement that the parties intended to treat him as the person primarily interested. The cases of Hendrick v. Lindsay and Nat. Bank v. Grand Lodge, and the expression in the opinions, do not antagonize upon this proposition, but accord with it. The language of FOLGER, J., in Simson v. Brown, 68 N.Y. 355, may be adopted as a correct and accurate statement of the law, as follows:

'It is not every promise made by one to another, from the performance of which a benefit may inure to a third, which gives a right of action to such third person, he being neither privy to the contract nor to the consideration. The contract must be made for his benefit as its object, and he must be the party intended to be benefited.'

There is a class of cases where, under a contract between two persons, properly has come to the hands of one of them, which in equity is charged with a lien or trust in favor of a third person, in which the latter may sue in his own name upon the promise to discharge the lien or assume the trust. These cases have no proper application to a case like the present, where a copartnership transfers its assets to a purchaser, and the only interest of the plaintiff is that of a creditor at large of the selling partners. Such creditors have no lien for their debts upon the partnership assets, except in cases of insolvency or administration. Colly. Partn. Sec. 894; Story, Partn. Secs. 358, 360; Crippen v. Hudson, 13 N.Y. 161. If upon such a transfer the purchaser assumes to pay certain specified creditors or certain enumerated debts of the seller, it may be fairly urged that the parties contemplate a direct liability to the specified creditor on the part of the purchaser. On the other hand, when the agreement is silent respecting any specific obligation to be assumed to a...