Baurer v. Devenes

Citation121 A. 566,99 Conn. 203
CourtSupreme Court of Connecticut
Decision Date22 June 1923
PartiesBAURER v. DEVENES ET AL.

Appeal from Superior Court, New Haven County; Frank D. Haines and Allyn L. Brown, Judges.

Suit by Regina Baurer against Peter M. Devenes and others for the foreclosure of a mortgage made by Devenes to Bagdan and by him assigned to the plaintiff, brought to the superior court for New Haven county, where Devenes and Tarulis, a subsequent mortgagee, filed a special defense, to which a demurrer was sustained, and the cause thereafter tried to the court, and judgment rendered in favor of the plaintiff, and appeal by defendants for error in sustaining the demurrer Error judgment set aside, and cause remanded, with direction to overrule the demurrer.

James M. Lynch, of Waterbury, for appellants.

Philip N. Bernstein, of Waterbury, for appellee.

WHEELER, C.J.

The complaint alleges these facts: The defendant Devenes on January 27, 1919, gave to one Anna Bagdan his promissory note for $1,000, and secured the same by a mortgage of even date. Mrs. Bagdan assigned the note and mortgage to William Bagdan on January 15, 1921, and on December 17, 1921, he assigned the same to the plaintiff, Regina Baurer. The defendant Devenes failed to pay, upon demand, the interest due on the note or the principal, the note being conditioned upon the payment of the principal on demand. The defendant Tarulis claims to have a mortgage bearing date October 29, 1921, upon the same premises. The defendant Devenes is still the owner, and in possession of, these premises.

The defendants in their answer admit all the allegations of the complaint except that alleging the default of Devenes, and plead a special defense admitting the making of the note and mortgage to Anna Bagdan by Devenes as alleged in the complaint, and the assignment by her to William Bagdan, and allege that Bagdan assigned the note on December 17, 1921, to the plaintiff for $800, and that the note and mortgage were reasonably worth at that time $1,000, and accrued interest. The defendants further allege that the assignment of the note and mortgage by Bagdan was " on condition that the assignee do not demand payment of the note from the defendants, or either of them, for a period of one year," and that this was agreed to by the plaintiff through her agent.

The plaintiff demurred to the special defense, because it did not appear that any of the defendants were party to the alleged agreement between Bagdan and the plaintiff, and that any breach of the agreement between Bagdan and the plaintiff could not be determined in this action.

The defendants seek to take advantage of a condition in a contract made by the promisor to the promisee and to which they are not parties. Such a contract is called one for the benefit of a third person. Professor Williston in his work on Contracts, vol. 1, § 347, defines such a contract as:

" A contract in which the promisor engages to the promisee to render some performance to a third person is generally called a contract for the benefit of a third person, with little regard to whether the purpose of the promisee in entering into the contract was his own benefit, or the benefit of the person to whom performance was to be rendered."

The condition of the contract of assignment upon which the defendants rely is the provision by which the promisor, who is the assignee of the mortgage note, agrees that he will not demand payment of this note for a period of one year from the date of assignment, December 17, 1921. This condition is a part of the contract of assignment, and, so far as appears in the allegations, is made for the direct, sole, and exclusive benefit of the defendants. The promisee of the contract has no pecuniary interest in the enforcement of this condition. That the condition is only one of several promises contained in the contract, and the only one for the benefit of these defendants, does not bar them from its enforcement. Williston on Contracts, vol. 1, § 346. Its character indicates that it was the intention of the promisee to benefit the defendants by giving them a longer time in which to pay the note. The promisor accepted the assignment with this condition a part of it.

Most state courts, as well as the federal courts, permit the third party to maintain his action against the promisor upon a contract for his benefit, whether the promisee retain a pecuniary interest in the promise to him or not. Connecticut is classed with Massachusetts, Michigan, and England, which deny to third parties this right, except in certain specified cases. The disposition of the present case requires a reexamination of our law upon this subject, and, while serving the purposes of this case, it will also tend to remove some of the erroneous impression which exists concerning the law of our state upon this subject.

The present action is an equitable one, and the special defense based upon the third party's right is as available for the defendants as an action by the plaintiff based upon such a right. Our first inquiry is whether or not such a right exists in equity in this jurisdiction. We confine our examination to the period beginning with the year 1881. In Meech v. Ensign, 49 Conn. 191, 44 Am.Rep 225, we held that an action could not be maintained by a mortgagee against the purchaser of an equity of redemption who had as a part of the consideration of his purchase agreed to pay the mortgage debt. A subsequent statute gave this remedy. The opinion cites several exceptions to the general rule it announced. Among these it says:

" There may also be cases in which a third party may have some peculiar equity in the subject matter of a contract which will enable him to maintain a bill in equity to enforce it."

Continuing our citation from cases which are brought by a third party upon a promise made to a promisee not a party to the action we find in Baxter v. Camp, 71 Conn. 250, 41 A. 803, 42 L.R.A. 514, 71 Am.St.Rep. 169, that the court refers to the possibility of an equitable action in that case, thus leaving the question open as to whether a suit in equity could not have been maintained had the representatives of the promisees been joined in the action.

In Lamkin v. Baldwin & Lamkin Co., 72 Conn. 57, 62, 43 A. 593, 1042, 44 L.R.A. 786, the question for decision was whether a creditor of a promisee, to whom another had promised to pay this debt, could have his action at law against this promisor. In holding that the action would not lie, the court said the creditor " has only an equitable claim." This can mean nothing other than that the claim of such a creditor can be enforced in equity. When a case of like character was before the court in Morgan v. Randolph & Clowes Co., 73 Conn. 396, 398, 47 A. 658, 659 (51 L.R.A. 653), the court reached a like conclusion, but was careful to point out that the action before the court was legal, not equitable, saying:

" The plaintiff is not seeking to enforce any particular equity which he claims to have in the property of the copartnership which was transferred to the corporation, nor any equity which he claims to have, either personally or through the administrator or surviving partner, against the corporation itself; he is seeking to enforce a legal obligation pure and simple, and nothing else."

In a similar case, Barber v. International Co., 73 Conn. 587, 595, 48 A. 758, 761, we said:

" If an equitable action could be supported, it would be necessary to make both the defendant [the promisee] and the English Company parties."

In Atwood v. Burpee, 77 Conn. 42, 58 A. 237, the case of a single creditor beneficiary was before the court, and we said:

" The demurrer was properly sustained. This is not an action for the enforcement of an equitable right, but of an alleged legal right," etc.

In Fisk's Appeal, 81 Conn. 433, 434, 71 A. 562, the suit was by a third party to the contract, and the court said:

" It is insisted that if any cause of action existed against the decedent, it was only one in favor of the estate of Mrs. Fisk. But, while the agreement of trust was not made by the appellants, it was made by their dying mother for their sole benefit. They, therefore, have an equitable right of action by virtue of its terms."

In each one of the cases which deny to the third party an action at law the court has been careful to point out the equitable remedy which we now hold to be open to a third party. We thus find a remedy in equity long approved of by our court, under which the third party has his action against the promisor to a contract, by which he engages with the promisee to render some performance to the third party. Neither want of privity nor lack of consideration will avail as a defense to such an action. In the equitable action in the instant case the defendants were entitled to have their special defense heard upon its merits, and the demurrer was improperly sustained.

In our cases which concern the right of a third party to maintain an action against a promisor to a contract to which the third party was not a party, but in which he had a benefit, we have recognized a number of exceptions to the rule denying a right of action at law to the third party. Some classes of cases are sometimes considered as exceptions to this rule when the action rests upon a basis apart from the contract which forms a part of the transaction. The principal classes of cases to be distinguished are those which furnish a property action simultaneously with the making of the contract, cases where the action involves the relation of principal and agent rather than contract relation, and cases of novation.

Among actions classed as property actions should be included those where property is delivered to one, together...

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