Carnahan v. Tousey

• Citation: 93 Ind. 561
• Decision Date: 20 April 1882
• Docket Number: 8010
• Parties: Carnahan et al. v. Tousey et al
• Court: Supreme Court of Indiana

93 Ind. 561

Carnahan et al. v. Tousey et al

No. 8010

Supreme Court of Indiana

April 20, 1882

Petition for a Rehearing Overruled March 6, 1884.

From the Superior Court of Marion County.

Judgment affirmed.

F. M Finch and J. A. Finch, for appellants.

E. F Ritter, L. C. Walker, L. Ritter, J. S. Caldwell and J. M. Judah, for appellees.

Woods J. Elliott, C. J.

OPINION

Woods, J.

The only question discussed by the appellants is the sufficiency of the complaint on which judgment was rendered against them. The complaint, so far as its averments need be rehearsed, shows that Carnahan and Finch purchased of Spiegel a tract of land, which was subject to a mortgage made by Spiegel. In the deed of Spiegel to the appellants, which they accepted, it was stipulated that the appellants should assume and pay the mortgage debt. Carnahan afterwards conveyed his interest in the land to Finch, by a deed which also contained an agreement that Finch should assume and pay the mortgage debt. The action is by an endorsee of the mortgage notes, and in the complaint are set out copies of the notes and mortgage and of the deeds aforesaid. The plaintiff prayed and obtained a personal judgment against the appellants upon their contract of assumption.

The objections made to the complaint are that it shows no privity of contract between the appellants and the plaintiff or the original payee of the notes, nor that the appellants were still in possession of the land, or any part of it, when the action was commenced, and that no acceptance of the contract of assumption, either by the payee and mortgagee or by any subsequent holder of the paper, is alleged.

In an action upon contract at law, strictly, privity of contract is essential to the right of action, but the rule in equity is different, and by a long and unbroken line of decisions since Bird v. Lanius, 7 Ind. 615, this court has held that a promise of one person to another for the benefit of a third may be enforced in an action brought by the latter in his own name. Rodenbarger v. Bramblett, 78 Ind. 213, and cases cited; Davis v. Hardy, 76 Ind. 272; Tinkler v. Swaynie, 71 Ind. 562; Medsker v. Richardson, 72 Ind. 323.

No authority is cited in support of the proposition that it was necessary to aver that the appellants still held the land, in consideration for which they had assumed to pay the mortgage debt; and no argument is made which commands our assent. The contract of assumption certainly did not cease to be operative and binding in favor of the party with whom it was made on account of any subsequent transfer of the lands by the appellants, and if still enforceable by the original party, to whom it was made, there can be no good reason why it should have ceased to enure to the benefit of the holder of the obligation, which was assumed. Rodenbarger v. Bramblett, supra. Each successive grantee who assumes the payment of an encumbrance necessarily remains bound to his grantor until the encumbrance has been removed, unless otherwise released from the obligation, and so long as not discharged or released the contract necessarily operates in favor of the holder of the encumbrance, who, if he chooses, may accept and enforce it; and though each grantee has bound himself by a separate agreement, yet, as all have assumed the payment of the same debt, they may be sued in one action, the last being held primarily liable, and each in the inverse order of his contract. McDill v. Gunn, 43 Ind. 315.

It remains to consider whether an averment of acceptance is necessary to a complaint, based upon such contract of assumption, brought by the holder of the original obligation.

In Risk v. Hoffman, 69 Ind. 137, it is directly held that such averment is not necessary. In Rodenbarger v. Bramblett, supra, it was held, distinguishing Miller v. Billingsly, 41 Ind. 489, and Durham v. Bischof, 47 Ind. 211, that where, upon an executed consideration, one has agreed with another to pay a specific sum or obligation due or to become due at a known or stated time, to or for the benefit of a third person named, a demand by such third person is not necessary before suing upon such agreement. And if a demand is not necessary, it is difficult to see why an allegation of acceptance should be required.

It is argued, and may be conceded, that without an acceptance there is no cause of action in favor of the plaintiff. The acceptance, however, is a mental act, consisting simply of the determination of the party to avail himself of the contract made by another for him. It is therefore a logical and metaphysical impossibility that he should institute a suit on the promise without first having accepted it. The purpose or determination to sue necessarily constitutes, if, indeed, it does not presuppose, an acceptance of the right to sue. The bringing of the action is therefore sufficient, and probably conclusive evidence of a previous acceptance, unless more is meant thereby than the formation of the purpose to appropriate the promise. If more is meant, it must be not simply the fact but notice of the acceptance, which is quite a different thing, and will be considered as we proceed.

In Davis v. Calloway, 30 Ind. 112, it is said that a paragraph which averred the acceptance of the promise (with the knowledge of all the parties evidently) would be good at law; and it was held in the case that until accepted by the third party the contract might be rescinded by the immediate parties. We do not question this right of rescission, nor decide anything which can be deemed to impair it. If the party, for whose benefit a contract is made, neglects to give notice of his acceptance of it, he incurs the peril of its abrogation, and if, without having given such notice, he brings an action, he may be defeated by the plea and proof of a rescission, accomplished before the service of the summons, just as he may be defeated, if he does give such notice, by proof of a rescission before the notice was served.

Reference has been made to McLaren v. Hutchinson, 18 Cal. 80, and Kelly v. Roberts, 40 N.Y. 432, as supporting an opposite view. The former case, however, denies the right of action to the third person in toto, and is, therefore, inconsistent with all the cases in this State since Bird v. Lanius, supra. In the opinion, which is quite short, it is said: "There is no privity between the parties, and the legal position of the plaintiff is that of a stranger to the agreement. The defendant is liable upon the agreement alone, and Beach is the only party who can maintain an action for its violation." And in so far as the case is authority for requiring the complaint to show an acceptance, it means such an acceptance as would have constituted "a novation of the indebtedness by substituting the liability of the defendant for that of Beach," the plaintiff's original debtor; or, if not a novation, at least an equitable assignment of the defendant's obligation.

The other case is to the effect that if the contract for assumption is not based on a new consideration, and amounts only to a direction of the creditor to his debtor to pay his note to a third person, the direction may be revoked at any time before it has been acted upon. Of the soundness of this doctrine there can be no doubt; but it in no sense conflicts with our conclusion, nor with the principles from which we deduce it.

It being conceded that the defendant in such a case is not entitled to a demand before suit, no good reason has been suggested why he should receive notice of the acceptance of his promise as a prerequisite to the right of action. The appellants, therefore, can not be allowed to make any question, because in this complaint notice of the acceptance of their promises is not alleged. Whether alleged or not, their right was the same to plead an abrogation or rescission of their contracts, or any other defence acquired before they received such notice, or before the commencement of the action, if that constituted the first notice which they received of the acceptance of their promises. The assignee of a non-negotiable promissory note, by failure to give notice of the assignment to the maker, may in like manner lose the right of action acquired by the assignment; but a complaint upon such note by an assignee need not, for that reason, allege the giving of such notice. There seems to be no reason for a different rule in respect to a contract of assumption by one person of the debt of another, whereby a quasi assignment of liability is accomplished.

Judgment affirmed.

Filed April 20, 1882. Petition for a rehearing overruled March 6, 1884.

DISSENT BY: Elliott

DISSENT

Elliott, C. J.--I think that upon principle as well as upon authority, it should be held that a promise made for the benefit of a third party can not be sued upon until it has been accepted or acted upon by the person for whose benefit it was made.

The acceptance or adoption of the promise must precede the action. The adoption is an essential element of the right of recovery. Without this element the right of action is not complete, and it is only upon a complete right that an action can be maintained. I quote from a text-writer a statement of...