Colonial Discount Co. v. Avon Motors

• Decision Date: 08 August 1950
• Court: Connecticut Supreme Court
• Parties: COLONIAL DISCOUNT CO., INC. v. AVON MOTORS, Inc., et al. Supreme Court of Errors of Connecticut

Page 507

75 A.2d 507

137 Conn. 196

COLONIAL DISCOUNT CO., INC. v. AVON MOTORS, Inc., et al.

Supreme Court of Errors of Connecticut.

Aug. 8, 1950.

James F. Rosen, New Haven, for appellant Levin.

David R. Lessler, Bridgeport, for appellant Avon Motors, Inc.

Samuel H. Platcow, New Haven, for appellee.

Before BROWN, C. J., and JENNINGS, BALDWIN, INGLIS and O'SULLIVAN, JJ.

INGLIS, Judge.

The crucial question on this appeal is whether the plaintiff, assignee of a third party beneficiary, may maintain an action upon a contract between the defendants whereby it was agreed that the defendant Levin would finance his purchases and sales of used automobiles exclusively through the plaintiff's assignor.

The finding, which is not subject to correction in any material particular except in so far as it states conclusions not warranted by law and except as hereinafter stated, discloses the following facts: For some time prior to September 18, 1946, the defendant Avon Motors, Inc., hereinafter referred to as Avon, was engaged in the business of buying and selling used automobiles. It did some of its financing with the Colonial Finance Company, Inc., hereinafter referred to as the Finance Company, and some with another company. Benjamin Banet, the president of Avon and the operator of its business, planned to go to Florida for an extended stay. For that reason he desired to arrange matters so that the defendant Levin could go into the used car business on his own account at Avon's place of business. In connection with his plans Banet conferred with Benjamin Spitzer, president both of the Finance Company and of the plaintiff, for the purpose of arranging to have all of Levin's financing done through the Finance Company, but it does not appear that Banet in any way bound himself or Avon to Spitzer in that conference.

On September 18, 1946, the defendants entered into a written lease whereby Avon leased its place of business together with all of the personal property and equipment contained therein to Levin for a term to begin on October 14, 1946, and from month to month thereafter for the purpose of conducting a used car business. The lease contained the following terms:

'18. [T]he Lessee covenants and agrees to and with the Lessor, that all financing of the motor vehicles acquired, held or sold by the Lessee in the conduct of his business from the demised premises shall be done and performed by him through and with The Colonial Finance Company, Incorporated, * * * and that he will not, directly or indirectly, finance any of such automobiles either by floor plan or retail financing with or through any other person, firm or corporation but the said The Colonial Finance Company, Incorporated.

'In consideration of the covenants contained in this Paragraph, the Lessor doth covenant and agree to and with the Lessee that all floor plan financing required by the Lessee and accomplished by or through the said The Colonial Finance Company, Incorporated, will be unconditionally guaranteed as to payment to the said The Colonial Finance Company, Incorporated by the Lessor, for the benefit of both the Lessee and the said The Colonial Finance Company, Incorporated.

'It is understood that all retail financing done by the Lessee with or through said The Colonial Finance Company, Incorporated, will be on a 'with re-purchase' basis and the Lessor will guarantee to the said The Colonial Finance Company, Incorporated, the faithful performance by the Lessee of his 're-purchase' agreements with such finance company.'

On the same day, Levin also executed another instrument in which he again covenanted with Avon that he would conduct no financing business with anyone other than the Finance Company and assigned to Avon any and all 'dealers' reserves' due or to become due to him from the Finance Company by virtue of any automobile financing done by him through or with it during the continuance of the lease.

In connection with the execution of these documents, Levin executed and delivered to the Finance Company a so-called reserve agreement whereby he requested it to purchase acceptable promissory notes, chattel mortgages and other security agreements acquired by him from retail purchasers of automobiles. In this agreement, which contained a provision for the maintenance of a dealer's reserve, there was no commitment on Levin's part to do business exclusively with the Finance Company. In addition, he furnished it with a 'dealer's financial statement' which contained a guarantee and waiver executed by him, his wife and Banet. Levin and the Finance Company filed with the secretary of the state of Connecticut the statement of trust receipt financing which under the law may be filed by any persons who intend to use trust receipts as a method of financing and which, when filed, protects an entruster as against creditors of his trustee. General Statutes, §§ 6556, 6557.

Levin did not at any time finance the motor vehicles acquired or sold by him in the conduct of his business by either floor plan or retail sales financing with the Finance Company; he did all of his financing with the Associates Discount Corporation. On two occasions Levin told the president of the Finance Company that Banet had instructed him not to give any business to it. The Finance Company was a subsidiary of the plaintiff. On December 2, 1946, it assigned to the plaintiff all of its rights and claims under the contract between Avon and Levin, and on January 10, 1947 it ceased to do business.

The trial court concluded that the provisions of the lease between the defendants which bound Levin to do his financing with the Finance Company exclusively were intended for the benefit of the Finance Company and could be enforced by its assignee, that Levin had breached the lease and that Avon, acting through its president, had caused that breach. The defendants made the claim in the trial court that the contract was not of such a nature that the plaintiff as the assignee of a third party beneficiary could sue thereon.

The law of this state on the subject of when a third party beneficiary under a contract may sue for a breach of that contract is now definitely determined by Baurer v. Devenis, 99 Conn. 203, 121 A. 566, and Byram Lumber & Supply Co. v. Page, 109 Conn. 256, 146 A. 293. It is the intent of the parties to the contract which governs. We defined the necessary intent in the Byram case, 109 Conn. at page 259, 146 A., at page 294, as follows: '[T]he intent which must exist on the part of the parties to the contract in order to permit the third party to sue was not a desire or purpose to confer a particular benefit upon him, but an intent that the promisor should assume a direct obligation to him.'

To determine the intent of the parties to a contract is a matter of interpretation of the contract. The intent of the parties expressed in a contract is not synonymous with the purposes or motives of those parties in making the contract. In ascertaining such intent, however, all of the circumstances surrounding the making of the contract must be taken into consideration; Byram Lumber & Supply Co. v. Page, supra, 109 Conn. 261, 146 A. 293; and the motives of the parties and the ends which they sought to accomplish by their contract are relevant. The law in this jurisdiction is, therefore, that the ultimate test to be applied is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party and that that intent is to be determined from the terms of the contract read in the light of the...