In re Gubelman

• Decision Date: 07 July 1926
• Docket Number: No. 358.,358.
• Citation: 13 F.2d 730,48 ALR 1037
• Parties: In re GUBELMAN et al. Petition of MUNTEAN et al.
• Court: U.S. Court of Appeals — Second Circuit

48 ALR 1037, 13 F.2d 730 (1926)

In re GUBELMAN et al.

Petition of MUNTEAN et al.

No. 358.

Circuit Court of Appeals, Second Circuit.

July 7, 1926.

Kremer & Leavitt, of New York City (Samuel Leavitt, of New York City, of counsel), for appellants.

Rosenberg & Ball, of New York City (Ralph F. Colin, of New York City, of counsel), for trustee appellee.

Before ROGERS, MANTON, and HAND, Circuit Judges.

MANTON, Circuit Judge.

The appellants, with others, have filed claims against the estate of the bankrupts, contending that they are creditors and entitled to share in the distribution of the estate. On June 16, 1923, Knauth, Nachod & Kuhne were petitioned in bankruptcy. The Louis Di Santis Bank of Canton, Ohio, prior to that date, had an arrangement with the bankrupts by the terms of which this bank and others in their own name could draw drafts or money orders on foreign banks, where such domestic banks had no balance, and the drafts would be protected and paid from the bankrupts' balance in such foreign banks. This is referred to as a drawing service. In brief, the bankrupts would supply the inland domestic banks with forms of drafts, and on request from one of its customers the inland bank would sell and issue a draft for a foreign currency amount, drawn on a foreign bank where the drawer had no balance. The agreement provided the "drafts must be signed in the name of the issuing bank." On advices, then, to the bankrupts of the issuance of the draft, the bankrupts agreed that "upon receipt of advice of draft, accompanied by adequate funds payable at par in New York, we shall promptly forward our advice of the same and provide the drawee with funds sufficient for the payment of the draft abroad. * * *" It further provided that "under this arrangement our correspondents in this country act as principals, and issue drafts in their own names, our name not appearing thereon. In other words, we are employed merely as the agents of the drawers, for the purpose of advising the issue of their drafts and providing the drawee banks with sufficient funds to cover their payment."

The draft involved in this proceeding was issued pursuant to the terms of this drawing service referred to. It was drawn on the Banca Albina at Sibiu, Roumania, for Lei 290,000, payable to the order of Muntean, for which he paid $1,638.50 to the Louis Di Santis Bank. The Louis Di Santis Bank had no balance with the drawee, but paid the bankrupts $1,638.50 under the terms and in a form supplied to it by the bankrupts. Acknowledgment of the receipt of this money was made by the bankrupts in sending it by way of a postal card receipt. It in turn advised the Banca Albina to pay the draft and charge the same to the bankrupts' account. When the draft was received abroad, it was not honored, for in the meanwhile a receiver in bankruptcy was appointed. The balance standing to the credit of the bankrupts, excepting that portion of the balance which has been attached by the creditors of the bankrupts, has been turned over to the receiver. The receiver has not paid the amount of the draft in question although payment was demanded. We are concerned on this appeal with the claim of Muntean only. A stipulation has been entered into between the other parties that the appellants would abide by the determination arrived at in consideration of the Muntean claim.

On these facts, the appellants contend that they have valid claims under the third party beneficiary doctrine. The argument is that the bankrupts, having received the funds for transmission and payment to a designated beneficiary, are liable to the appellants for failing to make the payment. But the contract of engagement of the bankrupts was with the Louis Di Santis Bank. The appellants are not beneficiaries under the stipulations of this contract. A third person may benefit by a contract, if promises are made where the promisee has no pecuniary interest in the performance of the contract, his object being to enter into it for the benefit of such third person, or where promises are made where the promisee seeks indirectly to discharge an obligation of his own to a third person by securing from the promisor a promise to pay his creditor. These are referred to in Williston on Contracts, vol. 1, § 356. The appellants' theory is based upon the New York doctrine announced in Lawrence v. Fox, 20 N. Y. 268. The rule that may be formulated under the federal decisions permits a third person not a party to a contract to enforce the promisor's obligation only where he is the beneficiary solely interested in the promise, and in such case it must appear that the parties intended to recognize the third person as a primary party in interest. It is insufficient if the third person is a mere beneficiary, having no direct interest in the performance of the stipulations of the parties. German Alliance Ins. Co. v. Home-water Co., 226 U. S. 220, 33 S. Ct. 32, 57 L. Ed. 195, 42 L. R. A. (N. S.) 1000; Constable v. Natl. S. S. Co., 154 U. S. 51, 14 S. Ct. 1062, 38 L. Ed. 903; Nat. Bank v. Grand Lodge, 98 U. S. 123, 25 L. Ed. 75; Penn. Steel Co. v. N. Y. City Ry. Co., 198 F. 721, 117 C. C. A. 503. In National Bank v. Grand Lodge, supra, the Supreme Court said, in speaking of the facts there involved:

"They may have had an...