Lazarus v. Swan

• Decision Date: 23 June 1888
• Citation: 17 N.E. 655,147 Mass. 330
• Parties: LAZARUS et al. v. SWAN.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

147 Mass. 330

17 N.E. 655

LAZARUS et al. v. SWAN.

Supreme Judicial Court of Massachusetts, Suffolk.

June 23, 1888

COUNSEL

James

E. Leach, Frank A. Farnham, and Johnson, Gallup & Hurry, for plaintiffs.

OPINION

The doctrine of an equitable assignment is briefly stated in Griffin v. Weatherby, L.R. 3 Q.B. 753, 758, by BLACKBURN, J. The principles of such an assignment which are applicable to this case have been definitely settled in numerous cases, and are as follows The order to pay or assignment of the debt cannot be revoked after it has been accepted by the holder of the fund. Hodgson v. Anderson, 3 Barn. & C. 842; Robertson v. Fauntleroy, 8 Moore, 10. There is a good consideration for the defendant's promise to pay plaintiffs. Walker v. Rostron, 9 Mees. & W. 411; Fruhling v. Schroder, 2 Scott, 135; Crowfoot v Gurney, 9 Bing. 372. Defendant's promise makes an agreement to pay a debt of his own, and not of another, and is not within the statute of frauds. Wyman v. Smith, 2 Sandf. 331. The fact that the amount covered by the assignment is not ascertained does not affect the question Fruhling v. Schroder, 2 Scott, 135; Crowfoot v Gurney, 9 Bing. 372. The agreement cannot be altered without the consent of all parties. Walker v Rostron, 9 Mees. & W. 411. From the above cases it appears that a direct privity is established by the acceptance of the order and promise to pay, and defendant thereupon becomes primarily liable to the plaintiff. Particular attention is called to the case above cited of Fruhling v. Schroder, 2 Scott, 135, which is similar to the present case in many particulars. See, also, 2 Chit.Cont. (Amer.Ed.) 913, 1375, note i, 1379, note p, (erroneously printed r,) note g, and note r. The English doctrine has been universally followed in America in numerous cases. See, for instance, Christmas v. Russell, 14 Wall. 69, 84; Wyman v. Smith, 2 Sandf. 331; Tripp v. Brownell, 12 Cush. 376, 380. The plaintiffs have now shown that the defendant was indebted to them in the full sum, whatever it might prove to be, that resulted from the sale of the cargo; a direct privity having been established between them by the defendant's promise to pay over the proceeds. The liability is just the same as if it were a debt due for goods sold by plaintiffs to defendant. To avoid this liability, some express agreement must be shown, or else conduct on the part of plaintiffs which would estop them from proceeding against the defendant. In this case the agreement or estoppel must be affirmatively shown by defendant, who must also show, in case of estoppel, that the plaintiffs acted with knowledge of their rights, and especially that he, defendant, relying upon the plaintiffs' acts, took action resulting in his own damage. This the defendant has wholly failed to do. The only acts of plaintiffs which can be advanced to show such abandonment, or which can be relied on to show an estoppel, are these two: Drawing bills of exchange on Danbon & Co., October 19, 1885, and proving a claim in bankruptcy against Danbon & Co., in January, 1886. No such effect can be given these acts, It is evident, from the authorities cited above, that, after the liability of defendant to plaintiffs became fixed, it could only be altered by agreement of all parties, in which the minds of all must meet. No such agreement having been shown, the plaintiffs had a right to bring this suit to collect their debt. Because the acts of the plaintiffs had no relation to the defendant, but were wholly collateral to the matter between them and defendant, and because the defendant has not connected his own acts with those of the plaintiffs, the plaintiffs contend that all evidence of those acts subsequent to their letter of July 22, 1885, is wholly immaterial, irrelevant, and should not be considered by the court.

Robert D. Smith and M.M. Weston, for defendant.

The first question is whether Swan did make an express promise to Lazarus. Henderson v. Rothschild, 33 Ch.Div. 459; Morgan v. Lariviere, L.R. 7 H L. 423. There was no novation, because Lazarus did not discharge Danbon, and take Swan for his debtor. This is shown by the plaintiff's subsequent actions, and by his declaration that he forebore to sue on his claim against Danbon. Clement v. Earle, 130 Mass. 585, note. "Both consideration and promise must be present at the moment of making a contract." Holmes, Com.Law, 216. On the strength of Tweddle v. Atkinson, 1 Best & S. 393, 30 Law J.Q.B. 265, it is said 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." Wald, Pol. Cont. (4th Eng.Ed.) 201, 203-207; Rogers v. Stone Co., 130 Mass. 581; Clement v. Earle, Id. 585. See Manter v. Churchill, 127 Mass. 31, Morrill v. Lane, 136 Mass. 93. The plaintiff cannot hold the defendant on his promise to Danbon & Co., because the plaintiff was not a party to that agreement. Mellen v. Whipple, 1 Gray, 317. If the defendant then made "an express promise to the plaintiff, still it cannot help the case, because it was void for want of consideration." In re Engineering Co., 16 Ch.Div. 125; Bank v. Rice, 107 Mass. 37, 98 Mass. 288; Pettee v. Peppard, 120 Mass. 523. The count for money had and received will not lie. McCulloch v. Insurance Co., 1 Pick. 278. The cases in which counts for money had and received have been sustained upon an implied contract are those in which "the defendant has in his hands money which in equity and good conscience belongs to the plaintiff." Here is no such fund in the defendant's hands. Bank v. Lodge, 98 U.S. 123. The plaintiffs' case seems strong in equity, yet even in such a case this doctrine leads to some anomalies. See Allen v. Thomas, 3 Metc. (Ky.) 198. See Hall v. Marston, 17 Mass. 575; Lilly v. Hays, 5 Adol. & E. 548. Assuming that the proceeds of the cargo are to be regarded as a fund with which the defendant was to pay the plaintiffs, it was held, not as agent of or trustee for the plaintiff, but as the agent of Danbon, with authority to pay over to the plaintiff. The authority could be and was revoked by the principal. Therefore the defendant's duty to pay the plaintiffs ceased. Denny v. Lincoln, 5 Mass. 385; Clement v. Earle, 130 Mass. 585, note; Dixon v. Pace, 63 N.C. 603; Henderson v. Rothschild, 33 Ch.Div. 459. Notes to Lampleigh v. Brathwait, 1 Smith, Lead.Cas. (8th Amer.Ed.) 271. There seems to be a class of cases in which there is a trust, assignment for the benefit of creditors, and the like, in which assumpsit will lie as an equitable action. See Frost v. Gage, 1 Allen, 262; Putnam v. Field, 103 Mass. 556; Morrill v. Lane, 136 Mass. 93, and cases cited; Townsend v. Long, 77 Pa.St. 143. This is not a case of a trust. The theory of a trust which may take the relation of the parties out of the rules of the common law is used to explain some cases like Gregory v. Williams, 3 Mer. 582. See In re Engineering Co., 16 Ch.Div. 25. See In re Flavell, 25 Ch.Div. 89; Sykes v. Beadon, 11 Ch.Div. 170; Dickinson v. Dodds, 2 Ch.Div. 463. Lazarus never gave up, or modified, or postponed, or forebore to press, his claim against Danbon. Again, he took payment for the acceptances in N. Danbon's notes. These notes are payment, as the commercial law of Porto Rico is presumed to be like that of Massachusetts. Chase v. Insurance Co., 9 Allen, 311; The Duero, L.R. 2 Adm. & Ecc. 393. Lazarus never agreed to abstain from suing Danbon & Co., or gave them time. He treated Danbon & Co. as still liable to pay the whole debt. Hunt v. Nevers, 15 Pick. 500. This is not a question as to which one of two equally innocent parties shall bear a loss, but whether a creditor can, without changing his position or giving any consideration, obtain second or double payment of a debt, or obtain from a promise of a third person, given without consideration, additional and cumulative security for his debt. Not only this, but whether the creditor, having, as he supposes, obtained an additional and cumulative promise from the defendant, and retaining his claim in full force against the original debtor, can deal with the latter in such a way as to discharge him, by receipt of payment in negotiable securities, without consultation with the person who stands in the position of surety, or can sell his original claim to a third person. Guild v. Butler, 127 Mass. 386.

MORTON C.J.

Danbon & Co., on June 19, 1885, shipped from Porto Rico, by the brig Hyaline, a cargo of molasses consigned to the defendant at Boston, for sale on commission on their account. On June 23 1885, they wrote to the defendant a letter, inclosing a bill of lading of the shipment, and adding: "On the safe arrival with you of the above-mentioned vessel, we would thank you to be very active in placing the cargo, if it is suited to the market, and the net proceeds resulting you will please hand to Messrs. A.S. Lazarus & Co., of New York, to whom we have written by the same mail, informing them that you would remit them, for our account, the sum resulting from the sale of the molasses." On the same day they wrote a letter to the plaintiff, inclosing a duplicate bill of lading, in which they state that the defendant "has instructions to place in your hands the net proceeds of said cargo as soon as possible." This letter was received by the plaintiffs on July 6, 1885. Danbon & Co., on July 5, 1885, wrote a letter to the defendant, stating that they had drawn on him two drafts on account of the molasses shipped to him, one of which, for $5,000, was expressed to be drawn against the cargo of the Hyaline; which letter contained the instruction that "you will please suspend our order to remit to A.S. Lazarus & Co., of New York, the net proceeds of the cargo per Hyaline, and in due time we will...