Phez Co. v. Salem Fruit Union

• Decision Date: 11 April 1922
• Parties: PHEZ CO. v. SALEM FRUIT UNION ET AL.
• Court: Oregon Supreme Court

205 P. 970

103 Or. 514

PHEZ CO. v. SALEM FRUIT UNION ET AL.

Supreme Court of Oregon

April 11, 1922

In Banc.

Appeal from Circuit Court, Marion County; Geo. G. Bingham and Percy R. Kelly, Judges.

On petition for rehearing. Petition denied.

For former opinion, see 201 P. 222.

John H. McNary, W. C. Winslow, and William H Trindle, all of Salem, for appellant.

Oscar Hayter, of Dallas, and Roy F. Shields, of Salem (Smith &amp Shields, of Salem, on the brief), for respondents.

PER CURIAM.

The defendants have presented a petition for rehearing, in which they earnestly insist that the conclusions reached by the court in its opinion heretofore filed herein (201 P. 222) are contrary to the evidence and are beyond the scope of the issues made by the pleadings. A re-examination of the record in the case and a careful reconsideration of the questions presented thereby satisfies us that the result announced in the opinion is correct.

The trial court sustained a general demurrer interposed by the defendant growers to plaintiff's complaint. In reviewing that decision, the rule, supported by many decisions of this court was discussed and applied, that where two persons make a contract for the benefit of a third party, such third party may maintain a suit or action directly against the promisor to enforce such contract. In the opinion care was taken to recognize the elements essential to a contract that may be enforced by a third party: (1) There must be an intention to benefit the third party; (2) the promisee must owe some obligation to the third party.

In Vrooman v. Turner, 69 N.Y. 280, 25 Am Rep. 195, the court said:

"To give a third party who may derive a benefit from the performance of the promise, an action, there must be, first an intent by the promisee to secure some benefit to the third party, and second, some privity between the two, the promisee and the party to be benefited, and some obligation or duty owing from the former to the latter which would give him a legal or equitable claim to the benefit of the promise, or an equivalent from him personally." The court continued:

"It is true there need be no privity between the promisor and the party claiming the benefit of the undertaking, neither is it necessary that the latter should be privy to the consideration of the promise, but it does not follow that a mere volunteer can avail himself of it. A legal obligation or duty of the promisee to him, will so connect him with the transaction as to be a substitute for any privity with the promisor, or the consideration of the promise, the obligation of the promisee furnishing an evidence of the intent of the latter to benefit him, and creating a privity by substitution with the promisor. A mere stranger cannot intervene, and claim by action the benefit of a contract between other parties. There must be either a new consideration or some prior right or claim against one of the contracting parties, by which he has a legal interest in the performance of the agreement."

The case of Vrooman v. Turner was cited or referred to with approval in the following Oregon cases: Parker v Jeffery, 26 Or. 186, 37 P. 712; Brower Lumber Co. v. Miller, 28 Or. 565, 43 P. 659, 52 Am. St. Rep. 807 (above rule quoted); The Home v. Selling, 91 Or. 428, 436, 179 P. 261 (above rule quoted); Y. M. C. A. v. Croft, 34 Or. 106, 110, 55 P. 439, 75 Am. St. Rep. 568 (above rule quoted and decision in Brower Lumber Co. v. Miller said to be based thereon).

That the rule is accurately stated in the opinion is not seriously questioned, but defendants contend that the application of the rule is limited to executed contracts under which some fund or property has come into the hands of the promisor, in consideration of which the promisor agrees to pay a debt or discharge a legal obligation which the promisee owes to a third party. In support of this contention, defendants cited the cases of Washburn v. Interstate Investment Co., 26 Or. 436, 36 P. 533, 38 P. 620; Brower Lumber Co. v. Miller, 28 Or. 565, 43 P. 659, 52 Am. St. Rep. 807. Those cases expressly recognize the rule as stated in the opinion in this case and as defined in the case of Vrooman v. Turner. In applying the rule in the cases mentioned, the court used the language which defendants claim limits the rule; in Brower Lumber Co. v. Miller, 28 Or. 565, 43 P. 659, 52 Am. St. Rep. 807, Mr. Justice Wolverton, in the opinion, quotes from the decision in Parker v. Jeffery, 26 Or. 186, 37 P. 712, as follows:

"In nearly if not quite every case coming under our notice in which the action has been sustained, * * * there has been some property, fund, debt, or thing in the hands of the promisor upon which the plaintiff had some equitable claim, and from which the law, acting upon the relationship of the parties, or the fund, established the privity, implied the promise, and created the duty upon which the action was founded."

And in Washburn v. Interstate Investment Co., 26 Or. 436, 38 P. 620, Mr. Chief Justice Bean, said:

"But where there is no such fund, debt, or obligation in the hands of or owing from the promisor, but only an executory contract by one person to advance his own money to pay the debts of another, who is a party to neither the contract or consideration, it is difficult to see upon what principle the doctrine can be applied."

In this case there was an obligation owing from the defendant growers to the plaintiff. By Exhibit C the growers expressly undertook to deliver the berries grown by them direct to the plaintiff, and to thereby discharge the obligation of the fruit union to make such deliveries, and the defendant growers controlled loganberries which were the subject of the contract (Exhibit A) between plaintiff and the defendant fruit union, and, moreover, the plaintiff to all intents and purposes was a party to the consideration of the contract between the growers and the fruit union, so that the rule may properly be invoked to sustain the complaint, even under the limitations placed upon its application in the cases relied upon by defendant. Those cases, however, do not purport to establish limitations upon the application of the rule for all cases.

Plaintiff's complaint, however, may be sustained upon other grounds. The contract for the sale of loganberries (Exhibit A) was entered into by the fruit union in behalf of the growers and as their exclusive agent, under the terms of, and the authority given by, the contract (Exhibit B). The defendant growers were referred to and named in Exhibit A, with the acreage devoted by each to the raising of loganberries and the estimated tonnage raised by each grower. The defendant growers were all members of the fruit union; the latter was organized by the defendant growers to facilitate the sale and delivery of the fruit products raised by them; the contracts under consideration were made pursuant to that purpose and to effect and carry it out. The sellers in the contract of sale (Exhibit A) were the defendant growers, and the fruit union was their agent, with express authority from them to make the contract, and this was known to plaintiff's assignor at the time the contract was made. The agent and principals mentioned, acting together, shortly before harvest, declared that they would not comply with the contract, and that they intended to sell and deliver elsewhere the berries to which plaintiff was entitled under the contract. Defendant growers were properly made parties to the suit, and the complaint was sufficient as to them, under the doctrine (considered in the original opinion) that the principal is bound by the contracts of the agent made within the scope of his authority, even though the contract is in writing and executed in the name of the agent alone, in cases where the body of the instrument clearly shows that the party executing the contract is acting as agent, and for whom he is acting. 2 Cor. Jur. 671, 674; 25 R. C. L. 657; 27 Cor. Jur. 298.

If the defendants be regarded as strangers to the contract of sale between the fruit union and plaintiff, as contended by defendants, the complaint is still sufficient as to the defendant growers under the rule that where a stranger wrongfully induces another to commit a...