Lorillard v. Clyde — 34 N.Y. St. Rep. 224

Majority

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Jacob Lorillard, App’lt, v. Wm. P. Clyde et al., Resp’ts.^[1]

(Court of Appeals, Second Division,

Filed December 2, 1890.)

Headnote

1. Contract—Obligation for the benefit of a third party.

In June, 1874, plaintiff and defendants, in order to consolidate their respective interests in the Philadelphia & New York Transportation Line, agreed together to form a corporation under the laws of the state of New York, in which each of the parties should hold equal shares; the stock to he issued in payment for certain vessels of which plaintiff was to contribute two, and Clyde & Co. nine. The corporation was formed under the name of the Philadelphia & New York Navigation Co. Clyde & Co. were to manage it,and it was to assume the lease of Loriilard’s Philadelphia wharf and the piers in the Bast river. The Philadelphia wharf had been leased to the Lorillard’s Steamship Co. for a term of years, and it was sued for the rent of the wharf. Defendants were notified of this, but failed to defend, and judgment was recovered against the Steamship Company,

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which paid the judgment, and assigned its claim against Clyde & Co. to plaintiff, who brings this action, held, that the Lorillard Steamship Co. had no cause of action upon which it could have maintained an action against the defendants.

3. Same.

Defendants had not received any property or benefit from, and hence did not owe any debt or duty to The Lorillard Steamship Co. in consideration of which they should promise to pay any existing debt or any debt that might accrue thereafter against the latter.

{Lawrence v. Fox, 30'U Y., 368, distinguished.)

Appeal by plaintiff from a judgment of the general term, superior court of New York city, affirming a judgment entered upon a report of a referee dismissing the complaint, with costs.

Bichard L. Sweezy, for app’lt; Edw. G. Boardman, for resp’ts.

The allegations of the plaintiff’s complaint are substantially that defendants are the survivors of the members of the co-partnership of Wm. Clyde & Co., existing in June, 1874, and engaged in the business of the transportation of freight between New York and Philadelphia, and that they entered into an agreement with plaintiff at that time, a copy of which is annexed to and forms a part of the complaint.

Of course the provisions and statements contained in the agreement are to be treated as allegations of the complaint so far as they serve to constitute a cause of action. The agreement was between plaintiff and said Wm. P. Clyde & Co., and was for the consolidation of their respective interests into the Philadelphia & New York Transportation Line; that they should form a corporation (under the laws of the state of New_ York) with a capital of $300,000, and to that capital they should contribute certain property, specifying it and. its value, and in such manner as to make each of the contracting parties the owners of one-half of the capi-’ tal stock of the proposed corporation; that the corporation was to be managed by said Clyde & Co., who were to receive therefor the usual commissions upon freights, and who were to guarantee the plaintiff a dividend not less than seven per cent." per annum for seven years ; the agreement after providing some minor details as to the management of the business of the corporation, contained this stipulation: “ The corporation to assume lease of Lorillard's Philadelphia Wharf, and to assume leases of piers 33 and 33-J Bast river, New York, at present rental, and to purchase Lorillard’s sheds, barges and fixtures at an appraised value.”

The complaint further and in terms alleges that in pursuance of said agreement a corporation was organized by the name of the Philadelphia and New York Steam Navigation Company; that said corporation, until its dissolution and the appointment of a receiver thereof, in July, 1879, was managed by the said firm of Wm. P. Clyde & Co.; that prior to and at the time mentioned, The Lorillard Steamship Company was a corporation, and that on the 18th of March, 1871, this company entered into a lease with The Philadelphia Ship Dock Company by which the latter company let its wharf to the Lorillard Steamship Company for a spec

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ified rent, which the latter agreed to pay to the Dock Company; that the expression “ lease of Lorillard’s Philadelphia Wharf,” used in the agreement, referred to this lease, and that it was understood and intended by the parties to said agreement (the plaintiff and the firm of which defendants are the survivors) in respect to paying the rent, that the agreement was made for the benefit of The Lorillard Steamship Company, and that the new corporation should, whe.n organized, enter into the possession of the said wharf and assume and pay the rent accruing under said lease to the end of its term; that in pursuance of said agreement The Lorillard Steamship Company, in December succeeding the June, the date of the agreement, transferred and delivered possession of said wharf to said Wm. P. Clyde & Co., the managing agents of said new corporation, and that said firm entered into and used said wharf for their own and not for the business of said new corporation, until the succeeding June; that said firm of Clyde & Co. though requested to do so, refused to have said new corporation assume said lease or to pay the rent falling due thereafter; that said Dock Company, the lessor in said lease, subsequently brought an action against The Lorillard Steamship Company, the lessee, for the balance of the rent, of which the defendants had notice and opportunity to defend, and recovered a judgment therefor, which was paid by The Lorillard Steamship Company, and that the latter assigned to the plaintiff the cause of action set forth in said complaint

This analysis of the complaint brings me to the question involved in this appeal, and that is whether The Lorillard Steamship Company had any cause of action upon which it could have maintained an action against the defendants.

It is generally regarded as essential that none but a party to a contract has a right to complain of or to recover damages for the breach of it against any of the other parties to it

The Lorillard Steamship Company was not a party to or even named in the agreement

The agreement was made and signed by the plaintiff and the defendants as individuals assuming to act for themselves only and not as directors or agents of a corporation or the agent of any person. The ground of the complaint is that the defendants agreed with the plaintiff that a corporation not in being, but which plaintiff and defendants agreed should come into being, should assume and pay the rent reserved in a lease, not between themselves or to which either of them was a party, but between two corporations neither of which was a party to the contract, at least in name. But it is urged in behalf of appellant, that though the Lorillard Steamship Company was not a party to nor referred to in the agreement, the assumption of its obligation to pay rent reserved in its lease with the Philadelphia Steamship Dock Company was intended to be and was in fact for its benefit and that theory brings the case within the principle of the celebrated case of Lawrence v. Fox, 20 N. Y., 268 .

Whether the principle of that case is applicable to this, depends upon this consideration, whether the facts of that case are the

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same or of the same essential nature as the facts of this case. Legal principles spring from the essential facts of a case, and it is. not safe to apply the principle which controls the decision of one case to the decision of another case, until the facts of the two cases have been closely compared and found to be essentially the same.

The essential facts of the case of Lawrence v. Fox were that one Holly at the request of Fox loaned the latter §300, at the same time stating to Fox that he, Holly, owed that sum to plaintiff Lawrence for borrowed money and had agreed to pay it the next day, and the defendant Fox in consideration of receiving said sum from Holly promised to pay it to the plaintiff Lawrence the next day. Fox failed to pay Lawrence according to the promise he had made Holly and Lawrence brought an action against Fox upon the promise made to Holly to pay Lawrence the $300 and recovered a judgment.

In this transaction Fox, in consideration of receiving $300 from Holly, promised Holly he would pay the debt that he owed Holly to Lawrence, the creditor of Holly.

The facts in the case under consideration are that the plaintiff and defendants agreed to contribute certain property owned by them respectively at an agreed valuation to the capital of a new corporation to be thereafter organized. The value of the property to be contributed by plaintiff exceeded the value of the property to be contributed by defendants, according to the agreed valuations, by $20,000, and for this difference the defendants gave their notes to plaintiff.

The defendants had not received any property or benefit from and hence did not owe any debt or duty to The Lorillard Steamship Co., in consideration of which they should promise to pay any existing debt or any debt that might accrue thereafter against The Lorillard Steamship Co. The defendants had put their property with cash to equal the property put in by plaintiff into The Philadelphia & Hew York Steam navigation Co., and the. stock of that company to be issued upon such basis was to be and was in fact equal.

In the case of Lawrence v. Fox, Holly, who parted with his money to Fox on his promise to pay Lawrence, made the agreement with Fox to pay Lawrence and Fox promised Holly that he would. There is no proof in this case that The Lorillard Steamship Co. made any agreement with defendants to pay its debt to the Philadelphia Steamship Wharf Co. or that defendants made any promise to The Lorillard Steamship Co. or to the Philadelphia Wharf Co. to pay such debt, or that either of these companies had any knowledge of this agreement or of the pretended obligation arising from it until long after the agreement was made and' had been in process of performance in other respects.

My conclusion is that the facts of this casa are materially different from the facts in the case of Lawrence v. Fox, and the courts have repeatedly said that the principle of that case should be limited to cases having the same essential facts. Wheat v. Rice, 97 N. Y., 302 . All that case decides is “that where one person

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loans money to another upon his promise to pay it to a third party to whom the party so lending the money is indebted, the contract thus made by the lender is made for the benefit of his creditor, and the latter can maintain an action upon it without proving an express promise to himself from the party receiving the money.” Garnsey v. Rogers, 47 N. Y., 240 .

This was distinctly held in Vrooman v. Turner, 69 N. Y., 284 . The court said that “in every case in which an action has been sustained there has been a-debt or duty owing by the promisee to the party claiming to sue upon the promise. Whether the decisions rest upon the doctrine of agency, the promisee being regarded as the agent of the third party, who by bringing his action adopts his acts, or upon the doctrine of a trust, the promisor being regarded as having received money or other things for the third party, is not material. In either case there must be a legal right, founded upon some obligation of the promisee, in the third party to adopt and claim the promise as made for his benefit.”

I have considered this case as if the action had been brought by the Philadelphia Wharf Company, of whom the Lorillard -Steamship Company leased the property and to whom the rent under the lease was payable.

I have assumed, in my discussion of the case, that the ^Lorillard Steamship Company might maintain this action against the defendants for not paying the rent if the defendants had been liable under the agreement to pay the rent to the Philadelphia Wharf Company.

If I had reached a different conclusion as to the liability of defendants under the agreement, it would have been necessary to consider other facts before holding that the defendants were liable rfo the plaintiff in this case.

I think the judgment should be affirmed, with costs.

All concur, except Haight, J., absent.