Central Electric Co. v. Sprague Electric Co.

120 F. 925 | 7th Cir. | 1902

JENKINS, Circuit Judge,

after stating the facts as above, delivered the opinion of the court.

It is an undoubted general principle that, to sustain an action at law upon a contract, privity of contract is necessary (National Bank v. Grand Lodge, 98 U. S. 123, 25 L. Ed. 75), and an indirect interest in the performance of an undertaking does not constitute such privity (Keller v. Ashford, 133 U. S. 610, 10 Sup. Ct. 494, 33 L. Ed. 667). There are, however, exceptions to the rule — as where the plaintiff is the sole beneficiary of the promise, or where assets have been acquired by the promisor which in equity belong to another, or where the promise is to pay the plaintiff. There are other exceptions noted in the books.

It is settled in the federal courts that whether the remedy in such cases is in equity or at law is dependent upon the law of the forum. Willard v. Wood, 135 U. S. 309, 10 Sup. Ct. 831, 34 L. Ed. 210; Union Mutual Life Insurance Company v. Hanford, 143 U. S. 187, 12 Sup. Ct. 437, 36 L. Ed. 118; Willard v. Wood, 164 U. S. 502, 17 Sup. Ct. 176, 41 L. Ed. 531. It is needful, therefore, to inquire whether by the law of the state of Illinois a remedy at law is afforded.

The nature of the claim here presented should be precisely apprehended. The plaintiff in error asserts itself to be a creditor of a corporation which transferred all its assets to the defendant in error; the latter, as is claimed, assuming all its contracts and obligations.

It has been ruled by the Supreme Court of Illinois that if one, upon consideration-, promises another to pay that other’s debt to a third person, an action at law may be maintained by the third person upon the promise (Brown v. Strait, 19 Ill. 88; Beasley v. Webster, 64 Ill. 465; Steele, Administrator, v. Clark, Administrator, 77 Ill. 474; Chicago & A. R. R. Co. v. Coal Co., 79 Ill. 126), and that a mortgagee may sue at law the grantee of the mortgaged premises, who has assumed the debt, the latter becoming primarily liable (Thompson v. Dearborn, 107 Ill. 92; Dean v. Walker, 107 Ill. 540, 47 Am. Rep. 467; Webster v. Fleming, 178 Ill. 140, 52 N. E. 975; Harts v. Emery, Executor, 184 Ill. 560, 56 N. E. 865). The ruling in these cases proceeds upon the ground that the promise is to pay a specified debt, and to a determinate person; but that court would seem to still hold to the doctrine that a stranger to the contract, who is to derive only an incidental benefit therefrom, cannot maintain an action thereon at law. Crandall v. Payne, 154 Ill. 627, 39 N. E. 601. It may not, however, be denied that the cases of Shober & Carqueville Lithographing Co. v. Kerting, 107 Ill. 344, and Schmidt v. Glade, 126 Ill. 485, 18 N. E. 762, go far to sustain the proposition that in the state of Illinois, where one has agreed, for a consideration, to pay all the debts of another, a creditor of the latter may maintain an action at law upon the promise against the former, notwithstanding that the specific debt is not stated in the promise. In the former case a corporation purchasing the business of the firm as part of the consideration of the transfer, assumed its debts and liabilities. It was held that a creditor of the firm could have his action at law for his debt against the corporation. In the latter case a surviving partner purchased the firm property, agreeing to pay the debts of the firm; and he was held liable at law to the executor of the deceased partner for the indebtedness of the firm to the deceased partner appearing upon the firm’s books, notwithstanding he had paid to the executor the amount agreed upon for the transfer of the interest of the deceased. The doctrine of these cases would seem to be somewhat shaken by the later holding in Crandall v. Payne, and the line of demarcation between the rule and the exception to be not well defined. In this state of the law, we assume, for the purposes of this case, that in the state of Illinois an action at law may be maintained by a creditor upon the promise of a third person to the debtor, grounded upon consideration, to pay all the debts of the debtor, and that therefore this action at law may be maintained if there has been shown such a promise.

The assumption of an obligation by a corporation must be the act of its board of directors, and its action is manifested by resolution spread upon its records. The minutes constituted, necessarily, the best evidence of such promise. Secondary evidence may be resorted to upon failure after due notice to produce the record, but that secondary evidence must speak to the language of the promise. The question here is, therefore, whether any evidence was introduced, competent to go to the jury, of the character of the promise. It was incumbent upon the plaintiff in error to show the nature of that resolution and promise. It attempted so to do by calling one who may be termed an unwilling witness, but that is of no moment; the character of the resolution and promise being not disclosed. The witness stated that the proceedings covering the acquirement of the property by the defendant in error were embodied in certain minutes contained in its minute book; that these minutes showed that the ex-ecutory and official contracts of the conduit company were accepted, but the witness.war not certain as to the liabilities and obligations; that the defendant in error paid certain of the liabilities of the conduit company for goods purchased, and which appeared upon the books of the conduit company, but not otherwise, but that he could not remember that the minutes provided that the defendant in error should pay all the liabilities of the conduit company; that he was not certain about it. This is substantially all the evidence touching the minutes which are said to contain the supposed promise. It is suggested that the witness sought to avoid disclosure of the nature of the resolution or promise contained in the minutes; but, if that was so, it could not avail the plaintiff in error. It was bound to show the nature of the transaction. It failed to show that the promise comprehended the payment of debts (especially of disputed claims), and if the witness prevaricated, and, knowing the nature of the promise, failed to disclose its character, the plaintiff in error was not thereby relieved of its duty to prove the nature of the promise; and, because the witness prevaricated (if he did), it was not for the jury to guess its character. The way was open by proper proceeding to cause the production of the original minutes, or to obtain a certify copy of them; and the plaintiff in error was not relieved from its duty in that regard by the fact that, to produce such testimony, it was necessary to go to the home of the defendant in error, in another state.

The evidence of the witness McKinlock, the president of the defendant in error, to the effect that the former president of the conduit company, and then the vice president of the defendant in error, declared to him that the latter company was to pay the obligations of the conduit company, cannot be considered. The corporation could only be bound by its corporate act, and not by the declaration of its officer. The statement was not with respect to the contents of the minutes. It was not in the nature of secondary evidence, and there was no proof of his authority to bind the corporation by his declaration.

We are of opinion, therefore, that there was no proper evidence to submit to the jury from which it could justly say that there was here a promise to pay all the obligations of the conduit company.

The judgment will be affirmed.