29 S.D. 30 | S.D. | 1912
The sole question presented by this appeal is whether one holding a note secured by a mortgage upon real estate can recover upon such note against a party other than the mortgagor, where such party had taken a deed to said mortgaged premises, and in such deed had assumed such mortgage indebtedness, the grantor in such deed being in no manner bound to pay such mortgage indebtedness, and there being no evidence, other tlian such deed, to show an intent on the part of the grantor and grantee in such deed to contract for the benefit of the owner of the note and mortgage. The trial court held there could be no„ recovery.
Respondent further urges that this court has decided the other question involved herein in the case of Fish & Hunter Co. v. New England Homestake Co., 27 S. D. 221, 130 N. W. 841. It is true that we indorsed therein the rule laid down in Jefferson v. Asch, 53 Milan. 446, 55 N. W. 604, 25 R. R. A. 257, 39 Am. St. Rep. 618, to-wit: “Without undertaking to lay down a general rule defining when a stranger to a promise between others may sue to enforce it, we are prepared to say, where there is nothing but the promise, no consideration from such 'stranger, and no duty or obligation to him on the part of the promisee, he cannot sue upon it.” An examination of the contract involved in the Fish & Hunter Co. Case reveals the fact that such contract was one solely between Godfrey and his co-owners for Godfrey’s benefit, and in no manner contained any promise or covenant in favor of third parties, and was therefore not “expressly for the benefit of a third person.”
Under all the authorities, such a contract gives to third parties no right of action. The Supreme Court of Wisconsin holds exactly contrary to the above Minnesota decision; yet the Wisconsin court, in a case involving a question similar to that arising upon the contract in the Fish & Hunter Co. Case, sustains this court
Pomeroy at section 1207 of the third edition of his work on Equity Jurisprudence notes that the courts, holding that there can be no liability upon the part of the grantee where there was none on the part of the grantor, also hold that the liability, when 3x\y does exist, results only from an application of the doctrine of subrogation, and that, unless there was a liability or obligation on the part of the grantor so that, as between the grantor and grantee, the grantee became the principal debtor and the grantor but a surety, there would be nothing upon which the creditor could base a right of subrogation. Pomeroy also notes that the courts holding the grantee liable where the grantor was not liable base the right of recovery solely upon the • contract, taking the position that, where a contract is made for the benefit of one not a party thereto, he may treat the promise as though made to himself, and may sue in his own name thereon.
The federal Supreme Court has adopted the subrogation theory of liability, as appears by the following from the case of Keller v. Ashford, 133 U. S. 610, 10 Sup. Ct. 494, 33 L. Ed. 667: “The doctrine of the right of a creditor to the benefit of all securities given by the principal to the surety for the payment of the debt does not rest upon any liability of the principal to the creditor, or upon any peculiar relation of the surety towards the creditor, but upon the ground that the surety, being the creditor’s debtor, and in fact occupying the relation of surety to> another person, has received from that person an obligation or security
For a general discussion of this question and a review of the numberous authorities bearing upon the different phases thereof, we refer to the very exhaustive notes pages 176 to '207 of 71 Am. St. Rep. These notes call particular attention to the two elements required under the New York decisions in order that there may be a recovery: (1) There must be an intent to benefit the third party; and (2) the promisee must owe some obligation to the third party. It is very apparent that the decisions from those states which have adopted the English rule above referred to are ’of no authoritative value upon the question before us. Among these states seem to be Georgia, Massachusetts, Michigan, New Hampshire, North Carolina, Vermont, Virginia, and Wyoming. We therefore cite cases from those states only which recognize the American rule allowing suit by real party in interest.
Among the authorities supporting the New York rule and denying a right of recovery under the facts in this case are the following: King v. Whitely, 10 Paige (N. Y.) 465; Vrooman v. Turner, 69 N. Y. 280, 25 Am. Rep. 195; Matter of Wilber v. Warren, 104 N. Y. 192, 10 N. E. 263; Durnherr v. Rau, 135 N. Y.
We would call particular attention to the Utah case owing to the very exhaustive dissenting opinion found therein. There are many other authorities which in principle support one or the other of the two theories mentioned herein, but we have confined our citations to those where the facts passed upon were the same as here, namely, where the grantee in a deed had assumed a mort-. gage debt for which his grantor was not liable.
While we think it must be conceded that, in case the second element required under the New York decisions does exist, it may, from that fact, be presumed that the first element is also present, and therefore the party for whose benefit the contract is made be entitled, under the subrogation theory, to recover of the party who has rendered himself the principal debtor; yet it seems equally clear to us that, whenever two parties enter into an agree-, ment that appears to have been made expressly for the benefit of
We concur heartily in the following words of Chief Justice Bartch of Utah in his dissenting opinion in McKay v. Ward: “My conclusion is that the rule which exempts a grantee, who has merely in a deed of conveyance assumed and agreed to pay the mortgage in case his immediate grantor is not personally liable for the payment of the mortgage debt, from liability to the mortgagee, or owner of the mortgage, is not only founded in reason and principle, but is sustained by an overwhelming weight of authority. I do not intend to hold, however, that the grantee of mortgaged premises, whose grantor is under no personal obligation to pay the mortgage debt, cannot render himself liable to' the mortgagee for a deficiency judgment upon foreclosure and sale'by accepting a deed containing an assumption clause with knowledge of such contents, and which clause contains apt words showing that the grantor intended to bestow a benefit upon the mortgagee. The rule cannot be thus extended; for doubtless a grantor may direct the payment of the purchase price as he chooses, and may, if he so wishes, contract with a grantee that the latter will pay a certain sum to a stranger, or a mortgagee, or..any person upon whom the grantor chooses to confer a benefit, and in such cases the bene
We think also that the very terms of our statute determine this question in favor of respondent. Recovery can only be had in case the contract was “made expressly for the benefit of a third person.” The state of California has' identically the same statute, and in Chung Kee v. Davidson, 73 Cal. 522, 15 Pac. 100, the Supreme Court of that state said: “It is not necessary that the parties for whose benefit the contract has been made should be named in the contract. It must appear, however, by the direct terms of the contract, that it was made for the benefit of such parties. It cannot be implied from the fact that the contract would, if carried out between the parties to it, operate incidentally
From both reason and authority we conclude: That inasmuch as the provision in the deed before us merely provided thatjdie grantee assumed the mortgage debt, and there being no other evidence of the intent of the parties to such deed, we should construe 'such provision as a mere agreement or contract to indemnify the grantor, and therefore insufficient as the basis of an action founded upon the doctrine of subrogation — there being no obligation on part of grantor to the third person — and also insufficient^ as the basis of an action under section 1193, Civil Code, it not appearing that the said agreement or contract was entered into “expressly for the benefit of a (the) third person.”
The judgment of the trial court is affirmed.