An association having issued bonds, some of which were as
collateral security in the hands of its creditors, a corporation
adopted a resolution whereby it assumed the payment of the bonds,
provided that stock was issued to the corporation by the
association to the amount of said assumption of payment by said
corporation as the said bonds were paid.
Held that a
holder of the bonds is not in such privity with the corporation,
nor has he such interest in the contract between it and the
association, as to warrant a suit in his own name to compel the
corporation to pay the bonds.
This is an action by the Second National Bank of Saint Louis,
Missouri, against the Grand Lodge of Missouri of Free and Accepted
Ancient Masons, to compel the payment of certain coupons formerly
attached to bonds issued in June, 1869, by the Masonic Hall
Association, a corporation existing under the laws of the State of
Missouri, in relation to which bonds the Grand Lodge, Oct. 14,
1869, adopted the following resolution:
"Resolved that this Grand Lodge assume the payment of the two
hundred thousand dollars bonds, issued by the Masonic Hall
Association, provided that stock is issued to the Grand Lodge by
said association to the amount of said assumption of payment by
this Grand Lodge, as the said bonds are paid."
The court below instructed the jury, that, independently of the
question of the power of the Grand Lodge to pass the resolution, it
was no foundation for the present action, and directed a verdict
for the defendant.
The jury returned a verdict in accordance with the direction of
the court; and judgment having been entered thereon, the plaintiff
sued out this writ of error.
MR. JUSTICE STRONG delivered the opinion of the Court.
It is unnecessary to consider the several assignments of error
in detail, for there is an insurmountable difficulty in the way of
the plaintiff's recovery. The resolution of the Grand Lodge
Page 98 U. S. 124
was but a proposition made to the Masonic Hall Association, and,
when accepted, the resolution and acceptance constituted at most
only an executory contract
inter partes. It was a contract
made for the benefit of the association and of the Grand Lodge --
made that the latter might acquire the ownership of stock of the
former, and that the former might obtain relief from its
liabilities. The holders of the bonds were not parties to it, and
there was no privity between them and the lodge. They may have had
an indirect interest in the performance of the undertakings of the
parties, as they would have in an agreement by which the lodge
should undertake to lend money to the association, or contract to
buy its stock to enable it to pay its debts; but that is a very
different thing from the privity necessary to enable them to
enforce the contract by suits in their own names. We do not propose
to enter at large upon a consideration of the inquiry how far
privity of contract between a plaintiff and defendant is necessary
to the maintenance of an action of assumpsit. The subject has been
much debated, and the decisions are not all reconcilable. No doubt
the general rule is that such a privity must exist. But there are
confessedly many exceptions to it. One of them, and by far the most
frequent one, is the case where, under a contract between two
persons, assets have come to the promisor's hands or under his
control which in equity belong to a third person. In such a case,
it is held that the third person may sue in his own name. But then
the suit is founded rather on the implied undertaking the law
raises from the possession of the assets, than on the express
promise. Another exception is where the plaintiff is the
beneficiary solely interested in the promise, as where one person
contracts with another to pay money or deliver some valuable thing
to a third. But where a debt already exists from one person to
another, a promise by a third person to pay such debt being
primarily for the benefit of the original debtor, and to relieve
him from liability to pay it (there being no novation), he has a
right of action against the promisor for his own indemnity, and if
the original creditor can also sue, the promisor would be liable to
two separate actions, and therefore the rule is that the original
creditor cannot sue. His case is not an exception from the general
rule that privity
Page 98 U. S. 125
of contract is required. There are some other exceptions
recognized, but they are unimportant now. The plaintiff's case is
within none of them. Nor is he sole beneficiary of the contract
between the association and the Grand Lodge. The contract was made,
as we have said, for the benefit of the association, and if
enforceable at all, is enforceable by it. That the several
bondholders of the association are not in a situation to sue upon
it is apparent on its face. Even as between the association and the
Grand Lodge, the latter was not bound to pay any thing, except so
far as stock of the former was delivered or tendered to it. The
promise to pay and the promise to deliver the stock were not
independent of each other. They were concurrent and dependent. Of
this there can be no doubt. The resolution of the lodge was to
assume the payment of the two hundred thousand dollar bonds, issued
by the association, "
provided that stock is issued to the
Grand Lodge by said association to the amount of said assumption, .
. . as said bonds are paid." Certainly the obligation of the lodge
was made contingent upon the issue of the stock, and the
consideration for payment of the debt to the bondholders was the
receipt of the stock. But the bondholders can neither deliver it
nor tender it; nor can they compel the association to deliver it.
If they can sue upon the contract, and enforce payment by the Grand
Lodge of the bonds, the contract is wholly changed, and the lodge
is compelled to pay whether it gets the stock or not. To this it
cannot be presumed the lodge would ever have agreed. It is
manifest, therefore, that the bondholders of the association are
not in such privity with the lodge, and have no such interest in
the contract, as to warrant their bringing suit in their own
names.
Hence the present action cannot be sustained, and the circuit
court correctly directed a verdict for the defendant.
Judgment affirmed.
