THIRD PERSON, CONTRACTS FOR THE BENEFIT 0 F. The English rule is that only he can sue from whom the consideration has moved. That is, even a promisee cannot sue, if he has not provided the considera tion ; 1 B. & S. 393 ; L. R. 4 Q. B. 706.
In America the rule is well-nigh universal that the promisee can sue, although the con sideration has moved from a third party; Bell v. Sappington, 111 Ga. 391, 36 S. E. 780; Williamson v. Yager, 91 Ky. 282, 15 S. W. 660, 34 Am. St. Rep. 184; Palmer Say. Bank v. Ins. Co., 166 Mass. 189, 44 N. E. 211, 32 L. R. A. 615, 55 Am. St. Rep. 387. Sometimes the right is based upon code provisions giv ing the "real party in interest" the right to sne ; sometimes upon the theory of a trust; sometimes upon agency. It is essential that the promise be made to the third party in fact, although not in form. It must appear that the parties intend to recognize him as a primary party in interest and as privy to the promise; Pennsylvania Steel Co. v. R. Co., 204 Fed. 513, 122 C. C. A. 633.
The contract must be made for the benefit of the third person as its object, and he must be the party intended to be benefited ; Sim son v. Brown, 68 N. Y. 355, quoted with ap proval in Constable v. S. S. Co., 154 U. S. 51, 14 Sup. Ct. 1062, 38 L. Ed. 903. Other New York cases are Embler v. Ins. Co., 158 N. Y. 431, 53 N. E. 212, 44 L. R. A. 512 ; Lorillard v. Clyde, 122 N. Y. 498, 25 N. E. 917, 10 L. R. A. 113.
The difficult question comes when the plaintiff is not the promisee, but is attempt ing to sue on a contract made for his ben efit. Such cases can be divided into two classes: 1. Where the plaintiff is attempting to enforce an agreement made on his behalf which operates as a gift to him (he is then usually called a "sole beneficiary"). 2. Where the fulfilment of the promisor's promise is to operate as satisfaction of an obligation due from the promisee to his creditor. The rules as to these two classes are different.
The cases of the "sole beneficiary" type arise principally in regard to life insurance. England has been compelled to pass a stat ute to allow a beneficiary of a life policy to sue; 45 & 46 Vict. c. 75, § 11. The sole bene ficiary cannot sue at law ; Goodyear Shoe Mach. Co. v. Dancel, 119 Fed. 692; Baxter v. Camp, 71 Conn. 245, 41 AU. 803, 42 L. R. A. 514, 71 Am. St. Rep. 169 ; Clare v. Hatch, 180 Mass. 194, 62 N. E. 250 ; Linneman v. Moross' Estate, 98 Mich. 178, 57 N. W. 103, 39 Am. St. Rep. 528; Union R. Storage Co. v. McDermott, 53 Minn. 407, 55 N. W. 606 ; Curry v. Rogers, 21 N. H. 247 ; Fugure v. Mut. Society, 46. Vt. 362; Ross v. Milne, 12 Leigh (Va.) 204, 37 Am. Dec. 646 ; Hostetter v. Hollinger, 117 Pa. 606, 12 Atl. 741. Most of the other states allow a sole beneficiary to sue even at law. The rights of the sole ben eficiary in equity have not been defined as yet. Insurance cases constitute a class by themselves, in which the sole beneficiary is universally allowed to recover, either by stat ute or by judicial decision; 3 Am. & Eng. Cyc. 980 ; also, when property is given or devised to a promisor on condition that he make certain payments to others, the bene ficiaries are generally allowed to sue, even in England ; see Poll. Contr. 3d Am. Ed. 252.
In New York the sole beneficiary cannot re cover; injured workmen cannot recover on an insurance policy, taken out for their ben efit by their employer ; Embler v. Ins. Co., 158 N. Y. 431, 53 N. E. 212, 44 L. R. A. 512 ; a subway contractor is not liable to abutting owners for the negligence of sub-contractors, though he has so agreed with the city ; Haef elin v. McDonald, 96 App. Div. 214, 89 N. Y. Supp. 395; a contract made by a share holder to guarantee the credits of the corpo ration to a transferee is not enforceable by the corporation ; Rochester D. G. Co. v. Fahy, 111 App. Div. 748, 97 N. Y. Supp. 1013.
In cases of the second class where the promise is exacted in order to meet a lia bility of the promisee to the beneficiary, most states allow an action at law. Exceptions are: Morgan v. Clowes Co., 73 Conn. 396, 47 Atl. 658, 51 L. R. A. 653 ; White v. Mill Corp., 172 Mass. 462, 52 N. E. 632 ; Bliss v. Plummet's Estate, 103 Mich. 181, 61 N. W. 263. The United States Supreme Court, Maryland, New Hampshire, Pennsylvania, and Wyoming are undecided. Mortgage cases are in a class by themselves. Massa chusetts, England, Ireland and Canada are the only jurisdictions which do not allow the mortgagee to sue the grantee of the mortgagor who has assumed the payment of the mortgage. The fundamental idea is that the promise to pay the debtor-prom isee's debt is an asset of the debtor of which the creditor can avail himself. This reasoning has gone so far as to allow the holder of a check a right of action against the bank on which it was drawn ; Poll. Contr. 3d Am. Ed. 267. Such a promise is an asset of a peculiar sort, however, and can be got ten at only by the creditor for whose ben efit the contract is made; Coleman v. Hatch er, 77 Ala. 217 ; Clinton N. Bk. v. Stude mann, 74 Ia. 104, 37 N. W. 112 ; Edgell v. Tucker, 40 Mo. 523; Baker & Smith v. Eglin, 11 Ore. 333, 8 Pac. 280; Vincent v. Watson, 18 Pa. 96 ; Putney v. Farnham, 27 Wis. 187, 9 Am. Rep. 459. When these conditions are not fulfilled, the creditor is denied a right of action. So when a mortgagor conveys to one who does not assume the mortgage, who in turn conveys to one who does assume it, the mortgagee cannot sue the latter ; Ward v. De Oca, 120 Cal. 102, 52 Pac. 130 ; Brown v. Stillman, 43 Minn. 126, 45 N. W. 2 ; Mount v. Van Ness, 33 N. J. Eq. 262 ; Vroo man v. Turner, 69 N. Y. 280, 25 Am. Rep. 195 ; contra, Dean v. Walker, 107 III. 541, 47 Am. Rep. 467; Crone v. Stinde, 156 Mo. 262, 55 S. W. 863, 56 S. W. 907; Brewer v. Maurer, 38 Ohio St. 543, 43 Am. Rep. 436; Merriman v. Moore, 90 Pa. 78 ; Enos v. Sanger, 96 Wis. 150, 70 N. W. 1069, 37 L. R. A. 862, 65 Am. St. Rep. 38. The result reached is right in theory since the original transferee of the mortgaged property was never liable to the creditor, and it is un likely that the ultimate transferee intends to make a gift to the mortgagee.