§ 364. Creditor's right derivative.

If the analysis in the preceding sections is sound the claim of the creditor is a derivative one. His only interest in the promise is the interest which he has in any property belonging to his debtor. This view has considerable support in the decisions in many jurisdictions in regard to promises to assume mortgages.47 A promise to assume and pay a mortgage for which the promisee is liable can hardly differ in principle from a promise to pay any other debt of the promisee, but the mortgage cases are frequently treated as a class by themselves. A few cases also of promises to pay unsecured debts are based on substantially this theory.48

§ 365. Statutes.

The law in the United States has not been much affected be statute. Such statutes as exist are generally of limited application. Many States make a policy of life insurance for the benefit of a wife or a wife and children good against creditors, 49 but these statutes are silent as to the respective rights of the beneficiary and promisee. In Massachusetts, however, the beneficiary of a life insurance policy is given a right of action.50 California, 51 North Dakota, 52 and South Dakota, 53 Montana 54 and Idaho,55 have the same provision that "a contract made

table right of a trustee from a mere contractual right.

47 See infra, § 384.

48 Jesup v. Illinois Central R. Co. 43 Fed. 483, 493; Mercantile Trust Co. v. Baltimore, etc., R. Co., 94 Fed. 722; Goff v. Ladd, 161 Calif. 257, 118 Pac. 792; Sheppard v. Bridges, 137 Ga. 615, 74 S. E. 245; Congregational Soc. v. Flagg, 72 Vt. 248, 47 Atl. 782; Vanmeters' Ex. v. Vanmeters, 3 Gratt. 148. In Forbes v. Thorpe, 209 Mass. 570, 95 N. E. 955, the court sustained a suit in equity, saying: "The contract being made by the firm for the benefit of their creditors, the latter may in equity enforce the rights of the copartners to compel the corporation to perform its agreement in this regard. This is a property right not subject to

attachment which can be reached in equity and made available for the benefit of the creditor." Consider also the rights of a creditor of a trustee to reach the trust estate or cestui que trust. See supra, § 313.

49 3 Am. & Eng. Cyc., 2d ed., 981.

50 Rev. L. c. 118, § 73.
51 Civ. Code, § 1559.

52 Comp. L. (1913), Civ. Code, § 5841.

53 Comp. L. (1913), Civ. Code, § 1193.

54 Rev. Codes (1907), Civ. Code, § 4970. But this seems to be very narrowly construed. McDonald v. American Nat. Bank, 25 Mont. 456, 65 Pac. 896.

55 Rev. Stat., § 3221.

expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it." The Louisiana Code 56 allows suit by the beneficiary of a contract, and Virginia 57 and West Virginia 58 have the same provision that “if a covenant or promise be made for the sole benefit of a person with whom it is not made, or with whom it is made jointly with others, such person may maintain in his own name any action thereon which he might maintain in case it had been made with him only, and the consideration had moved from him to the party making such covenant or promise." The Georgia Code provides 59 that "if there be a valid consideration for the promise, it matters not from whom it is moved, the promisee may sustain his action though a stranger to the consideration."

§ 366. Code provisions as to real party in interest.

The common provision in the so-called code States,0 that actions shall be brought in the name of the real party in interest, though sometimes referred to as controlling the question,61 seems properly to have little bearing upon it. The difficult question is whether the third person is the real party in interest. It is a question of substantive law as to the existence of rights rather than of the procedure appropriate for their enforcement. If, as matter of common law, the third person is held entitled to sue in the name of the promisee or to treat the promisee as a trustee for him, the provision would enable the third person to sue directly in his own name. The English common law, certainly, does not admit the indirect right any more than the direct. The provision has served in some States to add another element of confusion.

56 Art. 1890; Code of Practice, Art. 35.

57 Code, § 2415.

58 Code, § 3740.

59 Code, (1914) § 4249.

60 These statutes are collected in Hepburn, Cases on Code Pleading, 188.

61 Paducah Lumber Co. v. Paducah Water Supply Co., 89 Ky. 340, 12 S. W. 554, 13 S. W. 249, 7 L. R. A. 77, 25 Am. St. Rep. 536; Smith v. Smith, 5 Bush, 625, 632; Ellis v. Harrison, 104 Mo. 270, 277, 16 S. W. 198. See also Preston v. Preston (Mich.), 172 N. W. 371.

§ 367. Massachusetts law.

In no jurisdiction in the United States is the law as strict in denying relief to a stranger to the contract as it is in England. But there is no uniformity in the law of the several States. That of Massachusetts, until recently at least, most nearly approached the English rigor. Early decisions which followed what was then supposed to be the English law, and gave a direct right to the sole beneficiary of a contract and to a creditor against one who had promised to pay his debt, have been overruled.62 But by statute, if not otherwise, the beneficiary of a life insurance policy is entitled to the proceeds of the policy as against the personal representatives of the insured,63 and by a later statute 64 may sue the insurance company in his own name. Further, the Massachusetts court has held that a policy of fire insurance insuring the premises of a mortgagor and taken out and paid for by him, if made payable to the mortgagee, may be sued upon by the latter in his own 65 The mortagee's interest in such a policy is essentially

62 Terry v. Brightman, 132 Mass. 318; Marston v. Bigelow, 150 Mass. 45, 22 N. E. 71, 5 L. R. A. 43; Nims v. Ford, 159 Mass. 575, 35 N. E. 100; Wright v. Vermont Life Ins. Co., 164 Mass. 302, 41 N. E. 303; Clare v. Hotch, 180 Mass. 194, 62 N. E. 250; overruling Felton v. Dickinson, 10 Mass. 287; Felch v. Taylor, 13 Pick. 133; Bacon v. Woodward, 12 Gray, 376, 382. Cf. Nash. v. Commonwealth, 174 Mass. 335, 54 N. E. 865.

63 Stat. 1887, c. 214, sec. 73. This statute and that referred to in the following note are incorporated in Rev. L. (1902), 118, c. § 73. See also as to fraternal beneficiary associations Stat. 1888, c. 429, §§ 8, 9; Rev. L., c. 119, under which a beneficiary was allowed to sue in his own name in Dean v. American Legion of Honor, 156 Mass. 435, 31 N. E. 1; Timberlake v. Supreme Commandery, 208 Mass. 411, 94 N. E. 685.

64 By statute of 1894, c. 225, a beneficiary may sue in his own name upon

all policies of life insurance issued since that date. A decision in regard to this statute is Wright v. Vermont Life Ins. Co., 164 Mass. 302, 41 N. E. 303.

65 Palmer Savings Bank v. Insurance Co., 166 Mass. 189, 44 N. E. 211, 32 L. R. A. 615, 55 Am. St. Rep. 387, following previous practice, which had not before been disputed. The Massachusetts court relies on the fact that most courts in the country allow the mortgagee to sue. This is true. See 11 Am. Encyc. of Pl. and Pr. 394. But most American courts also allow any creditor to sue on a promise to pay him made to another, so that such holding by them as to the mortgagee's right is in accordance with their other decisions.

In Michigan, where as in Massachusetts a creditor cannot sue upon a promise to pay his debt, a mortgagee cannot sue upon insurance of the mortgagor made payable to the mortgagee. Hartford Fire Ins. Co. v. Davenport,

the same as any creditor's interest in a promise made to his debtor to pay the debt. It is true the promise of the insurance company is conditional and is not to pay the debt as such, but any payment made by the insurer operates as payment of the debt pro tanto, and, if all the parties are solvent it is the mortgagor not the mortgagee who derives benefit from the payment. The only distinction that seems possible to except this case from the general rule in regard to promises to pay a debt to a third person is to regard a policy of insurance as a mercantile instrument, the effect of which is largely determined by business custom 66 and which may be sued on like negotiable paper by the party to whom it is made payable without regard to who furnished the consideration or negotiated the contract. This distinction seems sound. There are also decisions in Massachusetts, not overruled, which hold a devisee who has accepted a devise made conditional on payment to another personally liable to the beneficiary.67 Finally, it has recently been held that a promise to a parent to give the latter's child a sum of money may be enforced by the child.68 The reasons given for distinguishing the case from earlier decisions 69 seem inadequate, but it may induce the Massachusetts court to recognize in the future more fully than in the past that a sole beneficiary should be entitled, under some form of procedure, to enforce a promise made for his benefit.

37 Mich. 609; Minnock v. Eureka F. & M. Ins. Co., 90 Mich. 236, 51 N. W. 367; conf. Hopkins Mfg. Co. v. Aurora F. & M. Ins. Co., 48 Mich. 148, 11 N. W. 846. In Collinsville Savings Society v. Boston Ins. Co., 77 Conn. 676, 60 Atl. 647, 69 L. R. A. 924, it was also held that making the loss payable to the mortgagee gave the latter no contract rights and that he was therefore bound by an arbitration to fix the loss under the policy, though not made party to the arbitration.

66 See Langdell, Summary Contracts, §§ 49, 51.

67 Felch v. Taylor, 13 Pick. 133; Adams v. Adams, 14 Allen, 65. In Prentice v. Brimhall, 123 Mass. 291, 293, Gray, C. J., explained these decisions by the lack of equity powers in the court when the first decision was made. As no equitable charge on the property could have been enforced, the defendant would have escaped altogether.if not held personally liable.

68 Gardner v. Denison, 217 Mass. 492, 105 N. E. 359, 51 L. R. A. (N. S.) 1108.

69 Ibid. at p. 494;

A large majority of the States allow the sole beneficiary to sue at law; 70 but besides Massachusetts, the Federal