cases especially the promisor may thus find himself in a difficult position between the mortgagee and the promisee, the grantor of the premises. If the promisor fails to keep his promise to pay the debt, he is liable to the promisee to the full amount of the debt; 94 and unless the promise can bear the construction of a promise to indemnify against loss, this seems sound. But the recovery of the promisee cannot affect the mortgagee's rights against the property, and if he forecloses the mortgage, the promisor loses the property though he has already paid the debt. The proper relief for the promisor is an application to equity when he is sued by the promisee, for an injunction against the action on terms of payment of the debt to the mortgagee. Equity should grant such an injunction, for it does not injure the promisee, since the terms imposed amount to a decree of specific performance of the promise.95 It seems also that if the mortgage has been foreclosed and the mortgagee thereby paid and the promisee freed from liability as mortgagor, the promisor should be entitled to an injunction against the collection of any judgment of the promisee against him, or if a judgment has already been collected, to an action on principles of quasi-contract to recover back the amount collected less costs and any payment or remaining liability of the promisee to the mortgagee. 94 Meyer v. Hartman, 72 Ill. 442; Stout v. Folger, 34 Ia. 71, 11 Am. Rep. 138; Furnas v. Durgin, 119 Mass. 500, 20 Am. Rep. 341; Locke v. Homer, 131 Mass. 93, 41 Am. Rep. 199; Walton v. Ruggles, 180 Mass. 24, 61 N. E. 267; Strohauer v. Voltz, 42 Mich. 444, 4 N. W. 161; Dorrington v. Minnick, 15 Neb. 397, 19 N. W. 456; Rawson v. Copland, 2 Sandf. Ch. 251; Recort v. Higgins, 48 N. Y. 532; Sage v. Truslow, 88 N. Y. 240; Wilson v. Stilwell, 9 Ohio St. 467, 15 Am. Dec. 477; Callender v. Edmison, 8 S. Dak. 81, 65 N. W. 425. See also infra, § 1408. But see Faulkner v. McHenry, 235 Pa. 298, 83 Atl. 827. And it makes no difference that the promisor has sold the land again. Reed v. Paul, 131 Mass. 129. But if the mortgagee has been paid from sale of the land the promisee can recover only nominal damages. Muhlig v. Fiske, 131 Mass. 110; Williams v. Fowle, 132 Mass. 385. See also Wilson v. Bryant, 134 Mass. 291. 95 Compare Ford v. Finney, 35 Ga. 258. In that case the mortgagee sued the mortgagor. The latter having sold the premises to a third party, who had agreed to pay the mortgage, brought a bill in equity joining both the mortgagee and the purchaser, praying that the latter be compelled to pay the debt. The bill was sustained. See also Wilson v. Stilwell, 9 Ohio St. 467, 15 Am. Dec. 477. § 393. Creditor's right to sue both debtor and new promisor. Diversity of opinion likewise prevails in regard to the right of a creditor whose debtor has received a promise to pay the debt, to sue both the new promisor and the original debtor. Courts which hold that the original contract is in effect an offer of novation to the creditor naturally hold that if the creditor accepts the promisor as his debtor he releases the original debtor, and on the other hand if he elects to sue the original debtor he thereby rejects the proffered novation and cannot afterwards sue the new promisor.96 The more common doctrine, however, allows the creditor a right against both the original debtor and the new promisor.97 And in some States 96 Henry v. Murphy, 54 Ala. 246; Hall v. Alford, 20 Ky. L. Rep. 1482, 49 S. W. Rep. 444; Floyd v. Ort, 20 Kan. 162; Searing v. Benton, 41 Kan. 758, 21 Pac. 800 (compare Kansas Pac. Ry. Co. v. Hopkins, 18 Kan. 494, 499, and Plano Mfg. Co. v. Burrows, 40 Kan. 361, 19 Pac. 809. In the latter case the court said that "no one has the right to take the objection that the old debt is not extinguished, but the old debtor, and probably even he would not have such right"); Bohanan v. Pope, 42 Me. 93; Brewer v. Dyer, 7 Cush. 337; Warren v. Batchelder, 16 N. H. 580; Wood v. Moriarty, 15 R. I. 518, 522, 9 Atl. 427; Phenix Iron Foundry v. Lockwood, 21 R. I. 556, 45 Atl. 546. See also Steinfeld v. Wing Wong, 14 Ariz. 336, 128 Pac. 354; Blake v. Atlantic Nat. Bank, 33 R. I. 464, 82 Atl. 225, 39 L. R. A. (N. S.) 874; McIlvane v. Big Stony Lumber Co.. 105 Va. 613, 54 S. E. 473; King V. Scott, 76 W. Va. 58, 84 S. E. 954. In no case, however, has a court held that a mortgagee by seeking to recover against one who had assumed a mortgage released the mortgagor; and in Rouse v. Bartholomew, 51 Kan. 425, 32 Pac. 1088, the Kansas court held the mortgagor was not released though the decision is inconsistent in princi ple with the previous decisions of the court as to other debts. In Young v. Hawkins, 74 Ala. 370, it was held that recovering judgment against the original debtor in ignorance that a new promisor had agreed to pay the debt did not bar a subsequent recovery against the latter. To make a binding election it was said knowledge of the facts is essential. 97 United States v. Illinois Surety Co., 226 Fed. 653, 661, 141 C. C. A. 409; Steinfeld v. Wing Wong, 14 Ariz. 336, 128 Pac. 354; Hopkins v. Warner, 109 Cal. 133, 41 Pac. 868; South Side Planing Mill Assoc. v. Cutler Co., 64 Ind. 560; Davis v. Hardy, 76 Ind. 272; Rodenbarger v. Bramblett, 78 Ind. 213; Stanton v. Kendrick, 135 Ind. 382, 389, 35 N. E. 19; Rothermel v. Bell & Zoller Co., 79 Ill. App. 667; Wickham v. Hyde Park Assoc., 80 Ill. App. 523; Rouse v. Bartholomew, 51 Kan. 425, 32 Pac. 1008; Leckie v. Bennett, 160 Mo. App. 145, 141 S. W. 706; Davis v. Nat. Bank of Commerce, 45 Neb. 589, 63 N. W. 852; Stephany v. More, 82 N. J. 186, 82 Atl. 731; Fischer v. Hope Mut. Life Ins. Co., 69 N. Y. 161; Poe v. Dixon, 60 Ohio St. 124, 129, 54 N. E. 86, 71 Am. St. Rep. 713; Feldman v. McGuire, 34 Oreg. 309, 313, 55 Pac. 872; Hawkins v. Western Nat. Bank (Tex. Civ. App.), 145 S. W. 722, he is allowed to join both as defendants in the same action.98 He ought to be compelled to do so. § 394. Defenses good against the promisee good against the creditor. Another question concerns the admissibility of certain defences by the promisor. When sued by the third person, the promisor may rely on facts showing that the promisee could not enforce the contract. Is the third person barred because the promisee would be? It is necessary to observe some distinctions here. The foundation of any right the third person may have, whether he is a sole beneficiary or a creditor of the promisee, is the promisor's contract. Unless there is a valid contract no rights can arise in favor of any one. Moreover, the rights of the third person, like the rights of the promisee, must be limited by the terms of the promise. If that is in terms conditional, no one can acquire any rights under it unless the condition happens.99 Further, if there is a contract valid at law, but subject to some equitable defence as fraud,1 mis 82 Johnson v. Shuey, 40 Wash. 22, 98 Roberts v. Abney (Tex. Civ. App.), 189 S. W. 1101. 99 Ellis v. Conrad Seipp Brewing Co., 207 Ill. 291, 69 N. E. 808; Russell v. Western Union Tel. Co., 57 Kan. 230, 45 Pac. 598; Fenn v. Union Central Life Ins. Co., 48 La. Ann. 541, 19 So. 623; Gill v. Weller, 52 Md. 8; Browning v. North Mo. Cent. Ry. Co. (Mo.), 188 S. W. 143. But see Orman v. North Alabama Co., 53 Fed. 469, 55 Fed. 18, 13 U. S. App. 215, 5 C. C. A. 22; East v. New Orleans Ins. Assoc., 76 Miss. 697, 26 So. 691; Oakland Ins. Co. v. Bank of Commerce, 47 Neb. 717, 66 N. W. 646, 36 L. R. A. 673, 58 Am. St. Rep. 663. See also Davis v. Dunn, 121 Mo. App. 490, 97 S. W. 226. In the first case the person to whom a telegram was sent, who was treated as the beneficiary of the contract with the telegraph company, was held subject to the requirement in that contract that the claim must be presented within 60 days. In the last two cases a mortgagee was allowed to sue on policies of insurance taken out by the mortgagor "loss payable to mortgagee" though the mortgagor had acted in such a way as would avoid the policy as to him. 1 Green v. Turner, 80 Fed. Rep. 41, 86 Fed. Rep. 837, 59 U. S. App. 252, 30 C. C. A. 427; Lloyd v. Lowe (Colo. 1917), 165 Pac. 609; Union City &c. Co. v. Wright, 145 Ga. 730, 89 S. E. 822; Benedict v. Hunt, 32 Ia. 27; Maxfield v. Schwartz, 45 Minn. 150, 47 N. W. 448, 10 L. R. A. 606; Ellis v. Harrison, 104 Mo. 270, 278, 16 S. W. take,2 or failure of consideration,3—the defence may be set up against the third person. If the undertaking is to pay a debt or discharge a duty of the promisee, the rights of the third person can be derived only through the promisee, and whatever defence affects the latter affects the creditor. In the case of a promise for the sole benefit of a third person, the beneficiary may indeed be regarded as having a direct right, but he is in the position of a donee. It is no more equitable for a sole beneficiary, though himself innocent to try to enforce a promise procured by the fraud of another, than for the donee of trust property to insist on his legal title as against the cestui que trust. 198; Saunders v. McClintock, 46 Mo. App. 216; American Nat. Bank v. Klock, 58 Mo. App. 335; Johnson v. Maier, 194 Mo. App. 169, 187 S. W. 143; Wise v. Fuller, 29 N. J. Eq. 257; Arnold v. Nichols, 64 N. Y. 117; Moore v. Ryder, 65 N. Y. 438; Trimble v. Strother, 25 Ohio St. 378; Bradshaw v. Provident Trust Co., 81 Oreg. 55, 158 Pac. 274; Janness v. Simpson, 84 Vt. 127, 78 Atl. 886; Osborne v. Cabell, 77 Va. 462. But see contra, Georgia Home Ins. Co. v. Boykin, 137 Ala. 350, 34 So. 1012. Fitzgerald v. Barker, 96 Mo. 661, 10 S. W. 45, and Klein v. Isaacs, 8 Mo. App. 568, also to the contrary must be regarded either as overruled or distinguished on the ground that the plaintiff bought the note, payment of which was assumed, on the faith of the defendant's promise to pay it. 2 Episcopal Mission v. Brown, 158 U. S. 222, 15 S. Ct. 833, 39 L. Ed. 960; Jones v. Higgins, 80 Ky. 409; Bogart v. Phillips, 112 Mich. 697, 71 N. W. 320; Rogers v. Castle, 51 Minn. 428, 53 N. W. 651; Gold v. Ogden, 61 Minn. 88, 66 N. W. 266; Bull v. Titsworth, 29 N. J. Eq. 73; Stevens Institute of Technology v. Sheridan, 30 N. J. Eq. 23; O'Neill v. Clark, 33 N. J. Eq. 444; Green v. Stone, 54 N. J. Eq. 387, 34 Atl. 1099, 55 Am. St. Rep. 577; Crowe v. Lewin, 95 N. Y. 423; Wheat v. Rice, 97 N. Y. 296; Broadbent v. Hutter, 163 Wis. 380, 157 N. W. 1095. 3 Clay v. Woodrum, 45 Kan. 116, 25 Pac. 619; Amonett v. Montague, 75 Mo. 43; Judson v. Dada, 79 N. Y. 373, 379; Osborne v. Cabell, 77 Va. 462. Several decisions present the case of a purchaser with warranty of land subject to a mortgage, who has been evicted from the premises and is thereafter sued by the holder of the mortgage. The defence was held good in Dunning v. Leavitt, 85 N. Y. 30, 39 Am. Rep. 617; Crowe v. Lewin, 95 N. Y. 423; Gifford v. Father Matthew Society, 104 N. Y. 139, 10 N. E. 39. But see contra, Blood v. Crew Levick Co., 177 Pa. 606, 35 Atl. 871, 55 Am. St. Rep. 741; Hayden v. Snow, 9 Biss. 511, 14 Fed. 70; s. c. sub nom. Hayden v. Drury, 3 Fed. 782. In the last case the decision was based on the fact that the plaintiff was a purchaser for value of the mortgage note after the defendant had assumed the mortgage. See also Knapp v. Connecticut Mut. L. I. Co., 85 Fed. 329, 56 U. S. App. 452, 40 L. R. A. 861, 29 C. C. A. 171; Connecticut Mut. L. I. Co. v. Knapp, 62 Minn. 405, 64 N. W. 1137. § 395. Non-performance by promisee a good defence. A more difficult case arises where the defence does not relate to the origin of the contract, but is based on supervening circumstances, such as non-performance by the promisee of a counter promise made by him, or discharge by the promisee by release or rescission. The defence of non-performance should be available against the third person whether he is a sole beneficiary or a creditor of the promisee. The defence is properly based on failure of consideration. As the substantial matter the parties had in mind was the performance of the promises the defendant promisor has in substance not received what he bargained for. Under these circumstances it is unjust to allow a mere donee to enforce the promise; and if the third person is a creditor he is not entitled to any greater right than his debtor had.4 § 396. Rescission or release sole beneficiary. The commonest defence, that of discharge by rescission or release, is different. In the case of a sole beneficiary it is like the attempted revocation of a gift. The promisor for good consideration has given the beneficiary a right. Later he seeks to take it away by procuring the extinction of the promise. If 3a See infra, § 813. 4 Episcopal Mission v. Brown, 158 U. S. 222, 15 S. Ct. 833, 39 L. Ed. 960; Pugh v. Barnes, 108 Ala. 167, 19 So. 370; Stuyvesant v. Western Mortgage Co., 22 Col. 28, 33, 43 Pac. 144; Miller v. Hughes, 95 Ia. 223, 63 N. W. 680; see also Willard v. Wood, 164 U. S. 502, 521, 17 S. Ct. 176, 41 L. Ed. 531; Loeb v. Willis, 100 N. Y. 231, 3 N. E. 177. But see apparently contra Cress v. Blodgett, 64 Mo. 449; Commercial Bank v. Wood, 7 W. & S. 89; Fulmer v. Wightman, 87 Wis. 573, 58 N. W. 1106. In Missouri and Nebraska it has been held that a surety for the promise of a contractor to a district or municipality to pay for his labor and materials is liable to workmen and material men in spite of the fact that the promisee, the district or munici pality, has paid the contractor during the progress of the work to an amount not allowed by the contract. The Missouri decision relies on the fact that the plaintiffs had become creditors on the faith of the defendant's suretyship before the promisee had committed any breach of duty. The Nebraska decisions make no such distinction. School District v. Livers, 147 Mo. 580, 49 S. W. 507; Doll v. Crume, 41 Neb. 655, 59 N. W. 806; Kaufmann v. Cooper, 46 Neb. 644, 65 N. W. 796; King v. Murphy, 49 Neb. 670. 68 N. W. 1029; Sailing v. Morrell, 97 Neb. 454, 150 N. W. 195. See also United States Fidelity &c. Co. v. United States, 191 U. S. 416, 24 S. Ct. 142, 48 L. Ed. 242. Cf. State v. Adams, (Ind. 1919), 118 N. E. 680, 681. |