[100] Walsh, Case & Coale, Chicago, Ill., for plaintiff.

Walter Cummings, Homewood, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Birthe Lise Robson ("Birthe") brought this action against her father-in-law, Raymond F. Robson, Sr. ("Ray, Sr.") in [101] order to obtain his performance under a contract entered into between Ray, Sr. and Birthe's husband, R. F. Robson, Jr. ("Ray, Jr.").^[1] Plaintiff asserts that under the terms of the contract, she is a third-party beneficiary with vested rights that are being infringed by the failure of Ray, Sr. to perform under the terms of the agreement. This matter is currently before the Court on cross motions for summary judgment.

The following facts are undisputed. Ray, Sr. and Ray, Jr. each owned fifty percent of the outstanding shares of P. B. Services, Inc. On July 23, 1975, they entered into a written contract in order to satisfy a twofold purpose: (1) to establish a retirement payment schedule for Ray, Sr., and (2) to provide for the ownership of their stock certificates in the eventuality of their deaths. The contract provides that each party would continue to own fifty percent of P. B. Services, Inc.; Ray, Jr. would be obligated to maintain the operation of the business; and Ray, Sr.'s only compensation from the operation of the business would be an allotment of $1,000 per month for the duration of his life. In the event of Ray, Sr.'s death, his stock certificates were to become the property of Ray, Jr., who was obliged to pay $500 per month from the proceeds of the company to his father's spouse for the duration of her life. In the event of Ray, Jr.'s death, his shares were to become the property of Ray, Sr., who thereafter was to pay $500 per month from the proceeds of the company to his son's wife (the plaintiff) for the five years immediately following Ray, Jr.'s death or until plaintiff remarried, whichever first occurred.^[2]

Subsequent to the execution of the contract, Ray, Jr. and Birthe experienced marital problems and separated, and in 1977, Ray, Jr. filed a Petition for Divorce. On February 21, 1979, Ray, Jr. and Ray, Sr. attempted to modify their contract by deleting that portion of the agreement which provided for any payment to Birthe. Ray, Jr. drew a line through the applicable portions of the contract in the presence of three witnesses and the change was initialed by both Ray, Jr. and Ray, Sr. Two days later Ray, Jr. died of cancer.^[3]

Plaintiff now seeks enforcement of the provisions of the original contract that require Ray, Sr. to pay her $500 per month for five years or until she remarries.^[4]

Under Illinois law, plaintiff has standing to sue as a third-party beneficiary under the original contract. As the Illinois Supreme Court stated in Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 257, 178 N.E. 498, 501 (1931):

[I]f a contract be entered into for a direct benefit of a third person not a party thereto, such third person may sue for breach thereof. The test is whether the benefit to the third person is direct to him or is but an incidental benefit to him arising from the contract. If direct he may sue on the contract; if incidental he has no right of recovery thereon.

A contract need not be entered into for the sole benefit of the third person in order to enable him to enforce it, so long as it is clear that the contracting parties intended him to benefit directly.^[5]Id.; Beck v. Reynolds [102] Metals Co., 163 F.2d 870 (7th Cir. 1947); People v. Davis, 78 Ill.2d 381, 36 Ill.Dec. 338, 400 N.E.2d 918 (1980); Town & Country Bank v. James M. Canfield Contracting Co., Inc., 55 Ill.App.3d 91, 12 Ill.Dec. 826, 370 N.E.2d 630 (4th Dist. 1977). The contracting parties in the case at bar clearly intended the contract to directly benefit not only themselves, but also their wives, with respect to whom specific provisions were drafted.

The more difficult question, and the one that as far as our research discloses, has never been faced by an Illinois court, is whether contracting parties may discharge, rescind, or revoke the benefit promised to a third-party donee beneficiary prior to the vesting of the beneficiary's rights, where the beneficiary has not detrimentally relied upon receiving the benefit. Although some authorities have stated that the promisor in a third-party beneficiary contract has no right to deprive the beneficiary of his vested rights therein, I.L.P. Contracts § 321; Bay v. Williams, 112 Ill. 91, 1 N.E. 340 (1884); Town & Country Bank v. James M. Canfield Contracting Co., Inc., 55 Ill.App.3d 91, 12 Ill.Dec. 826, 370 N.E.2d 630 (4th Dist. 1977); Pliley v. Phifer, 1 Ill.App.2d 398, 117 N.E.2d 678 (1st Dist. 1954), these authorities have no bearing on the case at bar because they fail to distinguish between creditor beneficiaries (at issue in all the above-cited cases) and donee beneficiaries (at issue in the instant case), and because plaintiff's rights in the instant case had not vested at the time the contracting parties attempted to discharge Birthe's interest.

A donee beneficiary of a contract is a third-party to whom the promised beneficial performance comes without cost as a donation or gift. 4 Corbin on Contracts § 782. In contrast, if a promisee enters into a contract with a promisor with the express intent that the performance contracted for is to satisfy and discharge a pre-existing duty or liability, the third-party to whom the pre-existing duty or liability is owed is a creditor beneficiary. 4 Corbin on Contracts § 787. In the typical creditor beneficiary case, A and B enter into a contract and thereafter B and C contract to have C perform B's obligation to A. A then becomes the third-party beneficiary to the contract between B and C.

In such creditor beneficiary cases, Illinois courts have held that the party procuring the promise (B) has no legal right to discharge the person who made the promise (C) from his liability to the beneficiary (A). See, e. g., Bay v. Williams, 112 Ill. 91, 97, 1 N.E. 340 (1884); Pliley v. Phifer, 1 Ill. App.2d 398, 406-07, 117 N.E.2d 678, 681-82 (1st Dist. 1954). Underlying this doctrine is the fact that the beneficiary obtains a vested right as against the promisor at the instant the promisor agrees to undertake the promisee's duty or liability to the beneficiary. Because creditor beneficiary cases only involve situations where a pre-existing duty or liability is contractually transferred to a new party, there is never any question that the third-party beneficiary's rights vest as soon as the contract is executed. Also underlying this doctrine is the belief that the beneficiary will relax his efforts to obtain performance from the promisee upon discovering that it is now the promisor who is obligated to perform the task. See, e. g., Pliley v. Phifer, 1 Ill.App.2d at 406-07, 117 N.E.2d at 681-82. The third-party beneficiary's reliance upon the performance of the promisor thus can be presumed in creditor beneficiary cases, due to the nature of the transaction. In such cases, Illinois courts have refused to let B discharge C's duty to perform, because A, although not a party to the B/C contract, obtained a vested right in the contract and will be harmed by the discharge of C. The harm, however, does not arise because A has not received his due from C; that problem arose long before the B/C contract. It arises, rather, because the B/C contract created a time-consuming diversion, during which A looked to C for performance. Were B allowed to constantly change the cast of characters on A, contracting for and then discharging his obligations to a steady stream of Ds, Es, Fs, [103] and Gs, A, without any right to interfere in B's collateral contracts, would be impotent to stop B's diversionary and dilatory tactics. Thus, Illinois courts have consistently held that a third-party creditor beneficiary obtains an immediate vested right as against a promisor, and this right, once given, deprives the promisor of any interest or right in the subject matter of the promise, including the right to alter, rescind, or revoke it. Pliley v. Phifer, 1 Ill.App.2d at 407, 117 N.E.2d at 682 and cases cited therein.

Donee beneficiaries present very different considerations. Their interests do not vest automatically upon execution of the B/C contract because they were not owed any pre-existing duty or liability. Indeed, prior to the B/C contract, the donee beneficiary may have had no relationship whatsoever with B or C. Similarly, unlike the creditor beneficiary situation, there is no reason for the Court to presume that a donee beneficiary would act in reliance upon the B/C contract. Indeed, a donee beneficiary may acquire rights even though he is unaware that he has been made a beneficiary to the B/C contract. Thus, because there is no pre-existing duty or liability owed to the donee beneficiary, there is no reason for courts to presume that a donee beneficiary acted in reliance upon being named as a third-party beneficiary to a contract.

One reason for the analytical distinction between the rights of creditor beneficiaries and donee beneficiaries is their disparate heritage. The rights of a creditor beneficiary derive directly from contract law. It is by virtue of his contract rights against the debtor that the creditor beneficiary acquires a right to sue against the new promisor. Williston on Contracts, 3d Ed. §§ 364, 368. Determining the rights of a donee beneficiary, however, is conceptually more akin to the law of gifts than it is to the law of contracts. In that context, it is elementary that when a donor has delivered a gift to C for the benefit of A, the gift is not revocable by the donor after such delivery, even if A is unaware of it. Pocius v. Fleck, 13 Ill.2d 420, 150 N.E.2d 106 (1958); Herrin v. McCarthy, 339 Ill. 530, 171 N.E. 621 (1930); Christian v. Christian, 69 Ill.App.3d 450, 26 Ill.Dec. 326, 387 N.E.2d 1254 (1st Dist. 1979). But where the gift has not been delivered, and moreover, where the gift is made conditional upon subsequent events which may or may not occur, that gift may be revoked by the donor at any time prior to its vesting; for until delivery there exists no gift, but rather, merely the promise of a gift.^[6]Pocius v. Fleck, 13 Ill.2d 420, 150 N.E.2d 106 (1958); Meyer v. Meyer, 379 Ill. 97, 39 N.E.2d 311 1942); Hopkins v. Hughes, 340 Ill. 604, 173 N.E. 100 (1930); Strand v. United (Methodist) Church of Sheldon, 12 Ill.App.3d 917, 298 N.E.2d 779 (3d Dist. 1973), rehearing 16 Ill.App.3d 744, 307 N.E.2d 621 (1973); Dudley v. Uptown National Bank of Moline, 25 Ill.App.2d 514, 167 N.E.2d 257 (2d Dist. 1960).

Although commentators have recognized the analogy between the rights of a donee beneficiary and the rights of one receiving a gift of property, they fail to follow the analogy through to its necessary conclusion. 4 Corbin on Contracts, § 814 at 254; Williston on Contracts, 3d Ed. § 396 at 1067. Instead, both Williston and Corbin indicate that a donee beneficiary acquires a [104] right at once upon the making of the contract and that right becoms immediately indefeasible. Id. The commentators, however, fail to consider a situation such as the one at bar. Where the donee beneficiary's right is contingent upon the occurrence of certain events, it does not vest until the occurrence of those events. Cf. Dudley v. Uptown National Bank of Moline, 25 Ill. App.2d 514, 528, 167 N.E.2d 257, 264 (2d Dist. 1960). See also Pliley v. Phifer, 1 Ill.App.2d 398, 407-08, 117 N.E.2d 678, 682 (1st Dist. 1954). Until the donee beneficiary obtains vested rights, he is without power to affect the decisions made by the contracting parties.^[7]

Regardless of whether contract principles, gift principles, or estates principles are applied, Ray, Sr. and Ray, Jr. had a right to alter, rescind, or revoke any or all of their contract prior to the time that the contract vested rights in the donee beneficiaries. Had the donee beneficiary acted to her detriment in reliance upon a promise contained in the agreement, this would be a very different case. There has been no evidence presented to the Court, in affidavit form or otherwise, to indicate that plaintiff acted in reliance upon the contract entered into by Ray, Sr. and Ray, Jr. However, where the contract rights of a donee beneficiary have not yet vested and where the beneficiary has not detrimentally relied upon a promise contained in the contract, this Court will not subvert the intent of the contracting parties when it is clear that they desired to alter the terms of their contract.

Finally, plaintiff argues that the modification of the contract is invalid for lack of consideration. This argument must fail for a variety of reasons. First, lack of consideration is an argument which goes to an attempt by one party to enforce a contract against another party. In the case at bar, nobody is seeking to enforce the terms of the modified contract. Moreover, plaintiff, with no rights in the modified contract, and with only contingent unvested rights in the original contract, is in no position to challenge the adequacy of consideration. Roberts v. Carter, 31 Ill.App. 142 (1888). Indeed, even if this were a proper challenge to consideration and if plaintiff was a proper party to assert the challenge, the Illinois Supreme Court has stated that a contract modification that has been executed by the parties will not be disturbed by the court, even in the absence of consideration. Snow v. Griesheimer, 220 Ill. 106, 77 N.E. 110 (1906); Terminal Freezers, Inc. v. Roberts Frozen Foods, Inc., 41 Ill.App.3d 981, 354 N.E.2d 904 (3d Dist. 1976). Moreover, it is apparent that the modified contract did involve adequate consideration for both the contracting parties. Ray, Jr. benefitted by discharging the contingent rights of a wife for whom he no longer cared and Ray, Sr. benefitted by being released from a potential obligation to make monthly payments to the plaintiff.

For the foregoing reasons, plaintiff's motion for summary judgment is denied and defendant's motion for summary judgment is granted. It is so ordered.

[1] Since plaintiff is a citizen of Illinois, defendant is a Florida citizen, and the amount in controversy is over $10,000, diversity jurisdiction is appropriate pursuant to 28 U.S.C. § 1332.

[2] The contract also stated that by entering into the agreement, the parties did not intend to create any individual personal indebtedness, and that all funds provided for in the contract were to be payable from the proceeds of the operation of P. B. Services, Inc.

[3] At the time of his death, Ray, Jr.'s divorce action was still pending in state court.

[4] As of the date of this decision, two years have passed since Ray, Jr.'s death and plaintiff has not remarried.

[5] The decision in Searles v. City of Flora, 225 Ill. 167, 170, 80 N.E. 98 (1906), cited by defendant, is not to the contrary. In Searles, the court stated that if a contract is entered into solely for the benefit of the contracting parties, third persons cannot recover under its provisions. Contrary to defendant's argument, this does not mean that a third-party beneficiary must be the sole beneficiary in order to obtain any rights under a contract. In the instant case, the contract was drafted for the direct benefit of the contracting parties and their wives.

[6]The same result obtains even if the issue is characterized as a question of testamentary power. In Illinois, a testator may revoke a portion of his will by drawing a line through the portions to be altered with the remainder of the document being unaffected if the testator acts in accordance with Ill.Rev.Stat. ch. 110-½ ¶ 4-9, which states in full:

An addition to a will or an alteration, substitution, interlineation or deletion of any part of a will which does not constitute a revocation of a will is of no effect, unless made by the testator or by some person in his presence and by his direction and consent and unless the will is thereafter signed and attested in the manner prescribed by this Article for the execution of a will.

See Casey v. Hogan, 344 Ill. 208, 176 N.E. 257 (1931); In re Estate of Newell, 119 Ill.App.2d 385, 256 N.E.2d 53 (1st Dist. 1970). In the instant case, Ray, Sr. has stated that Ray, Jr. altered his agreement with Ray, Sr. on February 21, 1979, in the presence of LaVerne F. Robson, Karen Robson, and a nurse, and that Ray, Jr. signed his name next to the alteration.

[7] The decision in Joslyn v. Joslyn, 386 Ill. 387, 54 N.E.2d 475 (1944), is not to the contrary. Joslyn is a donee beneficiary case where the court stated, in dicta, that a promisor and promisee could not discharge the rights of the donee beneficiary. Id. at 400-01, 54 N.E.2d 475. Unlike the instant case, however, the donee beneficiary's interest in Joslyn was not conditional and consequently vested immediately upon the execution of the contract between the promisor and promisee. Moreover, in Joslyn there was no agreement between promisor and promisee to discharge the interest of the donee beneficiaries. In contrast, the one overriding and uncontested fact in the case at bar is that Ray, Sr. and Ray, Jr. clearly intended to alter their contract in order to relieve Ray, Sr. of any contingent obligations that he had under the original contract.

224 N.Y. 223
MARION E. SEAVER, Respondent,
v.
MATT C. RANSOM et al., as Executors of SAMUEL A. BEMAN, Deceased, Appellants.
Court of Appeals of New York

[234]

(Argued June 12, 1918; decided October 1, 1918.)

APPEAL from a judgment of the Appellate Division of the Supreme Court in the third judicial department, entered January 7, 1918, affirming a judgment in favor of plaintiff entered upon a decision of the court at a Trial Term, a jury having been waived.

The nature of the action and the facts, so far as material, are stated in the opinion.

Frederick H. Bryant for appellants. Plaintiff cannot recover in an action at law. In order to give a third party, who may derive benefit from the performance of a promise, an action there must be: An intent by the promisee to secure some benefit to the third party; some privity between the two, the promisee and the party to be benefited, or some obligation or duty owing from the former to the latter, which would give plaintiff a legal or equitable claim to the benefit of the promise, or an equivalent from the promisee personally. (Lawrence v. Fox, 20 N. Y. 268; Burr v. Beers, 24 N. Y. 178; Garnsey v. Rogers, 47 N. Y. 233; Vrooman v. Turner, 69 N. Y. 280; Lorillard v. Clyde, 122 N. Y. 498; Durnherr v. Rau, 135 N. Y. 219; Townsend v. Rackham, 143 N. Y. 516; French v. Vix, 143 N. Y. 90; Embler v. Hartford Steam Boiler Co., 158 N. Y. 431; Borland v. Welch, 162 N. Y. 104; Rigney v. N. Y. C. & H. R. R. R. Co., 217 N. Y. 31; Wait v. Wilson, 86 App. Div. 485; Lockwood v. Smith, 143 N. Y. Supp. 480; Coleman v. Hiler, 85 Hun. 547.) Specific performance cannot be decreed. (Phalen v. U.S. Trust Co., 186 N. Y. 178.) There is no trust, express, implied or secret. (Matter of O'Hara, 95 N. Y. 403: Amherst College v. Ritch, 151 N. Y. 282; Hamlin v. [235] Stevens, 177 N. Y. 39; Mahaney v. Carr, 175 N. Y. 454; Ide v. Brown, 178 N. Y. 26; Bull v. Bull, 31 Hun, 69; Crippen v. Crippen, 53 Hun, 233; Ahrens v. Jones, 169 N. Y. 555.)

John P. Kellas for respondent. The agreement between Mrs. Beman and her husband at the time of the execution of her will was valid and can be enforced in this action. (Amherst College v. Ritch, 151 N. Y. 282; Matter of O'Hara, 95 N. Y. 403; Crippen v. Crippen, 53 Hun, 232; Bull v. Bull, 31 Hun, 69; Burr v. Burr, 24 N. Y. 178; Clark v. Howard, 150 N. Y. 232; Ahrens v. Jones, 169 N. Y. 555; McClellan v. Grant, 83 App. Div. 599; Goldsmith v. Goldsmith, 145 N. Y. 313; Gallagher v. Gallagher, 135 App. Div. 457.)

POUND, J. Judge Beman and his wife were advanced in years. Mrs. Beman was about to die. She had a small estate consisting of a house and lot in Malone and little else. Judge Beman drew his wife's will according to her instructions. It gave $1,000 to plaintiff, $500 to one sister, plaintiff's mother, and $100 each to another sister and her son, the use of the house to her husband for life, remainder to the American Society for the Prevention of Cruelty to Animals. She named her husband as residuary legatee and executor. Plaintiff was her niece, thirty-four years old, in ill health, sometimes a member of the Beman household. When the will was read to Mrs. Beman she said that it was not as she wanted it; she wanted to leave the house to plaintiff. She had no other objection to the will, but her strength was waning and although the judge offered to write another will for her, she said she was afraid she would not hold out long enough to enable her to sign it. So the judge said if she would sign the will he would leave plaintiff enough in his will to make up the difference. He [236] avouched the promise by his uplifted hand with all solemnity and his wife then executed the will. When he came to die it was found that his will made no provision for the plaintiff.

This action was brought and plaintiff recovered judgment in the trial court on the theory that Beman had obtained property from his wife and induced her to execute the will in the form prepared by him by his promise to give plaintiff $6,000, the value of the house, and that thereby equity impressed his property with a trust in favor of plaintiff. Where a legatee promises the testator that he will use property given him by the will for a particular purpose, a trust arises. (O'Hara v. Dudley, 95 N. Y. 403; Trustees of Amherst College v. Bitch, 151 N. Y. 282; Ahrens v. Jones, 169 N. Y. 555.) Beman received nothing under his wife's will but the use of the house in Malone for life. Equity compels the application of property thus obtained to the purpose of the testator, but equity cannot so impress a trust except on property obtained by the promise. Beman was bound by his promise, but no property was bound by it; no trust in plaintiff's favor can be spelled out.

An action on the contract for damages or to make the executors trustees for performance stands on different ground. (Farmers Loan & Trust Co. v. Mortimer, 219 N. Y. 290, 294, 295.) The Appellate Division properly passed to the consideration of the question whether the judgment could stand upon the promise made to the wife, upon a valid consideration, for the sole benefit of plaintiff. The judgment of the trial court was affirmed by a return to the general doctrine laid down in the great case of Lawrence v. Fox (20 N. Y. 268) which has since been limited as herein indicated. 

Contracts for the benefit of third persons have been the prolific source of judicial and academic discussion. (Williston, Contracts for the Benefit of a Third Person, [237] 15 Harvard Law Review, 767; Corbin, Contracts for the Benefit of Third Persons, 27 Yale Law Review, 1008.) The general rule, both in law and equity (Phalen v. U. S. Trust Co., 186 N. Y. 178, 186), was that privity between a plaintiff and a defendant is necessary to the maintenance of an action on the contract. The consideration must be furnished by the party to whom the promise was made. The contract cannot be enforced against the third party and, therefore, it cannot be enforced by him. On the other hand, the right of the beneficiary to sue on a contract made expressly for his benefit has been fully recognized in many American jurisdictions, either by judicial decision or by legislation, and is said to be "the prevailing rule in this country." (Hendrick v. Lindsay, 93 U. S. 143; Lehow v. Simonton, 3 Col. 346.) It has been said that "the establishment of this doctrine has been gradual, and is a victory of practical utility over theory, of equity over technical subtlety." (Brantly on Contracts [2d ed.], p. 253.) The reasons for this view are that it is just and practical to permit the person for whose benefit the contract is made to enforce it against one whose duty it is to pay. Other jurisdictions still adhere to the present English rule (7 Halsbury's Laws of England, 342, 343; Jenks' Digest of English Civil Law, § 229) that a contract cannot be enforced by or against a person who is not a party. (Exchange Bank v. Rice, 107 Mass. 37; but see, also, Forbes v. Thorpe, 209 Mass. 570; Gardner v. Denison, 217 Mass. 492.) In New York the right of the beneficiary to sue on contracts made for his benefit is not clearly or simply defined. It is at present confined, first, to cases where there is a pecuniary obligation running from the promisee to the beneficiary; "a legal right founded upon some obligation of the promisee in the third party to adopt and claim the promise as made for his benefit." (Farley v. Cleveland, 4 Cow. 432; Lawrence v. Fox, supra; [238] Garnsey v. Rogers, 47 N. Y. 233; Vrooman v. Turner, 69 N. Y. 280; Lorillardv. Clyde, 122 N. Y. 498; Durnherr v. Rau, 135 N. Y. 219; Townsend v. Rackham, 143 N. Y. 516; Sullivan v. Sullivan, 161 N. Y. 554.) Secondly, to cases where the contract is made for the benefit of the wife (Buchanan v. Tilden, 158 N. Y. 109; Bouton v. Welch, 170 N. Y. 554), affianced wife (De Cicco v. Schweizer, 221 N. Y. 431), or child (Todd v. Weber, 95 N. Y. 181, 193; Matter of Kidd, 188 N. Y. 274) of a party to the contract. The close relationship cases go back to the early King's Bench case (1677), long since repudiated in England, of Button v. Poole (2 Lev. 210; s. c, 1 Ventris, 318, 332). (Schemerhorn v. Vanderheyden, 1 Johns. 139.) The natural and moral duty of the husband or parent to provide for the future of wife or child sustains the action on the contract made for their benefit. "This is the farthest the cases in this state have gone," says CULLEN, J., in the marriage settlement case of Borland v. Welch (162 N. Y. 104, 110).

The right of the third party is also upheld in, thirdly, the public contract cases (Little v. Banks, 85 N. Y. 258; Pond v. New Rochelle Water Co., 183 N. Y. 330; Smyth v. City of New York, 203 N. Y. 106; Farnsworth v. Boro Oil & Gas Co., 216 N. Y. 40, 48; Rigney v. N. Y. C. & H. R. R. R. Co., 217 N. Y. 31; Matter of International Ry. Co. v. Rann, 224 N. Y. 83; cf. German Alliance Ins. Co. v. Home Water Supply Co., 226 U. S. 220) where the municipality seeks to protect its inhabitants by covenants for their benefit and, fourthly, the cases where, at the request of a party to the contract, the promise runs directly to the beneficiary although he does not furnish the consideration. (Rector, etc., v. Teed, 120 N. Y. 583; F. N. Bank of Sing Sing v. Chalmers, 144 N. Y. 432, 439; Hamilton v. Hamilton, 127 App. Div. 871, 875.) It may be safely said that a general rule sustaining recovery at the suit of the [239] third party would include but few classes of cases not included in these groups, either categorically or in principle.

The desire of the childless aunt to make provision for a beloved and favorite niece differs imperceptibly in law or in equity from the moral duty of the parent to make testamentary provision for a child. The contract was made for the plaintiff's benefit. She alone is substantially damaged by its breach. The representatives of the wife's estate have no interest in enforcing it specifically. It is said in Buchanan v. Tilden that the common law imposes moral and legal obligations upon the husband and the parent not measured by the necessaries of life. It was, however, the love and affection or the moral sense of the husband and the parent that imposed such obligations in the cases cited rather than any common-law duty of husband and parent to wife and child. If plaintiff had been a child of Mrs. Beman, legal obligation would have required no testamentary provision for her, yet the child could have enforced a covenant in her favor identical with the covenant of Judge Beman in this case. (De Cicco v. Schweizer, supra.) The constraining power of conscience is not regulated by the degree of relationship alone. The dependent or faithful niece may have a stronger claim than the affluent or unworthy son. No sensible theory of moral obligation denies arbitrarily to the former what would be conceded to the latter. We might consistently either refuse or allow the claim of both, but I cannot reconcile a decision in favor of the wife in Buchanan v. Tilden based on the moral obligations arising out of near relationship with a decision against the niece here on the ground that the relationship is too remote for equity's ken. No controlling authority depends upon so absolute a rule. In Sullivan v. Sullivan (supra) the grandniece lost in a litigation with the aunt's estate founded on a certificate of deposit payable to the aunt "or in case of her death to her niece," but [240] what was said in that case of the relations of plaintiff's intestate and defendant does not control here, any more than what was said in Durnherr v. Rau (supra) on the relation of husband and wife, and the inadequacy of mere moral duty, as distinguished from legal or equitable obligation, controlled the decision in Buchanan v. Tilden. Borland v. Welch (supra) deals only with the rights of volunteers under a marriage settlement not made for the benefit of collaterals.

KELLOGG, P. J., writing for the court below well said: "The doctrine of Lawrence v. Fox is progressive, not retrograde. The course of the late decisions is to enlarge, not to limit the effect of that case." The court in that leading case attempted to adopt the general doctrine that any third person, for whose direct benefit a contract was intended, could sue on it. The head note thus states the rule. FINCH, J., in Gifford v. Corrigan (117 N. Y. 257, 262) says that the case rests upon that broad proposition; EDWARD T. BARTLETT, J., in Pond v. New Rochelle Water Co. (183 N. Y. 330, 337) calls it "the general principle;" but Vrooman v. Turner (supra) confined its application to the facts on which it was decided. " In every case in which an action has been sustained," says ALLEN, J., "there has been a debt or duty owing by the promisee to the party claiming to sue upon the promise." (69 N. Y. 285.) As late as Townsend v. Rackham (143 N. Y. 516, 523) we find PECKHAM, J., saying that "to maintain the action by the third person there must be this liability to him on the part of the promisee." Buchanan v. Tilden went further than any case since Lawrence v. Fox in a desire to do justice rather than to apply with technical accuracy strict rules calling for a legal or equitable obligation. In Embler v. Hartford Steam Boiler Inspection & Ins. Co. (158 N. Y. 431) it may at least be said that a majority of the court did not avail themselves of the opportunity to concur with the [241] views expressed by GRAY, J.,— who wrote the dissenting opinion in Buchanan v. Tilden,— to the effect that an employee could not maintain an action on an insurance policy issued to the employer, which covered injuries to employees.

In Wright v. Glen Telephone Co. (48 Misc. Rep. 192, 195) the learned presiding justice who wrote the opinion in this case said, at Trial Term: "The right of a third person to recover upon a contract made by other parties for his benefit must rest upon the peculiar circumstances of each case rather than upon the law of some other case." "The case at bar is decided upon its peculiar facts." (EDWARD T. BARTLETT, J., in Buchanan v. Tilden.) But, on principle, a sound conclusion may be reached. If Mrs. Beman had left her husband the house on condition that he pay the plaintiff $6,000 and he had accepted the devise, he would have become personally liable to pay the legacy and plaintiff could have recovered in an action at law against him, whatever the value of the house. (Gridley v. Gridley, 24 N. Y. 130; Brown v. Knapp, 79 N. Y. 136, 143; Dinan v. Coneys, 143 N. Y. 544, 547; Blackmore v. White, [1899] 1 Q. B. 293, 304.) That would be because the testatrix had in substance bequeathed the promise to plaintiff and not because close relationship or moral obligation sustained the contract. The distinction between an implied promise to a testator for the benefit of a third party to pay a legacy and an unqualified promise on a valuable consideration to make provision for the third party by will is discernible but not obvious. The tendency of American authority is to sustain the gift in all such cases and to permit the donee-beneficiary to recover on the contract. (Matter of Edmundson's Estate, [1918, Pa.] 103 Atl. Rep. 277.) The equities are with the plaintiff and they may be enforced in this action, whether it be regarded as an [242] action for damages or an action for specific performance to convert the defendants into trustees for plaintiff's benefit under the agreement.

The judgment should be affirmed, with costs.

HOGAN, CARDOZO and CRANE, JJ., concur; HISCOCK, Ch. J., COLLIN and ANDREWS, JJ., dissent.

Judgment affirmed.

Action by the H. R. Moch Company, Inc., against the Rensselaer Water Company. From a judgment of the Appellate Division (219 App. Div. 673, 220 N. Y. S. 557), reversing an order of the Special Term, and granting defendant's motion for judgment dismissing the complaint for failure to state facts sufficient to constitute a cause of action, plaintiff appeals.

Affirmed.

See, also, 127 Misc. Rep. 545, 217 N. Y. S. 426.

[247 N.Y. 161]Appeal from Supreme Court, Appellate Division, Third Department.
Glenn A. Frank, of Albany, for appellant.

[247 N.Y. 162]Thomas F. McDermott, of Albany, for respondent.

[247 N.Y. 163]CARDOZO, C. J.

The defendant, a waterworks company under the laws of this state, made a contract with the city of Rensselaer for the supply of water during a term of years. Water was to be furnished to the city for sewer flushing and street sprinkling; for service to schools and public buildings; and for service at fire hydrants, the latter service at the rate of $42.50 a year for each hydrant. Water was to be furnished to private takers within the city at their homes and factories and other industries at reasonable rates, not exceeding a stated schedule. While this contract was in force, a building caught fire. The flames, spreading to the plaintiff's warehouse near by, destroyed it and its contents. The defendant, according to the complaint, was promptly notified of the fire, ‘but omitted and neglected after such notice, to supply or furnish sufficient or adequate quantity of water, with adequate pressure to stay, suppress, or extinguish the fire before it reached the warehouse of the plaintiff, although the pressure and supply which the defendant was equipped to supply and furnish, and had agreed by said contract to supply and furnish, was adequate and sufficient [897] to prevent the spread of the fire to and the destruction of the plaintiff's warehouse and its contents.’ By reason of the failure of the defendant to ‘fulfill the provisions of the contract between it and the city of Rensselaer,’ the plaintiff is said to have suffered damage, for which judgment is demanded. A motion, in the nature of a demurrer, to dismiss the complaint, was denied at Special Term. The Appellate Division reversed by a divided court.

Liability in the plaintiff's argument is placed on one or other of three grounds. The complaint, we are told, is to be viewed as stating: (1) A cause of action for breach of contract within Lawrence v. Fox, 20 N. Y. 268; (2) a cause of action for a common-law tort, within MacPherson v. Buick Motor Co., 217 N. Y. 382, 111 N. E. 1050, L. R. A. 1916F, 696, Ann. Cas. 1916C, 440; or (3) a cause of action for the breach of a statutory duty. These several grounds of liability will be considered in succession.

[247 N.Y. 164][1][2] (1) We think the action is not maintainable as one for breach of contract.

No legal duty rests upon a city to supply its inhabitants with protection against fire. Springfield Fire & Marine Ins. Co. v. Village of Keeseville, 148 N. Y. 46, 42 N. E. 405, 30 L. R. A. 660, 51 Am. St. Rep. 667. That being so, a member of the public may not maintain an action under Lawrence v. Fox against one contracting with the city to furnish water at the hydrants, unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise. No such intention is discernible here. On the contrary, the contract is significantly divided into two branches: One a promise to the city for the benefit of the city in its corporate capacity, in which branch is included the service at the hydrants; and the other a promise to the city for the benefit of private takers, in which branch is included the service at their homes and factories. In a broad sense it is true that every city contract, not improvident or wasteful, is for the benefit of the public. More than this, however, must be shown to give a right of action to a member of the public not formally a party. The benefit, as it is sometimes said, must be one that is not merely incidental and secondary. Cf. Fosmire v. National Surety Co., 229 N. Y. 44, 127 N. E. 472. It must be primary and immediate in such a sense and to such a degree as to bespeak the assumption of a duty to make reparation directly to the individual members of the public if the benefit is lost. The field of obligation would be expanded beyond reasonable limits if less than this were to be demanded as a condition of liability. a promisor undertakes to supply fuel for heating a public building. He is not liable for breach of contract to a visitor who finds the building without fuel, and thus contracts a cold. The list of illustrations can be indefinitely extended. The carrier of the mails under contract with the government is not answerable to the merchant who has lost the benefit of a bargain through [247 N.Y. 165]negligent delay. The householder is without a remedy against manufacturers of hose and engines, though prompt performance of their contracts would have stayed the ravages of fire. ‘The law does not spread its protection so far.’ Robins Dry Dock & Repair Co. v. Flint, 275 U. S. 303, 48 S. Ct. 134, 72 L. Ed. 290.

So with the case at hand. By the vast preponderance of authority, a contract between a city and a water company to furnish water at the city hydrants has in view a benefit to the public that is incidental rather than immediate, an assumption of duty to the city and not to its inhabitants. Such is the ruling of the Supreme Court of the United States. German Alliance Ins. Co. v. Homewater Supply Co., 226 U. S. 220, 33 S. Ct. 32, 57 L. Ed. 195,42 L. R. A. (N. S.) 1000. Such has been the ruling in this state (Wainwright v. Queens County Water Co., 78 Hun, 146, 28 N. Y. S. 987;Smith v. Great South Bay Water Co., 82 App. Div. 427, 81 N. Y. S. 812), though the question is still open in this court. Such with few exceptions has been the ruling in other jurisdictions. Williston, Contracts, § 373, and cases there cited; Dillon, Municipal Corporations (5th Ed.) § 1340. The diligence of counsel has brought together decisions to that effect from 26 states. Typical examples are Alabama (Ellis v. Birmingham Waterworks Co., 187 Ala. 552, 65 So. 805); California (Niehaus Bros. Co. v. Contra Costa Water Co., 159 Cal. 305, 113 P. 375,36 L. R. A. [N. S.] 1045); Georgia (Holloway v. Macon Gas Light & Water Co., 132 Ga. 387, 64 S. E. 330); Connecticut (Nickerson v. Bridgeport Hydraulic Co., 46 Conn. 24, 33 Am. Rep. 1); Kansas (Mott v. Cherryvale Water & Mfg. Co., 48 Kan. 12, 28 P. 989,15 L. R. A. 375, 30 Am. St. Rep. 267); Maine (Hone v. Presque Isle Water Co., 104 Me. 217, 71 A. 769,21 L. R. A. [N. S.] 1021);New Jersey (Hall v. Passaic Water Co., 83 N. J. Law, 771, 85 A. 349,43 L. R. A. [N. S.] 750); and Ohio (Blunk v. Dennison Water Supply Co., 71 Ohio St. 250, 73 N. E. 210,2 Ann. Cas. 852). Only a few states have held otherwise. Page, Contracts, § 2401. An intention to assume an obligation of indefinite extension to every member of the public is seen to be the more improbable when we recall the crushing burden [898] that the obligation would impose. Cf. Hone v. Presque Isle Water Co., 104 Me. 217, at p. 232,71 A. 769,21 L. R. A. (N. S.) 1021. The consequences invited would bear [247 N.Y. 166]no reasonable proportion to those attached by law to defaults not greatly different. A wrongdoer who by negligence sets fire to a building is liable in damages to the owner where the fire has its origin, but not to other owners who are injured when it spreads. The rule in our state is settled to that effect, whether wisely or unwisely. Hoffman v. King, 160 N. Y. 618, 55 N. E. 401, 46 L. R. A. 672, 73 Am. St. Rep. 715; Rose v. Pennsylvania R. Co., 236 N. Y. 568, 142 N. E. 287;Moore v. Van Beuren & New York Bill Posting Co., 240 N. Y. 673, 148 N. E. 753; Cf. Bird v. St. Paul Fire & Marine Ins. Co., 224 N. Y. 47, 120 N. E. 86,18 L. R. A. 875. If the plaintiff is to prevail, one who negligently omits to supply sufficient pressure to extinguish a fire started by another assumes an obligation to pay the ensuing damage, though the whole city is laid low. A promisor will not be deemed to have had in mind the assumption of a risk so overwhelming for any trivial reward.

The cases that have applied the rule of Lawrence v. Fox to contracts made by a city for the benefit of the public are not at war with this conclusion. Through them all there runs as a unifying principle the presence of an intention to compensate the individual members of the public in the event of a default. For example, in Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211,1 L. R. A. (N. S.) 958,5 Ann. Cas. 504, the contract with the city fixed a schedule of rates to be supplied, not to public buildings, but to private takers at their homes. In Matter of International R. Co. v. Rann, 224 N. Y. 83, 85,120 N. E. 153, the contract was by street railroads to carry passengers for a stated fare. In Smyth v. City of New York, 203 N. Y. 106, 96 N. E. 409, and Rigney v. New York Cent. & H. R. R. Co., 217 N. Y. 31, 111 N. E. 226, covenants were made by contractors upon public works, not merely to indemnify the city, but to assume its liabilities. These and like cases come within the third group stated in the comprehensive opinion in Seaver v. Ransom, 224 N. Y. 233, 238,120 N. E. 639,2 L. R. A. 1187. The municipality was contracting in behalf of its inhabitants by covenants intended to be enforced by any of them severally as occasion should arise.

[247 N.Y. 167][3] (2) We think the action is not maintainable as one for a common-law tort.

‘It is ancient learning that one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully, if he acts at all.’ Glanzer v. Shepard, 233 N. Y. 236, 239, 135 N. E. 275, 276 (23 A. L. R. 1425);Marks v. Nambil Realty Co., 245 N. Y. 256, 258, 157 N. E. 129. The plaintiff would bring its case within the orbit of that principle. The hand once set to a task may not always be withdrawn with impunity though liability would fail if it had never been applied at all. A time-honored formula often phrases the distinction as one between misfeasance and nonfeasance. Incomplete the formula is, and so at times misleading. Given a relation involving in its existence a duty of care irrespective of a contract, a tort may result as well from acts of omission as of commission in the fulfillment of the duty thus recognized by law. Pollock, Torts (12th Ed.) p. 555; Kelly v. Metropolitan Ry. Co., [1895] 1 Q. B. 944. What we need to know is not so much the conduct to be avoided when the relation and its attendant duty are established as existing. What we need to know is the conduct that engenders the relation. It is here that the formula, however incomplete, has its value and significance. If conduct has gone forward to such a stage that in action would commonly result, not negatively merely in withholding a benefit, but positively or actively in working an injury, there exists a relation out of which arises a duty to go forward. Bohlen, Studies in the Law of Torts, p. 87. So the surgeon who operates without pay is liable, though his negligence is in the omission to sterilize his instruments (cf. Glanzer v. Shepard, supra); the engineer, though his fault is in the failure to shut off steam (Kelly v. Metropolitan Ry. Co., supra; cf. Pittsfield Cottonwear Mfg. Co. v. Pittsfield Shoe Co., 71 N. H. 522, 529, 533, 53 A. 807,60 L. R. A. 116); the maker of automobiles, at the suit of some one other than the buyer, though his negligence is merely in inadequate inspection ([247 N.Y. 168]MacPherson v. Buick Motor Co., 217 N. Y. 382, 111 N. E. 1050, L. R. A. 1916F, 696, Ann. Cas. 1916C, 440). The query always is whether the putative wrongdoer has advanced to such a point as to have launched a force or instrument of harm, or has stopped where inaction is at most a refusal to become an instrument for good. Cf. Fowler v. Athens City Water Works Co., 83 Ga. 219, 222, 9 S. E. 673,20 Am. St. Rep. 313.

The plaintiff would have us hold that the defendant, when once it entered upon the performance of its contract with the city, was brought into such a relation with every one who might potentially be benefited through the supply of water at the hydrants as to give to negligent performance, without reasonable notice of a refusal to continue, the quality of a tort. There is a suggestion of this thought in Guardian Trust & Deposit Co. v. Fisher, 200 U. S. 57, 26 S. Ct. 186, 50 L. Ed. 367; but the dictum was rejected in a [899] later case decided by the same court (German Alliance Ins. Co. v. Homewater Supply Co., 226 U. S. 220, 33 S. Ct. 32, 57 L. Ed. 195,42 L. R. A. [N. S.] 1000) when an opportunity was at hand to turn it into law. We are satisfied that liability would be unduly and indeed indefinitely extended by this enlargement of the zone of duty. The dealer in coal who is to supply fuel for a shop must then answer to the customers if fuel is lacking. The manufacturer of goods, who enters upon the performance of his contract, must answer, in that view, not only to the buyer, but to those who to his knowledge are looking to the buyer for their own sources of supply. Every one making a promise having the quality of a contract will be under a duty to the promisee by virtue of the promise, but under another duty, apart from contract, to an indefinite number of potential beneficiaries when performance has begun. The assumption of one relation will mean the involuntary assumption of a series of new relations, inescapably hooked together. Again we may say in the words of the Supreme Court of the United States, ‘The law does not spread its protection so far.’ Robins Dry Dock & Repair Co. v. Flint, supra; cf. Byrd v. English, 117 Ga. 191, 43 S. E. 419,64 L. R. A. 94; Dale v. Grant, 34 N. J. Law, 142; [247 N.Y. 169]Connecticut Mut. Life Ins. Co. v. New York & N. H. R. Co., 25 Conn. 265, 65 Am. Dec. 571; Anthony v. Slaid, 11 Metc. (Mass.) 290. We do not need to determine now what remedy, if any, there might be if the defendant had withheld the water or reduced the pressure with a malicious intent to do injury to the plaintiff or another. We put aside also the problem that would arise if there had been reckless and wanton indifference to consequences measured and foreseen. Difficulties would be present even then, but they need not now perplex us. What we are dealing with at this time is a mere negligent omission, unaccompanied by malice or other aggravating elements. The failure in such circumstances to furnish an adequate supply of water is at most the denial of a benefit. It is not the commission of a wrong.

[4] (3) We think the action is not maintainable as one for the breach of a statutory duty.

The defendant, a public service corporation, is subject to the provisions of the Transportation Corporations Act. The duty imposed upon it by that act is in substance to furnish water, upon demand by the inhabitants, at reasonable rates, through suitable connections at office, factory, or dwelling, and to furnish water at like rates through hydrants or in public buildings upon demand by the city, all according to its capacity. Transportation Corporations Law (Consol. Laws, c. 63) § 81; Staten Island Water Supply Co. v. City of New York, 144 App. Div. 318, 128 N. Y. S. 1028;People ex rel. City of New York v. Queens County Water Co., 232 N. Y. 277, 133 N. E. 889;People ex rel. Arthur v. Huntington Water Works Co., 208 App. Div. 807, 808, 203 N. Y. S. 808. We find nothing in these requirements to enlarge the zone of liability where an inhabitant of the city suffers indirect or incidental damage through deficient pressure at the hydrants. The breach of duty in any case is to the one to whom service is denied at the time and at the place where service to such one is due. The denial, though wrongful, is unavailing without more to give a cause of action to another. We may find a helpful analogy in the law of common carriers. [247 N.Y. 170]A railroad company is under a duty to supply reasonable facilities for carriage at reasonable rates. It is liable, generally speaking, for breach of a duty imposed by law if it refuses to accept merchandise tendered by a shipper. The fact that its duty is of this character does not make it liable to some one else who may be counting upon the prompt delivery of the merchandise to save him from loss in going forward with his work. If the defendant may not be held for a tort at common law, we find no adequate reason for a holding that it may be held under the statute.

The judgment should be affirmed, with costs.

POUND, CRANE, ANDREWS, LEHMAN, and KELLOGG, JJ., concur.

O'BRIEN, J., not sitting.

Judgment affirmed, etc.