Dingeldein v. Third Avenue Railroad Company

Dingeldein v. Third Avenue Railroad Company. Right of action.—Privity of contract. Where property is transferred subject to the payment of all moneys which the assignors are bound to pay on a certain account, in connection with the property assigned, the assignees are liable to an action at the suit of a person holding such claim as they have assumed to pay. Dingeldein v. Third Avenue Railroad Co., 9 Bosw. 79, reversed. Appeal from the general term of the Superior Court of the city of New York, where a judgment entered in favor of the plaintiff, upon the report of a referee, had been reversed, and a new trial awarded; the plaintiff stipulating for judgment absolute, in case of affirmance. (Reported below, 9 Bosw. 79.) This was an action by John B. Bingeldein against the Third Avenue Railroad Company, to recover the excess of his expenditure in building a public sewer in the Third Avenue, one of the public streets of the city of New York, beyond the sum received by him therefor, from the city corporation. It appeared on the trial before a referee, that on the 1st January 1853, the corporation of the city of New York made a grant to certain parties for a railroad in the Third Avenue in said city. Thereupon, the grantees, in connection with other persons, including the plaintiff, formed a partnership for constructing and operating the road, and called themselves the Third Avenue Railroad Company. The city of New York, prior to June 1853, had directed a sewer to be built in the Third Avenue, and caused proposals td be adver» tised for doing the work. The company, deeming it to their interest to have the building of the sewer under their control, made arrangements whereby several of the company put in bids for the work. The two lowest bids were by Benjamin and Dingeldein for the company. On the 21st June 1853, the company passed a resolution, directing their committee on sewers, consisting of Hart, Reynolds and the plaintiff, to have the sewer constructed on the most favorable terms; and any deficiency in the cost of the work which they were thereby directed to have done, over and above what the city might pay, should be paid by the company. Pursuant to this resolution, the contract was awarded to the plaintiff as the lowest bidder. Hart and Reynolds, two of the committee, were offered as security on both bids, and the contract *with the city was made by plaintiff, on his bid, on the 29th June 1853. Dingeldein began work under the contract, on the 9th July 1853, and completed it in August 1854. He received from the city $7,062.28, and the cost of building the sewer was $10,938.17. On the 8th of October 1853, the defendants were incorporated, and on the same day, the former partnership transferred all their property, including the grant to the newly incorporated company, for the consideration of $1,170,000. That deed of transfer, which was also executed by the defendants, and contained. an acceptance by the defendants of the transfer, was “subject to the payment, by said parties hereto of the second part, of all the money which the Third Avenue Railroad Company (partnership) are, by a resolution adopted by said company, bound to pay on account of sewers in the Third Avenue, the contracts for the construction of which were awarded to Oscar P. Benjamin, one of which sewers is now being constructed by John B. Dingeldein.” While the work was in progress, the officers of the defendants gave directions in regard to it, and thereby increased the expense. The referee (Charles P. Kirkland, Esq.) found as matter of fact, that the defendants were cognisant of the plaintiff’s work, during its progress; their agents or officers were often, if not daily, during its progress, on the railroad, between the termini of the sewer; and tb at after the 8th October 1853, the defendants’ superintendent gave the plaintiff directions about carting away :’'e dirt and keeping the track clear, which directions were known to and recognised by the defendants’ president. Anri he reported a judgment in favor of the plaintiff for the amount of his claim. The judgment entered upon the report was, however, reversed by the general term, and a new trial awarded; whereupon, the plaintiff appealed to this court, giving the usual stipulation. Edmonds, for the appellant. Potter, for .the respondents. Also reported in 5 Trans. App. 155. [MAJORITY — *Hunt, C. J.] *Hunt, C. J. principles applicable to Two this case, must now be deemed as settled: 1. That in a contract between A. and B., wherein B. assumes and undertakes, upon a good consideration from A., to pay a certain sum of money to C., the latter may maintain an action against B. to recover the money, and this, although the arrangement was originally made without his knowledge or assent. This principle has been established, both where personal property was the subject of the contract, and where real estate was conveyed, upon which there was a mortgage, the amount of which the grantee promised that he would pay to the mortgagee. (Lawrence v. Fox, 20 N. H. 268; Burr v. Beers, 24 N. Y. 178; Hartley v. Har rison, Id. 171; Russell v. Pictor, 7 Id. 171.) 2. That where land is conveyed simply “ subject to a mortgage,” and there is no express agreement to pay, no agreement will be implied; and no action involving a personal liability can be maintained by the mortgagee against the buyer. (Belmont v. Coman, 22 N. Y. 438.) The plaintiff bases his claim, upon the first of these principles; the defendants resist it,- upon the second, íf the article of transfer of October 8th, 1853,'may fairly be held to contain a promise to pay the plaintiff’s debt, he may recover upon it; if not, he must fail or seek some other ground. In the case of Belmont v. Coman (supra), it was held, that the, transaction amounted simply to a conveyance of the equity of redemption of the land. The deed contained full covenants, and the recital of the mortgages was to qualify simply the grantor’s liability on his covenants. The conveyance of the land, with its liability to the incumbrances specified, was the evident and sole intention of the parties. The deed containing no express promise to pay the liens, it was held, and rightly, that none should be implied. In the present case, the language of the instrument and the intent of the parties are different. Here was no incumbrance on the property conveyed. The contract to indemnify the builder of the sewer was merely the personal obligation of the partnership, and was not a lien upon the property conveyed. The intent to <lua^y a Ability arising *from such lien- upon the property conveyed, could not, therefore, exist. The only conceivable intent with which this sewer contract was thus referred to, was to furnish the evidence that the new company would pay to Dingeldein the» amount which the partnership was bound to pay, under the resolution referred to. The fact that in Belmont v. Coman the words were necessary to qualify the grantor’s liability, and that here there was no such occasion, gives a different rule for the construction of the words in the two cases. The language, too, is different, and may well bear a different construction. In Belmont v. Coman, the land is con"veyed “subject to the mortgage.” There is a significant difference between the expression “subject to a mortgage,” and “subject to the payment of a certain debt.” In the present case, the property of a partnership, consisting of a railroad franchise, a road partly built, cars, horses, sleighs, harness, leases and licenses, is transferred to a corporation, “ subject to the payment, by the parties of the second part, of all the money which the partnership are bound to pay on account of sewers,” specifying the claim in question. They do not take the property “subject” to an incumbrance of the sewer debt, for there is no such incumbrance. It formed no lien on the property sold, and no connection with the subject, unless the debt was intended to be assumed. They take it subject “ to the payment” by themselves of the sewer debt, i. e., to a liability by themselves to pay the debt. They undertake to relieve the partnership from the payment of the debt, and to make themselves liable or responsible for it. That is the subjection or service to which they bind themselves. No other meaning can be given to this language, and no other intent can be imagined in the minds of the parties, than that the corporation made itself responsible for the payment of the sewer debt. The whole clause is irrelevant and useless, except upon this theory. In my opinion, the referee was right in holding that this language amounted to an agreement to pay, and the general term was in error in reversing the judgment. -The appellant insists, that under the circumstances of the case, the plaintiff could recover, although there had been no privity of contract between the parties, and cites many authorities to sustain his position. Without passing on this question, I prefer to place my judgment upon the ground, that there is a contract between the parties, by virtue of which the plaintiff is entitled to recover. The respondent insists that the agreement between Dingeldein and the partnership, was in Violation of public policy, and illegal and void. This is not set up as a defence in the case, and no such, issue was before the referee, and we are not called upon to decide it. The referee has not found that there was fraud or bad faith, or facts which necessarily constitute illegality or fraud. All intendments and presumptions are to be made in favor of the report, and none against it. The judgment of the general term ordering a new trial should be reversed, and the judgment upon the report of the referee affirmed. Order reversed, and judgment of the special term affirmed.