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In re Marriage of Smith & Maescher, 21 Cal. App. 4th 100 |
California Court of Appeals |
1993 |
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Chapter |
21 |
Title |
The Rights of Nonparties |
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Page |
886 |
Topic |
Third-Party Beneficiaries |
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Quick Notes |
A promisee cannot recover damages which may be suffered by the intended third party beneficiary, although the promisee may sue for specific performance of the promisor's obligation. |
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Book Name |
Torts Cases, Problems, And Exercises. Weaver, Third Edition. ISBN: 978-1-4224-7220-0. |
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Issue |
o Whether Smith may maintain a damage action for breach of the third party beneficiary contract? No, unless Peter assigned his right to her. However, she still has to right to ask specific performance. |
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Procedure |
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Trial |
o Granted Smith $11,109. |
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Appellant |
o Reversed, because Peter was a donee and not a creditor, therefore Smith (mom) was not liable as a promisee for the promisors (dad) breach of the separation agreement to pay for his school. |
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Facts |
Reason |
Rules |
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Pl Smith (Wife) Df Maescher (Husband) Party Relationship. o Maescher, the husband, and he X-wife were married for 11 years. o They had two boys together. Separation Agreement o Their marriage separate agreement stipulated that Maescher would pay child support for each of their two boys until they the age of 18. o Also, he would pay for the undergraduate college of an accredited school. What happened? o Maescher paid for Peters 3 years at Syracuse, but stopped paying because Peter was not performing well. o He told Peter that he would pay for only room and incidental expenses for his senior year and that he would reimburse him if he attained a B average his senior year. Obtaining a School Loan o Peter could not secure financing. o Peters mom obtained a loan for him. o Peter participated in the graduation ceremony although he we deficient in credits to graduate. o Maescher gave Peter a gift of $10,000 and told him to use that to pay for his loan. o Peter then tried to give the money to his mom. o His mom refused and told him to keep it. Smith files suit o Filed suit to recovery $11,109, the amount she advanced Peter for his senior year. Trial Court o Granted Smith $11,109. Stopped Making Payments o Maescher also stopped making support payments to Smith for Peter and his brother after each of them turned 18.
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Court Maeschers contention that the trial court erred o The court relied upon the language of the separation agreement in awarding these damages to Smith. o The parties agree the separation agreement made Peter an intended third party beneficiary as to college expenses. o The pivotal issue in this dispute is whether Smith may maintain a damage action for breach of the third party beneficiary contract.
Maescher contends - only Peter may enforce the contract. o The promisee also has a right to enforce the contract.
307 Remedy of Specific Performance o Where specific performance is otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a suit for specific enforcement of a duty owed to an intended beneficiary.
Courts Analysis Only Peter may enforce the contract o The Restatement Second of Contracts acknowledges the right of a promisee to at least one form of remedy (i.e., specific performance), stating:
Specific Performance o Where specific performance is otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a suit for specific enforcement of a duty owed to an intended beneficiary. o Even though a contract creates a duty to a beneficiary, the promisee has a right to performance.
Other Points o [No cases were found] which preclude a promisee from enforcing a third party beneficiary contract. o To the contrary, Massachusetts case law appears to fully support a promisee's right to enforce the contract.
Standing For a Child Rule o Whatever the standing of a child to enforce provisions in a contract made for its benefit, it is clear that a party to such a contract may enforce it.
Conclusion of Analysis Only Peter may enforce the contract o A third-party beneficiaries are not indispensable parties to a promisee's action to enforce the contract. o We conclude Smith, as a promisee, has a right to enforce Maescher's promise to pay for Peter's college education.
Courts Analysis Error In Jumping To Damages o The trial court apparently jumped from this premise to conclude Smith was entitled to bring an action for damages.
Recovery Depend On (Creditor vs Donee) o Whether she (promisee) may recover damages depends on whether Peter was an intended "creditor" or "donee" beneficiary.
Creditor Beneficiary o A creditor beneficiary receives payment from the promisor of a debt or other obligation owed the beneficiary by the promisee.
Liability o If a promisor does not pay the promisee's debt to the creditor beneficiary, then the promisee will remain liable to the beneficiary for the full amount of the debt and could directly suffer damages in this full amount
Donee Beneficiary o A donee beneficiary does not and essentially receives a gift in the form of the promisor's obligation to it.
No Liability o If the promisor does not perform its obligation to the donee beneficiary, the promisee will not be liable to the beneficiary for such performance and presumably will suffer only nominal damages.
Both Cases o The promisee may have a right to enforce the contract by obtaining specific performance against the promisor.
Rest. 2d Contract 302, cmt. b o The promisee of a promise for the benefit of a beneficiary has the same right to performance as any other promisee, whether the promise is binding because part of a bargain, because of his reliance, or because of its formal characteristics. o If the promisee has no economic interest in the performance, as in many cases involving gift promises, the ordinary remedy of damages for breach of contract is an inadequate remedy, since only nominal damages can be recovered. o In such cases specific performance is commonly appropriate.
Promisee Cannot Recover Damages o A promisee cannot recover damages which may be suffered by the intended third party beneficiary, although the promisee may sue for specific performance of the promisor's obligation.
Courts Analysis Conclusion o Nothing required Smith to pay for her sons eduations. o Smith has not legal obligation to pay and she made the payment voluntarily. o Peter is clearly a donee beneficiary and had a direct cause of action against his dad for violation of that provision. o She [did] not claim Peter assigned her his rights against Maescher. Thus, Smith has no right to collect the loaned money from Maescher. o Since Peter is not a party to this action, the court had no legal authority to award Smith $11,109 in damages against Maescher. o As a result, we reverse this portion of the order.
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Rules |
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307 Remedy of Specific Performance o Where specific performance is otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a suit for specific enforcement of a duty owed to an intended beneficiary.
Standing For a Child Rule o Whatever the standing of a child to enforce provisions in a contract made for its benefit, it is clear that a party to such a contract may enforce it.
Creditor Beneficiary o A creditor beneficiary receives payment from the promisor of a debt or other obligation owed the beneficiary by the promisee.
Liability o If a promisor does not pay the promisee's debt to the creditor beneficiary, then the promisee will remain liable to the beneficiary for the full amount of the debt and could directly suffer damages in this full amount
Donee Beneficiary o A donee beneficiary does not and essentially receives a gift in the form of the promisor's obligation to it.
No Liability o If the promisor does not perform its obligation to the donee beneficiary, the promisee will not be liable to the beneficiary for such performance and presumably will suffer only nominal damages.
Both Cases o The promisee may have a right to enforce the contract by obtaining specific performance against the promisor.
Rest. 2d Contract 302, cmt. b o The promisee of a promise for the benefit of a beneficiary has the same right to performance as any other promisee, whether the promise is binding because part of a bargain, because of his reliance, or because of its formal characteristics.
o f the promisee has no economic interest in the performance, as in many cases involving gift promises, the ordinary remedy of damages for breach of contract is an inadequate remedy, since only nominal damages can be recovered. o In such cases specific performance is commonly appropriate.
Promisee Cannot Recover Damages o A promisee cannot recover damages which may be suffered by the intended third party beneficiary, although the promisee may sue for specific performance of the promisor's obligation.
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Class Notes |
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