McNAUGHT v. HOFFMAN, 274 F. 918

GILBERT, Circuit Judge (after stating the facts as above). The legal effect of the deed and the contract as between the parties thereto was determined by a judgment of the Supreme Court of Montana in Smith v. Hoffman, 56 Mont. 299, 184 Pac. 842, a suit brought by Mrs. Smith against Mrs. Hoffman seeking the cancellation of the deed for alleged breach of the contract to make the $50 monthly payments so provided for. The court held that under

section 5031 of the Code of Montana the deed and the contract were to be taken together as parts of one transaction, that from the evidence the only consideration for the deed was the promise to make the $50 payments, that the deed was a grant upon condition subsequent, and that upon a breach thereof the plaintiff would have been entitled to a rescission but for the fact that she waived the condition subsequent, that Mrs. Hoffman’s title constituted a life estate unless she should remarry, in which event her estate would terminate, with reversion to Mrs. Smith, her heirs and assigns.

The court also held that so far as the suit pending therein was concerned, Mrs. Hoffman was justified in treating the letter of October 9, 1910, and another letter written a year later, as relieving her from the necessity of making any further payments to Mrs. McNaught. We agree with the Supreme Court of Montana in construction of the deed and the accompanying contract, and we hold that the instruments created in the grantee an estate upon condition subsequent, and that they had not the effect to create a trust in favor of the plaintiff herein. 39 Cyc. 65; Steele v. Clark, 77 Ill. 471; Marston v.

Humphrey, 24 Me. 513; Riddle v. Beattie, 77 Iowa, 168, 41 N. W. 606; Birdsall v. Grant, 37 App. Div. 348, 57 N. Y. Supp. 705. And even if the letter of October 9, 1910, had not the effect to release the defendant herein from the necessity of making further payments to the plaintiff, the latter would still have no cause of action against the defendant. The right of a third party for whose benefit a contract is made is regulated by

section 4970 of the Revised Codes as follows: “A contract, made expressly for tlie benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” The statute came before the Supreme Court of Montana for construction in McDonald v. American Nat.

Bank, 25 Mont. 456, 65 Pac. 896, where the court said: “To come within the meaning and scope of the section, the (executory) contract made expressly for the benefit of a third person must be one whereby the promisor undertakes to pay or discharge some debt or duty which the promisee owes to the third person; in other words, the third person must sustain such a relation to the contracting parties that a consideration may be deemed to have passed from him to the promisee which raises the implication of a promise from the' promisor directly to himself.

There must be a consideration passing from the third person by virtue of which he may assert the existence of a promise in his favor.” That construction of the statute was followed in Tatem v. Eglanol Mining Co., 45 Mont. 367, 123 Pac. 28. It may be conceded that the rule so established in Montana as to the rights of third persons for whose benefit contracts have been made is opposed to the weight of modern authority. 6 R. C. L. 884; 13 C. J. 705. But it rests upon the construction of a state statute, and it is binding upon this court. In the case at bar, Mrs.

Smith is the sister of the plaintiff, but that relation does not raise the implication that she owed a duty to the plaintiff which the defendant agreed to discharge, nor does it make the defendant’s undertaking a promise to pay or discharge a debt which Mrs. Smith owed to the plaintiff. Nor was there any consideration passing from the plaintiff by virtue of which she may assert the existence of a promise' in her favor. The judgment is affirmed. @=vFor other cases see same topic & KEY-NUMBER in ail Key-Numbered Digests & Indexes