Fruitvale Canning Co. v. Cotton

PATTERSON, J. pro tem.

Plaintiff appeals from a judgment in favor of defendants R. L. Cotton and Mamie M. Cotton, his wife, in an action to recover for money loaned to Charles E. Cotton.

Charles E. Cotton owned a box factory, and the Fruitvale Canning Company, the plaintiff, was one of his customers. He desired in connection with his box factory operations to acquire a timber supply and to construct a sawmill. To finance it he entered into an agreement with the Fruitvale Canning Company, the plaintiff, dated March 4, 1946, by which the company agreed to advance the sum of $25,000 to him. In return for this Cotton agreed to furnish for a period of five years such shook as the company needed in its cannery operations “when and as the plaintiff should order the same.” Cotton agreed to repay the sum advanced at the rate of $5,000 annually. Five thousand dollars was to be credited each year against purchases, and in the event the purchases were less than $5,000 he was to pay the difference in cash. He furnished shook in accordance with the agreement to December, 1948. Charles E. Cotton became badly involved financially and by deed dated December 23, 1948, conveyed the box factory

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to his brother, E. L. Cotton, and his wife, Mamie M. Cotton. By agreement dated the same date, although the court found it was not actually executed until February, 1949, E. L. Cotton and his wife purchased the box factory from Charles Cotton. There was adequate consideration and no claim of bad faith is made. Eiehard L. Cotton furnished shook under this agreement until 1950 when the box factory burned. At that time there was a balance due on the payments from Charles in the sum of $21,000. No further payments were made and plaintiff brought this action against Charles Cotton, Eiehard L. Cotton and Mamie M. Cotton, his wife. The court gave judgment in the sum of $21,000 with interest against Charles E. Cotton and in favor of the other defendants. Defendant Charles E. Cotton did not appeal, and plaintiff takes this appeal from the judgment in favor of the other defendants. For convenience we shall refer to Charles E. Cotton as Cotton and E. L. Cotton and Mamie M. Cotton, his ivife, as the defendants.

The plaintiff contends that it is entitled to recover first on the grounds that under the contract by which Cotton sold the box factory to defendants the latter assumed and agreed to pay the indebtedness of the former to the Fruitvale Canning Company. It is argued that the contract therefore falls within the provisions of section 1559 of the Civil Code as a contract made expressly for the benefit of the Fruitvale Canning Company and may be enforced by it. The pertinent language in the agreement is as follows: “Buyers hereby agree to assume that certain contract dated March 4, 1946, and executed by the sellers, Charles E. Cotton, and the Fruit-vale Canning Company. It is understood, however, that the sellers will pay and discharge the indebtedness owing to the said Fruitvale Canning Company under and by virtue of the terms of said contract, whether the said indebtedness is now due and payable or not; provided, however, and in the event that the buyers are required to pay any of said indebtedness, that the amount so paid shall be charged against the sellers, and be deducted from the amounts here in this contract agreed to be paid by the buyers to the sellers, under the terms of this contract or any modification thereof.” The argument is advanced that the defendants assumed all of Cotton’s obligations to Fruitvale Canning Company, including the repayment of the indebtedness of $25,000. Although the agreement provides that the seller, Cotton, is to pay the indebtedness, it is claimed this was merely an arrangement between themselves,