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Seargeant v. Commerce Loan & Inv. Co.

Supreme Court of Arizona

June 1, 1954

SEARGEANT et ux.
v.
COMMERCE LOAN AND INV. CO. et al.

Page 1087

[77 Ariz. 300] Emmett R. Feighner, Phoenix, for appellants.

J. S. Riggs, Phoenix, for appellees.

PHELPS, Chief Justice.

This is an appeal from a judgment entered in favor of appellees and against appellants in the sum of $4,624.50 and from an order denying appellants' motion for a new trial.

We deem it unnecessary to relate the circumstances under which this case got into the trial court or to pass upon the preliminary questions raised relating thereto. Suffice it to say that insofar as it is material here, appellee Commerce Loan Company, a corporation, brought this action as a third-party beneficiary under an alleged contract between appellant L. H. Seargeant and one W. C. O'Brien, a secondhand [77 Ariz. 301] automobile dealer. It is claimed Seargeant had agreed to finance O'Brien to the extent of $10,000 on a 'floor plan' arrangement for the purchase by O'Brien of ten secondhand automobiles from appellee; that Seargeant was to deposit $10,000 in the Valley National Bank to the credit of W. C. O.'Brien and that said contract was made by Seargeant and O'Brien for the benefit of appellee.

The allegation of appellee relating to this contract follows:

'That on or about November 30, 1948, and in conjunction with and prior to the time this defendant and cross-complainant and the defendant, Commerce Loan & Investment Company, and the defendant, William C. O'Brien, entered into the above described purchase and sale agreement, the defendant, L. H. Seargeant, and the defendant, William C. O'Brien, entered into an agreement, the terms of which were as follows, to wit: The defendant, L. H. Seargeant, was to furnish the defendant, William C. O'Brien, with the sum of Ten Thousand Dollars ($10,000.00), in cash, for the purpose of financing the purchase of said motor vehicles described hereinabove, and the defendant, L. H. Seargeant, would deposit the said Ten Thousand Dollars ($10,000.00) in the Valley National Bank to the credit of the defendant, William C. O'Brien, as soon as this defendant and cross-

Page 1088

complainant delivered the titles to said motor vehicles to the defendant, William C. O'Brien, for the purpose of covering the said checks which the defendant, William C. O'Brien, would give this defendant and cross-complainant in payment for the said motor vehicles hereinabove described, and as security for the repayment of said Ten Thousand Dollars ($10,000.00) the defendant, L. H. Seargeant, was to 'floor plan' said motor vehicles upon the defendant, William C. O'Brien's sales lot. That under the terms of said 'floor plan' agreement, the defendant, William C. O'Brien, was to deliver the titles to said motor vehicles which the defendant, William C. O'Brien received from this defendant and cross-complainant, and the defendant, Commerce Loan & Investment Company; that the defendant, L. H. Seargeant, would hold said titles until these cars were sold, collecting his money from the proceeds of sales as the defendant, William C. O'Brien sold said automobiles.'

A 'floor plan' is described by appellee's witness Benjamin as an arrangement whereby a used-car dealer who wants to buy a car and doesn't have the money to pay for it, takes his title to the car to someone who does have the money (either a finance company or an individual) who is able to put up the money and upon receipt of the money required, turns the title[77 Ariz. 302] to the car over to the person lending the money and usually a conditional sales contract (or a certificate of trust used by the finance company) is executed by the money lender in favor of the used-car dealer. The money lender becomes the legal owner of the car and upon resale of the car by the used-car dealer the money lender is paid the amount loaned. The title is transferred from the money lender to the new purchaser and the dealer retains the profits, if any.

Appellee alleged that Seargeant refused to deposit the $10,000 in the Valley National Bank to the credit of W. C. O'Brien as agreed and as a result thereof appellee suffered losses in the sum of $4,624.50 Seargeant denied these allegations generally and specifically. The cause was tried to the court without a jury with the result above set forth.

Appellant Seargeant has assigned a number of errors, one of which is that the contract, being verbal, violated the statute of frauds. The case of Steward v. Sirrine, 34 Ariz. 49, 267 P. 598, clearly points out the fallacy of this position. That case holds that a promise made to a debtor (who then owes a debt or is about to incur a debt to another) to pay his debt to another is not violative of the Statute of Frauds. It is only when he makes such oral promise to the creditor that the Statute of Frauds is violated. Here whatever promise was made by Seargeant is alleged in the complaint to have been made to O'Brien and the appellee's evidence supports that allegation. At no time did Seargeant promise appellee that he would pay it $10,000 or any sum whatsoever.

The vital question before the court therefore to be determined resolves itself into whether appellee under the terms of the agreement between Seargeant and O'Brien falls within the category of a third-party creditor beneficiary. If it does, appellee is entitled to recover. If it does not, it may not maintain this cause of action. The trial court has found that it does fall within said category and specifically finds:

'III

'At said time, November 30, 1948, the cross-defendant William C. O'Brien and the cross-defendant, L. H. Seargeant had an agreement whereunder the cross-defendant L. H. Seargeant would advance the sum of Ten Thousand Dollars ($10,000.00) and deposit same to the credit of the cross-defendant William C. O'Brien, at the Valley National Bank in Phoenix, Arizona, for the purpose of covering checks to be given by cross-defendant William C. O'Brien as payment for said ten (10) automobiles which the defendant ...


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