Banker v. Breaux
133 Tex. 183, 128 S.W.2d 23 (1939)
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Rule of Law:
A third party may only enforce a contractual provision made for their benefit if the contracting parties clearly intended to confer a direct benefit upon that third party. The presence of a clause specifying a remedy for the promisee in the event of a breach can negate the inference that the promise was made for the benefit of a third-party creditor.
Facts:
- E. H. Breaux sold a city lot to Elmer and Annie Webb, who executed a vendor's lien note to Breaux for the purchase price.
- The Webbs later conveyed the lot to H. F. Banker by a deed which stated the conveyance was 'subject to' Breaux's vendor's lien, but Banker did not assume payment of the note.
- Banker made several payments on the Webb note to Breaux.
- Banker then conveyed the lot to J. A. and V. Y. Willis. The deed contained a clause stating that Banker (the grantor) agreed to pay the outstanding Webb note.
- This deed also provided that if Banker failed to pay, the Willises (the grantees) were given the right to pay the Webb note and apply those payments as a credit against the note they had given to Banker.
- The Willises never made any payments on their note to Banker.
- At Banker's request, the Willises later conveyed the lot to Bruce Badger.
- Banker surrendered the Willises' unpaid note to them.
Procedural Posture:
- E. H. Breaux sued H. F. Banker and Bruce Badger in the District Court of Jefferson County (trial court).
- The trial court entered a default judgment against Badger, foreclosing the lien.
- In the case between Breaux and Banker, the trial court, at the conclusion of testimony, instructed a verdict for Banker.
- The jury returned a verdict for Banker, and the trial court rendered judgment in his favor.
- Breaux (appellant) appealed the judgment in favor of Banker (appellee) to the Court of Civil Appeals (intermediate appellate court).
- The Court of Civil Appeals reversed the trial court's judgment and rendered judgment in favor of Breaux.
- Banker (plaintiff in error) was granted a writ of error by the Commission of Appeals, acting for the Texas Supreme Court (highest court).
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Issue:
Does a grantor's promise to a grantee to pay an outstanding debt on a property create an enforceable right for the third-party creditor when the contract also specifies that the grantee's remedy for the grantor's non-payment is to pay the debt themselves and receive credit on their own note to the grantor?
Opinions:
Majority - Mr. Presiding Judge Harvey
No. The grantor's promise does not create an enforceable right for the third-party creditor because the contract, when read as a whole, demonstrates the promise was made for the benefit of the grantee, not the creditor. The law requires that for a third party to enforce a contract, the contracting parties must have intended to create a provision for that third party's benefit. While the first clause of the provision in the Banker-Willis deed contains a promise by Banker to pay the outstanding debt, the subsequent clause qualifies this promise. It stipulates that if Banker fails to pay, the Willises' remedy is to pay the debt themselves and receive a credit on their own purchase money obligation to Banker. This specific remedy shows the parties' intent was to protect the Willises, not to provide Breaux with a new obligor. The qualifying language negates any implication that the promise was made for Breaux's benefit.
Analysis:
This case refines the application of the third-party beneficiary doctrine in Texas, particularly within the context of real estate transactions involving existing liens. It establishes that a mere promise to pay a debt is not, by itself, sufficient to create an enforceable right for the creditor; the entire contractual provision must be analyzed to determine the parties' intent. The decision underscores that a clause providing a specific, internal remedy for the promisee (the grantee) in case of breach is strong evidence that the promise was not intended to benefit the third-party creditor. This precedent guides courts to look beyond a simple promise and consider qualifying language that reveals the true purpose of the contractual term, thereby preventing third parties from claiming benefits the contracting parties never intended to confer.
