Drewen v. Bank of Manhattan Co.

Brief Fact Summary. As part of a divorce agreement, Party 1 agreed not to reduce the "quality or quantify of the children's interests in his estate".   In a will executed on the same day as the agreement, each child was granted about 30% of Party 1's estate.

Synopsis of Rule of Law. "A promisee of a contract for the benefit of a third party donee has a sufficient interest in the enforcement of the promise to entitle him to sue for damages."

Facts. The Plaintiff, John Drewen, administrator c.t.a. of the estate of Doris Ryer Nixon ("Ms. Nixon")(the "Plaintiff") brought suit against the Defendant, the Bank of Manhattan Co., executor of Stanhope Wood Nixon's ("Mr. Nixon") estate (the "Defendant").  On July 27, 1945, Ms. Dixon and Mr. Nixon entered into a divorce settlement in which Mr. Nixon agreed "never to reduce the quantity or quality of the children's interests in his estate, as set forth in a will executed on the same day as the agreement."  Each child, Lewis Nixon and Blanche Nixon, was to receive about 30% of Mr. Nixon's estate in fee.  If one child died, the other would receive the deceased child's interest.  Ms. Dixon died intestate in 1948.  In 1951, Mr. Nixon executed a new will, the effect of which revoked his July 27, 1945 will.  Specifically, instead of fee interests, the children were given life estates in his property.  If one of the children died, the other child was to receive their life estate.  The remainders were to go to charities.  There was an in terrorem clause in the will, which in effect avoids a disposition if a will contest is brought.  Blanche Nixon died in 1955 and Lewis Nixon succeeded to her shares, regardless of which will was operative. Mr. Nixon died in 1958, and his 1951 will was admitted to probate.  The Chancery Division and the Appellate division both dismissed the Plaintiff's suit.

Issue. Does a "promisee of a contract for the benefit of a third party donee ha[ve] a sufficient interest in the enforcement of the promise to entitle him to sue for damages?"

Held. Yes.  The court relying on the Restatement observed "[a] promisee of a contract for the benefit of a third party donee has a sufficient interest in the enforcement of the promise to entitle him to sue for damages." Additionally, "[h]e may also invoke the aid of a court of equity, for the general reason that his remedy at law is inadequate, and he should not be denied an effective means of compelling fulfillment of a promise that he bought and paid for."

Discussion. A third-party beneficiary to a contract has the right to sue for damages, or if damages cannot compensate for the harm, bring and action for equitable relief.