Erickson v. Grande Ronde Lumber Co.

Brief Fact Summary. Party 1 was the creditor of Party 2.  Party 3 agreed to pay Party 2's debts.

Synopsis of Rule of Law. "A creditor beneficiary who has an enforceable claim against the promisee can get judgment against either the promisee or the promisor or against each of them on their respective duties to him. Satisfaction in while or in part of either of these duties, or of judgments thereon, satisfies to that extent the other duty or judgment."

Facts. The Plaintiff, Erickson (the "Plaintiff"), was a creditor of the Defendant, Grande Ronde Lumber Co. (the "Defendant").  Stoddard Company agreed to pay all the Defendant's debts.  Stoddard Company and the Defendant argue that the Plaintiff must elect from whom he wants relief and that he cannot have relief from both parties.

Issue. In the context of a third party beneficiary transaction, may a judgment be entered against both the promisor and the promissee?

Held. Yes.  The court quoting the Restatement observed, "(1) A creditor beneficiary who has an enforceable claim against the promisee can get judgment against either the promisee or the promisor or against each of them on their respective duties to him. Satisfaction in while or in part of either of these duties, or of judgments thereon, satisfies to that extent the other duty or judgment."  The court then recognizes this section represents the law of the state.  Additionally the court cites an Oregon law review article, which states "Oregon cases are in accord with this section and hold uniformly that there can be but one satisfaction, though both promisor and promisee are liable."  Based on these rules, the courts "conclude[d] that the plaintiff was entitled to maintain this action against the promisor (the Stoddard Company) as well as against his original debtor (the Grande Ronde Company). He was entitled to judgment against both; however, to only one complete satisfaction."

Discussion. This case demonstrates the basics of how a third-party beneficiary relationship works.