BARRATT ET AL. v. GREENFIELD

Bonds — Actions — Mortgages — Contracts — Third party beneficiaries — Bondholders — Trustee — Principal and surety — Restatement, Contracts.

1. Where it appeared that a mortgage was given to a trustee for the protection of the purchasers of an accompanying bond issue; that the real owner of the premises secured by the mortgage, a corporation, and its president, who was financially interested in the affairs of the company, gave to the trustee under the mortgage an agreement in writing under seal whereby they guaranteed to the trustee "for the benefit of holders of bonds secured by said mortgage, the punctual payment of the interest upon said mortgage and the bonds issued thereunder, . . . . . . until the principal of the said mortgage shall be repaid in full"; and that when the bond issue and mortgage became due, payment of the principal was extended for additional periods of years, by agreement between the owner and the trustee, and at the same time the corporate owner and its president delivered to the trustee an agreement in writing in which they referred to their "guarantee of the payment of the interest of a certain mortgage" and assented to the extension of time and agreed that such extension "shall in no way affect our aforesaid guarantee of the payment of the interest on the said mortgage"; it was held, in an action by the holders of a bond against the defendant president of the corporate real owner, to recover unpaid interest, that an order sustaining a statutory demurrer to the statement of claim was properly entered on the grounds that the defendant and the corporate owner had intended to obligate themselves to guarantee the payment to the trustee of the interest on the mortgage or the bond issue as a whole, and not to guarantee the payment of interest on each of the bonds issued, and that individual bondholders were not entitled to maintain suit.

2. Restatement, Contracts, section 133, cited.

Argued October 3, 1939.