Contract, Parties. Set-off, Mutual demands. A declaration in set-off alleged, that the defendant held a judgment against a certain corporation of which he was a stockholder, that the corporation had in accordance with a vote of its stockholders assigned its only valuable asset to the plaintiff on the condition, accepted by the plaintiff, that he should assume and pay all the debts of the corporation, and that therefore the plaintiff owed the defendant the amount of the judgment. Held, on demurrer, that the declaration in set-off stated no cause of action at law and therefore no demand that could be set off under Pub. Sts. c. 168, § 1, and that the defendant's remedy, if any, must be by way of equitable defence or by a bill in equity. The plaintiff's promise was made to the corporation and for its benefit, and the corporation alone had a right of action at law upon the contract.
HAMMOND, J.
The promise set out in the declaration in set-off was made to, and upon a consideration moving from, the corporation alone. The defendant, although he might be benefited by the performance of the contract, was not a party to it, and he still holds the corporation upon his judgment. Under the decisions of this court it is clear that the case comes within the general rule that a person who is not a party to a contract and from whom no consideration moves cannot maintain an action at law upon it. Mellen v. Whipple, 1 Gray, 317. Exchange Bank v. Rice, 107 Mass. 37, and cases cited. Borden v. Boardman, 157 Mass. 410, and cases cited.
The property was not transferred to the plaintiff for the benefit of creditors, but for the benefit of the corporation in securing a promise to be made to itself, and the incidental beneficiaries are not the defendant alone but the other creditors and the corporation itself, and the latter alone has the right to an action at law upon the contract and to control such an action in the nature of an equitable defence or by bill in equity.
The demands are not mutual, and one cannot be set off against the other. Pub. Sts. c. 168, § 1. Whatever remedy, if any, the defendant has must be by way of equitable defence in the answer, or by a bill in equity.
Demurrer sustained.