Colonial Discount Co. v. Avon Motors, Inc.

75 A.2d 507 (1950)

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Nature of the Case

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Facts

Avon (D) was engaged in the business of buying and selling used cars. It did some financing with Finance Company (P). The president of D planned to go to Florida for an extended stay and wanted to arrange for Levin (D1) to go into the used car business of his own account at D’s place of business. D conferred with P for the purpose of arranging to have all of D1’s financing done through P. From the first meeting, it did not appear that D had bound himself to P in that conversation. On September 18, 1946, D and D1 entered into a month to month lease beginning on October 14, 1946. The lease contained provisions that D1 was to do all his financing with P. In consideration of that the lessor was to covenant and agree to and with the lessee that all floor plan financing required by the lessee and accomplished by or through the said P would be unconditionally guaranteed as to payment to P by the Lessor for the benefit of both the Lessee and P. It was also understood that all financing done by the lessee with P would be on a repurchase basis and that the lessor would guarantee P the full faith performance of the lessee of the repurchase agreement with P. D1 also executed another instrument in which he covenanted with D that he would conduct no financing business with anyone other than P and assigned to D any and all dealer reserves due or to become due to him from P during the continuance of the lease. D1 also executed a reserve agreement with P to purchase acceptable promissory notes, chattel mortgages, and other security agreements acquired by D1 from retail purchases of cars. Under this agreement there was no commitment on D1’s part to do business with P. D1 also furnished P with a dealer’s financial statement which contained a guarantee and waiver executed by D1, his wife and Banet, the president of D, for the intent to use trust receipts as a method of financing to protect the intruster against creditors of the trustee. D1 did no business with P and instead did it with Associates. D told P that on two occasions, Banet had instructed D1 not to give P any business. P then assigned the agreement to Colonial (P2). P was a subsidiary of P2. On January 10, 1947, P stopped doing business. The trial court found that the lease between D and D1 bound D1 to do his financing with P and that the agreement could be enforced by P2. The court found that D1 breached the agreement and that D acting through its president, Banet, had caused that breach. Ds contended that the contract was not of such a nature that P2 as the assignee of P, the third-party beneficiary, could sue under. Ds appealed.