Morrison Flying Service v. Deming National Bank

404 F.2d 856, 21 A.F.T.R.2d (RIA) 1562
CourtCourt of Appeals for the Fifth Circuit
DecidedMay 17, 1968
DocketNo. 9547
StatusPublished
Cited by4 cases

This text of 404 F.2d 856 (Morrison Flying Service v. Deming National Bank) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morrison Flying Service v. Deming National Bank, 404 F.2d 856, 21 A.F.T.R.2d (RIA) 1562 (5th Cir. 1968).

Opinion

HILL, Circuit Judge.

This controversy is here for a second time. In the first appeal we reversed the trial court on an order entered granting the Bank a summary judgment.1 At that stage of the case Morrison was only seeking a judgment against the Deming National Bank upon the grounds recited in our former opinion. After remand, by Amended Complaint, Morrison pleaded additional causes of action against the Bank, Cisco Aircraft, Inc., and National City Aircraft Leasing Company, claiming a prior equitable lien upon the contract proceeds still held by the Bank superior to any claim by Cisco or National City to such funds. Service was procured upon Cisco and National City under 28 U.S.C. § 1655. Neither Cisco nor National City answered or appeared and default judgments were entered against each of them, adjudging that appellant’s claim to the contract proceeds held by the Bank was prior to any claim of either Cisco or National City to such proceeds. Appellee, United States of America, intervened in the § 1655 phase of the case and claimed a prior lien upon the contract proceeds in the hands of the Bank by reason of income taxes owed by Cisco. Trial was had to the court and a judgment was entered in favor of the Bank and a determination made that the action was not within the purview of 1655. The default judgments against Cisco and National [859]*859City were thereafter set aside. The trial court also decreed that the intervenor had a prior lien for taxes upon the contract proceeds. This appeal by Morrison followed.

Actually, we find little conflict in the evidence adduced at the trial. Early in 1962, the United States Department of Agriculture through the Forest Service advertised for bids on a contract providing for the aerial spraying of timber land in Montana. Cisco Aircraft, Inc., became a prospective bidder. Mr. Monroe, President of Cisco, contacted appellant about furnishing gas, oil and some of the chase aircraft necessary in the performance of the contract. On April 23, 1962, Cisco and the government entered into a contract for the spraying work. A short time later Cisco and Morrison reached an oral understanding about Morrison’s participation in the contract and on May 15 the parties evidenced the oral understanding by a written agreement. Prior to this date, Mrs. Herrin, President of Morrison, had knowledge that Cisco either had assigned or would assign the proceeds of the contract to the Deming National Bank and that the Bank would finance Cisco on the project. On May 9, she wrote the Bank concerning possible arrangements whereby the Bank would pay Morrison when it completed its part of the contract2 and the Bank did not reply to that letter until June ll.3 On [860]*860May 21 Cisco had executed a written absolute assignment of the proceeds of the contract to the Bank. Performance of the contract was not commenced until June 21 and was completed July 24. On that date and after completion, Cisco’s President, Mr. Monroe, a representative of the government and Mrs. Herrin met in her office in Helena, Montana, and agreed in writing as to the amount due Morrison and addressed such writing to the Bank and it was mailed. Mrs. Herrin later discovered an additional item of $464.81 and so advised the Bank. Various conferences and communications between Morrison and the Bank followed but the Bank did not receive the contract proceeds until December 24. Prior to this date, Cisco authorized in writing payment by the Bank of a bond premium in the amount of $3,168.75 and attempted to assign the remainder of the contract proceeds not then received by the Bank to National City Aircraft Leasing Co.

In our prior opinion in this case we concluded that the June 11 letter from the Bank to Mr. Morrison constituted a promise by the Bank to pay Morrison out of the contract proceeds for its part in performing the contract. We had some question about consideration to support the promise. The case then stood on appeal only upon the propriety of the order granting a summary judgment in favor of the Bank and an evidentiary hearing had not been held. Although counsel now interprets our former opinion as holding that there was no consideration for the promise, we did not make a final determination of that question because the evidence on the question was not then before us. We now have all the evidence on behalf of both Morrison and the Bank in the record and we must conclude from a legal standpoint that Morrison’s performance of the contract constituted a good and sufficient consideration to support the promise to pay.

The law is well settled that performance of a pre-existing duty owed by the promisee to the promisor is not a sufficient consideration. But, that is not our situation here. The contract to be performed was between Morrison and Cisco and the promise here is by a third party, the Bank, to Morrison. The performance of the contract was certainly beneficial to the Bank and Morrison suffered a detriment in going forward with performance rather than refusing to perform because of the questionable financial condition of Cisco or seeking other and extraordinary means of insuring payment prior to performance.

Without dispute, the record shows that Mrs. Herrin, President of Morrison, testified that if she had not received the June 11 letter from the Bank, she would have requested the Forest Service to pay Morrison’s share of the contract proceeds direct to her instead of to Cisco. She also testified, without contradiction, that the Forest Service had acceded to such a request on the part of another subcontractor during the performance of this same contract.

We recognize that there is a conflict among the authorities as to whether there is a sufficient consideration for a promise by a third person made to induce a party to an existing contract to perform.4 Professor Corbin recognizes this conflict and his comment about it has the approval of this court.5 We believe not [861]*861only that the trend of recent decisions but the “weight of authority” now compels us to follow the rule enunciated by the American Law Institute in Restatement, Contracts, § 84, “Consideration is not insufficient because of the fact * * (d) that the party giving the consideration is then bound by a contractual or quasi-eontractual duty to a third person to perform the act in furtherance given or promised as consideration.”

Professor Corbin quotes this section of the Restatement with approval and makes the following comment:

“This should be supported for two reasons: (1) The promisor gets the exact consideration for which he bargains, one to which he previously had no right and one that he might never have received; (2) there are no sound reasons of social policy for not applying in this case the ordinary rules as to sufficiency of consideration. The performance is bargained for, it is beneficial to the promisor, the promisee has forborne to seek a rescission or discharge from the third person to whom the duty was owed, and there is almost never any probability that the promisee has been in position to use or has in fact used any economic coercion to induce the making of the promise. There is now a strong tendency for the courts to support these statements and to enforce the promise.

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404 F.2d 856, 21 A.F.T.R.2d (RIA) 1562, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morrison-flying-service-v-deming-national-bank-ca5-1968.