CONTRACTS - THIRD PARTY BENEFICIARY - RIGHT OF PROMISOR TO SET OFF CLAIM AGAINT PROMISEE IN A SUIT BY BENEFICIARY

A and B mortgaged real estate to the plaintiff to secure their notes aggregating $9,000. Six months later A and B exchanged this property to the defendant for certain real estate owned by her. By the deed the defendant assumed the mortgage indebtedness owed to the plaintiff. As a further consideration for the exchange, A and B executed a note for $13,050 to the defendant.

The plaintiff instituted this action against A and B, seeking to recover the balance, and by amended petition joined the defendant. The defendant claimed the right of set-off on the uncollected judgment against A and B, now insolvent, on the ground that the plaintiff's right was derivative through A and B, and so subject to the same defenses. Held, that the beneficiary's right of recovery against the promisee is subject only to defenses arising from the contract, and therefore is not subject to set-off. Commonwealth Life Ins.

Co. v. Eline, 274 Ky. 539, 119 S. W. (2d) 637 (1938).