Muir v. Schenck, & Robinson — 3 Hill & Den. 228

Majority

p. 228

Muir vs. Schenck, & Robinson.

Headnote

In a conflict of equitable claims, the rule at law as well as in equity is, qui prior est tempore potior est jure.

As between different assignees of a chose in action, by express assignment from have given no notice to either the subsequent assignee or the debtor. the same person, the one prior in point of time will be protected, though he

In order, however, to secure the rights of the first assignee as between him and the debtor, the latter must be notified; for if he pay the subsequent assignee before notice, such payment will be operative as to the first.

Otherwise, if the debtor pay the subsequent assignee after notice from the first; in which case the latter may, at his election, either sue the debtor upon the original claim, or charge the subsequent assignee as for money had and received.

M., who held a bond andmortgage_ against S. & R. on which two installments remained unpaid, assigned and" delivered the bond to D. as collateral security for the payment of a debt due him, and afterwards executed an absolute assignment of the same bond, together with the mortgage, to A., for a valuable consideration. Notice of the last assignment was immediately given to S. & R., who thereupon promised A. to pay him as the installments became due. One payment having subsequently been made to A., D. notified S. & R. of the previous assignment to him, giving as a reason for delaying notice that he did not expect to be obliged to resort to the bond for his security. Another installment was afterwards paid to A., whereupon he acknowledged satisfaction of the mortgage. Held, in an action on the bond by D., in the name of M., that the last payment was made by the obligors in their own wrong; and that D. might recover the amount.

The case of Murray v. Lylbum, (2 John. Ch. Rep. 441,443,) commented on, and some of its dicta disapproved.

As between the assignor and assignee of is compíete without any notice to the debtor.

The assignment of a chose in action will prevent its passing to assignees in virtue of a subsequent general assignment by the same assignor under the bankrupt or insolvent acts; and this, without notice to the debtor or subsequent as. signees.

Anassignee of a chose in action may sue in his own name, on an express promise by the debtor to pay him. Per Cowen, J,

But if the assignment be inoperative by reason of a prior assignment to another, the debtor’s promise is void for want of consideration.

Debt on bond, tried at the Cayuga circuit, in October, 1841, before Moseley, C. Judge. The case was this : On the 5th

p. 229

of September, 1836, the bond in question, and a mortgage of the same date, were executed by 'the defendants to the plaintiff. The bond was conditioned for the payment of $1500, in five equal annual installments, with interest. The first three installments were paid to the plaintiff, who, on the 13th of November, 1839, assigned and delivered the bond to Ira Doty, as collateral security for the payment of a note of $318,85, held by him against the plaintiff. On the 9th of March, 1840, the plaintiff executed to Sedgwick Austin an absolute assignment of the mortgage “ and the bond therein referred to,” in payment of certain notes held by Austin against the plaintiff, which were thereupon delivered up to the latter. In this assignment the plaintiff covenanted that there remained unpaid the sum of $600, and interest from the 5th of September, 1839. Austin gave immediate notice of the assignment' to the defendants, who promised to pay him. Accordingly, in September, 1840, the defendants paid Austin the fourth installment, ($342,) and on the 6th of September, 1841, they paid the balance ; whereupon he acknowledged satisfaction of the mortgage. Intermediate these two payments, viz. in October, 1840, Doty gave notice to the defendants that the bond had been assigned to him before the assignment to Austin ; and forbade any further payments to the latter ; claiming a right to the money thereafter to become due. The defendants enquired why he had not given notice before, and Doty gave as a reason, that he did not suppose he would be obliged to resort to the bond in order to obtain payment of the debt due from the plaintiff. This action was brought for the benefit of Doty, who insisted that he was entitled to recover the last installment with interest. The circuit judge charged the jury, that the payment to Austin of the last installment was rightfully made by the defendants, notwithstanding the notice from Doty. The jury rendered a verdict for the defendants, and the plaintiff now moved for a new trial on a case.

A. Gould, for the plaintiff.

p. 230

F. G. Jewett, for. .the defendants.

The question is, whether the de- • fendants were right in preferring Austin, and making the/las t| ■ payment to him instead of Doty. Doty had the nreTassi^h- | ment from the obligee, and, as between him and Austin, was entitled to _the jnoney. In a conflict of equitable claims, the rule is the same at law as in equity, qui prior est tempore, potior e~l est jure. There was no need of notice to Austin for the purpose of securing .the preference as against him; and Austin might have been compelled at the election of Doty to pay over to him the last installment received from the defendants. _But before that installment was paid, he chose to fix the defendants by giving notice of his right to them, and forbidding the payment of any more to Austin. The payments were correctly made to the latter, till notice. The payment afterwards, was in the defendants’ own wrong. The notice, when it came, afforded them a complete protection, and had the farther effect to render what was before an inchoate right in Doty, perfect from the beginning. As Austin had never any right to receive, the defendants had now no right to pay. No one would doubt that the first assignment divested the right of the obligee, though the legal interest remained in him. Could he transfer to Austin a greater right than his own 1 His legal interest was not assignable ; and he had parted with all his equitable right. Does it not follow that nothing remained for Austin 1 __I

The decision at the circuit, I admit, derives some degree of countenance from the remarks made by Chancellor Kent in Murray v. Lylburn, (2 John. Ch. Rep. 441, 443.) I allude to the view there taken of Redfearn v. Ferrier, (1 Bow’s Pari. Cas. 50,) which the learned Chancellor supposed should perhaps be received as a qualification of the rule laid down by Lord Thurlow, in Davis v. Austin, (1 Ves. Jun. 249,) who said : “ A purchaser of a chose in action must always abide by the case of the person from whom he buys ; that I take to be an universal rule.” True, his lordship was speaking of the

p. 231

case of the assignor, as it stood between him and the debtor ; yet the same rule has been often applied to a case as between him and one of his previous assignees. Nothing is better settled, for instance, than that the previous assignment of a 'chose in action will prevent its passing to assignees by a general assignment under the bankrupt or insolvent acts; an assignment carrying even the legal right, and this too, without notice either to the debtor or the subsequent assignees. OrdinarP-} ly, any notice to subsequent conventional assignees must be out of the question; for the first assignee cannot know who they will be. Notice to the debtor might, I admit, afford them a better chance ; for then there would be one of whom they might enquire, and of whom they naturally would., enquire. This might prevent fraud ; and, to require it, would therefore , perhaps be very proper. It is required by the law of Scotland, as appears by Redfearn v. Ferrier, which was decided upon the Scotch law. By that law there must be what is called an intimation to the debtor, before the assignment is perfect and secures a complete preference even as against a subsequent assignee. In suggesting, however, that such is perhaps the law of England or of this state, Chancellor Kent admitted that he was doing what was not necessary to the decision of the case under his consideration, which turned on a point entirely different, viz. a lis pendens operating as constructive notice. In Livingston v. Dean, (2 John. Ch. Rep. 479,) there was actual notice. But neither Redfearn v. Ferrier, nor the two cases decided by Chancellor Kent, related to a previous express assignment. There was scarcely the semblance of such an assignment, but only a trust to be inferred by the court of chancery from circumstances—a sort of implied trust—a creature peculiar to that court. The prior right claimed, was spoken of as a latent equity. As between express assignments, I take the law to be correctly laid down "by Parker, C. J. in Wood v. Partridge, ( 11 Mass. Rep. 488 , 491, 2.) He said : “ Between assignor and assignee the contract is complete with- - out any notice to the debtorand he considered the notice as in

p. 232

'.-fi tended to protect the debtor alone. Story, J. in his learned work on the Conflict of Laws, (p. 328 to 330,) mentions the difference between the Scotch law and our own, admitting the necessity of intimation in the former. He says, that according to our law, an assignment operates, per se, as an equitable transfer of the debt, and he concedes that notice is necessary to protect the debtor; adding : “ But an arrest or attachment of the debt in his hands by any creditor of the assignor, will not entitle such creditor to a priority of right, if the debtor receive notice of the assignment pendente lite, and in time to avail himself of it in discharge of the suit against him.” That has been held in several cases. (Bholen v. Cleveland, 5 Mason 174, 176 ; Foster v. Sinkler, 4 Mass. Rep. 450 ; Fix v. Cobb. id. 508 .) In Wood v. Partridge, this question between a previous assignee and a subsequent attaching creditor, was considered the same in principle as that between conflicting assignees. It is undoubtedly so. The principle has been declared by other cases. (White’s heirs v. Prentiss’ heirs, 3 Monroe, 510 ; Madeiras v. Catlett, 7 id. 477 .) In Jordan v. Black, ( 2 Murph. 30 ,) the claim of the assignee presented a very strong equity. Hall, J. said, in substance that, 6< upon an examination of the authorities it would be found that the ground taken by the assignee of being a bona fide purchaser, is tenable by those persons only who have the legal title in them, and plead that they are purchasers for a valuable consideration without notice. By this plea they shew that they have as much equity on their side as their opponents ; and that being the case, a court of equity will not interfere and divest them of their legal title. All that the assignee shows is, that she purchased the assignor’s right to a chose in action. She has no legal, but only an equitable title.”

No fraud upon Austin’s rights is imputable to Doty. He entertained a confidence that the assignor would pay his claim, —p\ and that he should therefore not find it necessary to take measures for collecting the bond. He gave notice to the defendants as soon as he found himself disappointed.

p. 233

Nor is it any answer to Doty’s claim, that the defendants promised to pay Austin. It is said truly, that this, in an ordinary case, would have entitled him to an action in his own name. Prima facie it brought him within the rule, that an assignee of a chose in action may sue in his own name, on an express promise by the debtor to pay him.^[1] This arises from consideration and privity; but in the case at bar, the assignment to Austin having failed of effect by reason of the prior assignment to Doty, there was no consideration for the promise. The case is the same as if Austin had held no assignment even in form. The last payment by the defendants was, therefore, made in their own wrong; and there must be a new trial, the costs to abide the event.

New trial granted,

(a) (a) See Jessel v. The Williamsburgh Ins. Co., (ante, p. 88, 9,) and the eases there cited.