Hyperlawhypertext legal databasebeta York v. Conde 147 N.Y. 486

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York v. Conde

147 N.Y. 486 Court N.Y. Decision date 1895-11-26 English

Delivered by Andrews, Ch. J.

Contents

Majority

p. 486
Anson E. York et al., Respondents, v. William W. Conde et al., Appellants.

Headnote

1. Construction op Federal Statute by Federal Court — Effect on State Court. When a question of statutory construction of an act of Congress which has been determined by the Supreme Court of the United States .arises in a state court, the state court should follow the construction of the federal court, on the principle of comity, although the case in which the question arises is one where the ultimate jurisdiction is vested in the state court.
2. Claims against United States—Assignment—U. S. Rev. St at. § 3477. In view of the decisions of the Supreme Court of the United States on the subject, the just construction of the provision of section 3477 of the Revised Statutes of the United States, which declares “absolutely null and void ” all transfers and assignments of any claim against the United States made before the allowance of the claim, is that such a transfer or assignment, made in the legitimate and usual course of business, in good faith, to secure an honest debt, while it may be disregarded by the government, is good ás between the parties so far as to enable the transferee, after the government has paid over the money to the claimant, to enforce, as against' him or those who take with notice, the interest or lien given by the assignment.
Mem. of decision below, 71 Hun, 614 .
(Argued October 30, 1895;
decided November 26, 1895.)
Appeal from judgment of the General Term of the Supreme Court in the fourth judicial department, entered upon an order made September 12, 1893, which affirmed a judgment in favor of plaintiffs entered upon a verdict.
The nature of the action and the facts, so far as material, are stated in the opinion.
Elon R. Brown for appellants.
Section 3477 of the Revised Statutes of the United States prohibits and renders void the assignment from Witherby & Gaffney to York & Starkweather of an interest in the claim of Witherby & Gaffney against the United States for the construction of officers* quarters at Madison Barracks, Sackets Harbor, U. Y. (U. S. R. S. § 3477; U. 8. v. Gillis, 95 U. S. 407 .) This statute-covers every voluntary assignment or transfer of a claim
p. 487
against the United States, and may be invoked by private parties as well as by the government to defeat such an assignment or transfer. (Spafford v. Kirk, 97 U. S. 484 ; Mo Knight v. O. 8., 98 U. S. 179 ; 8. P. <& P. B. B. Co. v. JJ. 8., 112 U. S. 733 ; Hager v. Sviayne, 149 U. S. 242 ; Baker v. 8weetzer, 15 Minn. 427 ; Kmmons v. IT. 8., 42 Fed. Rep. 26 ; Trist v. Child, PL Wall. 441, 447; Heioell v. West, 21 N. E. Rep. 954 -956; McKee v. Cochrane, 17 Wash. L. Rep. 219 ; Woods v. Dickinson, 18 Wash. L. Rep. 5; Ely v. IT. 8., 19 Ct. Cls. Rep. 658, 664; Johnston v. Z7. 8., 13 Ct. Cls. Rep. 217; Belt v. U. 8., 15 Ct. Cls. Rep. 92; Forehand v. U. 8., 23 Ct. Cls. Rep. 477; .Lopez v. IT. S., 24 Ct. Cls. Rep. 84 ; JLowes v. IT. 8., 24 Ct. Cls. Rep. 170; Harris v. IT. 8., 27 Ct. Cls. Rep. 177; Hitchcock v. U. 8., 27 Ct. Cls. Rep. 185.) The statute does not cover assignments in bankruptcy or insolvency, or to heirs or legatees at death, or by other involuntary devolution. (Erwin v. IT. 8., 97 U. S. 392 ; Goodman v. Kiblack, 102 U. S. 556 ; Bailey v. IT. 8, 109 U. S. 432 ; B. B. B. B. Co. v. IT. 8., 16 Ct. Cls. Rep. 238; Spofford v. Kirk, 97 U. S. 484 ; ILobbs v. McLean, 117 U. S. 567 ; E. 8. & T. Co. v. Shepherd, 127 U. S. 494 ; Butler v. Gorely, 146 U. S., 303 ; Bedfield v. IT. 8., 27 Ct. Cls. Rep. 393; McKay v. Z7. S', 27 Ct. Cls. Rep. 422; Morgan v. IT. 8., 4 Ct. Cls. Rep. 319; Forest v. Price, 29 Atl. Rep. 215 ; Hager v. Swayne, 149 U. S. 242 ; Dexter v. Meigs, 21 Atl. Rep. 114 ; Stanford v. Lockwood, 24 Hun, 291 ; i?. W. .Sítov!; v. IF&on, 122 N. Y. 478 ; ,¿M-mps v. O’Brien, 45 How. Rr. 392, 402.) The assignment from Witherby & Gaffney to York & Starkweather of a part of the claim against the United States was forbidden by sections 1909 and 1910, Code Civil Procedure. (U. 8. v. Bobbins, 9 Pet. 319 ; Winchester v. Hackley, 2 Craneh, 342; Pom. Eq. Juris. § 168; Hager v. Swayne, 149 U. S. 242 ; Goodman v. Niblack, 102 U. S. 556 .)
Henry Purcell for respondents.
The main contention of the defendants is that the plaintiffs, by virtue of their assignment, acquired no right to the moneys to be earned by With
p. 488
erby & Gaffney under-their contract with the government, for the reason the assignment was absolutely void, it being prohibited by section 3477 of the Bevised Statutes of the United States. This is untenable. (Erwin v. United States, 97 IT, S. 392; Goodman v. Hiblack, 102 U. S. 556 ; Bailey v. United States, 109 U. S. 432 ; Ilobbs v. McLean, 117 U. S. 567 ; F. S. & T. Go. v. Shepherd, 127 U. S. 494 ; Lawrence v. United States, 8 Ct. Ols. Bep. 253; Jernegan v. Osborn, 155 Mass. 207 .) Unless the statute stood in the way, the instrument executed by Witherby & Gaffney to the plaintiffs, in equity transferred to them $3,000 of the moneys which they were to receive from the government. (Field v. Mayor, etc., 6 N. Y. 179 ; Hutchins v. Hebbard, 34 N. Y. 24 ; Bevelin v. Mayor, etc., 63 N. Y. 8 ; People ex rel. v. Comptroller, 77 N. Y. 45 ; Prill v. Tuttle, 81 N. Y. 454 ; Jones v. Mayor, etc., 90 N.Y. 387 ; Story’s Eq. Juris. §§ 1040,1055; Taylor v. Bates, 5 Cow. 376 ; Patterson v. Hall, 9 Cow. 747 ; Mortons. Haylor, 1 Hill, 583 ; Field v. Mayor, etc., 6 N. Y. 179 ; De Forrest v. Bates, 1 Edw. Ch. 393 ; Balloxo v. Boland, 14 Hun, 355 ; Ba/rse v. Mox'ton, 43 Hun, 479 ; Pa/rker v. Syracuse, 31 N. Y. 376 ; Fairbanks v. Sargent, 104 N. Y. 108 ; 117 N. Y. 320 .)

The determination of this appeal depends upon the. true construction of section 3477 of the Bevised Statutes of the United States. The general facts may be briefly stated. The firm of Witherby & Gaffney were contractors with the United States for' building barracks at Sackets Harbor. The plaintiffs constituted the firm of York 6 Starkweather, and furnished to the contractors lumber and materials for the work of the value of $3,000 and upwards, which were used in the construction. During the progress of the "work and before its completion, and on the 27tli day of March, 1890, Witherby & Gaffney made a written assignment to York & Starkweather of $3,000 “of the money .due, and to become due,” to the assignors from the government on their contract, to apply on their indebtedness

p. 489
to the assignees for the lumber and materials so furnished, and authorized the disbursing agent of the government, through whom the payments on the contract were made, to pay the plaintiffs §500 from the next estimate thereafter, and $2,500 on the completion of the contract, and when the balance coming to the assignors should become payable to them. "Witherby & Gaffney paid the plaintiffs $500, but no further payment has been made. On May 15, 1890, the contract having been completed, the disbursing officer delivered to Gaffney, one of the contractors, a draft for $4,400, in payment of the amount unpaid on the contract, which he delivered ■on the same day to the defendants to secure them for liabilities, as indorsers and otherwise, previously incurred for the benefit of Witherby & Gaffney. The defendants, before they had parted with the draft, were notified by the plaintiffs ■of their claim and of the terms of the assignment to them, and they demanded that the defendants should pay them out of said draft the sum of $2,500, the amount remaining unpaid to them from Witherby & Gaffney, which the defendants refused to do. This action was thereupon brought to recover said sum.

The claim set up by the defendants in their answer, that prior to the assignment to the plaintiffs, Witherby & Gaffney had verbally assigned to them the money to become due on the contract, as security for their indorsements, was tried before the jury and found against them and need not be further considered. There can be no doubt that under the general rule of law prevailing in this state the plaintiffs, under the assignment of March 21, 1890, acquired an equitable, if not a legal, title to the money payable on the contract of Witherby & Gaffney with the government to the extent of $3,000, and that the defendants, having acquired possession of the draft for the final payment on the contract, by delivery from Witherby & Gaffney, to secure an antecedent liability, on being-notified of the claim of the plaintiffs, held the draft and the fund it represented, as trustee of the plaintiffs, to the extent of their -claim. (Field v. Mayor, &c., 6 N. Y. 179 ; Devlin v. Mayor, &c., 63 id. 8.)

p. 490
But the contention is that the plaintiffs took nothing under the assignment to them, because, as is claimed, the transaction was void under section 3477 of the Revised Statutes of the United States, to which reference has been made. That section is as follows : “All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may he the consideration therefor, and all powers of attorney, orders or other authorities for receiving payment of any such claim, or of any part or share thereof, shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof. Such transfers, assignments, and powers of attorney must recite the warrant for payment, and must be acknowledged by the person making them, before an officer having authority to take acknowledgments of deeds, and shall be certified by the officer; and it must appear by the certificate that the officer, at the time of the acknowledgment, read and fully explained the transfer, assignment or warrant of attorney to the person acknowledging the same.”

This section has been considered in several cases by the Supreme Court of the United States. If that court has construed the section so as to determine the point involved in this ease we should deem it our duty to follow its decision. The judgment we shall render will not, we suppose, be subject t© review by the Supreme Court. "We do not question the validity of the section in question, nor will our decision affect any right of the defendants based thereon. Their right, if any, rests upon the transfer of the draft after it came to the hands of Witherby & Gaffney. They seek to defeat the right of the plaintiffs under their prior assignment of a portion of the fund, and invoke section 3477 to establish that the assignment was void and conferred no right. But on a question of statutory construction of an act of Congress which has been determined by the Supreme Court of the United States, sub

p. 491
sequently arising in this court, \ve should feel bound to adopt and follow the construction of that tribunal on the principle of comity, although in a case where the ultimate jurisdiction is vested in this court. This principle is especially important to be observed in such a case, in view of the relation between the Federal and State courts, not exercising, in all cases, a. co-ordinate jurisdiction, but engaged in the administration of justice to a great extent between persons who are citizens both of a state and of the United States. The decisions of the tribunals of a state as to the true construction of the statutes of its own sovereignty are followed by the Federal courts, and it would be most unseemly and produce great confusion if state courts should refuse to adopt the construction of the Supreme Court of the United States, of Federal statutes.

The section in question was taken from the act of Congress, approved February 26, 1863, entitled- “An act to prevent frauds on the treasury of the United States.” Its object was to protect the government. It was enacted, as was said by Hr. Justice Hiller in Goodman v. Niblack ( 102 U. S. 556 ), to prevent embarrassments to the government which might arise if it was compelled to recognize rights of third persons not parties to the original contract or transaction, and, second, to shut the door to improper influences in prosecuting claims before the departments or courts or Congress.

There are two theories of construction of the statute. One is that, which gives the widest meaning to the words and which makes a transfer or assignment of a claim or interest void not only as to the government and its officers, but as to the parties to the transfer or assignment. Upon this theory the money, when paid over to the original claimant, cannot be reached in his hands unless, after the allowance of the claim and the issuing-of a warrant for its payment, the provisions of the section were-complied with. This theory wholly forbids the- acquisition before this has been done of any right in the fund through any transfer or assignment, however formal the instrument or however just and innocent the transaction. The other theory is that the objects of the statute are accomplished by a construe

p. 492
.tian which makes' an assignment or transfer made before the allowance of a claim void as between the claimant and the government, but leaves the transferee, after the fund has come to the hands of the claimant, to assert such legal rights against the fund and avail himself of such legal remedies to enforce them, as exist in other cases of transfer.

The Supreme Court has consistently maintained that a transfer or assignment made before the allowance of a claim, was void at the election of the government, and that as against the assignee or transferee, the government may wholly disregard it, and that payment made to the original claimant by the government is a good acquittance of the liability, although it had notice of the transfer at the time. But the court has also decided that the government may recognize such a transfer and that payment to the transferee will protect it against any subsequent claim of the original party. (Bailey v. U. S., 109 U. S. 432 .) The principal case relied upon by the defendants to sustain their contention is Spofford v. Kirk ( 97 U. S. 484 ), and if what Mr. Justice Miller in Goodman v. Niblack (supra) characterizes as the strong language of the opinion, in that case, is to have the broadest application, there would be difficulty in holding that the assignment now in question can be upheld. But the transfer under consideration in Spofford v. Kirk was of part of a disputed claim then in controversy between the claimant and the government. The court soon began’to depart from the rigid interpretation of the statute indicated in Spofford v. Kirk. In Goodman v. Niblack (supra) it was held that the statute did not embrace the case of a voluntary general assignment by an insolvent for the benefit of his creditors, and that a claim existing against the government in favor of the assignor passed by the assignment. Mr. Justice Miller in his opinion, referring to the statute, said: “ Its sole purpose was the protection of the government and not that of the parties to the assignment.” 'The case of Hobbs v. McLean ( 117 U. S. 567 ) shows a further relaxation of the strict rule declared in Spofford v. Kirk, and the court, referring to sections 3737 and 3477 of the Revised

p. 493
Statutes, after stating that they were passed for the protection of the government, said: “ The purpose was not to dictate to the contractor what he should do with the money received on his contract, after the contract had been performed.” The case of Freedman's Saving and Trust Co. v. Shepherd, and Shepherd v. Thompson ( 127 U. S. 494 ) has an important bearing upon the present case. The facts are complicated. The question related to the conflicting claims of parties to two drafts which had been issued and delivered by the government to an attorney for-rent under a lease of premises made by one Bradley to the government in 1873, and to another sum of $787.50 paid by the government to a receiver for rent of the same premises, after June 6, 1878. One of the drafts was for rent for the-year ending June 30, 1876, and the other for the rent for two years prior to June 30, 1878. Thompson, one of the parties, to the action, claimed to be entitled to the drafts as pledgee of the rents, under an agreement dated June 21, 1877, made-between him and Bradley, the original lessor, and Shepherd,, his grantee. At the date of the pledge a suit was pending against the United States to recover the rent for the year ending June 80, 1876, in favor of Bradley. The case was finally decided in his favor in October, 1878. ' During the pendency of the suit a suit was brought for the rent for the two years ending June 30, 1878, and the second draft was given in settlement of that suit. Enough has been stated to show that Thompson claimed under a pledge made not only before an allowance of the rent due June 30, 1876,' but while, a suit against the United States was pending for its recovery, and that only part of the rents for the years 1877 and 1878, included in the pledge, for which the second draft was given, had become due when the pledge was made. Thompson’s right to the drafts was contested under section 3477 'of the Revised Statutes, the claim being that the pledge was void. But this objection was overruled and the court sustained Thompson’s claim to the drafts, and on appeal the judgment was affirmed. Mr. Justice Harlan, in pronouncing the opin
p. 494
ion of the court, said: “ The simple question is whether the money received from the government shall be diverted from the purpose to which Bradley, Shepherd and Shepherd’s trustees agreed in writing that it should be devoted, namely, the payment of the debts Thompson holds against Shepherd. This question must be answered in the negative, and in so adjudging we do not contravene the letter or spirit of the statute.” The case, although many more circumstances appear than are here stated, seems to us to go far in sustaining the claim of the plaintiffs in the present action. We think that the question cannot be said to have been decided adversely to their contention in the Federal Supreme Court. In our opinion a just construction of the statute does not invalidate the transfer of Witherby & Gaffney to the plaim tiffs, nor will the objects of the statute be defeated by the construction that such a transfer, made in the legitimate and usual course of busin ess, in good faith, to secure an honest debt, while it may be disregarded by the government, is good as between the parties so far as to enable the transferee, after the government has paid over the money to the claimant, to enforce as against him or those who take with notice, the interest or lien given by the assignment. The fact that the government may refuse to recognize any transfer or assignment, in connection with the general principle of law which avoids all agreements contrary to public policy, will be a sufficient discouragement to illegitimate transactions, or, at all events, it is all the law can justly interpose, having due regard to the exigencies of business and the protection of innocent parties.

The Supreme Court of Massachusetts, in Jernegan v. Osborn ( 155 Mass. 207 ) reached substantially the same conclusion as that to which we have arrived.,

The judgment should be affirmed.

All concur, except O’Brien, J., not sitting,

Judgment affirmed.

Cases cited