Throop Grain Cleaner Co. v. Smith

Assuming that the proceedings by which the plaintiffs attempted to secure a lien by attachment upon the debt alleged to be due from the defendant to E. P. Allis & Co. were regular and valid, we are brought directly to the real question in the case, viz., whether at the time of such levy the debt attempted to be levied upon was then due to Allis & Co., or had been previously transferred by them to the Farrell Foundry and Machine Company.

Both Allis & Co. and the Farrell Company were nonresidents of this state; Allis & Co. residing at Milwaukee, in the state of Wisconsin, and the Farrell Company in the state of Connecticut. The Throop Grain Cleaner Company and H. Cordenio Smith both resided in this state. The attachment referred to was issued in an action in the supreme court of this state, between the Throop Grain Cleaner Company, plaintiff, and Allis & Co. as non-resident defendants, and jurisdiction is claimed to have been acquired by the court in that action upon the allegation that Allis & Co. had property in the state subject to levy under attachment.

The only property of that character claimed to exist was the alleged indebtedness of Smith to Allis & Co. The attempted levy under the attachment was made on May 21, 1881. It is contended by the defendant that previous to that time Allis & Co., had transferred their debt against him to the Farrell Company and that at the time of such levy it was a debt owing by him to the Farrell Company.

The trial court held as matter of law that the debt had been transferred previous to the levy, and therefore, non-suited the plaintiffs. One of the main questions litigated upon the trial was, whether the alleged transfer by Allis & Co., was made with the intent and design, on their part, of defeating an intended levy upon such debt by the plaintiffs.

If this were proved, it was contended by the plaintiffs, that the alleged transfer would be fraudulent and void as to them. It may be assumed that such was the intent of Allis & Co., without affecting the result of this action, for the plaintiffs do not occupy a position which enables them to raise any question as to the bonafides of such transfer. This can be done only by a judgment-creditor in an action to enforce the equity of the creditors of Allis & Co. An

This equity was not the subject of a levy under an attachment, even if an attempt had been made to effect it. We may, therefore, in the further consideration of the case lay out of view all the evidence tending to show that the attempted transfer was made in bad faith, as it has no bearing upon the real issue in the case. The plaintiffs, however, upon the trial requested to be allowed to go to the jury on the question of fact as to whether the evidence showed a valid transfer of the debt prior to the attempted levy. This was refused by the trial court and the plaintiffs duly excepted to its ruling.

The learned general term was of the opinion that the evidence did not show, as matter of law, that transfer had taken place.

There was no conflicting evidence upon the question of the alleged sale, as it was effected entirely by written correspondence, and if a contract was thereby made, free from latent ambiguity or language of doubtful significance, a question of law is presented for the consideration of the court, and not a question of fact for the jury. Dwight v. Germania Life Ins. Co., 103 N. Y., 341 ; 3 N. Y. State Rep., 115.

This question must be determined from an examination of the correspondence passing between the parties; their relation to, and the circumstances surrounding the transaction at the time of the making of the alleged contract, and the acts of the parties in consummating the sale prior to the attempted levy. Ho claim is made here that the mere delivery to a third person of a check or draft drawn by a creditor upon his debtor effects a legal transfer of the debt; but it is contended that the correspondence accompanying the transfer of certain drafts, discloses an intention to effect thereby a transfer of the debt referred to in such correspondence. That an equitable assignment of an account may be effected in this way, even though it is not referred to in the draft or order, admits of no doubt. Thus it was held in Bisley v. Phœnix Bank ( 83 N. Y., 318 ), that the delivery by a creditor of a check or draft upon his debtor for the whole, or a part of a debt, to a payee therein named, to enable him more conveniently to recover such debt, does not preclude such payee, in an action against the debtor, from showing a parol contract aside from the check or draft, to transfer the debt itself. It was also said in the same case that “ an assignment of an account may be made without writing or delivery of any written statement of the claim assigned, so as to vest in the assignee a right to proceed, in his own name, for the recovery of the debt, provided only that the assignment is founded on a valid consideration between the parties.”

On the 10th day of May, 1881, Allis & Co., who were then indebted to the Farrell Company in an amount exceeding the contract liability of Smith to them, made their two sight drafts in favor of the Farrell Company upon Smith for the sums of $1,050 and $2,800 respectively, being the precise amount due upon the contract, and transmitted the same to the Farrell Company in a letter, of which the following is a copy:

“Milwaukee, May 10,1881.

“ Farrell Foundry and Manuf. Company,Ansonia, Conn.:

“We enclose two drafts on H. C. Smith, of Marcellus Falls, the one $2,800, the other $1.050, which kindly credit to our account. The $2,800 will be paid as soon as the rollers for which you have order, are delivered at Marcellus Falls. The other is now due. Kindly acknowledge.

“ Yours truly,

“E. P. ALLIS & CO.”

By letter of the same date they also advised Farrell Company that “our people to-day send drafts on Smith for amount due from him. We charge the amount to you in general account, and want you to credit the same and collect it. Please have no error in receiving and treating the drafts as belonging to you.”

These letters were apparently received at the same time by Farrell & Co., and must be treated together as parts of the same transaction, and constituting the conditions upon which the drafts were transmitted.

On the thirteenth of May thereafter Farrell & Co. replied to such letters as follows: “Yours of the tenth at hand. We have sent the two drafts onoH. C. Smith forward for collection, and will ship his rolls next week. Will report when drafts are paid. Have written him to honor $1,050, and to ask bank to hold the other until rolls arrive.” They also entered the drafts in their bill book as drafts due to them from

These letters constitute the whole correspondence between the parties in relation to the sale of the demand, and from which it must be determined whether such sale was thereby effected. This correspondence does not seem to us to be susceptible of any other construction than that the drafts were sent forward as representing the indebtedness of Smith to Allen & Co., upon a contract obligation, partly due and partly to become due thereafter, and for the purpose only of faciltating the collection of the amount owing by Smith. We think that this constituted an equitable assignment of the fund in question, under our decision in Brill v. Tuttle ( 81 N. Y., 454 ). It can hardly be supposed that the parties intended to go through an idle ceremony, such as the mere delivery of an unaccepted draft would imply; but it was intended thereby to effect the substitution of the liability of a third person to the Farrell Co. in place of that of Allis & Co. Thus, Allis & Co. say, “ we have sent your drafts on H. C. Smith for amount due from him, and want you to credit the same to us, and collect it.” This language can mean nothing else than that they intended to transfer a debt due them from Smith, and required the Farrell Co. to collect such debt from Smith. This could only be effected by the ownership of the debt represented by the drafts.

No liability from Smith to Allis & Co. then existed, except the contract obligation to pay for the machinery when received. There was no other transaction to which the correspondence could apply, and the amount of the drafts corresponded precisely with that of the contract obligation. The $1,050 was stated to be for property already received by Smith, and the $2,800 draft represented machinery which the Farrell Co. were to ship to Smith upon Allis & Co’s, previous order. Smith was not liable upon the drafts, either to Allis & Co or the Farrell Co. until they were accepted by him, and when they were delivered to Farrell & Co., unless they represented the contract obligation of Smith to Allis & Co. they had no pecuniary value whatever. It would be quite absurd to suppose that Allis & Co intended by the transaction to sell only their obligation upon the drafts as the makers thereof, or the Farrell Co.

That it was the intention of Allis &■ Co. to transfer the debt which Smith owned them is clearly shown, not only by their simultaneous notice to Smith of the assignment of the account, but also by the terms of the letters to the Farrell Company, accompanying the drafts in which they request them to credit the amount to Albs & Co., on account, which plainly implies the transfer of property as the basis of the requested credit. It is clearly impbed that the drafts represent an amount due from Smith to Albs & Co. on account for machinery sold and the expectation, if the Farrell Company accepted their offer, that they would credit the amount on Albs & Co.’s account and would assume the collection of the claim by whatever means were necessary to accomplish that object.

This impbcation is emphasized by the injunction that they wished no error made by Farrell & Co. in “receiving and treating the drafts as belonging to ” the Farrell Company. The answer to their propositions expresses no dissent from any of them, but assumes their acceptance and asserts the intention of the proposed transferees to act upon the assumption of their ownership of the claim due from Smith. They say: “The drafts are received and we have forwarded them for collection.” This seems to us to constitute an unquahfied acceptance by the Farrell Company of Abis & Co.’s proposition. The statement that Farrell & Co. had forwarded the drafts for collection, does not quabfy their acceptance in any degree for that was just what Abis & Co. proposed they should do, and they had no right to send the drafts forward except upon the terms imposed in Abis & Co.’s letters, requiring that they should be credited to Abis & Co., and should be cobected by the . Farrell Company as the owners of the claim represented by them. The Farrell Company had no right to collect the drafts on account of Abis & Co., for this was impliedly forbidden by the instructions accompanying the drafts. If they were not willing to credit the amount to Abis & Co. in accordance with the terms of the proposition, they had no authority to use the drafts for any purpose, and the use of the drafts by them was the equivalent of an express acceptance of the terms under which they were transmitted. They could not vary the contract proposed to be made by Abis & Co., except with their assent, and this they never received.

What the Farrel Company intended by their letter is clearly shown by their letter to Smith of May 19th in which they say that they had credited Albs & Company with the amount of the drafts and that they had become their prop

The implication is irresistible from the conduct of the parties and the language of their correspondence, that they all understood that the delivery and acceptance of the drafts were intended to carry with them the debt which they represented and we think it would be doing violence to the expressed intent of the parties to hold otherwise.

We have not been able to discover in the evidence any fact or reasonable inference to be drawn therefrom, conflicting with the views above expressed. The action of the parties in permitting Allis & Company to allow the amount of a counterclaim made by Smith after the alleged transfer, has we think no bearing upon the validity of the previous transfer. It was entirely competent for the parties by consent to make such deduction, and it was proved that this was done by virtue of an agreement of the Farrell Company, Smith, and_ Allis & Company before the attempted levy by the plaintiff.

1Íeither was it of any consequence whether the Farrell Company actually credited Allis & Company with the amount of the drafts in their books of account. If they, in fact, bought the demand of Allis & Company before the attempted levy, it was entirely unimportant whether they entered the credit in their account books. They would still be liable to pay for their purchase as they had agreed to do.

If there had been any doubt as to when the contract of sale had been consummated, this evidence might have affected that question, but no question arises but that the whole correspondence relating to the transfer had been completed before the attempted levy. The statement in the Farrell Company’s letter that they had forwarded the drafts for collection, is not only not inconsistent with the theory of a sale, but is notice to Allis & Co. that they had acted on the latter’s proposition, and can be interpreted only as meaning that they had forwarded them under the terms imposed by Allis & Co.’s letters transmitting the drafts.

We are, therefore, of the opinion that the case presented no question of fact which required submission to the jury.

We find no exception in the case authorizing the plaintiffs

Neither can any question arise in this case with reference to the sufficiency of the consideration agreed to be paid by Farrell & Co. upon the transfer of the debt for, as between the parties, an agreement to credit it upon a precedent debt is a valuable consideration.

. We are, therefore, of the opinion that the order of the general term should be reversed, and judgment rendered for the defendant upon the order of the trial court, non-suiting the plaintiffs, with costs.

All concur.