York v. Conde — 39 N.Y. St. Rep. 945

Majority

p. 945

Anson E. York and Wallace W. Starkweather, Resp’ts, v. William W. Conde and John C. Streeter, App’lts.

(Supreme Court, General Term, Fourth Department,

Filed July 7, 1891

Headnote

Equitable assignment—Priority.

W. & G., who had a building contract with the government, assigned a portion of the money to become due to plaintiffs in payment for material furnished. Prior thereto the defendants had endorsed notes for W. & G. to enable them to procure funds to prosecute their work, under an agreement by which it was agreed that they should have the avails of such contract when it was closed up with which to pay such notes, and that the check when-received should be turned over to them. Held, that this constituted an equitable assignment of the fund, and that defendants were entitled to the moneys.

This was an appeal from a judgment entered in Jefferson county, December 9,1890, for $2,661.77, damages and costs. A verdict was directed by the court in favor of the plaintiff, t In September, 1889, the firm of Witherby & Gaffney, who were contractors and builders, entered into a contract with the government of the United States to construct certain buildings known as officers’ quarters at Madison Barracks, Sacketts Harbor, H. Y.

Subsequently, the plaintiffs, at the request of Witherby & Gaffney, sold and delivered to them on credit large quantities of lumber and building material, which was used in the construction of such buildings, and was of the value of more than $3,000.

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Witherby & Gaffney, being thus indebted to the plaintiffs, before the completion of their contract, and on March 27,1890, executed to them an assignment of $3,000 of the money which should thereafter become due and owing them from the government, to be applied in part payment of their indebtedness.

The moneys due Witherby & Gaffney were afterwards paid to-the defendants, with notice of' the plaintiffs’ assignment.

The defense interposed was that prior to the assignment to the plaintiffs by Witherby & Gaffney, the defendants had become accommodation endorsers for Witherby & Gaffney to the extent of upwards of $4,000; that the defendant Conde was a surety to the government on the contractors’ bond, and that these endorsements were essential to enable the contractors to carry on their work, and the proceeds thereof went into the buildingsj that, before such endorsements were made, Witherby & Gaffney promised the defendants that they would devote the moneys realized from the government on the contract to the payment of the notes thus endorsed, and would transfer and assign the evidences, of the Government’s indebtedness to the endorsers to be devoted to that purpose; that thereafter, in pursuance of that purpose, and on April, 18, 1890, Witherby & Gaffney, who at that time were getting a further endorsement of $500, assigned the same moneys in writing to the defendants; that afterwards, and on May 15r 1890, the government having delivered to Witherby & Gaffney a draft for the moneys due on the contract, less $110 penalties for non-performance as to time, they transferred the same to the defendants, who discharged the endorsed notes therewith.

On the trial the defendants also insisted that the assignment by Witherby & Gaffney to the plaintiffs, as well as the assignment to-themselves, was void under § 3477 of the United States Revised Statutes.

The defendant Streeter testified that, at the time of the first endorsement, Mr. Gaffney said, “that under no circumstances would anything step in or interfere with the payment of these notes; that we should have the avails at the closing up, the payment from the government; that when it was transferred or delivered to him, it would be transferred to us to wipe out these notes; and that he regarded it as a sacred matter; it would be the first liability that would be canceled. There were several talks of that character from September on, as the endorsements were made, and these talks were had before March 27, 1890. Mr. Gaffney endorsed the check or draft and turned it over to Mr. Conde in my presence. Conde and I.endorsed this paper jointly by arrangement between us three. He had to have help, or he could not complete the job.”

Mr. Conde testified: “ Mr. Gaffney repeatedly told me that if it should become necessary, he would assign the contract with the government at any time I desired it; that he would assign over all right and title that he had in the property. I replied that I didn’t want the contract. The understanding between us was, that at the final settlement, that out of the final moneys which he-got, there was enough percentage kept back, and that when that

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was paid these notes would be retired. He promised to turn over the check or draft after he got it to me. That was at the time the endorsements, or some of them, were made. It was stated that it was to be turned over for the retiring of these notes endorsed by me and Mr. Streeter. Those notes were made before March 17,1890. There were several talks like that before March 17, 1890, and Mr. Gaffney did so turn over the draft to me when he received it on financial settlement from the government.”

The trial judge held that § 8477 of the U. S. R S. did not apply to the assignment in question; that the plaintiffs’ assignment was therefore not void, but gave them an equitable lien on the moneys in question; that such equitable lien could be enforced in an action at law; that what took place between the defendants and Gaffney at the time they commenced to endorse their paper did not operate to create a lien upon the fund, or any right to have the fund applied to the payment of the notes endorsed by the defendants; that their right to have the fund applied to the payment of such notes was first created at the time of the first transfer in writing to the defendants.

The defendants duly excepted to the direction of a verdict by the court, and also duly excepted to each of the propositions stated by the court in arriving at the conclusion to direct a verdict.

Brown & Adams, for app’lt Conde; Watson M. Rogers, for app’lt Streeter; Henry Purcell, for resp’ts.

—The controversy between the parties to this action was as to the priority of their respective rights to the fund in question.

The plaintiffs’ claimed title was founded on an assignment to them made by Witherby & Gaffney, March 27, 1890. The defendants’ rights were based upon an oral agreement with Witherby & Gaffney, made long before the plaintiffs’ assignment, which the defendants contend amounted to an equitable assignment to them of the fund in question.

If the defendants’ contention is sustained by the proof, or if the evidence was sufficient to present a question of fact for the jury upon that question, the judgment must be reversed, and no other question need be considered.

The defendants’ testimony was to the effect that in or about the month of September, 1889, the firm of Witherby & Gaffney applied to the defendants to endorse the notes of that firm to enaMi it to procure the money necessary to prosecute the work under its contract with the United States government; that the defendants agreed to, and did, endorse such notes; that in consideration of such agreement and endorsement by the defendants, said firm expressly agreed that the defendants should have the avails of such contract when it was closed up, with which to pay the notes which should be endorsed by them, and that when the check or draft for the work should be received by said firm, it should be delivered to the defendants to be applied by them in paying such notes.

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IE this agreement was made as testified to, we think, as it was-founded upon a valuable consideration, it amounted to an equitable assignment of the fund in question, and that the defendants-were entitled to receive and use it for the payment of the notes endorsed by them. That such an agreement amounts to an equitable assignment seems to be well settled in this state. Williams v. Ingersoll, 89 N. Y., 508 ; Fairbanks v. Sargent, 104 id., 108; 5 N. Y. State Rep., 531; S. C., 117 N. Y., 320 ; 27 N. Y. State Rep., 411. That the defendants subsequently took a written assignment does not affect such rights. The assignment was not invalid because it was oral. Risley v. Phenix Bk. of City of N. Y., 83 N. Y., 318 ; Coates v. First Nat. Bk. of Fmporia, 91 id., 20.

We think the court erred in holding, as a matter of -law, that the defendants acquired no right to the fund in question under their agreement and directing a verdict for the plaintiffs, and that, the defendants’ exception thereto was well taken.

Judgments reversed on the exceptions and a new trial ordered,, with costs to abide the event.

Hardin, P. J. and Merwin, J., concur.