Ashley & Rumelin v. City of Portland

BURNETT, J. 1. Without dispute, the testimony discloses that Hart assigned to the plaintiff all his March earnings, amounting to $1,613.97, and that the city paid to the plaintiff that sum of money. It is uncontroverted, also, that during the month of April he earned $187.30, which the city paid to the plaintiff. Afterwards during that month he earned a total of $735.90 under the contract. Prior to that time he had become indebted to the city in various sums for overpayment, retained collections and wood he had disposed of, aggregating $779.52, all of which occurred before he earned anything during the month of April. It appears in evidence, also, that the New Amsterdam Casualty Company was surety on the bond Hart had given to the city and that on his financial collapse and abandonment of the contract the Surety Company took it up and completed it. With these facts appearing before it in the evidence without dispute, the Circuit Court seems to have adopted the theory that inasmuch as the city had exacted a bond from Hart it should look to its security without claiming any offset against what he had earned and assigned to the plaintiff; and so, notwithstanding the fact that there was more due from Hart to the city than from the city to him,' the Circuit Court entered judgment against [43] the city for his side of the account assigned to the plaintiff. “In the case of an assignment of a thing in action, the action by the assignee shall be without prejudice to any setoff or other defense existing at the time of, or before notice of the assignment; but this section shall not apply to a negotiable promissory note or bill of exchange transferred in good faith and upon good consideration before due'”: L. O. L. 28. This is but the codification of a very familiar principle, that the transfer of a demand upon an open account is without prejudice to any counterclaim or setoff existing at the time in favor of the person against whom the assigned demand has accrued. The assignment of Hart’s claim against the city did not put the plaintiff in any position more favorable than that of Hart himself. Hence the plaintiff took its claim under the assignment without prejudice to the right of the city to counterclaim against it for the full amount of Hart’s indebtedness to it'arising out of the transaction involved in the contract. Although secured by the bond of the Surety Company, the city would not have been -safe in paying the amount either to Hart or to his assignee. It would have depleted the fund to which the Surety Company was entitled in subrogation on assuming the performance of the contract, and would have operated to- release the surety. It is analogous to the situation portrayed in the ease of Derby v. United States Fidelity & Guaranty Co., 87 Or. 34 (169 Pac. 500), to the effect that a contractor on a public work requiring a bond for the faithful performance of the contract, cannot assign his earnings under the agreement in such a manner as to prevent the surety from becoming subrogated to his rights and to the fund accruing when it [44] undertakes to carry out the stipulation despite his default and failure: See, also, Labbe v. Bernard, 196 Mass. 551 (82 N. E. 688, 14 L. R. A. (N. S.) 457, and note). The cases cited by the plaintiff, such as McDaniel v. Maxwell, 21 Or. 202 (27 Pac. 952, 28 Am. St. Rep. 740); Willard v. Bullen, 41 Or. 25 (67 Pac. 924, 68 Pac. 422); Wakefield, Fries & Co. v. Parkhurst, 84 Or. 483 (165 Pac. 578), to the effect that the assignment of such a claim or any part thereof is good in equity as a transfer pro tamdo, are not applicable here, for in all of them the person from whom the money was primarily due had no offset or counterclaim against the payment and was practically but a stakeholder, indifferent between the several claimants. It would not be common justice to compel the city to pay the claim of the contractor who has embezzled its funds to a greater amount than he had earned. The plaintiff is in no better plight by reason of its assignment. No proper conception of the undisputed testimony in the case would justify the conclusion embodied in the judgment of the Circuit Court. It is therefore reversed and the cause remanded with directions to enter judgment for the defendant. Reversed With Directions. McBride, C. J., and Benson and Harris, JJ., concur.