Bank of Harlem v. City of Bayonne

Green, V. C. The city officials seem to have proceeded on the theory that ¡acceptance on its part was necessary to the validity of a transfer ■of money payable by the city on a contract. The city clerk was ■directed by the council, with no little formality, to return to the •complainants the assignments and notices which had been served, ¡in one instance, “ with the explanation that the city cannot recognize any such notice.” The position assumed misconceives the mature of, if it does not entirely ignore, those transfers of particular funds, known as equitable assignments, recognized and ■enforced by a court of equity. It is settled that' an assignment for a valuable consideration of ¡a sum of money due or to grow due on the performance of an ■existing contract, will, on notice thereof being given to the debtor, operate at once, or when the fund is created, as an equitable assignment of so much of the fund as is covered thereby, ■subject to all valid prior charges. Superintendent &c. v. Heath, 2 McCart. 22; Shannon v. Mayor of Hoboken, 10 Stew. Eq. 123; affirmed on appeal, 10 Stew. Eq. 318; Kirtland v. Moore, 13 Stew. Eq. 106; Brokaw v. Brokaw, 14 Stew. Eq. 315; Lauer v. Dunn, 115 N. Y. 405; Story Eq. Jur. § 1040; 3 Pom. Eq. Jur. § 1280. While, properly speaking, an assignment cannot be made •of a subject which does not exist, such as a fund to become due on the future performance of a subsisting contract, yet equity, ■on the possible debt ripening into an enforceable specific money ■liability, treats the agreement as an assignment pro tanto of the fund, and, by force thereof, vests the equitable title to the money ¡in the assignee. Field v. Mayor, 6 N. Y. 179; S. C., 57 Am. [253] Dec. 435 and notes; Hall v. City of Buffalo, 1 Keyes 199; Brill v. Tuttle, 81 N. Y. 454, 457; Brown v. Dunn, 21 Vr. 111, 113; 2 Spenc. Eq. Jur. § 852; 3 Pom. Eq. Jur. §§ 1280, 1283, n. 2. To impound the amount in the hands of the debtor, notice of' the assignment must be given to him, but no particular form of' notice is required; any writing or act which' clearly indicates-that the assignor intends to make over the fund belonging to’ him amounts in equity to an assignment of the fund1. Bower v. The Hadden Blue Stone Co., 3 Stew. Eq. 171; S. C. on appeal, sub nom. Lyon v. Bower, 3 Stew. Eq. 340; Shannon v. Mayor, supra. On notice being given to the debtor,, and the sums being earned under the contract, the debtor becomes trustee or quasi'trustee for the assignee as to the amount assigned, subject to. existing equities and valid prior charges thereon. Story Eq. Jur. § 1044; 2 Spenc. Eq. Jur. § 857; Hall v. Buffalo, supra; Darle v. Hall, 3 Russ. 1, 57; Meme v. Bell, 1 Hare 73, 84. From this it follows that neither payment to nor a release or discharge by the assignor, after notice of the assignment, can affect' the rights of the assignee against the debtor. Jones v. Farrell, 1 DeG. & J. 208; Brill v. Tuttle, supra; Field v. Mayor, supra; North Bergen v. Eager, 12 Vr. 184; 2 Pom. Eq. Jur. § 704. It is evident from this statement of the incidents of unequitable assignment that acceptance by the debtor of the order or assignment is not, in equity, necessary to its validity as a. transfer pro tanto of a fund in his hands; It takes effect from the acts of the assignor and assignee, and the debtor, so far as the right to the fund is concerned, is but the instrument through whormthe transfer is to be actually made. ’(The debtor’s acceptance or promise gives the assignee an action at law against him, nofcon-the assignment, but on the promise; in equity, it neither creates, increases or diminishes his liability to the assignee. 3 Pom. Eq. Jur. § 1280 and note 1. The answer of the city admits the making of the contract;, that Phelan commenced the work under it, and certain provisions of the contract; it puts in a denial of other allegations of the254 bill, and of knowledge sufficient to form a belief as to the remainder. As originally filed, the answer sets up as a defence that the complainant, prior to the $1,500 loan, had loaned Phelan $2,000, and sought to make an arrangement with the city whereby the payment of the loan of $2,000 would be guaranteed to the complainant, which the city refused to do, and notified complainaut, through its officials, that the city would not in any way recognize any transfer, assignment or order, which should be made by Phelan, or Munn & Phelan, for the payment of any moneys to grow due upon the contract. That complainant was notified of the first payment to Munn & Phelan being ordered, and advised to recoup itself from the moneys so ordered paid, and that the subsequent loan of $1,500 was made with full knowledge of all these facts and after payment had been made of the loan of $2,000. ■ This statement, contained in paragraph four of the answer, was, under Rule 224, struck out on motion. The grounds for granting such motion were, that the facts therein stated, if true, furnished no defence to the action for the reasons which are hereinbefore stated. . After the close of the evidence counsel for the city urged that the complainant was not entitled to a decree on two grounds— first, that no valid assignment had been made out; and, second, that notice to the city had not been proven. The first objection went not to the form of the assignments, but to their execution. There were two, one in the name of “ John Phelan,” the other “Munn & Phelan,” but each was signed by John Phelan ¡Aersonally. Jfc Was argued that the debt to the complainant was money borroAved by Phelan on his individual ■note, to secure Avhich ho could not use the partnership credit or property. In support of this position counsel cited Lind. Part. (Text Book Series) 201, 203, note 1; Mecutchen v. Kennedy, 3 Dutch. 230; Farmers and Mechanics Bank v. Green, 1 Vr. 316; Craig v. Hulschizer, 5 Vr. 363. If this case sIaoavs nothing Avhich takes it out of the principle of those cases, the contention of defendants must prevail. In the cases cited, except the last, the non-acting partner sought relief from the act of the [255] ■other. In this Munn, the passive partner, is a party, and makes no objection to anything done by his partner. Nor could he well do so. It appears that on the very day the contract was signed he assigned to Phelan all moneys arising from the contract except percentage, which he was to receive only out of -the last payment, Phelan only to have a right to receive all other moneys payable for and on said contract. It appears by his testimony that Phelan was to do all the work and furnish all the money, and by Phelan’s testimony that the original loan by complainants, which was the real basis of the one in question, was for money •used on the work. There is no pretence- that the amount covered by the assignments was that from which Munn’s percentage was to be paid. The money was therefore, as between Munn & Phelan, due to and belonging solely to Phelan, and which he alone -had the right to receive from the city. As such, so far as the ■partnership was concerned, Phelan could control and dispose of it. The citation from Lindley was urged as an authority that Phelau had no right to sign the firm name to one of the assignments ; but such authority relates to the use of the firm name to negotiable instruments. In this case, he had given his own ■assignment, but the contract was with Munn & Phelan. It might be that the city would not recognize his individual assignment, and would require the name of the firm. The money belonging to him, as against Munn, and the assignment being given to secure an advance of money to prosecute the work, there was no fraud in his using the name of his firm, if it would facilitate the collection of the money. Boswell v. Green, 1 Dutch. 390, 396. The city had notice of this authority in the assignment itself, which recites that he holds an assignment of said contract and all moneys due, and to’ become due thereunder, with power of attorney to receive the same. It is claimed that the assignments cannot be recognized because -they violate an express provision of the contract. That provision is— “And the said party of the second part further agrees that he will give his personal attention constantly to the faithful performance'of said-work, and that he will not assign nor sublet the same, but will keep the same under his ■control.” [256] This is simply a provision against subletting, inserted to secure-the performance of-the contract; its violation might have authorized the city to take the work out of the hands of another person-attempting to do it, but cannot control the disposition of money earned under the contract by the contractor, accepted by the city and certified as done under its terms. This line of defence is-open to the criticism that it is disingenuous, in view of the fact that it appears by the warrants for $600 and $2,000 that they were actually paid on endorsements, having the same authority as the assignments thus objected to. Did the city have proper notice ? The charter of Bayonne is found in the laws of 1872. P. L. of 1872 p. 686. By section 17 it is provided that the treasurer shall pay out money only upon the warrant of the board of councilmen, signed by the mayor and countersigned by the city clerk, and no warrants on the city treasurer shall be authorized' except in pursuance of an order of said board, passed at a stated meeting and entered on the minutes. In this case both of the-assignments were given to the city clerk and by him presented to the council the last one was read to the council and discussed.. The council was the body under the charter whose vote controlled the expenditure of all money, and it is difficult to determine what better service could have been made. In Field v. The Mayor, supra, and in Hall v. The Mayor supra, notice was-served on the comptroller; in Shannon v. Mayor, 10 Stew. Eq. 123, service was on the city clerk. In this case, on the city clerk,, who presented the assignments and notice to the council. I am of opinion that the assignments given to the complainants were properly brought to the notice of the city, and that the-same were valid, equitable assignments of $1,500 of the payments made thereafter; that the delivery of the warrants for-$600 and $2,000 to persons other than the complainant was in violation of its rights, and that it is entitled to recover the sum) of $1,500, with interest on $600 from October 15th, 1889, and on $900 from November 5th, 1889, the dates, respectively, of' the two payments.