Throop Grain Cleaner Co. v. Smith

(dissenting). — The defendant had made a contract with Allis & Co. for the purchase of some flouring mill apparatus to be sent by railroad to him at Marcellus, N. Y. A portion of this was manufactured by Allis & Co., at Milwaukee, some at Jackson, Mich., and some by the Farrell Foundry and Machine Company, of Ansonia, Conn. The portions from the two former places were shipped to the defendant in April, and that from Ansonia in May, 1881. And it all amounted to $3,850. By the contract, the title to the property was vested in the defendant when loaded on the cars and consigned to him, and therefore the levy of the attachment on the property was ineffectual (29 Hun, 493). This action is in aid of the attachment (Code Civil Pro., sec. 677). And the important *309question is, where was the legal title to the claim against the defendant for the property so contracted to be sold, and sold by Allis & Co. to him at the time of the levy of the attachment, on the 21st day of May, 1881? On the part of the defendant, it is contended that it was not then in Allis, but by transfer from Allis & Co. the Farrell Foundry Machinery Company had taken such title. While the contention of the plaintiffs is, that no effectual transfer had been- made to the latter company, and that the attempted transfer was fraudulent and void as against the plaintiffs, the Throop, &c., Company, a creditor of Allis.

The plaintiffs’ right to maintain this action is dependent wholly upon the creation of a specific lien by the levy of the attachment, and that was not accomplished unless the legal title was then in Allis to the claim against the defendant. If a ■transfer had been in fact made of it to the Farrell, &c., Company, the attachment levy was not effectual to furnish any lien or right of the action. The question whether or not the transfer was fraudulent as against the creditors of Allis cannot arise, nor is it entitled to consideration in this action (Anthony agt. Wood, 96 N. Y., 180; Lawrence agt. Bank of the Republic, 35 id., 320.)

It seems that the attachment had been levied May 7th upon the machinery which had arrived at Marcéllus, and on the 9th of May the defendant advised Allis & Co.' by telegram of the levy; and on May 10th that company sent to the Farrell, &c., Company two sight drafts on the defendant, ^ one for $1,050 and the other for $2,800, and by letter wrote the company that the drafts had been sent and requesting credit for them; and by another letter of the same date to the cdmpany say: “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.” And by letter of the same date Allis & Co. say to the defendant: “We have to-day assigned our account against you to the Far*310rell Foundry and Machine Company, of Ansonia, Conn. You will kindly honor their drafts when presented.” Farrell & Co., by letter of May 13, acknowledge receipt of that to them of the 10th, and say to Allis & Co.: “We have sent the' two drafts on H. C. Smith forward for collection. * * * Will report when the drafts are paid.” And May 19th the Farrell Company wrote the defendant: “We have credited the drafts on his Allis & Co.) account, they became ours, * * * and we would like New York drafts for the amount, as you and he agree.” And evidence was given tending to prove that Allis & Co. charged the amount of the claim to the Farrell Company when the drafts were sent to them, and that the latter company made an entry of the drafts on their bill book, but did not place them to the credit of Allis & Co. by any entry in their account with them. That at the time the drafts were sent to, and the request made of the Farrell Company to credit the amount, the indebtedness of Allis & Co. to that company exceeded the amount of those drafts.

The evidence was sufficient as between those parties to support a transfer of the claim against the defendant to the Farrell Company. It is, however, contended by the learned counsel for the plaintiffs that such fact was ' not conclusively established, but that the evidence, at most, presented a question of fact for the jury which should have been submitted to them. The transaction rested wholly in written communications.

The drafts were sent with information that the amount was charged in account and with request of the Farrell Company to so credit them.

The latter company received the drafts and advised Allis & Co. that they had sent them forward for collection, and informed the defendant that they had given Allis & Co. credit for them. This, as between the parties, would seem to take from the latter the right to collect the claim and vest it in the Farrell Company. The fact that the drafts were sent forward by it on the receipt of them, with information to Allis & Co. that they were so used, was an effectual adoption of the ex*311pressed purpose for which, they were sent to and received by them. The two drafts correspond in amount with that of the amount of the defendant’s liability upon his contract for the supply of machinery, and there was then no other existing dealing or transaction between him and Allis & Co.- Those drafts were understood to be, as they were in fact, drawn on account of such liability or debt, which in some states would give to the drafts, as between the drawer and' payee, the effect of an equitable assignment of the claim (Daniel on Neg. Insts., secs. 17-28; Mandeville agt. Welch, 5 Wheat., 277; Roberts agt. Austin, 26 Iowa, 315; Forgaities agt. Bank, 12 Rich, 518; Mann agt. Buck, 25 Ill., 35).

In this state, the rule is such that the mere drawing and transmission of the drafts by the drawer to the payee would not have the effect of an assignment of the fund or debt due from the defendant, as the drafts were not in their terms drawn upon the particular fund, but were in form negotiable bills of exchange, and the acceptance by the defendant was requisite to effect an assignment of the debt or of his liability to pay it (Attorney-General agt. Continental Life Ins. Co., 71 N. Y., 325; S. C., 27 Am. Rep., 55). But here the defense does not rest alone upon the effect of the drawing and receiving the drafts. The intention and purpose of transfer are expressed in the correspondence, and is necessarily by it so understood by all the parties to the transaction.

The delay in acceptance by the defendant was not caused by any misunderstanding or want of acquiescence in that respect, but to obtain indemnity against the proceedings taken by the Throop, &c., Company to charge the defendant with liability to it for the amount of the debt. The reason which induced the transfer does not defeat its operation as such between the parties, but goes only to the good faith of the transaction. It rs evident from the correspondence that the reason and one purpose of the transfer was to defeat the right of the Throop, &c., Company to obtain a lien upon the claim by attachment or to appropriate it to the payment of the judgment, that the com*312pany might recover in its action against Allis. But there is not sufficient in this and the circumstances as between Allis & Co. and the Farrell Company to so qualify the transaction as one for collection of the debt simply as distinguished from and in exclusion of a transfer. While the former result was in view, the right of the Farrell Company to the fund was given by the transfer, and could not be diverted by Allis & Co., although as against a creditor of the latter permitted to allege fraud as against their creditors the transfer would be treated as void. The fact that the entire amount of the drafts had not become due at the time they were drawn is not important, as the liability to pay was in a then existing contract for the purchase of property a portion of which had then been delivered. The residue was to go from the Farrell Company and was delivered before the levy of the attachment

The transfer covered the debt arising out of the liability of the defendant given by such contract; and when the Farrell Company sent forward the drafts for collection they advised the defendant that the rest of the property would be delivered the then next week and requested him to have the bank hold the larger draft until the arrival of such residue of the property.

In Bills agt. National Park, Panic (89 N. Y., 343), and Gibson agt. Same (98 id., 87), the fund in question belonged to the corporation debtor at the time the attachments were levied and the outstanding certified checks drawn upon it were then held by its officer for its purposes, and did not go into the hands of a bona fide holder, but were paid to such officer by transfer to his individual credit and the fund used for the benefit of such debtor. The lien of the attachment was held effectual to support the actions against the bank because it wa’s chargeable with notice of the relation of the officer. The checks were drawn by and payable to him as such.

The cases cited by the plaintiffs’ counsel relating to the effect of the levy of an attachment upon tangible property, capable of manual delivery, which had been transferred in fraud of creditors, do not necessarily have any application to the case at bar. *313In such case the lien of attachment will support an action in aid of it, and of the execution issued upon the judgment recovered in the action, and the plaintiff may attack the transfer as fraudulent against the creditors of the debtor (Rinchey agt. Stryker, 28 N. Y., 45; Frost agt. Mott, 34 id., 253). But no sucb lien is acquired upon choses in action, not tbe subject of levy by execution, as against a fraudulent assignment

The question of good faith of the assignment, or fraud as against creditors, cannot arise in an action by tbe attaching creditor in support of tbe lien of bis attachment.

Tbe remedy for relief in sucb case is in equity only by action in tbe nature of a creditor’s bill (Thurber agt. Blanch, 50 N. Y., 80; Anthony agt. Wood, supra).

Tbe view taken of tbe case leads to tbe conclusion tbat there • was no evidence to support a verdict for tbe plaintiffs; and tbat • tbe motion for a new trial should therefore be denied, and judgment directed for tbe defendants.

If Allis & Co. sold and transferred the debt in. suit to the Farrell Company before the attachment was levied-*303thereon, then this action cannot be maintained, although such sale was void in law as against the attaching creditor. We all concur in this proposition, on the authority of Anthony agt. Wood (96 N. Y., 180), Pinchey agt. Striker (28 id., 45).

The attachment could become a lien only upon such choses in action as belonged to the debtor at the time of the levy. Whether or not there was such a transfer of' the title to the demand in question as the defendant now sets up was a mixed questiou'of fact and law.

The sheriff sought to make a levy on.the 21st of May, 1881, by leaving a proper notice with the defendant Allis & Co., being non-residents. ' Up to this time, all the negotiations relating to a sale and transfer had been carried on by correspondence between Allis & Co. and the Farrell Company. From their letters, and the attending circumstances, tlpe fact in issue is to be'determined. It may be conceded that Allis & Co. were-desirous to divest themselves of all title to their demand against the defendant, with a view of placing it beyond the reach of the attachment proceedings. But this they could not accomplish without the assent of the Farrell Company to become a. purchaser and to take the title.

On this question, in my judgment, the evidence is not conclusive, and the case should have been submitted to the jury for their determination. The acts of Allip & Co., standing alone, could not affect a transfer. They never executed any paper which in form constituted a sale and assignment of the debt to the Farrell Company. The negotiations relative to the • sale were commenced by Allis & Go.] and at most was a proposition on their part to sell and transfer the debt to the Farrell Company. Therefore, at the time of the levj7', the title was still in Allis & Co., unless prior to that their proposition had been accepted by the Farrell Company, and became the purchaser and assignee of the demand.

In terms, the'latter company never consented to purchase the demand and take the title thereto. Neither did they do any act on their part which the court can say as a matter of ’ *304law was an agreement to purchase the demand against the defendant Smith. In their first letter, under date of May 10th, inclosing the two drafts, Allis & Co. made the request of the Farrell Company to credit their account with the amount of the drafts. In a reply written three days thereafter, the Farrell Company acknowledged the receipt of the drafts and stated that they had been forwarded “for collection,” and that they “will report when drafts are paid.” The'letter of Allis & Co. does not intimate a desire to sell the debt against which the drafts were drawn. In the usual and ordinary course of business between merchants and traders, the drafts would be regarded as sent for collection, and as a mearis, when paid by the ■drawee, of placing funds in the hands of the payee for the purindicated letter of instruction.

It also appears That on the same day their first letter was dated, Allis & Oof sent another letter to the Farrell Company relative to the drafts which were inclosed in the first, in which they say: “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.” It does not clearly appear from the evidence that this letter had been received by the Farrell Company when •they sent their letter of the 13th, to which reference has been made. If it was in hand at that time, the fact that in their reply they wholly omitted to refer to the contents of the last letter written by Allis & Co., has much significance as indicating that they did not assent to the proposition to treat the drafts as their own, and this is the more so when considered in ■connection with the fact that they never did credit Allis & Go. with the drafts, and the evidence tends to show that they did not treat them as their own until the drawee had accepted and paid the same, which was after the levy made by the sheriff. If in fact the last letter was received by the Farrell Company, after they had sent the one under the date of the 13th of May, then the same significance may be given to their omission to *305acknowledge its receipt, or reply to tbe same in any manner until after the attachment was served. It was for the jury to say whether the omission on the part of the Farrell Company to reply to the letter amounted to an assent upon their part to accept the proposition of Allis & Co. to become the purchaser of the debt against the defendant Smith. The letter of the 19th of May, written by the Farrell Company to the defendant, in which they stated that they have credited Allis & Co. with the drafts, and that they were the owners of the same, is not conclusive evidence in the face of the other circumstances, that they had assented to become purchasers before the levy of the attachment. It was not addressed to Allis & Co., and whether it was received by Smith before the attachment was levied, does not appear. As a matter of fact, the account of Allis & Co. had not been credited with the amount of the drafts. As against the evidence on which the defendant relies for the purpose of showing title in the Farrell Company, at the time of the levy, there are many facts and circumstances which would have justified the jury in reaching the conclusion that the latter never assented to the proposed sale and did not become a purchaser of the claim prior to the levy. The defendant Smith was not a debtor to Allis & Co. at the time the drafts were •drawn and forwarded to the Farrell Company. The contract to supply machinery was then unexecuted in part, and the defendant was under no obligation to make any payment until it was fully performed, and he assumed that .position on refusing to accept the drafts. There is another circumstance indicating that Allis & Co. did not regard that they tad surrendered all control over the contract with the defendant, for as late as the 17th of May they agreed with Smith to abáte from the contract the sum of $385, against which their draft was drawn. After the levy was made, and in a letter dated May 30th, the Farrell Company assent to that arrangement

There is also evidence which, I think, tends to show that after the levy was made, and before the defendant paid the *306drafts, Allis & Co. gave their notes to the Farrell Company for balances found due from them without deducting therefrom, or claiming the right to do so, the amount of the drafts, and thus indicating that it was not the intention of the Farrell Company to treat the drafts as so much paid on their account against Allis & Co.

If the Farrell Company consented to accept the proposition made to them by Allis & Co. to purchase the drafts, and the minds of the parties met on the terms of the bargain, and the drafts were sent and delivered to the payee, as a mode of effecting the transfer, the title, doubtless, did pass as between those parties, although the drawee refused to accept the same. But sending forward of the drafts alone, without any further arrangement between the parties relative to a bargain and sale of the debt, would not be' sufficient to transfer either the legal or equitable title thereto.

A check or inland bill of exchange, drawn in the ordinary form, not describing any particular fund, or using any words of transfer of the whole or any part of any amount, standing fi> the credit of the drawer, does not operate as an ’ assignment, either actual or equitable, of the funds of the drawer in the hands of the drawee. Such check or draft to have the effect of an equitable assignment must be drawn on a particular specified fund (Attorney- General agt. The Continental Life Ins. Co., 71 N. Y., 325).

At the time these drafts were drawn, and until after the levy was made, Smith was not a debtor to the drawer in any sum whatever, for the contract between him and Allis & Co. was unexecuted in part, and in a legal sense he was not indebted to the drawer, nor were there any funds in his hands belonging to Allis & Co.

A chose in action may be assigned by parol, yet, to constitute such an assignment, there must be a surrender of all control over the demand by the creditor, and it must be shown that the appropriation of it was absolute and unqualified. If the case had been submitted to the jury, and they had found, as I think *307they would have been justified in finding, from the evidence that at the time the drafts were sent forward the Farrell Company parted with no value on receiving the same and did not reliquish any right which they had against Allis & Co., then there was no transfer of the demand, nor an equitable assignment of the same (Rupp agt. Blackford, 34 Barb., 629; Kissell agt. Albertus, 56 id., 365).

The general rule is, as established by all the authorities, that an ordinary draft, unaccepted, does not work a transfer to the payee of the debt drawn against. "What will amount to the present appropriation of the debt or demand so as to constitute a legal or equitable assignment, where there is no formal transfer, is a question of intention, to be gathered from all the language used by the parties, written or verbal, construed in the light of the surrounding circumstances.

If there was a failure to make an actual transfer of the debt-in presentí, then the Farrell Company was not bound by any contract valid as against it, for the reason that none of its-officers or agents subscribed any note or memorandum in writing agreeing to purchase the debt. The statute of frauds applies to a sale of a thing in action, when the contract price is fifty dollars or more. An account for goods sold and delivered is a chose in action (Armstrong agt. Cushing, 43 Barb., 340).

As we have seen, the draft standing alone did not operate as a transfer even in form, so the court could not say as a matter of law that the buyer did accept and receive the thing in action, or some evidence of it, so as to satisfy .the second subdivision of third section of the statute. Nor did the Farrell Company pay any part of the purchase price. An agreement that the price shall be applied to a precedent debt, owing by the seller to the buyer, does not amount to a payment of the .purchase money as required by the statute, unless actually applied by giving a receipt or otherwise (Bly agt. Ormsby, 12 Barb., 570).

It is not well settled how much must be done to make an effectual assignment of an account But it was said by the court in Truax agt. Stater (86 N. Y., 630): “The better opinion *308seems to be that an account may be sold like any chattel, and that an agreement which will pass the title to a chattel will pass the title to an account There must be a valid agreement of sale, based upon a sufficient consideration, and if the price be fifty dollars or over the statute of frauds must be complied with.”

If, at the time of the levy, the Farrell Company had assumed the position as against Allis & Co., that it was not bound by any valid contract to allow the face of the drafts on its account against them the court could not hold, as I think, in a suit between those parties involving the validity of the sale, that as a matter of law the title to the account had in form passed to the Farrell Company, and Allis & Co. were entitled to a credit ■on their account for the face of the drafts.

Upon the whole evidence, I think a case was made for the jury. Some of the facts essential to resting a title to the account in the Farrell Company, even as against Allis & Co., were not so clearly settled by the evidence, that the court could dispose of the case as matter of law.

Nonsuit set aside. New trial ordered. Costs to abide event