Case ID: ny-st-rep_13/html/0145-01.html
Source: Caselaw Access Project
Author: {"author": "Daly, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George Gunther, Resp’t, v. Louis Darmstadt et al., Resp’ts, and Abraham Steers, App’lt.
    
      (New York Common Pleas,
    
    
      Filed January 3, 1888.)
    
    Assignment—What will not operate as assignment of fund.
    A party wrote to another for the benefit of a third as follows: “Please pay A. S. or order two thousand dollars and charge the same to the balance of my contract for the erection of two buildings.” * * * At the time that this instrument was drawn there was nothing due the drawer on the contract, nor had he any general credit with the party on whom it was drawn. 1Weld, that it did not operate as an assignment of a fund afterward to become due on the contract.
    Appeal by defendant Steers from the judgment of this court entered upon the report of a referee in an action for the foreclosure of mechanic’s hens, adjudging that the defendants, lienors, Holler and St. John, Hott & Co., are entitled to the money found due from the defendant, owner, Darmstadt to the defendant, contractor, Douglas, and that the defendant Steers is not entitled to any part thereof.
    
      E. Moeran, for app’lt; C. W. Dayton, for resp’t.
   Daly, J.

The appellant Abraham Steers claims a portion of the moneys due from the owner to the contractor by virtue of the following order:

“New York, Septembers8, 1885. “Louis Darmstadt, Esq., J¡9 Ann Street, New York City:

“Please pay Abraham Steers or order two thousand dollars and charge the same to the balance due on my contract for the erection of two buildings on south side of Sixth street, 300 feet of First avenue in the city of New York.

NATHAN DOUGLAS.”

Douglas was the contractor with Darmstadt the owner, for the erection of the buildings, and having purchased from Steers lumber to be used in the buildings, gave the above order to one Thompson, the collector and superintendent for Steers, telling him that there was about $3,000 due him, the contractor, on the job, and that the order would be paid in a few days. Thompson presented the order to Darmstadt the day after it was drawn and asked him for the money. According to Thompson’s testimony, Darmstadt looked at his ledger, figured up $3,000 due on the contract, and said he should not pay the money that day, but it would be paid in a few days; that Thompson asked him if he would not give his note as they wanted to use the money, but that Darmstadt refused; and that Thompson did not ask him to accept the order. He also says that the order was to apply on the amount due from Douglas to Steers, but that Douglas did not receive credit for the amount.

From the testimony of Douglas, the drawer, it would appear that nothing was due him from Darmstadt at the time he drew the order, and that he had no. general credit with the latter, and that the money was to become due when the buildings were completed, which was three or four weeks after that. Darmstadt, the drawee, swears that he did not tell Thompson that the order would be paid in a few days, but referred him to his son and kept the order to give the latter. The son, Louis F. Darmstadt, swears that he saw Thompson three or four days after, who asked him if his father was going to accept the order and contended that it had been accepted by his father taking it; that he looked after the buildings for his father, and made payments to Douglas right along without reference to the number of payments provided for in the contract.

It was argued by the appellant Steers that the order in question operated as an assignment proianto of the moneys subsequently coming due under the contract between Darmstadt and Douglas, and that he should be paid the amount thereof in preference to the persons who subsequently filed liens against the building. The referee held that it was a mere draft, and that the circumstances attending the drawing and delivery of it did not indicate an intention to assign any part of the fund. The ground for his decision was that under the authorities the direction in the draft to pay and charge to the balance due on the drawer’s contract merely designated a source of reimbursement and was not a direction to pay out of the particular fund; that the draft was intended as a negotiable instrument by the direction to pay to Steer’s “ order;” that Darmstadt did nothing to recognize Steer’s right to the fund, and Douglas did not receipt for the amount to Darmstadt. Brill v. Tuttle, 81 N. Y., 454; Schmittler v. Simon, 101 id., 554: Gibson v. Lenane, 94 id., 183.

It was held in Brill v. Tuttle that when the order is not negotiable and its language is ambiguous, the attendant circumstances may be shown to ascertain the intention and understanding of the parties-

In Schmittler v. Simon it is said that the insertion of words expressly making the paper negotiable was quite significant, and indicated an intention on the part of all the parties that it should be transferable and partake of the character of commercial paper, and that any contingency inferable from the language of the draft, making the amount payable thereon indefinite and uncertain, would tend largely to depreciate its value for such purpose and defeat the intention with which it was apparently made; and that in all the cases where an order had been held to operate as an equitable assignment of a fund there were either special phrases contained in the instrument indicating an intent to have it so operate, or ambiguous language used which construed in the light of surrounding circumstances justified the inference of a limitation of liability. Citing Parker v. Syracuse, 31 N. Y., 376; Alger v. Scott, 54 id., 14; Munger v. Shannon, 61 id., 251; Ehrichs v. De Mill, 75 id., 370; and Brill v. Tuttle (supra).

If the paper be regarded as a direction to pay the amount out of the designated fund when it should accrue, then it operates as an assignment pro tanto of such fund; if it be intended as a direction to the drawee to advance the amount of the order without regard to the state of the account and charge the amount thus advanced to the drawer, and for the drawee to subsequently reimburse himself out of the sums to become due from him to the drawer on the specified account, then it is not an assignment. The question is whether the draft was drawn upon the general credit of the drawer or upon a particular fund. Brill v. Tuttle, above.

In the case of the order before us, we have the fact that it is by its terms negotiable, a circumstance regarded as controlling in Brill v. Tuttle, but if not decisive upon the question of the intent of the drawer and payee, then according to Schmittler v. Simon, it is quite significant and indicates an intention that the order should partake of the character of commercial paper, because its value as such would be largely depreciated, and such intention would be defeated by construing it to be an assignment of a fund or part of a fund, thereby making payment indefinite and uncertain, because contingent upon the drawer becoming entitled to such fund. Starting with this strong evidence of the intention of the parties, we have the fact that the drawer knew that there was nothing due him at the time it was made, and that payments had been made to him by the drawee for his work under the contract without reference to the time of payment stipulated in the contract. As Louis F. Darmstadt testified “I made payments to Douglas right along without reference to the number of payments provided for in the contract.” It was evidently drawn in the hope that it would be honored without regard to the fact that payment under the contract had not matured, and without any intention that the payment should be deferred or be contingent upon earnings under the contract.

There is but one case cited by appellant which holds that a negotiable order in the form of that under discussion operates as an assignment. In St. John v. Vaupel (Com. Pl. Spl. T., June, 1887), there was such an order, but the evidence in the case as to what transpired between the drawer arid payee when the order was made, showed that it was intended as an apppropriation of moneys to fall due in the future, and was not drawn on the general credit of the drawer for there was no such credit.

The judgment should be affirmed with costs against anpellant in favor of the respondents Holler and St. John, Hoyt & Co.

Van Hoesen and Larremore, JJ., concur.