Case ID: abb-ct-app_2/html/0301-01.html
Source: Caselaw Access Project
Author: {"author": "Denio, Ch. J. Ingraham, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

HALL v. THE CITY OF BUFFALO.
    September, 1864.
    Where the special duties of a comptroller of a municipal corporation are not defined by law, proof of his usage to receive and file notices affecting the indebtedness of the city is sufficient in an action against the conporation to cast on them the burden of proof that his duties did not in elude the subject in question.
    One wlio had performed work for a municipal corporation under an agreement by which he was to be paid in orders on the general fund to be paid from the tax of a certain year, afterward, for valuable considerations, gave orders on the comptroller of the city to pay the former orders, when they should become due, to certain third persons ; and the latter orders, so drawn by the contractor, were presented to the comptroller and filed in his office. Meld, that they operated as assignments pro tanto, of the moneys due to the contractor, and being payable from a particular fund to arise at a future day, were not bills of exchange, and need not be accepted to make the drawee liable.
    
    It is not necessary that the city should have specific notice that the orders were given for valuable consideration. Knowledge of the fact that the orders had been given, is sufficient to put the city on inquiry.
    The holders of the orders may resort in the first instance to the city, to enforce their demands, without proving that the maker of the orders has become insolvent; for the making of the orders is an assignment pro tanto of tne claim against the city.
    Joel Hall and five other persons brought this action against the city of Buffalo and Moses Balcer, and seven others.
    The following facts were found by the referee.
    A city contractor, Moses Baker, in October, 1849, had made with, the city of Buffalo a contract to grade and fill certain market grounds, for which he was to paid in orders on the general fund of the city, to be paid from the tax of the year 1850. Baker, for a valuable consideration, from time to time drew and delivered to one Edwin Rose, orders on Cadwallader, the comptroller of the city, of one of which the following is a copy.
    “ Mr. Cadwallader, Comptroller:
    “ Please pay E. Rose or order $700, in orders on my contract for filling Elk street market grounds, when the same are drawn, and oblige, yours, &c., M.'Baker.”
    The several orders, soon after they were drawn, were left with the comptroller, and by him put on file and pinned to Baker’s contract with the city. Afterward, Edwin Rose, for valuable considerations, drew sub-orders on the comptroller in favor of various persons, and among others, in favor of the present plaintiff. Hall; and these sub-orders were also delivered to the comptroller, and filed by him in his office, pinned to the contract between the city and Baker.
    The city collected the assessment necessary to pay the contractor; and afterward and before the commencement of the action, the owners of several sub-orders drawn by Rose, demanded of the city of Buffalo the payment thereof and the requisite orders therefor, which were refused.
    On November 14, 1851, Baker served on the comptroller a notice in writing, requiring him to take notice that he thereby countermanded all orders given by him to said Rose.
    Prior to June 1, 1852, Baker’s contract with the city was adjusted, the work accepted, and the cominon council passed a resolution directing an order to be drawn for the balance on the appropriate fund, for one thousand and three dollars and twenty-six cents in favor of Moses Baber, and such order was, pursuant thereto, drawn by the city clerk in favor of Moses Baker and delivered to the comptroller.
    Afterward Moses Baker sued the city on the contract for said amount, and obtained a judgment therefor against the city, but Rose and the owners of the sub-orders were not made parties to that action..
    It was customary in the comptroller’s office when contracts for work had been made in similar cases, to receive contractor’s orders and sub-orders like those in question; and when orders were directed by the common council to be drawn pursuant to such contracts, to deliver them to the persons holding the contractor’s orders therefor, and to divide them for that purpose.
    On the refusal of the city to pay, this action was brought, all the holders of orders and sub-orders who' would consent being made plaintiffs, and the rest being made defendants.
    The relief demanded in this action was an adjudication of the rights and interests of the individual parties both plaintiff and defendant, in the fund alleged to be due from the city of Buffalo, and represented by the order drawn by authority of the common council in favor of Baker. The answer of the city of Buffalo denied, (1) that any such orders had been drawn by Baker; (2) that they had been accepted by the city; (3) that the assignments of the orders or interests set forth in the complaint had been executed. 3STo other defense was set up.
    A judgment was rendered in favor of the plaintiffs, from which the city of Buffalo appealed.
    
      The court; at general term affirmed the judgment, holding that the old usage of the comptroller’s office as to the division of orders had nothing to do with the case. That the city, by not denying the allegation that there was a balance due Baker, admitted it, and stood in the position of fund v holders between the several claimants, and should have paid the money into court and obtained • an order that the claimants interplead. Also that the finding by the referee that Baker had obtained a judgment against the city, for the sum in question, which had been paid and satisfied, could not affect the case as presented by the pleadings, and that the pleadings could not then be amended.
    From this judgment the city of Buffalo appealed.
    
      H. S. Cutting, for defendants, appellants.
    ■ II C. Day, for plaintiffs, respondents.
    
      
       Cited on this point in Parker v. City of Syracuse 31 N. Y. 376.
    
   Denio, Ch. J.

It is not surprising that the common council of the city should have declined 'the task of settling the rights of the claimants to the moneys which Baker had earned, . and should have preferred to cut the knot, which it had become difficult to untie, and by acting upon Baker’s revocation of the orders which he had given, and paying the money directly to him. They seem to have made that election by directing a draft on the treasury, for the balance, to be given him. It is not apparent why the draft was not paid without a suit. If it was thought that a judgment in his favor would protect the city against the demands of the parties holding the orders, it was a mistake. If these parties had acquired claims on the funds which the city was bound to recognize, that obligation could not he discharged by any judgment resulting from a litigation to which they were-not parties. The case therefore is the same as though they had voluntarily paid the money to Baker, in total disregard of the orders which he had given.

The evidence is quite satisfactory to charge the city with notice of the existence of these orders. They were actually lodged with the comptroller soon after they were drawn, and this' was in pursuance of a practice prevailing in that office. The special duties of the comptroller are not prescribed by the charter, further than by declaring that any financial power or duty confided to any city officer may be vested exclusively in him. L. 1843, p. 120, § 12. This authority, together with the custom found by the referee, was sufficient, prima facie, to east the onus upon the city of showing by their by-laws that his duties did not embrace the subject of the city indebtedness. Á corporation consists of officers and agents, some of whom must represent the corporate body in such a sense as to render him a proper party to” receive such a notice. Baker’s revocation of the orders was served upon the comptroller, and as the common council acted upon that revocation, the presumption is inevitable that the revocation came to its knowledge, and as it presupposed the existence of orders, it was sufficient at least to put it upon inquiry. I do not say that what was done by the comp-. trailer amounted to a contract with the holders of the orders, in the nature of an acceptance or engagement to pay them. It was sufficient to charge the city with notice of the orders and of their cdntents.

The question then is whether the orders, they having been given for value, amounted to an assignment or appropriation of portions of the indebtedness which was accruing in Baker’s favor against the city, to the benefit of the payees, respectively. I do not suppose that any privity of contract is established between the city and thé holders of the orders. It is sufficient if these holders, by their transactions with Baker and the notice to the corporation, had acquired an equitable interest in the fund. If that be established, it follows that the city, as the holder of the fund, was the trustee of the parties interested in it, and could not equitably do anything to prejudice the interest of these parties. That the holders of the orders had acquired such an interest seems to me well established by authority. In Row v. Dawson, 1 Ves. Sr. 331, it appeared that one Gibson had lent money to parties under whom the defendant claimed, and gave them an order on Swinburne, the deputy of Horace Walpole, who was an officer of the exchequer, for the payment out of the moneys due to him from Walpole, out of the exchequer, of four hundred pounds to one of the persons, and two hundred pounds to the other, “ value received.” The question was whether the representatives of these persons were entitled to a specific lien upon the moneys due from the exchequer to the estate of Gibson, he having become a bankrupt, and it was held that they were entitled to such lien. Lord Hardwicks said: “ This draft, which amounts to an assignment, is deposited with the officer, Swinburne, and therefore is attached immediately upon it, so that Swinburne could not have paid the money to Gibson, supposing he had not been bankrupt, without making himself liable to the defendants, because he would have paid it with full notice of the assignment for a valuable consideration.”

In Yeates v. Groves, 1 Ves. Jr. 280, the facts were that Dawson owed Teates and Brown four hundred and fifty pounds, for which they held his note. By an arrangement between Dawson and Groves and Dickinson, the latter was to purchase a dwelling-house of Dawson. Teates and Brown pressed Dawson for payment on the note, and he gave them an order on Groves and Dickinson for the amount of the note out of the purchase money of the house “for value received,” and the note was given up. The order was not but Groves and Dickinson verbally agreed that when the purchase money was to be paid, Brown should receive notice to attend. Dawson afterward became bankrupt. Lord Chancellor Thurlow said: This is nothing but a direction by a man to pay part of his money to another for a foregone valuable consideration. If he could transfer he has done it; and, it being his own money, he could transfer. The transfer was actually made. They were in the right not to accept, as it was not a bill of exchange. It is not an inchoate business. The order fixed the money the moment it was shown to Groves and Dickinson.” And he made a decree accordingly.

Passing over a considerable period of time, we come to Lett v. Morris, 4 Sim. 607, where a builder, who was erecting a house under a contract, gave an order to one who had furnished him with lumber, for certain sums out of moneys which would become payable to him on the contract. It was held a good equitable assignment, and so much of these moneys as the orders called for was decreed to be paid to the holder of the order. See, also, to the same general purport, Burn v. Carvalho, 4 Mylne & C. 690; and Rodick v. Gandell, 15 Eng. Law & Eq. 22. In the first of these cases, Lord Chancellor Coitbítham: laid down the equitable principle in these words: In equity, an order given by a debtor to his creditor upon a third person having funds of the debtor to pay the creditor out of such funds, is a binding equitable assignment of so much of the fund.” He quotes the dictum of Lord Eldoh in Exp. South, 3 Swanst. 293, as follows: “ It has been decided in bankruptcy that if a creditor gives an order on his debtor to pay a sum in discharge of his debt, and that order is shown to the debtor, it binds Mm. On the other hand, this doctrine is brought into doubt by some decisions in the courts of law which require that the party receiving the order should in some way enter into a contract. That has been the course of their decisions; but it certainly is not the doctrine of this court.” Lord CotTRÍTHAM adds that “it is upon this principle that assignments of future freight, and of non-existing but expected funds, have been enforced in equity.”

The principle of these cases has been adopted and frequently acted on in this country. 2 Story Eq. Jut. 1044; Peyton v. Hallett, 1 Cai. 363; Weston v. Barker, 12 Johns. 276; Bradley v. Root, 5 Paige, 632; Morton v. Naylor, 1 Hill, 583. Many other cases of a similar character are referred to in those which have keen cited. In Field v. Mayor, &c. of N. Y., 6 N.Y. 179, a similar question came before this court. One who had contracts with the corporation of the city of Slew York for printing, for a valuable consideration, assigned, to a party under whom the plaintiff claimed, his bills against the corporation, to the amount of one thousand five hundred dollars, to be paid after two prior assignments had been satisfied. The only notice given to the city was a letter to the comptroller, accompanied with a copy of the assignment. It was held that the assignment was a transfer enforceable in equity, and that the plaintiff was entitled to a decree against the city. See also Lowery v. Steward, 25 N. Y. 239.

The orders in these cases were not bills of exchange. They were payable out of a particular fund, and that fund was to arise and be made available subseqently to the drawing of the orders, and there is some doubt whether they could be considered as payable in money. The judgment which it is proposed to give will not be in any respect hostile to the cases which hold that the drawee of a proper bill is liable to the holder only upon an acceptance of the bill. Luff v. Pope, 5 Hill, 413, 417; Harris v. Clark, 3 N. Y. 93; Mandeville v. Welch, 5 Wheat. 277. The point decided in the last case was that the drawing, by a creditor, of a bill upon his debtor, in favor of a third person, with some other slight circumstances, did not amount to an assignment of the debt. Stress was laid by the counsel, who argued against the position, that it was an assignment, upon this circumstance, that the bill was general and not payable out of a particular fund. What was said by Judge Story, in giving the reasons of the court, of the impossibility of dividing a demand by an assignment of a portion of it, was probably correct in the application which he made of the principle; but if it was intended to state that equity would not protect an assignment of a part of a demand, the dictum is hostile to nearly all the cases I have referred to, and especially to the one in this court which distinctly presented that feature.

The orders in this case were not expressed to be for value received, as in some of the cases cited. It was, however, proved and found that they were given for value. I do not think it was necessary for the city to have had specific notice of that circumstance. The drawing of the first class of orders, and the transfer by Rose of the interest which they were supposed to create, was sufficient evidence to put the city upon inquiry, and to show conclusively that Rose was not the mere agent of Baker. A proper inquiry would have disclosed the fact that they were given for a valuable consideration.

The appeal being on behalf of the city alone, no question is presented respecting the distribution of the money among the different claimants. The recovery was for the precise amount which the city would have owed Baker if he had not parted with his claim. The orders which he had given to Rose exceeded the whole balance in his favor. It cannot, therefore, be said that injustice has been done to the city, even should the disposition of the moneys be inaccurate, of which I have found no evidence.

It is objected that it was not proved that Baker was insolvent; and that is true, though this contest among his creditors leads to a strong inference that such was the fact. I do not see, however, that it was essential to establish that fact.

If, as has been held, the drawing of the orders was a transferiré tanto of the debt, the holders were entitled to resort in the first instance to the city to enforce their demands, and it would have been no answer for the city to say that they might have had a remedy against Baker.

It is readily seen that the principle which we feel bound to act upon may operate incoriveniently upon parties owing demands of this character, by obliging them to arrange with several parties claiming under the one with whom they had con-traded. But the same difficulty frequently arises where a creditor has parted, by formal transfers, with the whole or portions of the debt. The law affords the debtor a remedy in the nature of a suit of interpleader, so that it is his own fault if he pays to a person not entitled. If the rule would still operate inconveniently to municipal corporations, who are, perhaps, more exposed than others, to be embarrassed with conflicting claims, it is for the legislature to protect them. They might also provide by express agreement that they should not be obliged to recognize derivative claims arising out of a contract for a public improvement.

I am in favor of affirming the judgment appealed from.

Ingraham, J.

The indebtedness of the city of Buffalo for the amount claimed by Baker as due him is admitted, it being alleged in the complaint and not denied in the answer. The only allegations denied in the answer of the appellants are; 1. As to the drawing of the orders by Baker; 2. The acceptanee of the orders by the city; and 3. Whether the assignments of the orders set forth in the complaint were executed. The first and third of these defenses were proved on the trial, and were found by the referee against the defendants. I do not understand the appellants as insisting on these defenses. The only remaining one set up in the answer is as to the acceptance by the defendants of the orders, so as to bind the city to the pay-meat.

The referee finds that Baker drew five orders on the comp-trailer in favor of Rose, for the sum, in all, of one thousand one hundred and eighty-nine dollars and seventy cents. That Rose delivered the orders to the comptroller, who annexed them to the contract of Baker. The amount due Rose was subsequently reduced somewhat by repayment. Afterward, the amount due Baker from the city was adjusted, and an order for that amount was directed by the council to be drawn in favor of Baker.

There can be no doubt that the assignees of such a claim might give notice of the assignment to them, and recover the same without an actual accptance by the debtor of the order or promise to pay to the assignee. This was held in Morton v. Naylor, 1 Hill, 583. Cower, J., says: The order was an equitable assignment of the rent in question, with notice to Morton, who was bound to pay it according to the order/ whether he had accepted or not.” Wheeler v. Wheeler, 9 Cow. 34. Nor is it any objection to a recovery under such an order or assignment that it is not for the whole of the balance due. Taylor v. Bates, 5 Cow. 376; Pattison v. Hull, 9 Id. 747; Field v. Mayor, &c. of N. Y., 6 N. Y. 179. Whether there was or not any valid defense in the matter relied on by the appellants, of a payment to Baker, is unnecessary to be decided in this action. Ho such defense was set up in the answer, and the appellants have no right to avail themselves of the findings of the referee which may have been necessary under the issues raised by the other defendants.

The objection that notice to the comptroller was not notice to the city of Buffalo is taken by the appellants. In Field v. Mayor, &c. of N. Y., supra, the same objection was taken and overruled. .The court say the notice of the respondent’s claims was served upon the comptroller while in his office, engaged in the duties thereof, and was beyond all doubt sufficient.

I think the judgment should be affirmed.-

All the judges present concurred.

Judgment affirmed, with costs.