Case ID: misc_5/html/0234-01.html
Source: Caselaw Access Project
Author: {"author": "Bischoff, J. Pryor, J. (concurring).", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Fortunato v. Patten, Impleaded with the Twelfth Ward Bank of the City of New York.
    (New York Common Pleas—General Term,
    October, 1893.)
    A city may exact restrictions upon the assignability of its contractor’s rights, under a contract pending performance, and before his right to demand payment of the moneys agreed to be paid becomes absolute.
    In an action between the city of New York and'one D., the latter covenanted that he would not assign any of the moneys payable to him, except with the previous written consent of the commissioner of public works, to be indorsed on the contract, and that no right under the contract, nor to any of the moneys payable by reason of its provisions, should be asserted by any assignee of the contractor whose assignment was not' authorized by the commissioner in the manner above stated.
    On April 11,1887, D., without the approval of the commissioner of public works, assigned all his rights and interests under the contract to P., as collateral security for the payment of an indebtedness. On March 1, 1889, with the approval of the commissioner of public works, and to-secure the same indebtedness, D. executed a further assignment to Pout of the first moneys due orto grow due by virtue of the contract. This assignment was filed with the comptroller March 5, 1889. On December 13, 1887, D. assigned to the defendant’s bank all moneys due orto grow due in and by virtue of his contract with the city, as security for moneys advanced and to be advanced to Mm by the bank, appointing the bank his attorney to colle ct the moneys assigned. At the time of its several advances or loans to D., the bank was ignorant of any assignment to P., and it did not appear that the latter, at any time, caused notice of either of the assignments to him to be given to the bank. On the completion of the contract, the amount due D. was inadequate to pay both claims. Held, that the assignment of December 13, 1887, was entitled to-priority in payment.
    
      Held, also, that that portion of the bank’s claims against D., representing advances made to him subsequent to the assignment' to P., dated March 1, 1889, could not be subjected to priority of P.’s claim in the absence of actual notice on the bank’s part of such assignment when it made the advances.
    Appeal by one defendant from so much of the judgment of a referee as adjudges the claim of a codefendant to be entitled to priority in payment. Action to have certain liens and claims against moneys which had accrued to the contractor under a contract with the city of New York for regulating a street, and their order of priority, determined.
    
      Robert F. Deyo, for Patten, defendant (appellant).
    
      John R. Abney, for the Twelfth Ward Bank of the City of New York, defendant (respondent).
   Bischoff, J.

We are asked on this appeal to determine-whether, upon the facts found, the. referee was justified in his conclusion, that the claim of the defendant, the Twelfth Ward Bank, is entitled to priority in the order of payment over that of defendant Patten. The question is of gravity to the litigants, since it is apparent that the fund out of which the payments must be paid, is inadequate to pay both claims in full.

On October 8, 1886, the defendant John F. Dawson entered into a contract with the mayor, aldermen and commonalty of the city of New York, ivhereby in and for the •consideration of the payments to be made to him as therein provided, he undertook to regulate and grade a certain street known as Edgecomb avenue. Dawson, among other things, covenanted that the city should be privileged to retain out of the moneys agreed to be paid him sufficient to meet any liens which might be claimed for labor and materials pursuant to the provisions of chapter 315, Laws of 1878, entitled “ An act to secure the payment of laborers, mechanics, merchants, traders and persons furnishing materials toward the performing of any public work in the cities of the state of New York,” as well as to reimburse itself for any damages which ■should accrue to it from the contractor’s negligence ; that he would not assign any of the moneys payable to him, except with the previous written consent of the commissioner of public works to be indorsed on the contract, and that no right under the contract, nor to any of the moneys payable by reason of its provisions should be asserted by any assignee of the pontractor whose assignment was not authorized by the commissioner in the manner above stated. Subsequent to the ■several assignments hereinafter mentioned the work required of Dawson was completely performed by him and accepted by the city, and at the time of the trial of this action there was due the former from the latter $57,179.55.

On April 11, 1887, Dawson, by an instrument in writing, assigned all his rights and interests under the contract to defendant Patten as collateral security for the payment of an indebtedness of $5,000 and interest. This assignment was, however, without the approval of the commissioner of public works.

On March 1, 1889, Dawson, to pay the same indebtedness, executed and delivered a further assignment to Patten of $5,000 and interest thereon from the time specified, out of the first moneys due or to grow due in and by virtue of the contract ” with the city hereinbefore mentioned. The assignment last referred to was approved by the commissioner of public works and filed with the comptroller of the city of New York March 5, 1889. On March 13, 1889, Patten, in writing, consented to payments to Dawson of all moneys except thirty percent thereof which the city had reserved to await the completion of the contract.

On December 13, 1887, after Dawson’s first, but before his second, assignment to Patten, the former, in writing, further assigned to the defendant, the Twelfth Ward Bank, “all moneys due or to grow due in and by virtue of” his contract with the city as security for moneys advanced and to be advanced to him by the bank, thereby also appointing the bank his attorney to collect the moneys assigned. This assignment was approved by the commissioner and filed with the comptroller on the day of its date.

Dawson’s aggregate indebtedness to the bank at the time of the commencement of this action was $29,453.35, exclusive of interest, of which only $18,889.10 had accrued on March 5, 1889, the time of Dawson’s second assignment to Patten, and its approval by the commissioner and filing with the comptroller. At the time of its several advances or loans to Dawson, the bank was ignorant of any assignment to Patten, and it does not appear that the latter at any time caused notice of’ either of the assignments to him to be given to the bank.

Ho question arises concerning the accuracy of the amounts or the justice of the respective claims of Patten and the bank against Dawson, and upon the facts narrated the referee adjudged the bank to be entitled to preference in the order of payment as against Patten out of the balance due Dawson from the city, and remaining .after the payment of certain liens, the priority of which was not disputed.

It is the settled law of this state, as appellant’s counsel contends, and whatever the rule may be in other jurisdictions, that notice to the debtor or custodian, of an assignment of a chose in action or fund, is not essential to the validity of the assignment, and that, as between successive assignees of the same chose in action or fund, the order of priority in payment must be determined by the order of time in which the several assignments were made. Muir v. Schenck, 3 Hill, 228; Bush v. Lathrop, 22 N. Y. 535 ; Williams v. Ingersoll, 89 id. 508 Fairbanks v. Sargent, 104 id. 108 ; 117 id. 320; Beach's Mod. Eq. Jur. §§ 343, 344. But we are, notwithstanding, of the opinion that respondent’s claim to priority in payment as against appellant is clear and incontrovertible. Being immediately concerned and interested in the performance of the contract on Dawson’s part, it was competent for the city to exact restrictions upon the assignability of the former’s rights under the contract pending performance, and before his right to demand payment of the moneys agreed to be paid had become absolute. The restrictions contravened no rule of law or of public policy. Greenhood Pub. Pol. 500. Hence the law governing the contract is in accord with its provisions. Modus et conventio vi/nount legem,. '' Broom’s Leg. Max. 689. The assignability of Dawson’s rights must be measured, therefore, by the terms of the contract out of which those rights are alleged to have accrued (Kneettle v. Newcomb, 22 N. Y. 249, 252; Andrews v. Callender, 13 Pick. 491; Kahle v. Sneed, 59 Penn. St. 389 ; Little Rock, etc., R. Co. v. Eubanks, 48 Ark. 467), and an assignment made in violation of a covenant not to assign, when the latter is not inoperative because contrary to law or public policy, is ineffectual as well in law as in equity. Zabriskie, Chancellor, in Griggs v. Landis, 19 N. J. Eq. 350. Dawson’s right to assign was a qualified one, to be operative only with the previous written consent indorsed by the commissioner of public works on the contract. His assignment to Patten on April 11,1887, without such approval, therefore, never took effect, at least not until his right to the moneys payable under the contract with the city became absolute by performance of the contract on his part. Before that time Dawson assigned the moneys yet to accrue to the Twelfth Ward Bank by an instrument effectual for that purpose, according to the requirements of the contract. The assignment to the bank, therefore, was the first and prior to any assignment to Patten, and under the rule hereinbefore stated, entitled the bank to priority in payment without notice to Patten.

Nor can that portion of the bank’s claim against Dawson, which represents the advances made to him subsequent to the latter’s assignment of March 1, 1889, to Patten, be subjected to the priority of Patten’s claim, in the absence of actual notice on the bank’s part of the fact of the assignment to Patten when it made the advances. Ackerman v. Hun-sicker, 85 N. Y. 43.

The judgment should be affirmed, with costs.

Pryor, J. (concurring).

It was perfectly competent for Dawson and the city to restrict the assignability of any claim of the former against the latter arising under their contract, and then modus et conventio vvneunt legem. Broom’s Leg. Max. 689. By their contract it was. expressly stipulated that Dawson could assign no claim thereunder without the express authorization of the commissioner of public works. Dawson’s right, therefore, under the contract was not absolute, but was qualified and limited by the restriction in his agreement. Without consent of the commissioner of public works, he had no assignable right, and that consent he did not obtain until 1st of March, 1889. But, meanwhile, namely, 13th of December, 1887, with the consent of the commissioner, Dawson duly and effectually assigned to the respondent all the money due, or to grow due, under or hv virtue of said contract.

An assignee- succeeds only to the right of his assignor.

I am of the opinion that the respondent’s claim to the fund in dispute is clear and uncontrovertible.

Judgment affirmed.