Court Opinion

ID: 5422276
Source: CourtListenerOpinion
Date Created: 2022-01-08 16:31:56.749792+00
Date Added: 2024-06-11T08:31:17.743973
License: Public Domain

Frankenthaler, J. (concurring).
The question here presented is whether a provision of an employment contract between the plaintiff’s assignor and the defendant that the former would make no assignment of the wages earned by him prevents a recovery by the plaintiff on an assignment of such wages by the employee.
There is an important difference between an assignment of a contract itself and an assignment of a claim for moneys due under the contract. (Fortunato v. Patten, 147 N. Y. 277, 282; Snyder v. City of New York, 74 App. Div. 421, 426.) It is only the latter with which we are concerned here. With but one possible exception (Reisler v. Cohen, 67 Misc. 67) our courts have held that a provision against the assignment of a claim for money does not make an assignment of such claim void, but merely gives the obligor a right *79of action against the obligee-assignor for damages which the former may have incurred by reason of the breach of that provision.
In Manchester v. Kendall (19 J. & S. [51 N. Y. Super. Ct.] 460), which was affirmed by the Court of Appeals (103 N. Y. 638), a contract contained the provision that neither it nor any of the installments to grow due under it were to be assigned. An installment not yet due was assigned to the plaintiff who brought the action after the installment became due. To the defendant’s objection that the contract prohibited such an assignment, the court answered (p. 463): “ These words [prohibiting assignment] do not, on their face, attempt to prevent there coming into existence those things and rights, which when they exist, show there is something to which the law attributes the quality of assignability. There would be performance and a corresponding obligation to pay, in which Haas [the obligee] or his assignee would have a right of property. The words must be construed to mean, if they can be enforced, that Haas agrees not to assign, etc., and if he do, the appropriate consequence would be a claim for damages for a breach of the agreement. They would not make the assignment void.”
In Snyder v. City of New York (supra) the agreement provided that neither the contract nor “ any of the moneys payable under this contract ” should be assigned unless by and with the written consent of the commissioner of public works. The Appellate Division, First Department, held that this was a “ restriction solely upon the assignment of the contract as such and not of the moneys earned thereunder which the city is bound to pay.”
In Bank of United States v. Public Bank (88 Misc. 568; affd., 168 App. Div. 915) it was held that defendant’s rule requiring pass books to be presented by the depositor in person in order to be honored for drafts was ineffective against an assignee of the account. This court said that it would not construe the bank’s rule so as to permit a debtor to make his debt unassignable.
In Reliable Loan & Investment Co. v. Delgus Co., Inc. (223 App. Div. 94), our Appellate Division reaffirmed the rule laid down in Manchester v. Kendall (supra). That contract provided that it “ and the payments to be made thereunder ” might be assigned, upon condition that notice was given by registered mail. It was stated that “ The covenant requiring notice in writing does not make the assignment void, but only makes the assignor hable for damages, if any.”
The same conclusion has recently been reached by the Illinois courts in State Street Furniture Co. v. Armour & Co. (345 Ill. 160), which deals with an agreement not to assign wages without the *80written consent of the employer. In effect, that agreement was like that which we are considering here, for it cannot be doubted that this defendant might, had it so desired, have waived the prohibition against assignment. The Illinois court held that the right to wages was a money claim and freely assignable under its statute (Ill. Prac. Act, chap. 110, § 18), which is not materially different from ours (Pers. Prop. Law, § 41); that the contract not to assign was not binding against the assignee who was not a party thereto, even though he had notice; and although the breach of the agreement might furnish a ground of action by employer against employee, that the former could not control the disposition of the moneys earned.
The suggestion in Manchester v. Kendall (supra) that the obligation to pay money due under a contract is something in which the obligee or his assignee has a right of property, the transfer of which cannot be prohibited by the debtor, has met with the favor of the United States Supreme Court in an opinion by Mr. Justice Holmes (Portugese-American Bank v. Welles, 242 U. S. 7, 11) in which it is said that “ Of course a covenantor is not to be held beyond his undertaking and he may make that as narrow as he likes. Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. S. 379. But when he has incurred a debt, which is property in the hands of the creditor, it is a different thing to say that as between the creditor and a third person the debtor can restrain his alienation of that, although he could not forbid the sale or pledge of other chattels. When a man sells a horse, what he does, from the point of view of the law, is to transfer a right, and a right being regarded by the law as a thing, even though a res incorporalis, it is not illogical to apply the same rule to a debt that would be applied to a horse.”
The opinion in Reisler v. Cohen (supra), which is the only New York case seemingly contrary to the general rule as I have stated it, merely sets forth a conclusion without offering any reasons or any authority therefor. It has never been followed nor even cited in any reported opinion in this State and is diametrically opposed to the decision in Snyder v. City of New York (supra). Furthermore, it seems that in Reisler v. Cohen (supra) the contract itself was assigned and that plaintiff’s claim to the payments due thereunder was based on the assignment of the contract.
The rule that a contractual prohibition of the assignment of a money claim does not void such an assignment is reinforced by the provision of section 41 of our Personal Property Law that “ any claim or demand can be transferred,” except in certain specified cases, none of which includes a situation where the con*81tract giving rise to the claim prohibits its transfer. That this section is not to be construed as merely permissive in effect has been indicated by the Court of Appeals in the dictum by the present chief judge in State Bank v. Central Mercantile Bank (248 N. Y. 428, 435), that “ it might well be held that by the Personal Property Law of New York (§ 41) the claim could be transferred even though the transfer was prohibited.”
In Bewick Lumber Co. v. Hall (94 Ga. 539) it was held that a Code provision that “ all choses in action arising upon contract are assignable so as to vest the title in the assignee ” (Code of 1882, § 2244; Code of 1914, § 3653) made ineffectual as against an assignee a provision of a credit check that it was “ not transferable.”
Inasmuch as section 41 of the Personal Property Law specifically sets forth the exceptions to freely assignable claims it inferentially eliminates all other possible exceptions. The argument that an exception additional to those enumerated is to be implied where the transfer of a claim is prohibited by contract completely overlooks the fact that there would be even greater reason for implying such an exception in cases where a Federal or State statute prohibits the assignment and yet the Legislature deemed it necessary to specifically insert an exception in those instances and not rely upon implication. To say that it is incongruous to hold that the Legislature has invalidated private contracts prohibiting that which, in the case of public employees, it has expressly prohibited by law, is to overlook the fact that our courts have held such private agreements invalid as against an assignee of a money claim and that the Legislature has merely strengthened the rule by giving its sanction to it. Even in the absence of section 41, the prohibition against assignment is ineffective against this plaintiff under the rule laid down by the authorities in this State.
The argument that subdivision 3 of section 41 authorizes the defendant to assert the existence of the contractual prohibition as a defense against the assignee is based on the assumption that the prohibition is valid as against him, thus begging the very question which is presented for decision. Subdivision 3 gives no evidence of having been intended to do more than preserve the well-established rule that an assignee takes subject to all defenses. The prohibitory clause obviously could not be a defense existing against the transferrer, for the breach occurs only when the claim is assigned to a transferee. It cannot be a defense against the transferee unless created by the very act of assignment itself. As I interpret the authorities and subdivision 1 of section 41, the assignment does not create a defense against the transferee.
*82The Georgia Code (supra) provides that the assignee takes subject “ to the equities existing between the assignor and debtor at the time of the assignment, and until notice of the assignment is given to the person liable,” yet the decision in the Bewick Lumber Co. Case (supra) held the prohibition ineffective. The Illinois Code (Prac. Act, chap. 110, § 18) provides that in a suit by an assignee, “ there shall be allowed all just set-offs, discounts and defenses, not only against the plaintiff, but also against the assignor or assignors, before notice of such assignment shall be given to the defendant.” The courts of that State have held that this does not make the prohibition valid as a defense against the assignee. (State Street Furniture Co. v. Armour & Co., supra.)
The contention that, by reason of the provisions of subdivision 3 of section 41 of the Personal Property Law, the assignee’s only recourse is against his assignor, while it may represent the law in some States, is refuted by the authorities in this State which have held that it is the debtor whose only recourse is against the assignor. (Manchester v. Kendall, supra; Reliable Loan & Investment Co. v. Delgus Co., Inc., supra.)
The majority opinion takes the view that the conclusion which I have' reached is correct only because of the wording of the agreement involved in this case. I can observe no real difference between a stipulation that the employee will not assign his wages and an agreement that the wages are not assignable. Both, in effect, prohibit an assignment of the wages. To make a distinction is to disregard the decisions in Bank of United States v. Public Bank (supra), where the provision against assignment was obviously not a mere personal covenant, and in Portuguese-American Bank v. Welles (supra), where Mr. Justice Holmes clearly indicated that a debt is a property right, the alienation of which cannot be restrained. In Bewick Lumber Co. v. Hall (supra) the language of the prohibition made it obvious that there was no merely personal covenant against assignment, and the court reached the same conclusion as to the effectiveness of the prohibition.
That the prohibitory phrases in Manchester v. Kendall (supra); Snyder v. City of New York (supra); Reliable Loan & Investment Co. v. Delgus Co. (supra), and State Street Furniture Co. v. Armour & Co. (supra) can be classed as personal promises does not mean that such a distinction as the majority opinion has created actually exists. I have found nothing in those opinions to indicate that they considered the possibility of such a distinction, and I am of the opinion that none in fact exists.
The judgment should be affirmed.