National Exchange Bank v. McLoon

73 Me. 498, 1882 Me. LEXIS 78

• Court: Supreme Judicial Court of Maine
• Decided: May 29, 1882
• Status: Published

Opinion

Peters, J.

It appears, from the facts in this case, that William McLoon and his son, Charles William McLoon, -were the owners of a ship destroyed by the confederate cruiser Alabama, the former owning an eighth and the latter seven-eighths thereof; that soon after the loss of the ship the son died intestate, the father being his- sole heir; that soon after the son’s decease the father died intestate; that his administrators, who were also administrators upon the estate of the son, petitioned the court of commissioners upon the Alabama claims, to recover the value of the vessel, her freight and fittings, setting- forth all the claims for the father and sonin a single petition, and recovering accordingly; that during the pendency of the petition, Silas W. McLoon, another son of William, and as such entitled to one-seventh of his estate, assigned his share of the funds, to be received by his father’s administrators for the loss of the ship, to certain of his creditors; that, after the administrators received the funds, other creditors of Silas sued him and trusteed the administrators; that it turns out that the administrators are indebted to Silas, not for his share of those funds alone and separate from the other funds of the estate, but for a seventh of the entire funds of the estate in their possession, which exceed the amount recovered for such loss; and that there is a conflict of claim for the assigned fund between the attaching creditors and assignees.

The questions are.these: First: Is the assignment of a part only of an entire demand or chose in action, valid in equity, so as to be upheld in a court of equity, against the consent of the person owing the demand assigned? Second: If so, is the fund in-a situation, under the proceedings now before us, to authorize us to decide upon its equitable distribution ? Third: To what extent is the fund to be subjected to an equitable distribution, if at all, upon the facts adduced?

The first is an important question not before decided in this State. It is universally admitted, at the present day, that the whole of a chose in action may be assigned, and the assignment be binding upon the debtor. That is but an equitable assigment, unknown to the ancient common law, but such as the later common law-takes notice of and protects, allowing the assignee to use the legal remedies in the name of the assignor. But courts of law. not, as such, exercising equitable jurisdiction, do not protect or recognize an assignment of a part only of an entire demand. At law, a partial assignment may be good between the parties, and, if the assignor collects the money, he would in such case hold it as the trustee of the assignee. But the assignee has no legal remedy against the debtor who does not become a party to the arrangement. The reason for the legal doctrine is obvious. The law permits the transfer of an entire cause of action from one person to another, because in such case the only inconvenience is the substitution of one creditor for another. But if assigned in fragments, the debtor has to deal with a plurality of creditors. If his liability can be legally divided at all without his consent, it can be divided and sub-divided indefinitely. He would have the risk of ascertaining the relative shares and rights of the substituted creditors. He would have, instead of a single contract, a number of contracts to perform. A partial assignment would impose upon him burdens which his contract.does not compel him to bear. In support of this doctrine, as one of law, the following cases have been commonly cited and relied upon: Mandeville v. Welch, 5 Wheat. 277 ; Tierman v. Jackson, 5 Pet. 580; Gibson v. Gooke, 20 Pick. 15; Robbins v. Bacon, 3 Maine, 346.

' In a court of equity, however, the objections to a partial assignment of a demand which are formidable in a court of law, disappear. In equity, the interests of all parties can be determined in a single suit. The debtor can bring the entire fund into court, and run no risks as to its proper distribution. If he be in no fault, no costs need be imposed upon him, or they may be awarded in his favor. If he be put to extra trouble in keeping separate accounts, he can, if it is reasonable, be compensated forit. In many ways a court of equity can, while a court of law, with its present modes, cannot, protect the rights and interests of all parties concerned.

The debtor is not the only party whose interests should be considered. There is as much natural equity, in many cases, in protecting an assignment of a part of a claim as an assignment of the whole of it. Equitable assignments are the outgrowth of the requirements and refinements of the present business era. In many ways, directly and indirectly, do circumstances create assignments of parts of funds, in dealings through servants, tenants, consignees, bankers and other agencies. Disastrous results will often be experienced by deserving and innocent persons, if this boon be not granted by courts of equity. The case at bar illustrates it. The parties in this ease supposed the assignment covered all the funds the assignor had, while it turns out that the administrators had a slightly larger amount to be distributed. This is a race, too, between creditors. The statute allows the funds to be intercepted by creditors in different suits, and the administrators might be required to make as many payments as there are suits. Should it be, that a debtor cannot assign to a creditor what the same creditor may attach? We must bear in mind that both the common law and equity have been constantly progressive in the consideration of commercial questions. And the spirit of progress has also actuated legislatures in the same direction. Most of the states in the union have passed laws allowing an assignee of a chose in action to prosecute the claim in his own. name; and the privilege is now most liberally accorded to an assignee by an English enactment, notwithstanding Lord-CoKE’s belief, that "any right of assignment would be of great oppression of the people, and the subversion of the due and equal execution of justice.” See act of 1873, (36 and 37 Vict.) c. 66, sec. 25, sub-sec. 6. We think, upon reason and principle, partial assignments should be sustained in a court of chancery, in all cases where it can be done without detriment to the debtor or stakeholder, whenever equitable and just results may be accomplished by it.

The doctrine is vindicated, directly and indirectly, by a great deal of authority. It was recognized at an early day in the English chancery cases. Row v. Dawson, 1 Ves. Sen. 431; Yeates v. Groves, 1 Ves. Jr. 481; Ex parte South, 3 Swanst. 392; Fitzgerald v. Stewart, 2 Sim. 333 ; S. C. 2 Russ. and My. 457; Lett v. Morris, 4 Sim. 607; Watson v. The Duke of Wellington, 1 Russ. and Mylne, 602.

In Burn v. Carvalho, 4 Mylne and Cr. 690, Lord Cottenham lays down this statement of the principle : " 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 funds.” And previous cases are reviewed in the opinion in that case, in the following manner: "In Row v. Dawson, Lord Hardwicke says, 'It is a credit on the fund, and must amount to an assignment of so much of the debt; and, though the law does not admit an assignment of a chose in action, this court does, and any words will do, no particular words being necessary thereto; and in Yeates v. Groves, Lord Thurlow says : 'This is nothing but a direction by a man to pay part of his money to another for a valuable consideration. If he could transfer, he has done it; and it being his own money, he could transfer.’ In Ex parte South, Lord Eldon says : '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 him. On the other hand, this doctrine has been 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 is certainly not the doctrine of this court.’ In Fitzgerald v. Stewart, and Lett v. Morris, the same rule was acted upon; and, in Watson v. The Duke of Wellington, Sir J. Leach thus defines an equitable assignment: 'In order to constitute an equitable assignment, there must be an engagement to pay out of a particular fund.’ . . . Here there is an existing fund in an agent’s hand, and there is a distinct contract to discharge the liability out of that fund.”

Lord Truro in Rodick v. Gandell, 1 De Gex. Mac. and Gor. 763 ; S. C. 12 Beav. 325, reviewed the cases extensively, and expresses a similar opinion as to the principle to be deduced from them. The same rule has been repeatedly acted upon in the later English chancery decisions. Addison v. Cox, L. R. 8. Ch. 76, reviews and approves the doctrine of the earlier cases. That was a case where an officer assigned a part of a sum due to him from the sale of his commission, and the sale was held to be valid. Brice v. Bannister, L. R. 3 Q. B. Div. 569 is a pertinent case. The facts were these : A agreed to build a vessel for B, the price of which was to be paid by installments. Before the vessel was finished, the builder, being in debt to C, by an instrument in writing directed B to pay to C one hundred pounds out of monies due or to become due from B to the builder. B had notice but refused to bo bound by it. The written transfer was held to be an equitable assignment of that part of the money then due to the assignor, and it was decided that the assignee could sustain an action therefor against B, under a provision of the act creating the Supreme Court of Judicature which allows an assignee to have in his own name either legal or equitable remedies. Other cases are decided upon the same principle. Ranken v. Alfaro, L. R. 5 Ch. D. 786; Ex parte Hall, L. R. 10 Ch. D. 615; Hopkinson v. Forster, L. R. 19 Eq. 74; Thompson v. Simpson, L. R. 5 Ch. 659 ; Brown v. Bateman, L. R. 2 C. P. 272; Field v. Megaw, L. R. 4 C. P. 660.

In some cases in Massachusetts the doctrine appears not to have been yielded to, but the discussions have arisen in cases at law and not in equity. Palmer v. Merrill, 6 Cush. 282 ; Tripp v. Brownell, 12 Cush. 376; Bullard v. Randall, 1 Gray, 605; Dana v. Third Nat. Bank, 13 Allen, 445.

In New York the doctrine is well established by a series of cases covering a long period of time. Morton v. Naylor, 1 Hill, 583, and cases cited in note. Bradley v. Root, 5 Paige, 632; Phillips v. Stagg, 2 Edw. Ch. 108; Marshall v. Meech, 51 N. Y. 140 ; Alger v. Scott, 54 N. Y. 14 ; Brown v. Mayor of New York, 18 Supreme Court R. 22; Jones v. Mayor, 47, N. Y. Superior Court R. 242. In Field v. The Mayor of New York, 2 Seld. 179, the precise question was presented and fully discussed and decided in accordance with preceding cases in that state. In Risley v. Phoenix Bank, 83 N. Y. 318, the rule was again applied and the doctrine affirmed, where the question was disposed of in these words : "The claim that there can be no valid assignment of a part of an entire debt or obligation is opposed to the well settled rule in this state. This point was ruled the same way by the court of King’s Bench, in Tibbetts v. George, 5 Ad. and Ell. 107. The tendency of modern decisions is in the direction of more fully protecting the equitable right of assignees of choses in action, and the objection that to allow an assignment of a part of an entire demand might subject the creditor to several actions to enforce a single obligation has much less force .under a system which requires all parties in interest to be joined as parties to the action.” See S. C. 18 Supreme Court R. 484.

The same result is reached by the Pennsylvania court. In their latest case touching the question, Appeals of the City of Philadelphia, 86 Penn. St. 179, it was held that the principle, for reasons of public policy, should not apply to claims against a municipality, the court remarking, that "there is no doubt, that' as between individuals the rule prevails in equity.” In Daniels v. Meinhard, 53 Georgia, 359, it was held that a-holder of a fire insurance policy, after a loss, might assign in writing .an interest in the same to a creditor to the extent of the creditor’s debt, which would prevent an attachment of it as the property of the assignor by trustee process. In Stanberry v. Smythe, 13 Ohio St. (N. S.) 495, the court refused to recognize the principle in an action at law, expressly admitting that it would obtain in equity, "where the rights of all the parties could be determined in one and the same controversy.” In Etheridge v. Vernoy, 74, 809, N. C. which was " a civil action in the nature of a bill in equity,” the rule was applied. Similar decisions have been made in other courts. Dowell v. Cardwell, 4 Saw. 217 ; Lapping v. Duffy, 47 Ind. 51; Whitney v. Cowan, 55 Miss. 626. The above are marked cases illustating the rule. New Hampshire cases cast some light upon the question. Conway v. Cutting, 51 N. H. 407; Christie v. Sawyer, 44 N. H. 298. The doctrine is adopted in New Jersey, acted upon in Yermont, and evidently approved by the supreme court of the United States, as a rule in chancery. Public Schools v. Heath, 15 N. J. Eq. 22; Claffin v. Kimball. 52 Vt. 7; Christmas v. Russell, 14 Wall. 69; Trist v. Child, 21 Wall. 441.

There is a concurrence of opinion also among text writers, so far as the question is noticed by them. 2 Story Eq. Jur. § 1044; 2 Spence’s Eq. Jur. *859 ; Byles on Bills, (6th Am. ed.) 171; 1 Pars, on Notes and Bills, 334. The American editors of Leading Cases in Equity, (1st ed. vol. 2, pt. 2, p. 234,) say: "But whatever may be the intrinsic propriety or convenience of the doctrine, it seems too well established by authority to be shaken, that the partial assignment of a debt is binding in equity and will invalidate subsequent payments to the assignor, to the extent thus assigned.” In subsequent editions, however, the doctrine is not so conclusively stated. The Roman law contained the same principle. It allowed a single debt to be assigned in parts, but required all the assignees to join in one suit and receive the whole debt at one time. Ware, J., in the case of Hull of a New Ship. 2 Ware, R. 203.

The counsel for the attaching creditors relies upon the cases of Mandeville v. Welch, and Tierman v. Jackson, supra, as asserting that there can be no equitable assignment of a part of a demand which even a court of equity will protect. We understand the opinions in those cases to declare no more than that a court of law cannot protect such equitable assignments. Those were actions at law. In the former, Story, J., says: "The secoud question is whether, under all the circumstances of the case, Prior was an assignee in equity entitled to maintain the present action.” In the latter case the same judge said the question was whether the assignee could maintain that action, adding these words, "whatever might be the case in a suit in equity, brought to enforce his equitable claims under his assignment.” We think the counsel falls into the same error in attributing the same meaning to the words of the opinion in Getchell v. Maney, 69 Maine, 442. The most that was intended to be said there was, that, without the assent of the debtor, a creditor cannot assign part of a debt or chose in action, so as to give an equitable interest or lien, which a court of law can recognize and protect. The learned judge who delivered the opinion of the court in that case did not undertake to say, nor had he any occasion to say, what would be the rule in such a case in a court of equity. As before seen, a court of law protects the assignment of an entire demand, although that is an equitable and not a legal assignment. Further than that the law does not deal with equitable assignments. It matters not whether the partial assignment be by parol or by a formal instrument or by an order or draft upon a particular fund. Neither law or equity observes any difference in the kinds or modes of as'ignment. Neither is a legal, while either may be an equitable, assignment. Where a draft or order constitutes an assignment, it must be upon a particular fund. It is not enough that it is drawn upon a debtor by a creditor in general terms.

The next question is, can we, in this proceeding, determine the equitable rights of the parties? We think we can and that we should do so. The statutory provisions relating to trustee process and procedure necessitate our taking jurisdiction of the matter, so far as to decide whether the assignment be valid or not. It would be an useless circuity to require a bill in equity to be instituted merely to settle that controversy. All persons interested are parties to this litigation, which is carried on in most respects as if it were a bill of interpleader. We cannot, by this proceeding, enforce payment to the assignees, but can prevent payment to the attaching creditors. In quite a number of the cases already cited by us, the same question arose and was settled upon similar proceedings.

Lastly: how shall the assets be distributed ? It is contended that the instrument by Silas conveys only one-seventh of his father’s direct ownership in the Alabama claim. We think the intention was to transfer the assignor’s interest in all the fund coming to his father’s estate from all descriptions of loss caused by the destruction of the vessel, and from whatever sources obtained, and that the words of the instrument are sufficient to accomplish the purpose intended. The actual intention is clear enough. Equity adheres to the intention.

It appears that Silas owes the estate for advances. Equity requires that his interest in the unassigned assets shall be first exhausted to pay such advances. The attaching-creditors can stand in no more favorable situation than their debtor did at the date of their attachments'. By assigning one part of the assets he agrees that charges common to all the assets shall be paid by the part not assigned. Equity directs that the assets in which the assignees have no interest, shall bear the incumbrance in preference to imposing any share upon the interest conveyed. Holden v. Pike, 24 Maine, 427; Shepherd v. Adams, 32 Maine, 63.

The fees of the administrators come under this head; they are not a lien on any particular portion of the estate. Any special expenses attending the recovery of the Alabama claim, entirely incident thereto, should be deducted from that fund. Had anything been allowed to the administrators as commissions upon the estate of Charles W. McLoon, that should have been deducted. That charge, however, is included in a four per cent, commission charged against the father’s estate. It may be equitable to consider that charge as arising in the settlement of the son’s estate.

We think no other points taken in behalf of the attaching creditors need an especial examination.

An application of these rules to the facts of the case, gives the following result. The Alabama award was ninety-two thous- and and fifty-four dollars and eleven cents. After deducting the expenses of prosecuting the claim (four thousand three hundred and forty-two dollars and eighty cents), and also a commission upon the portion of the award coming through the son’s estate (three thousand two hundred and twenty-one dollars and eighty-nine cents), and then deducting the widow’s share (twenty-eight thousand one hundred and sixty-three dollars and fourteen cents), leavers a remainder (fifty-six thousand three hundred and twenty-six dollars and twenty-eight cents), one-seventh of which (eight thousand and forty-six dollars and sixty-one cents), is the amount of the award really and effectually assigned. The amount which the assignor owes the estate (one thousand five hundred and forty-eight dollars and two cents) is to be paid out of his interest or ownership in any other assets of the estate, so far as such interest goes. Any balance necessary to meet the amount, must be taken and made up from the sum assigned (eight thousand and forty- ' six dollars and sixty-one cents). The remainder left from the' latter sum, so far as required to pay the notes (five thousand five hundred dollars) and interest thereon, must be paid to Dyer and Gurney, the assignees. Any excess left after such payments, if there be such, may be held upon the trustee writs in the order of attachment, as the assignment is only for security. Macomber v. Doane, 2 Allen, 541; Simpson v. Bibber, 59 Maine, 196. If any interest is to be accounted for, that may be added to the sum assigned. And the case, by the terms of the report, is remitted to the court at nisi prius, to regulate the rights of the parties upon the rules prescribed in this opinion.

Appleton, C. J., Walton, Barrows, Daneorth and Libbey, JJ., concurred.