Bush, Redwood & Co. v. Foote

1. Equitable Assignment. How made. Part of a debt assignable. A valid equitable assignment of a part of a debt may b'e made, regardless of the assent of the debtor; and anything which clearly manifests the intention of the creditor to make a specific appropriation of a particular thing to a, particular purpose, and a willingness on the part of the transferee to accept such appropriation, may take effect as an equitable assignment. 2. Same. Order on special ■ find. General bill of exchange. Liability of drawee. ■ • ■ An order drawn on a particular fund is operative as an assignment of the fund, or the portion thereof covered by the order, and will make the drawee equitably answerable to the payee for a failure to comply with its terms; but ai bill of exchange or draft payable generally, and not specifying or referring to any particular fund, does not operate as an equitable assignment. And when the drawee refuses to accept such bill, or in any way to recognize any obligation as imposed on him by it, although indebted to the drawer in aru amount greater than that drawn for, and afterwards pays to the drawer the-amount of his indebtedness, the payee cannot hold him liable as upon ans equitable assignment.

Appeal from the Chancery Court of Noxubee County. Hon. F. A. Critz, Chancellor. H. W. Foote employed F. T. Sanford to build three storehouses, for the aggregate sum of about $8,000, to be paid on; the completion of the buildings. Bush, Redwood & Co. agreed to lend Sanford money to carry on the work of building the houses which he had. undertaken to build for Foote, upon Sanford’s agreement that they should be repaid out of the money which he expected to get from Foote on his building contract. Upon this agreement Sanford obtained money, from time to time, as his work progressed, until his indebtedness to them amounted to $2,940.42, when he gave to them .•an instrument of writing as follows : — “$2,940.42 ■ Macon, Miss., July 7.tk, 1879. “ On the 1st day of .August, 1879, pay to the order of Bush, Redwood & Co. twenty-nine hundred and-forty and dollars, for value received, and charge to account of F.- T. Sanford. “To Hon. H. W. Foote, Macon, Miss.” Bush, Redwood & Co. claim that Sanford intended this written demand as an assignment of $2,940.42 of the money to be due him from Foote on'the building contract, and which lie thought would become due at the time the demand was ■made payable, and that they accepted it as- such assignment. It was presented to Foote, and he refused to accept, as the drawee thereof. Bush, Redwood & Co. allege that they requested Foote to notify them when he got ready to settle with Sanford, so that they might protect themselves, and that he by his conduct led them to believe that he would do so. But he denies that he did anything from which they might infer that he would give them such notice. Some time after Foote’s refusal to accept Sanford’s demand in'favor of Bush, Redwood & Co., Foote and Sanford had a settlement,’ and it was agreed that the former owed the latter $3,500, for which. Foote gave. Sanford his checks on Bush, Redwood & Co., who were bankers, with whom Foote had money on general deposit. The checks were presented to Bush, Redwood & Co., and they paid $559.58 thereon, but refused to pay the balance of $2,.940.42, claiming that Sanford had assigned to them that part-of the amount due him by Foote on the building contract. Foote bought in his checks for $2,125, and then brought an action at,law against Bush, Redwood & Co. upon his deposit account to recover the amount unpaid on the checks, :$2,940.42. Thereupon, they filed the bill in this cause against Foote and Sanford, and obtained an injunction thereon prohibiting Foote to proceed in his action at law against them. Foote answered the bill, and then moved to dissolve the injunction on bill and answer. His motion was sustained, and the complainants appealed. 1. The pleadings establish an equitable assignment of the fund due from Foote to Sanford on the building contract to the extent of $2,940.42, which is a valid, equitable offset to 'the suit af law, and shows a payment of the balance claimed by the suit at law. Foote’s answer denies that the deposit account of himself with appellants was, or could have been, as.signed by Sanford. We do not claim that it was, or was intended to be, assigned to appellants. We allege that the money due Sanford by Foote on the buildings was assigned, >not the deposit account of Foote with these appellants. Sanford had no control over, or interest in this latter account, and, •of course, could not assign it. He did own the account due him for erecting the buildings, and had a perfect right to transfer , or assign it to any one. The courts have mainly ■differed on the question whether an order or draft for part of the sum due should be regarded as an assignment pro tanto .as against the holder of the fund, without his assent. This •question has been settled in favor of the assignment, by our ■Supreme Court. Fitch v. Stamps, 6 How. 487 ; Moody v. Kyle, 5 Geo. 506; Hutchinson v. Simon, 57 Miss. 628. 'There is no difference, under these decisions, in a court of •equity,.between an order, or bill of exchange for the whole •of a fund or sum of money in the hands of the holder and •one for pax’t of such fund or sum. In either case it is an as.sigixmexit. 2. It is coxxtended by the appellee that a bill of exchange, payable generally, without specifying any special fund out of which it is to be paid, does not come within the rule, and is not an-assignment, even in equity. Whether this be true or not, when there is but one fund in the hands of the holder, or there ai'e circumstances showing an intent to charge a particular fund, the order or bill of exchange operates as an assignment, just as if it specified the fund on its face. Willard’s Eq. Jur. (Platt’s ed.) 464. Viewing the case as made by the pleadings, the bill of exchange was an order on a special fund, and the case is controlled by Hutchinson v. Simon, 57 Miss. 628. The same doctrine is announced in the recent case of First National Bank of Ganton v. Dubuque Southern Railroad Company, in the Supreme Court, of Iowa, reported in North-Western Reporter (n. s.), vol. 3* No. 3, p. 395 ; also in American Law Review, February, 1880, p. 166. When the circumstances show an intention to assign* the bill of exchange will have that effect. Bank of Commerce v. Bogy, 44 Mo. 15; Kimball v. Donald, 20 Mo. 577. There is no difference, in this State, between an order or draft for the whole and for a part of a fund. Hutchinson v. Simon,. 57 Miss. 628. A bill of exchange drawn for the whole of a. fund or indebtedness is held by the best modern authorities to be an assignment of the fund, after notice to the drawee. 1 Dan. Neg. Inst. 12-21; Story’s Eq. Jur., sects. 1041— 1044; Gibson v. Cook, 20 Pick. 15; Robins v. Bacon,. 3 Greenl. 349 ; Corser v. Craig, 1 Wash. C. Ct. 424 ; Wheatley v. Strobe, 12 Cal. 97 ; Roberts v. Austin, 26 Iowa, 315. 3. Another well-established principle of equity sustains appellants’ bill. When there is an agreement to pay advances out of a certain fund, and the advances are made on the faith of the agreement, the party advancing has an inchoate right to subject that fund by enforcing a specific performance. The simple agreement is not, perhaps, of itself, sufficient to constitute an assignment, or give the right to claim the fund, as against the holder, because the owner of the fund still has control over it, and a payment to him would be good. But whenever the agreement is specifically performed by the owner appropriating the fund to the payment of the advances, the assignment is complete. No form of words is necessary to constitute this appropriation. Any act or writing on the part of the owner of the fund that will authorize the holder to pay the money .directly to the assignee, without the further intervention of the owner, will be sufiicient. Story’s Eq. Jur., sects. 1045-1049 ; Trist v. Child, 21 Wall. 447 ; Bank of Commerce v. Bogy, 44 Mo. 15, and cases there cited ; Hoyt v: Story, 3 Barb. 262. The bill of exchange, having been givert by Sanford in pursuance of the original agreement* upon the faith of which complainants advanced him money, was a sufficient appropriation of that fund, as it authorized Foote to pay directly to appellants without the further intervention of Sanford. Did the drawing of-the bill of exchange by Sanford, in favor of Bush, Redwood & Co., on H. W. Foote opei’ate -as an equitable assignment of the money which Foote owed Sanford for building, or did it’confer any rights on Bush, Redwood & Co. against H. W. Foote? We hold that it did not. What was the paper which Sanford gave Redwood on Foote? It was not a bank check; it was not an order ; it was a pure, simple bill of exchange. It was not drawn on any particular fund, nor was it drawn for the amount which Foote, the drawee, owed Sanford, the drawer, when they settled.. At the time it was drawn, Foote owed Sanford nothing. Under the contract, he owed nothing till the buildings-were, finished, and that was more than six weeks after the bill was-drawn.An ordinary draft or bill of exchange, unaccepted, and hot made payable out of a particular fund, does not operate as an assignment or an appropriation of the funds of the drawer which may be in the hands of the drawee.. 1 Abb. N. Y. Dig. 303, sects. 229, 230, 236. . There must be more than a mere agreement to pay out of a particular fund; there must be air appropriation, either by giving an order on it, or by transferring it in such manner as would have authorized Foote to have paid the whole of what he owed, without further intervention, objection, or interference by Sanford.- 1 Abb. N. Y. Dig. 303, sect. 229. “A bill of exchange does not operate as an equitable assignment of the money for which it was drawn, in the hands of the drawee.” Harrison v. Williamson, 2 Edw. Ch. 430 ; Phillips v. Slagg, 2 Edw. Ch. 108. - These were chancery cases. Abbott states the proposition thus: “An ordinary draft or bill- of exchange,- unaccepted, and not made payable out ol a particular fund, does not operate as. an equitable assignment, and in all the cases where an order has been held to be an equitable assignment of a particular fund, the fund has been specified in the order,” and cites the following cases, which will be found to support the proposition as stated by him : Harris v. Clarke, 3 N. Y. 93 (affirming s. c. 2 Barb. 94) ; Cowperthwaite v. Sheffield, 3 N. Y. 343 (affirming s. c. 2 Sandf. 416 — chancery case) ; Winter v. Drury, 5 N. Y. 525. (affirming s. c. 3 Sandf. 263 — chancery case) ; Chapman v. White, 6 N. Y. 412 ; 1 Yes. 280 ; 1 Russ. & M. 602, 605 ; 4 Sim. 607 ; 4 Myl. & Cr. 690; 3 Hare, 89 ; 18 Wend. 329 ; 2 Edw. Ch. 108 ; 3 Sandf. 257 ; Dykers v. Bank, 11 Paige, 617. This last case shows that Sanford had the light to countermand the payment of his bill, which he did. There may be some dicta to the effect that a bill of exchange operates as an equitable assignment, but Judge Parsons says he - found but one, and that (Corser v. Craig, 1 Wash. C. Ct. 424, referred to by opposite counsel) may be considered as overruled. 1 Pars, on Notes & Bills, 331. The case of Wheatley v. Strobe, 12 Cal. 97, differs materially from this-. The bill of exchange was for the full amount of the debt. There were equities in favor of the payee not apparent here, and Strobe, the debtor, was interpleading with creditors who were contending for the fund. Strobe went into court saying, “I owe the. exact amount; here.it is; let the court decide to whom I shall pay it.” The case of Roberts v. Austin, 26 Iowa, 315, did hold that •a banker’s check passed the money to the payees of the check. It is not necessary to point out the difference between a bill ■of exchange and a banker’s check. But even in case of a banker’s check there is no assignment, as is abundantly shown ‘by the Supreme Court of the United States in Bank of the .Republic v. Millard, 10 Wall. 155 ; First National Bank v. Whitman, 94 U. S. 343. The cases in the United States •court have uniformly held that an ordinary bill of exchange •does not operate as an equitable assignment, and in late cases they go so far as to say that a check springs no such privity "between the payee and the bank as to justify a suit against ■the bank. Manderith v. Welch, Am. Law Rep. 647 (from 5 Wheat., near close of opinion); Tiernan v. Jackson, 5 Pet. •508, 601; Bank of the Republic v. Millard, 10 Wall. 152; .First National Bankv. Whitman, 94 U. S. 343. A solemn promise to pay out of a special fund will not •operate as an assignment, dirimas v. Russell, 14 Wall. 84. But a conclusive case, Bank v. Bogy, 44 Mo. 16, expressly ■decides that a bill is not an equitable assignment. A claim which has never received the assent of the person ;against whom it .is operated, and-which remains to be settled by negotiation or suit at law, cannot be so assigned as to give the assignee an equitable right to prevent the original parties from compromising or adjusting the claim on any terms that may suit them. Kendall v. United States, 7 Wall. 113. After part of a debt has been assigned, without the consent of the ■debtor it is competent for the original parties to compromise. Burnett v. Crandall, 4 Cent. L. J. 212 (citing Love v. Fair-field, 13 Mo. 300, and the case of Kendall v. United States, 7 Wall. 113).