Porter v. Hartley

MR. JUSTICE COOPER

delivered the opinion of the court.

This action was instituted by George P. Porter, as state auditor, to have determined the respective rights of the several claimants to a balance due from the state to James Hartley & Co. for work done and materials furnished in the construction of what is known as the Metallurgical Building, at the State School of Mines, in Butte. Upon completion of the work in September, 1920, there was due the contractors, as James Hartley & Co. will hereinafter be called, a balance of $10,611.20. Against this amount there were brought into the case by .interpleadings four groups of claims which counsel for the Banking Corporation have classified as follows: Group No. 1, $747.76 and interest for premiums due the State Industrial Accident Board under the Workmen’s Compensation Act (Laws 1915, c. 96); (2) James C. Bain, as assignee, and George W. Huffaker, as sheriff of Lewis and Clark county, under writs of attachment levied and served September 15 and 24 on the state auditor in an action by Bain upon a note in the sum of $3,000, signed by James Hartley and delivered to the Merchants’ & Mechanics’ Bank of Helena; (3) an assignment in writing filed with the state auditor on September 23, given by James Hartley & Co. to the Banking Corporation of Montana, to secure a note in the sum of $9,000 and interest; and (4) for materials and labor used and performed in the construction of the Metallurgical Building by fifteen corporations and persons, amounting in all to the sum of $9,809.14.

The complaint alleges that the state board of examiners on October 9 allowed each of the claims filed with the clerk of the board, composing group No. 4, “ordered and directed that warrants be drawn in payment thereof,” and delivered the approved claims to the state auditor for the issuance of war *249 rants in favor of each of the claimants named. There is then set forth the number of each of the fifteen warrants, the claim number, the amount, and the name of the payee. The prayer is that each and all of them be required to appear, interplead and set forth “their claims and rights to said warrants, and adjust their several demands between themselves.”

The State Industrial Accident Board filed its separate answer to the complaint, and offered evidence in support thereof at the trial.

The answer of the Banking Corporation avers that the assignment filed by it was given as security for moneys advanced to James Hartley & Company, a copartnership composed of James Hartley and R. W. Lamb, in furtherance of their contract with the state in which they agreed to do certain concrete and cement work upon the Metallurgical Building mentioned; that the moneys so advanced to the firm to enable it to meet its current obligations and incorporated in the note amounted to the sum of $9,132.27; that on September 30, 1921, the sum of $1,138.50 was credited and applied thereon, leaving due a balance of $8,679.71. The prayer is that the court adjudge it to be entitled to a warrant drawn in favor of F. C. Austin for the sum of $625, as its assignee, and also that the state auditor be directed to pay it from any moneys due under the contract the balance referred to.

James C. Bain and George W. Huffaker, the sheriff who served the writs of attachment and garnishment, answered jointly, alleging that Bain’s claim was against Hartley individually.

The joint answer of the Montana Hardware Company and the claimants composing group No. 4, including the two Ryans, Right and F. C. Austin, mentioned hereafter, alleges that James Hartley & Co. complied with the rules and regulations of the board of examiners requiring vouchers and receipts or other writings showing claims for labor performed or materials furnished it, and assigned to each of them as payment for materials furnished and labor performed the respective *250 amounts due them, and filed written assignments thereof with the board; that the board passed upon and allowed all of the claims, and ordered that warrants be issued to each of them in payment therefor.

The cause was tried by the court without a jury on October 19, 1921. At the close of the evidence the court sustained a motion for nonsuit as against the claim of the State Industrial Accident Board. As to the other claims, the court found in writing the following: That the contract was made October 25, 1919, and completed October 1, 1920; that on October 6, 1920, claims composing group No. 4 above were filed with the clerk of the board of examiners for allowance, accompanied in each instance by a written assignment, signed “James Hartley”; that on October 9 the claims composing group No. 4 were allowed by the board; that at no time before October 9 did the bank give “notice of an adverse claim of amounts due James Hartley & Go. on the contract to the board”; that neither the Banking Corporation nor Bain nor the sheriff gave notice to the board of any adverse claims; that, upon delivery of the claims to the state auditor by the board, state warrants for the various sums were drawn in favor of the parties named therein as assignees; that on September 23 the bank caused to be served upon the state auditor and the state treasurer written notice of its claim against the contractors. Hpon these findings the court rendered judgment that each of the warrants so made out by the state auditor should be by the clerk delivered to each of the defendants named in group 4, and adjudged that the hank. James G. Bain and George W. Huffaker, as sheriff, take nothing as against the claimants named.

Counsel for the bank argue that the notice of assignment was in proper legal form, and upon its filing with the state auditor, imparted legal notice to all adverse claimants of the nature and extent of the bank’s claim, and that it thereby acquired a right prior and superior to Bain, the attaching creditor of Hartley, and to that of the assignees of James *251 Hartley, whose claims were filed with the clerk of the board of examiners and signed by James Hartley. Opposing counsel contend that, because the state board of examiners was “the only board of officials to which notice of the assignment” could be given legally, and no claims other than those represented in group 4 were so filed, the ruling of the district court should be sustained.

The governor, secretary of state, and attorney general [1] “constitute a board of examiners, with power to examine all claims against the state, except salaries or compensation of officers fixed by law, and perform such other duties as may be prescribed by law.” (Const., Art. VII, sec. 20.) Section 238 of the Eevised Codes of 1921 allows any person having a claim against the state for which an appropriation has been made to present it in the form of an account or petition. The board is required to allow or reject claims in the order of their presentation.

To sustain the order of the district court in directing the issuance of the warrants to the several claimants composing group No. 4 would necessitate a holding that after the board had examined, adjusted and approved a claim against the state, it could determine the legal question of title to the warrant in a dispute between conflicting claims thereto. After it has examined and approved claims as provided by law, its functions are ended, and its power is exhausted. It stands between the state and persons contracting with it, and is bound to see that the rights of its principal are protected and enforced.

Section 34 of Article V of the Constitution provides that [2([ “no money shall be paid out of the treasury except upon appropriations made by law, and on warrant drawn by the proper officer.” Subdivision 17, section 151, Chapter 11, Part III, of the Eevised Codes of 1921 imposes upon the state ■auditor the duty of drawing all “warrants on the state treasurer for the payment of moneys directed * * * to be paid out of the treasury.” Section 233 requires the board to *252 meet the third Monday in every month, and, under section 244, “to proceed to examine and adjust” all claims properly presented against the state. If the board approve a claim, it “must indorse thereon,” over the signature of the members, the words, “ ‘Approved for the sum of - dollars,’ and transmit the same to the office of the state auditor; and the auditor must draw his warrant for the amount so approved in favor of the claimant, or his assigns, in the order in which the same was approved.” (See. 239.)

It is plain from these provisions of the statute that notices of assignment, writs of attachment or execution should be filed with the state auditor,' and that, by filing its notice of assignment in the office of the state auditor, the bank acquired rights prior and superior to those of the claimants named in group 4, whose assignments were filed with the clerk of the board of examiners at a later date.

The note upon which the action of Bain v. Hartley was [3] brought and attachment process served upon the state auditor was the personal obligation of Hartley. It was purchased of the Merchants & Mechanics’ Bank by Bain, who sought to satisfy the indebtedness by garnishment of Hartley’s interest in the balance due James Hartley & Co. on their contract with the state. The law is that the personal debts of a partner cannot be satisfied out of the partnership assets until the partnership obligations have all been discharged. “It is only the interest of the partner in the partnership property which can be levied upon and sold under an attachment against him. This interest is the surplus of the property remaining after the adjustment of accounts between the partners and the firm debts.” (30 Cyc. 576; Rowley on Partnership, sec. 820.)

The last contention counsel make is that the assignment to [4] the bank is “what might be called a blank assignment, without the special statements as to the rights and causes of action assigned.” The language of the instrument is: “We hereby make assignment of all our right, title and interest in and to all funds belonging to, or to become due to the firm of *253 James Hartley & Co.” In the next paragraph the auditor is requested to deliver warrants or other evidence of any obligation due to James Hartley & Co., on account of the construction of the Metallurgical Building at the School of Mines at Butte, as soon as the same are ready for delivery. It is signed, “James Hartley & Co., by E. W. Lamb,” who was a .member of the firm. This is clear enough to apprise any person of ordinary intelligence that it was the intention of James Hartley & Co. to transfer the moneys earned by it upon its contract with the state to the bank. That thought was meant to be, and was, clearly expressed therein. No particular set of words is necessary to impart notice in a case like this. It is sufficient if such information is communicated to the debtor as gives him to understand that the assignee is the owner of the chose in action. (5 C. J., p. 936.) In the fourteenth edition of Mr. Story’s work on Equity Jurisprudence (vol. 3, sec. 1408) it is said: “In order to constitute an assignment of a debt or other chose in action in equity, no particular form is necessary. A draft drawn by A. on B. in favor of C., for a valuable consideration, amounts (as we have seen) to a valid assignment of so much of the funds of A. in the hands of B.” (See, also, Hovey v. Grand Trunk Ry. Co., 135 Mich. 147 , 97 N. W. 398 ; United States Farm Land Co. v. Bennett, 55 Cal. App. 299 , 203 Pac. 794 ; National Bank v. United Securities etc. Ins. & T. Co., 17 App. D. C. 112.)

The balance due the partnership of James Hartley & Co. on its contract, as testified to by the clerk of the board of examiners upon the final settlement, was found by the board to be $10,611.20. On October 25, by stipulation in writing filed with the clerk of the court, all the parties to the action agreed that the warrants in favor of George Eyan, L. E. Eyan, and Ed. Eight for labor, aggregating the sum of $429, should be delivered to them. During the trial it was stipulated between all the parties that the warrant covering the claim of F. C. Austin in the sum of $625 should be delivered to the Banking Corporation, as his assignee. This reduced *254 the partnership fund to the sum of $9,557.20. The evidence <of Mr. Ramsey, the president of the bank, was that on September 30, 1921, the Banking Corporation received and credited upon the indebtedness of Hartley & Go. $1,138.50, and that there then remained due from the firm the sum of $8,697.71, with interest.

Rehearing denied May 25, 1923.

The Banking Corporation being entitled to judgment, and it being apparent that its claim, principal and interest, will absorb the balance of the partnership fund, it follows that the judgment and order appealed from should be reversed, with directions to the district court to enter judgment in favor of the bank, that it order redelivery of the warrants now in custody of the clerk of the court to the state auditor, and that it further order that the state auditor make out and deliver to the Banking Corporation a warrant for the amount of its claim with interest. And it is so ordered.

Reversed, with directions.

Mr. Chief Justice Callaway and Associate Justices Holloway, Galen and Stark concur.