Grabow v. Bergeth , 59 N.D. 214 ( 1930 )

I agree with the majority opinion in holding, that there was error in the instructions of the court for which there must be a new trial; but on the question of the assignability of a cause of action for deceit in the sale of bank stock I disagree, and dissent.

The majority opinion quotes from the footnotes to § 310 of the "Field Code" as follows, "This section is proposed to establish one rule for the assignability and the survivorship of things in action." The opinion then proceeds to analyze and construe § 310 of the "Field Code" as it was written, and not as it was adopted by the territorial legislature.

The law relating to things in action must be considered and construed as it appears in our Code, and it is as follows, § 5445, Comp. Laws 1913. "A thing in action is a right to recover money or other personal property by a judicial proceeding." Section 5446, "A thing in action, arising out of the violation of the right of property, or out of an obligation, may be transferred by the owner. Upon the death of the owner it passes to his personal representatives, except when in the cases provided by law it passes to his devisees or his successor in office." Under this section two classes of things in action, may be transferred by the owner, first, a cause of action arising out of the violation of a right of property, which includes all actions arising either out of contract or tort, which in any manner is a violation of a right of any kind of property, and second, a cause of action arising out of an obligation.

Section 5783, "A right arising out of an obligation is theproperty of the person to whom it is due and may be transferredas such."

Section 7279, "Whenever the meaning of a word or phrase is defined in any statute, such definition is applicable to the sameword or phrase wherever it occurs, except, when a contraryintention plainly appears."

Section 4331, "In this state there is no common law in any case where the law is declared by the Codes."

Section 7321, "The rule of the common law that statutes in derogation thereof are to be strictly construed has no application to the Code. The Code establishes the law of this state respecting the subjects to which it relates, and its provisions and all proceedings under it are to be liberally construed with a view to effect its objects and to promote justice."

In 1865 the territorial legislature adopted the "Field Code," but amended § 310, now § 5446, Comp. Laws 1913, by striking out the word "contract" and substituting the word "obligation," so instead of reading, "Things in action arising out of the violation of the right of property, or out of a contract," as in the "Field Code," it reads, "Things in action arising out of the violation of a right of property or out of an obligation." This section was re-enacted in 1877, in 1895 and remains on the statute books today as it was originally adopted in 1865. The word "obligation" is a broader term under the statute than the word "contract." It is defined by § 5763 as follows, "An obligation is a legal duty by which a person is bound to do or not to do a certain thing."

Section 5764, "An obligation arises either from, first, the contract of the party, or second, the operation of law." In the use of the word obligation in the statute relating to things in action, the legislature does not limit the term in any way, and it follows, that it means in the statute wherever it appears an obligation arising either by contract or by operation of law.

The legislature in 1865 said in so many words, "A thing in action, arising out of the violation of a right of property, orout of an obligation, may be transferred by the owner. An obligation arises from either the contract of the parties; or theoperation of law, and a right arising out of an obligation is the property of the person to whom it is due, and may be transferred as such." It not only struck out the word contract and substituted the word obligation, but it defined obligation so as to include both contract and tort.

This is the conclusion that was reached by the South Dakota supreme court in the case of Sherman v. Harris, 36 S.D. 50, 153 N.W. 925, Ann. Cas. 1917C, 675. This action involved the question of the assignability of an action for fraud and deceit, and the court held that it was assignable, overruling the case of Erickson v. Brookings Co. 3 S.D. 434, 18 L.R.A. 347, 53 N.W. 857.

California, with the same statute relating to things in action, in the case of Wikstrom v. Yolo Fliers Club, 206 Cal. 461, ___ A.L.R. ___, 274 P. 959, has this to say of the South Dakota case, viz.:

"A cause of fraud and deceit similar in principle and related by kindred facts to the one before us in Sherman v. Harris,36 S.D. 50, 153 N.W. 925, Ann. Cas. 1917C, 675, where Code sections exist identical with the two sections above cited. Our own statutes are construed, and the holding made is in accord with our conclusion here. The decision of the court of Idaho in the case of MacLeod v. Stelle, 43 Idaho, 64, 249 P. 254, related to an action arising out of fraud in the sale of mining stock, and therein it was held that the cause of action survived and was assignable. Likewise in the case of Horton v. Tyree, 102 W. Va. 475, 135 S.E. 597, an action for fraud and deceit, it was held that the action related to the property and not to the person and was assignable. See also Sullivan v. Curling, 149 Ga. 96, 99 S.E. 533, 5 A.L.R. 124. See also note to said cause, page 130; Harris v. Welch, 148 Wis. 441, 134 N.W. 1041; Metropolitan Ins. Co. v. Day, 119 Me. 380, 111 A. 429; J.H. Leavenworth Son v. Hunter,150 Miss. 245, 116 So. 596; Porter v. Lane Constr. Corp. 212 App. Div. 528, 209 N.Y. Supp. 54."

Kansas and Oklahoma with the same statutes hold, that an action on tort is not assignable, for the reason, the statute also provides that every action must be prosecuted in the name of the real party in interest, except, as otherwise provided in § 82 of this Code, but this section shall not be deemed to authorize the assignment of a thing in action not arising on contract. It is held, that the last clause of this section, viz., but thissection shall not be deemed to authorize the assignment of athing in action, not arising on contract, is a limitation uponthe section relating to a transfer of things in action. (Italics are the writer's.) Kansas Midland R. Co. v. Brehm, 54 Kan. 755, 39 P. 690; Kansas City M. O.R. Co. v. Shutt, 24 Okla. 96, 138 Am. St. Rep. 870, 104 P. 51, 20 Ann. Cas. 255. Assuming, that the statute quoted is a limitation on the statute authorizing the transfer of things in action; we had the same statute until the adoption of the 1895 Code when the statute was amended, by striking out that part which is claimed to be a limitation on the right of transfer, and as passed and adopted in 1895, it is now § 7395, Comp. Laws 1913, and reads: "Every action must be prosecuted in the name of the real party in interest except as otherwise provided in § 7397." Section 7397 relates to actions by executors and administrators, trustees, etc.

The early California decisions are based on the principle, that the assignment of a right of action for a tort is contrary to public policy, the Kansas and Oklahoma decisions on a statute which if it ever was any limitation on the assignment of a "thing in action" has been repealed; the New York decisions, and other decisions cited in the majority opinion are based on different statutes, or on the common law.

The case of Wikstrom v. Yolo Fliers Club, 206 Cal. 461, ___ A.L.R. ___, 274 P. 959, supra, states the general rule as follows:

"`As regards particular results, it is pretty generally held in America that the only causes or rights of action which are not transferable or assignable in any sense are those which are founded upon wrongs of a purely personal nature, such as slander, assault and battery, negligent personal injuries, criminal conversation, seduction, breach of marriage promise, malicious prosecution, and others of like nature. All other demands, claims and rights of action whatever are generally held to be transferable. . . . But where property is obtained by a deceit or fraudulent device of any sort, the cause of action is assignable, for here the injury is done in respect of the particular property which is wrongfully acquired.' 3 Street, Foundations of Legal Liability, pp. 86, 87. Rued v. Cooper, 109 Cal. 682, 693, 34 P. 101; Lazard v. Wheeler, 22 Cal. 139.

"The case of McCord v. Martin, at pages 132, 133, of 34 Cal. App. (166 P. 1014) was an action by an assignee of 25 persons, stockholders in a corporation known as the Lost Hills Mining Company, for damages sustained in making sales of their respective shares of stock on the false representation of a fellow stockholder as to the price reported by him to them that could be obtained for the stock and for fraud and deceit in connection with the transaction."

In this case the plaintiff, as assignee, is seeking to recover the difference between the actual value of the stock and the purchase price for which it was obtained by fraud and deceit, and it was held that he could recover as assignee.

In the instant case, the plaintiff as assignee is seeking to recover the money obtained from the purchasers of the bank stock by fraud and deceit.

In principle the cases are alike, and if there is a recovery in one it is difficult to understand why there should not be a recovery under the other.

I am of the opinion, that when the legislature struck out of the statute the word "contract" and substituted the word "obligation," that it did so for the purpose of employing a broader term than the word "contract" clearly intending and meaning that the term "obligation" as used and defined in the statute, is a right of action arising out of a contract between the parties, or by operation of law and is assignable.