Milford State Bank v. Parrish , 88 Utah 235 ( 1935 )

After much doubt, which a study of a considerable number of cases has not completely dispelled, I have come to the conclusion that I must dissent from that part of the prevailing opinion which holds that there was an equitable assignment by Dr. Parrish to Edna Parrish of the claim which the former had against the Investors Syndicate. In the first place, it is necessary to determine what particular thing Judge Whittaker, attorney for Dr. Parrish, and Mr. Tanner, attorney for Mrs. Parrish, were referring to when they had their conversation in the courtroom the 4th day of January, 1933, (when the order to show cause why Dr. Parrish should not be adjudged guilty of contempt was returnable) relative to the motion made by Mr. Tanner to impound the check made out by the Investors Syndicate to Dr. Parrish and which was in the courtroom under the custody of Miss Pearl Miller, an agent of the Investors Syndicate, in response to a subpoena duces tecum. Miss Miller testified that Judge Whittaker had said, "You can have the check, we are not trying to avoid the debt. We want to pay it. You can have it." Mr. Tanner testified Judge Whittaker said, "That is not necessary, you can have that, and we will take care of the balance of it within a few days." In answer to which, he stated, "Well, there is no necessity of pressing that motion, I withdraw it." It is rather evident that the parties referred to the check. The check had been made out in favor of Dr. Parrish by the Investors Syndicate for $856.75, which was the net amount owing by the Syndicate to Dr. Parrish after subtracting from the surrender value of his certificate in that company the amount of money which he had borrowed thereon. The check, an order on a bank in which the Syndicate had deposited its funds, reflected the indebtedness which the Syndicate owed to Dr. Parrish, but independent of the check, which was the method of paying the indebtedness, the underlying indebtedness existed. I think it would make a difference in this case as to whether it was contended the check had been assigned or the indebtedness had been assigned. Certainly, if it is claimed that there was an equitable assignment of the check, perhaps different evidence would be required of the assignment than if it were contended the indebtednes had been assigned. The check was capable of indorsement and manual delivery. The indebtedness represented by the check was not capable of manual delivery or reduction to possession so that in order to show a transfer of the present right in the indebtedness independently of the check certain evidence might be required. However, the indebtedness and not the check was garnisheed by the bank and the interpleaded defendant, Edna Parrish, alleged in her answer that an assignment was duly made by Charles R. Parrish, acting through his attorney, J.J. Whittaker, of "the sum of money mentioned in the answer of the garnishee, to wit, the sum of $856.75." So it appears from the evidence that the conversation in the courtroom on the 4th day of January, 1933, referred to the check, whereas the pleadings in regard to the case at bar referred to an indebtedness. Treating the matter as if it were an assignment of the indebtedness, the conversation about the check in the courtroom, above referred to, being considered as relating to the indebtedness by referring to the tangible evidence of the indebtedness, to wit, the check, I shall set forth the elements necessary to perfect an equitable assignment of the indebtedness. It is generally held that in order to perfect and make an equitable assignment no particular words nor particular mode are necessary. There must, however, be shown by the circumstances surrounding the transaction the following elements: There must be an absolute appropriation by the assignor of the debt to the use of the assignee. The assignor must intend to transfer a present interest in the debt. It is further laid down that there must be a relinquishment of control by the assignor, but this may be but another way of stating that unless there is a relinquishment of control, no present interest in the indebtedness can be considered as having been transferred. If he retains control, it is fatal to the assignment. As is quite frequently the case, the law stated in the abstract does not reveal its difficulties until an attempt is made to apply it to a concrete situation. What constitutes a present appropriation of the debt to the use of the assignee is a difficult question.

"An equitable assignment is such an assignment as gives the assignee a title which, although not cognizable at law, equity will recognize and protect. It is in the nature of a declaration of trust, and is based on principles of natural justice and essential fairness, without regard to the form." 5 C.J. 837, § 2.

An examination of many of the authorities reveals the fact that there is a great conflict among them as to what is required to show a passage of title under the theory of an equitable assignment. Some of the courts have held that there was an equitable assignment under a certain state of facts, whereas other courts, under substantially the same state of facts, have held that some of the elements were missing. Other courts have unconsciously gone so far in requiring proof of a transfer of a present interest or proof of an appropriation to the use of the assignee as practically to make the requirements those of a legal assignment, evidently forgetting that legal assignments may be made orally. Of course, this destroys the distinction between a legal and equitable assignment because an equitable assignment is, in equity, an assignment, though not in law, that is, one which equity in good conscience will recognize as fair and just under the circumstances. See In re Macauley (D.C.) 158 F. 322. Other courts have gone to the other extreme and apparently have sized up the situation, and if the chancellor felt that the circumstances warranted equity in saying that the title of the debt should be in the assignee, he so held without much regard to any of the elements which are necessary to make an equitable assignment. The difficulty has been in distinguishing between a promise by the alleged assignor to pay out of the fund over which he has control or which in the future was to be created for him, and an actual transfer of the interest in the fund. It seems to be quite clear that if the transaction between the parties creates merely an obligation by such alleged assignor to make payment out of a particular fund, or to promise in the future to transfer a debt owing him to the alleged assignee, it cannot be treated as an assignment. See Thomas v. New York G.L. Ry. Co., 139 N.Y. 163, 34 N.E. 877; Rogers v. Hosack'sExecutors, 18 Wend. (N.Y.) 319; Christmas v. Russell, 14 Wall. 69, 20 L. Ed. 762; Trist v. Child, 21 Wall. 441,22 L. Ed. 623; Donovan v. Middlebrook, 95 A.D. 365,88 N.Y.S. 607. If, on the other hand the transaction has given rise to a right upon the part of the alleged assignee to come against the debtor of the assignor, or to come against the fund, that is to say, the debt has been appropriated to the use of the assignee, or he has present right in the debt or fund whether such fund is presently in existence or to be created in the future it is then to be an assignment. Wright v. Ellison, 1 Wall. 16, 17 L. Ed. 555; Smedley v. Speckman, 157 F. 815, 85 C.C.A. 179; Weaver v. Atlantic Roofing Co., 57 N.J. Eq. 547,40 A. 858; Seyfried v. Stoll, 56 N.J. Eq. 187, 38 A. 955;Board of Education of School Dist. No. 85 v. Duparquet,50 N.J. Eq. 234, 24 A. 922; Lanigan's Adm'r v. Bradley CurrierCo., 50 N.J. Eq. 201, 24 A. 505; Bower v. Hadden Blue StoneCo., 30 N.J. Eq. 171, affirmed Lyon v. Bower, 30 N.J. Eq. 340;In re Stiger (D.C.) 202 F. 791; 3 Pomeroy's Eq. Jur. § 1280.

A number of cases, including the United States Supreme Court, have laid down the test as to whether the alleged assignee would have the right to compel the assignor's debtor or the holder of the fund to pay him, or, put in another way, as to whether the holder of such fund or the assignor's debtor could safely pay. See Fairbanks v. Sargent, 117 N.Y. 320,22 N.E. 1039, 6 L.R.A. 475. I submit that this is begging the question. If there is an assignment, the assignor's debtor could safely pay or the assignee could compel him to pay. If not, he could not be compelled to pay. The helpfulness of such a test is exactly nil. After it is stated, we are thrown back just as much upon the determination of whether there has actually been a transfer of a present right.

It has been generally held that, unless the statutes require, in order to perfect a legal assignment it is not necessary that the debtor of the assignor or the holder of the fund be notified of the assignment. If the assignor assigns to two persons, the question of who is prior may depend upon which of the assignees first notified the debtor or holder of the fund, but such notification is not necessary to a legal assignment, consequently it would not be necessary in the case of an equitable assignment. But it may be one of the methods by which an appropriation of the debt or fund to the use of the assignee may be shown. It would certainly be evidence of a transfer of a present right. But such appropriation might be otherwise shown as in the case ofOppenheimer v. First National Bank, 20 Mont. 192, 50 P. 419, where a corporation was indebted to a partnership and at the request of a member of the partnership the corporation consented to transfer a certain sum of money owing it, the corporation, from the First National Bank at Butte and entries were made on the respective books of the firm and the corporation showing the transaction. In the case of Hutchins v. Watts and Choate,35 Vt. 360, the defendant Watts verbally agreed to assign to the plaintiff a demand in favor of the former against Choate, the trustee, whereupon Choate was called in and in the plaintiff's presence was informed by the defendant that he had transferred his claim against the trustee to the plaintiff and was requested by the defendant to pay to the plaintiff. It was held that the assignment from the defendant to the plaintiff was a present and perfected one, the notice to the fundholder or debtor in this case being evidence of the appropriation. In the case ofRichardson v. Rust (1841) 9 Paige (N.Y.) 243, it was held that where a defendant sold certain demands which he had against the county to his creditors in favor of whom orders for the payment thereof were afterward made, it constituted an equitable assignment. The court said that it was more than a mere promise to pay them out of the fund when audited. Evidently the reporter of the opinion somewhat questions the decision, because he states in the syllabus: "Whether a mere agreement by the owner of a fund to pay the debt of his creditor out of such fund, when received by him, gives to the creditor an equitable lien upon the fund." This query has been definitely answered in many cases as above noted in the negative.

It was held in York v. Conde, 61 Hun, 26, 15 N.Y.S. 380, that an agreement to pay certain claimants who had indorsed the notes of a firm in order to enable it to carry out the contract out of which such fund arose and that such claimants should have the proceeds of such contract when closed to repay them the amount paid by reason of said indorsements, was an equitable assignment and that such indorsers were entitled to priority over other creditors of the firm holding a subsequent written assignment of said fund from it. It is difficult to see why this case is not contrary to the general rule that a promise to pay out of a fund is not an equitable assignment. In People v.Westchester County, 57 A.D. 135, 67 N.Y.S. 981, it was held that a written order given by building contractors on a county, directing the building committee of the county to pay a subcontractor "such amounts as may be due them from us," which was accepted by such committee, is binding on the county as an equitable assignment. The notice to the county to pay to the subcontractor was an appropriation. In Hanchey v. Hurley, 129 Ala. 306, 30 So. 742, it was held, quoting from the syllabus:

"An order for the payment of money, until accepted by the party upon whom it is drawn, does not operate as an assignment, either at law or in equity, nor does a mere agreement between a debtor and creditor that a third person shall collect a particular fund, and apply the same to the indebtedness existing between them, operate as such until such person has collected the fund and agreed to so apply it."

Certainly the first part of this statement is against the weight of authority.

In the case of Philadelphia Veneer Lumber Co. v.Garrison, 160 Ky. 329, 169 S.W. 714, it was held, quoting from the syllabus:

"Any order, writing or act which makes an appropriation of a debt or fund amounts to an equitable assignment thereof."

In Wood v. Casserleigh, 30 Colo. 287, 71 P. 360, 362, 97 Am. St. Rep. 138, it was stated:

"An intention to assign, on the one side, and an assent to receive, on the other, operate as an equitable assignment of the subject-matter of transfer, if sustained by a sufficient consideration. The form of words used is not, alone, controlling, but all the circumstances of the transaction are to be considered in determining the intention of the parties to such an agreement."

The contract between the parties provided that the defendants agreed to give to the plaintiff a two-thirds interest in the amount recovered through law if legal proceedings were commenced and a one-fourth interest of any amount recovered if settlement was made without legal proceedings. From the contract it would appear that there was nothing but an agreement. The court said: "A specific share in a specific property was what the parties contemplated." It was held to be an equitable assignment. An identical contract between Wood and Casserleigh was up before the United States Circuit Court of Appeals of the Eighth Circuit, and was there held not to be specifically enforceable by a court of equity. See Casserleigh v. Wood, 119 F. 308. It is submitted that a mere conversation showing an intention to assign and intention to accept is not sufficient; there must be some act showing an appropriation of the indebtedness or fund to the alleged assignee from which the alleged assignor cannot retreat.

In the case of Winberry v. Koonce, 83 N.C. 351, it was stated:

"An intent to sell by one and an intent to buy in the other, at a price paid or agreed to be paid, with such conduct or acts as means that the one resigns all future control of the chose, and the other assumes to regard it as his own, is an appropriation inter se, and on notice to the party who is to pay it, approximates a delivery of a chattel, and is then called a constructive delivery, and thereupon the right of the assignee is perfected against any possible further control of the assignor."

In the case of Weaver v. Atlantic Roofing Co., 57 N.J. Eq. 547, at page 554, 40 A. 858:

"The essential requisite of such an assignment is not the vesting of a right to immediate payment in the party in whose favor it is given, for it may be subject to prior equities (Bankof Harlem v. City of Bayonne, 48 N.J. Eq. [3 Dich.] [246] 253, 21 A. 478), but that the assignor should presently strip himself of his interest in the fund or in some part thereof. This he may do by directing payment to the party to be benefited, or to some one else for his use. It may be either an absolute or a conditional order, by a direction for immediate payment, or for a retention to secure a future payment. When made, the effect of the transfer by the assignor must be such that no power remains with him to revoke or control the disposition made."

From the above cases, and many more which might be added, some idea may be obtained as to what acts are necessary to make the appropriation or to strip the alleged assignor of his interest or to transfer a present right — all different methods of expressing the simple idea of doing those acts which in equity will be considered as having passed the title to the assignor's right in the fund or debt. If we take the evidence in this case in the light of the principles above enunciated and in view of the cases herein considered, it appears to me that there is not sufficient evidence to show that Dr. Parrish stripped himself of all control over the indebtedness owing to him by the Investors Syndicate. No order or direction was given to the Syndicate to pay the indebtedness to the intervener. The language used was in effect, "You may have that" (referring to the check). If we treat this statement as referring to the indebtedness in the sense that the reference to the check was something representative of the indebtedness, we in reality only have the statement that the intervener might have the indebtedness. But this does not seem sufficient to strip Dr. Parrish's control over the indebtedness. It was an expression of willingness to give the intervener the debt. It can hardly be said that there was anything which showed a present intent to transfer it or that there was any act which could be construed in equity as a transfer of it. If the bank had not garnisheed and if this controversy were between Mr. and Mrs. Parrish, it might well be that an estoppel could be pleaded because of the intervener withdrawing her motion to impound the check on the supposition there had been an appropriation of the debt to her use. Dr. Parrish, knowing that the motion to impound had been abandoned upon the supposition that the debt had been assigned, might be estopped from asserting that he had not assigned it. But estoppel cannot be urged against a stranger. Further evidence seems to bear out the above analysis that the statement of Judge Whittaker could only be construed as a willingness to tranfer. When the attorney walked out of the courtroom, according to the testimony of Mr. Tanner, the latter suggested that Judge Whittaker go with him to get the money, to which response was made, "In a few days we will take care of it all; we are going to apply for the loan forms of insurance policy, and at that time we can clear up the whole matter." This appears to be consistent with the idea that the $856.75 had not yet been turned over. In fact, the only evidence of an assignment is the statement that "you may have that," or "you may have the check," both expressions having been used by different witnesses. There was no constructive delivery of the indebtedness which would have made it an oral legal assignment nor any appropriation to Mrs. Parrish which could be said to amount to a transfer of the present right to the indebtedness.

I concur with the dissenting opinion of the CHIEF JUSTICE where he states that the statements of the judge could only show what understanding the judge had as to the agreement of the parties and cannot bind Dr. Parrish because it does not even appear that Dr. Parrish was present when these statements were made by the trial judge.

Having arrived at the conclusion as I have, it becomes unnecessary to consider the question as to whether Judge Whittaker as attorney for Dr. Parrish had authority to make the statements. It may well be that since he was representing his client in the hearing to show cause why the latter should not be committed for contempt for failure to pay $2,900 and since part of the property of Dr. Parrish was in court represented by the check, perhaps subject to the court's order as in a supplemental proceeding, the authority of the attorney may perhaps be considered to have gone to the extent of doing those things necessary to defend or purge or excuse the alleged contempt, or, if there was contempt, to do any act by way of mitigating it to save the doctor punishment therefor. While the conversations between the attorneys above referred to evidently took place after the main case had been submitted so that it could not be presumed that Dr. Parrish was still in the courtroom and heard the remarks, although he may have been, yet if the attorney had the authority it would not require the supporting fact of a client standing by without protesting when his attorney agreed to a certain disposition of his property if such silence could be construed as a consent or modification. If the authority was there inherent in the attorney because of the nature of the case, so that representation of his client in the case would require that he had the power to appropriate certain of his client's property to a settlement of the suit as part of his powers necessary to proper representation, it would make no difference whether the doctor was present or absent. But, as stated, that it is not necessary to determine that question which itself may be one of considerable nicety.