Page images
PDF
EPUB

3 Robbins.

Cogan v. Conover Manufacturing Co.

the insolvency of the company at the time and the validity of an assignment to secure past-due indebtedness under the circumstances claimed to exist in this case, would all arise if I should find that the Conover company had ever authorized this assignment for $8,250.

I do find that it authorized an assignment for $5,470, and that it is proper to treat this assignment for $8,250 as if it were for $5,470; and since this sum was, at the time of the assignment, advanced by the trust company to the Conover company, none of the other questions are present.

Under the cases heretofore cited it seems to me to be settled law that a president of a corporation may not bind the same by acts in excess of his authority, and it clearly appears in excess of his authority in this case to have given any assigninent to the trust company for any greater sum than $5,470.

It is scarcely necessary to point out-but it is very important that it should be constantly borne in mind-that this is not an assignment of the contract existing between the Conover company and the Public Service Corporation. Keefe v. Flynn, 116 Mass. 563.

If it had been an assignment of the contract the questions raised would have been entirely different from those that must be determined in this case.

It is an equitable assignment of moneys to be earned in the future by the assignor if and when he carries out a contract with a third party.

Such assignments have been frequently dealt with in our courts, and in the following cases many of the principles applicable thereto are laid down: Superintendent, &c., v. Heath, 15 N. J. Eq. (2 McCart.) 22 (Chancellor Green, 1862); Bower v. Hadden Blue Stone Co., supra; Burnett v. Jersey City, 31 N. J. Eq. (4 Stew.) 341 (Court of Errors and Appeals, 1879); Terney v. Wilson, 45 N. J. Law (16 Vr.) 282 (Supreme Court, 1883); Shannon v. Mayor of Hoboken, supra; Kirtland v. Moore, 40 N. J. Eq. (13 Stew.) 106 (Vice-Chancellor Van Fleet, 1885); Brokaw v. Brokaw, 41 N. J. Eq. (14 Stew.) 215 (Vice-Chancellor Van Fleet, 1886); Brown v. Dunn, 50 N. J. Law (21 Vr.) 111 (Supreme Court, 1887); Bank v. Bayonne,

Cogan . Conover Manufacturing Co.

69 Eq.

48 N. J. Eq. (3 Dick.) 246 (Vice-Chancellor Green, 1891); affirmed, 48 N. J. Eq. (3 Dick.) 646; Lanigan v. Bradley & Currier Co., 50 N. J. Eq. (5 Dick.) 201 (Vice-Chancellor Pitney, 1892); Board of Education v. Duparquet, 50 N. J. Eq. (5 Dick.) 234 (Vice-Chancellor Pitney, 1892); Bernz v. Marcus Sayre Co., 52 N. J. Eq. (7 Dick.) 275 (Court of Errors and Appeals, 1894); Bradley-Currier Co. v. Bernz, 55 N. J. Eq. (10 Dick.) 10 (Chancellor McGill, 1896); Weaver v. Atlantic Roofing Co., 57 N. J. Eq. (12 Dick.) 547 (Vice-Chancellor Grey, 1898); Miller v. Stockton, 64 N. J. Law (35 Vr.) 614 (Court of Errors and Appeals, 1900).

It will be observed that in every case in which the right of the assignee is upheld the money had been actually earned by the assignor and was due.

The following general principles are deduced from the cases: In equity one may assign his right to that which is not yet in existence.

To the extent that the assignor ever obtains a right in the thing assigned his previous assignment is effective against him. It is also effective against his creditors and his subsequent assignees and pledgees.

The English rule required notice to be given by the assignee to the third party, holding that personal property passes by delivery, and that when actual delivery is not possible, the nearest approach to it that is possible must be had.

When, therefore, the subject-matter of the assignment is money to be earned in the future by the assignor, it was held that the assignee, to perfect the transfer of it to himself, must notify the third party of the assignment.

This doctrine has been discarded in certain jurisdictions in this country, including New York and our own. Luse's Executors v. Parke, 17 N. J. Eq. (2 C. E. Gr.) 415 (Chancellor Green, 1864); Terney v. Wilson, supra; Board of Education v. Duparquet, supra; Miller v. Stockton, supra; Muir v. Schenck, 3 Hill 228; McCorkle v. Hermann, 5 N. Y. Supp. 881; Kamena v. Huelbig, 23 N. J. Eq. (8 C. E. Gr.) 78; Williams v. Ingersoll, 89 N. Y. 508; Coates v. First National Bank of Emporia, 91 N. Y. 20; Fairbanks v. Sargent, 104 N. Y. 108;

3 Robbins.

Cogan v. Conover Manufacturing Co.

Stevens v. Ogden, 130 N. Y. 182; Fortunato v. Patten, 147 N. Y. 277.

Such an assignment does not change or affect the contractual relations between the assignor and the third party. Bernz v. Marcus Sayre Co., supra.

The latter is protected if, without notice, he pays the assignor; or if, with notice, he pays that one who, so far as he is charged with notice appears entitled to the money.

The equitable assignee, therefore, is secure in his right whenever the assignor has filled his contract with the third party; and the latter would owe the money to the assignor were it not for the assignment, and does, by virtue of the assignment, owe it to the assignee.

He is insecure until this happens; until that time he has only a contingency which is subject to all the risks which inhere in the situation.

It is extremely difficult, if not impossible, to sum up in a single definition the interest of an equitable assignee with respect to money to be earned by the assignor.

Courts sometimes describe the situation in terms of a trust, holding that the debtor is, with respect to the money earned by the assignor and which he has assigned, a trustee for the assignee, and that when the money has been earned the assignee may call him to account for it. Bank v. Bayonne, supra.

Again, it is described as a contract to give a lien, and is referred to as if it were itself a lien. Bernz v. Marcus Sayre Co., supra; Central Trust Co. v. West India Improvement Co., 169 N. Y. 314 (at p. 323).

In my view the legal situation of the parties to an equitable assignment with respect to money to be earned in the future by the assignor is as follows:

The assignor has, by the assignment, divested himself of any right to demand and receive that portion of the money which he has assigned, and the assignee is vested with the right to demand. and receive the money if it is ever earned by the assignor.

Although the courts do not require more than one contract it must, it seems to me, in the nature of things, be considered as if there were two contracts-one by which the assignor contracts

Cogan v. Conover Manufacturing Co.

69 Eq.

that when the money is due him he will assign and transfer his right to it to the assignee; the other is the actual transfer of ' the thing when it is in existence. Otis v. Sill, 8 Barb. 102; Cooper v. Douglass, 44 Barb. 409; Faulkner v. Swart, 8 N. Y. Supp. 239; Tailby v. Official Receiver, 13 App. Cas. 523; 10 Eng. Rul. Cas. 445.

I fail to see how, at law or in equity, there can, properly speaking, be said to be a lien upon something which is not in existence and which may never exist.

In equity there may be an agreement that there shall be a lien upon a thing if and when it exists, but that agreement is not itself a lien.

A lien, from the legal standpoint, embodies the idea of a tie or bond, and it necessarily implies that there is something in existence to which it attaches to which it is tied or bound.

If I am correct in my conclusion as to the nature of the interest of the equitable assignee, it follows that he has no lien unless and until the assignor has earned the money under the contract with the third party.

If the subject-matter of the assignment be left within the power and under the control of the assignor, the risk of its being impaired or destroyed is assumed by the assignee. James v. Railroad Company, 2 Disn. (0.) 261.

If, after the assignment, the assignor, in the course of his dealings with the other contracting party, does that which disentitles him to the money, the effect is that the assignee takes nothing under his assignment. Bradley-Currier Co. v. Bernz, 55 N. J. Eq. (10 Dick.) 10 (Chancellor McGill, 1896); Cooper v. Douglass, supra; McCubbin v. City of Atchison, 12 Kan. 166 (1873); Faulkner v. Swart, supra; Spicer v. Snyder, 12 N. Y. Supp. 744 (1890); Conselyea v. Blanchard, 103 N. Y. 222; Mechanics and Traders National Bank v. Winant, 123 N. Y. 265; Holmes v. Evans, 129 N. Y. 140.

If the assignor fails to carry out his part of the contract with the other contracting party the rights of the assignee must necessarily fail.

In the suit in hand the Conover company was enjoined by this court from the further carrying on of its business, and hence it

3 Robbins.

Cogan v. Conover Manufacturing Co.

never did fill its contract with the Public Service Corporation, and therefore the trust company, as assignee of money to be earned by the Conover company by that contract, can take nothing by virtue of its assignment.

The trust company, however, claims that it is entitled to preference on the ground that its assignment is good, and that the adjudication of insolvency against the company, the injunetion against the same and the appointment of the receiver, do not affect its rights.

It will, therefore, be necessary to consider the effect of the proceedings in insolvency and the position of the receiver thereunder as applied to this case.

The history of that portion of our present Corporation act, which vests jurisdiction in the court of chancery and which provides for the issuance of an injunction and the appointment of a receiver of a corporation found to be insolvent, is traced and set forth in the clear and thoughtful opinion of Vice-Chancellor Stevenson in Gallagher v. The Asphalt Co. of America, 65 N. J. Eq. (20 Dick.) 258 (1903).

As he shows therein, this legislative scheme amounts practically to an equitable quo warranto.

The idea embodied in the New York legislation, from which ours was copied, was to vest in the court power to stop the further operations of insolvent corporations at the instance of the attorney-general.

Our act, copied almost literally from the New York act, preserving all the features of it, changed the applicant from the attorney-general to any stockholder or any creditor.

It did not, however, it seems to me, in anywise change the legislative purpose as disclosed in the act.

It is in no sense a creditor's bill, and to but a very limited extent is it an action inter partes.

Its primary purpose is to enable the court, upon a proper case shown, to forbid the further prosecution of business by an insolvent corporation.

It vests power in the court of chancery with respect to corporations which the court did not theretofore have, and which could only proceed from a legislative grant, it not being among

« EelmineJätka »