Erskine v. UphamErskine v. Upham
Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]
Appeal is by defendant in intervention Chester R. Upham (also the defendant), from a judgment in favor of plaintiff in intervention Richard William Clark for the unpaid balance on an agreement to pay for an assignment of certain contracts and accounts.
Clark (the intervener) had been employed by one George Snider who was in the neon sign business. During the course of the employment Clark was injured, and as a result thereof he obtained a judgment against Snider for $5,267. Snider did not carry compensation insurance. Within a few days after the injury Snider sold his business, but retained certain conditional sales contracts and accounts receivable, of the total face value of approximately $7,300. Later, on October 28, 1939, he sold said contracts and accounts to Upham (the defendant) for $3,500, of which $1,750 was paid upon execution of the written agreement of sale and the balance was to be paid after acknowledgments of the contracts by the purchasers, and verifications of the amounts due under the contracts, had been made. On October 31, 1939, Snider assigned his contract with Upham for the unpaid balance of $1,750 to Don S. Erskine (the plaintiff). Then Upham accepted Erskine as Snider's assignee. Erskine, after having made demand for payment upon Upham, filed an action in the municipal court on January 2, 1940, for the unpaid balance under the contract assigned to him by Snider. On January 29, 1940, a previous execution having been issued
The judgment was that Erskine take nothing by his complaint; that the assignment by Snider to Erskine was fraudulent and void; that the sale by Snider to Upham was valid; that Upham was indebted to Snider for the unpaid balance which had been assigned to Erskine; and that Clark, the intervener, was entitled to recover the unpaid balance due from Upham to Snider.
Appellant Upham's points on appeal include the contentions, among others, that plaintiff Erskine had not performed certain conditions precedent relative to obtaining acknowledgments and verifications of the assigned contracts and accounts, and therefore the action was prematurely commenced; and that, even though the assignment from Snider to Erskine was fraudulent and void as to intervener Clark, it was valid as to Upham until it was adjudged void by a court, and therefore his "return of not indebted," in response to the levy of execution, was proper.
The court found that Snider was insolvent at the time he sold the contracts and accounts receivable to Upham and at the time he assigned to Erskine the balance remaining unpaid on his contract with Upham, and that he entered into the transactions with intent to defraud intervener Clark; that Upham had no knowledge of Snider's fraudulent intent at the time he purchased the contracts and accounts from Snider and was a bona fide purchaser for value, but that he did know of Snider's fraudulent intent at the time he (Upham) accepted Erskine as Snider's assignee.
The court further found that prior to the commencement of this action, substantially all the assignments, agreements and accounts receivable transferred to Upham by Snider had been duly acknowledged by the purchasers and those which were not duly acknowledged were guaranteed by
Defendant's motion for a new trial was denied. He contends on appeal that the evidence was not sufficient to support the trial court's finding with reference to acknowledgments of the assignments, and verifications of the unpaid balances on the contracts and agreements. Appellant argues that the procuring of the acknowledgments of the assignments to appellant, and procuring verifications of the amounts due on the contracts, agreements and accounts receivable were conditions precedent to be performed by Snider or his assignee Erskine; that there was a failure of performance as to all of the 59 accounts receivable and as to more than one-half of the 40 contracts, and plaintiff was therefore in default in the performance of the conditions precedent at the time he commenced his action.
[1] The contract provided that, "Said second party [Upham] hereby agrees to pay to said first party [Snider] in consideration for said Contracts, Agreements and AccountsReceivable the sum of Three Thousand Five Hundred ($3,500.00) Dollars, payable as follows: One Thousand Seven Hundred and Fifty ($1,750.00) Dollars upon the execution of this agreement and One Thousand Seven Hundred and Fifty ($1,750.00) Dollars when all the assignments of the said Contracts and Agreements have been duly made and acknowledged by the purchaser under saidContracts and Agreements, and when the unpaid balances of said Contracts and Agreements, as represented by said first party [Snider], have been verified by the second party [Upham] hereto." (Italics added.)
The accounts to be acknowledged and verified, as designated by the above proviso, did not include accounts receivable. The contract specifically set forth the property Snider was transferring to Upham as follows: contracts, agreements andaccounts receivable. The provision requiring acknowledgment
The performance of two conditions precedent was required before any right against Upham accrued under the
[4] (1). It should be noted that the language of the contract required no particular person to perform the first condition, nor did it require that any particular method be employed to carry it out. Appellant maintains that Snider promised to use his best efforts to assist in the collection of the contracts; and, in fact, that when appellant purchased the contracts Snider agreed to work for him and devote his time to the contracts and secure acknowledgments of the assignments of the contracts from the purchasers acknowledging therein the balance due. Appellant, however, by his written acceptance of Erskine as Snider's assignee, released Snider from obligation under the contract. The evidence shows that Erskine did assist in obtaining the acknowledgments, and that he pursued the work diligently. Erskine testified that he "spent the biggest part of two weeks securing them," and he thought he "got them all but about three." The various contracts were introduced as exhibits at the trial and appellant repeatedly stated at the trial that payments on the contracts did not constitute acknowledgment, that some payments were made after the action was commenced, that some accounts might be uncollectible and that Snider had guaranteed, to the extent of $7,100, the accounts which totaled $7,300. The trial court correctly stated that the only two conditions precedent to appellant's performance were that the assignments be acknowledged by the purchasers and the unpaid balances verified by appellant, that financial responsibility was not "called for" and that there was no warranty as to collectibility of the accounts. It does not appear that appellant was misled by any representations allegedly made by Snider. Appellant testified at the trial, in answer to a question as to whether he believed Snider's representation, at the time of entering into the transaction, as to the value of the contracts, "I didn't believe it, no." The testimony showed further: "Q. [by plaintiff] And you entered into this transaction knowing full well, or not relying on this particular representation; isn't that a fact? . . . A. That's correct . . . Q. You did not expect to collect every dime that was set forth on the face of the contracts
[5] Appellant contends that there was no proof of payment as to certain accounts at the time the action was filed, hence plaintiff was in default in the performance of the conditions precedent at the time of commencing the action and that no excuse for the default was either pleaded or proved. Assuming that some of the payments which constituted acknowledgments had been made subsequently to filing the action, the trial was conducted before a court of equity which, in making final disposition of the case, was governed by the circumstances as they existed at the time of the decree rather than at the time of filing the action. This action was filed on January 2, 1940, but did not come on for trial until May 14, 1941. At that time there was apparently no question but that it could have been properly filed. Manifestly, these facts did not prejudice appellant's rights. It was stated in Mercer Casualty Co. v. Lewis, (1940)
[7] (2) Appellant's contention that the second condition precedent, requiring verifications, was not performed cannot be sustained. The evidence was sufficient to support the finding that substantially all of the unpaid balances had been verified by appellant. The record shows that employees of appellant investigated and checked these contracts and agreements for three days prior to the date of execution of the contract; that Dun
Bradstreet reports had been obtained, first over the telephone as to the majority of them and later in writing as to all of them. Each purchaser was notified of the assignment by telephone, written notices were also mailed each of them by appellant's employees and a copy thereof delivered in person by Erskine. It would be a harsh rule to require strict performance of a condition when procrastination by the promisor would delay the accrual date of his own obligation. To require it where no time is specified in which performance must be had, as in the instant case, may preclude any recovery. [8] It is a rule that where a contract requires the doing of an act but does not specify a time within which it must be done, a reasonable time will be implied. What is a reasonable time will be determined from the circumstances in the particular case. More than two months had elapsed from the date of executing the contract to the time Erskine filed the action, and more than 1 1/2 years had elapsed to the time of trial. It thus appears that Upham had a reasonable time within which to verify the amounts due. Upham did not at any time prior to the action, as found
[9] Appellant also attacks the findings as to waiver, asserting that waiver must be pleaded and that the pleadings alleged performance by the plaintiff and not waiver by defendant. Plaintiff did allege full performance by him and his assignor and the record discloses that they had performed all that was required of them under the written contract. Upham testified that Snider had agreed orally to use his best efforts to assist in the collections of the contracts and that he was to work for him and devote his time to them. However, when Upham agreed in writing to accept Erskine as Snider's assignee under the contract he was aware that Snider was planning to leave the state and would be unable to fulfill any such purported oral promises, and that he was relieving Snider of any such obligation, if Snider ever was bound thereby. If Erskine assumed any such oral obligation, he fully performed it since the evidence shows that he used his best efforts to secure the required acknowledgments and verifications of the contracts and he went so far as to give his personal guarantee on some of them. There was sufficient evidence for the court's finding that plaintiff and his assignor had fully performed all the terms, conditions and obligations on their part to be performed. The court also made a finding that defendant Upham had waived a strict performance of the conditions precedent. No variance between the allegation in a pleading and the proof is to be deemed material, unless it has actually misled the adverse party to his prejudice in maintaining his action or defense upon the merits. It is apparent that defendant was not
[11] There is no merit in appellant's contention that intervener Clark, having failed in his cause of action which alleged that the sale by Snider to Upham was fraudulent, had "no connection" with appellant and that his remedy was in equity to set aside the fraudulent transfer from Snider to Erskine. The parties were in equity. They submitted themselves to its jurisdiction and, having done so, were subject to all the rights and powers a court of equity possesses under such circumstances and whatever order the court properly made, under the circumstances, was binding upon them. (Leggate v. Porter,
(1938)
[12] Appellant's further point, that a creditor of a fraudulent transferor has no cause of action against a debtor of a fraudulent transferee and that intervener must look to the fraudulent transferee for his recovery, is in part a restatement of the last point covered. It was found by the court that appellant was the debtor of the fraudulent transferor Snider at the time the writ of execution was served upon him, and that appellant was aware Snider was his creditor by reason of his knowledge of the fraudulent nature of the transaction between Snider and Erskine. Section 720 of the Code of Civil Procedure provides in part, "If it appears that a person . . . alleged to have property of the judgment debtor, or to be indebted to him . . . denies the debt, the judgment creditor may maintain an action against such person . . . for the recovery of such interest or debt. . . ." The judgment creditor had a right to follow Snider's property, and have his rights declared thereon.
[13] Appellant argues that even though the assignment from Snider to Erskine was void as to Clark, it was valid and was a transfer of the legal title so far as he, appellant, was concerned until a court declared it void and that, therefore, his return of not indebted was proper since it was made prior to the litigation here involved. Upham, having knowledge of and acquiescing in the fraudulent transaction, should not be permitted, by his own wrong in recognizing the fraudulent transfer by the judgment debtor, to defeat a recovery by the judgment creditor of the balance due at the time of service of the writ of execution. If Upham's return of not indebted was proper, then the judgment creditor would have been entitled to recover only the amount remaining unpaid
[14] Appellant also contends that it was an abuse of discretion to adjudge costs against a party not involved in the particular part of the action in which costs were expended. This was an equitable action in which costs might have been allowed, apportioned, or withheld in the discretion of the court. (Code Civ. Proc., §
[15] A further point presented by appellant is that a garnishor acquires only such rights against a garnishee by virtue of a garnishment as a creditor of the garnishee would have. Appellant cites the Estate of Bennett, (1939)
A judgment will not be reversed except for error prejudicial to the appellant; i.e., error which substantially affects his legal rights and obligations. (Bank of America v. Gillett, (1940)
The judgment is affirmed.
Schauer, P.J., concurred.
Concurrence Opinion
I concur in the judgment.