253 F. 473 | E.D. Pa. | 1918
The crucial point of the question involved in this case may be best presented by an outline statement of the fact situation:
Cloud, Stiles & Work, a contracting corporation, entered into a contract with the city of Philadelphia to do certain construction work for
As part of the inducement to thg surety to become such, the contractor made what is conceded to have been (between the parties) a' valid assignment of all moneys which became payable under the contract by the city, including this reserve. The assignment became operative in the event of a default by the contractor upon its contract.. This assignment was duly executed and delivered, but no notice thereof was given to the city, nor was there other delivery than of the-assignment. The contractor proceeded with the work until May 1; 1916. It then defaulted, and the city thereupon regularly declared, and notified tire surety of, the default, and called upon -the latter to complete the work. This the surety did at a cost in excess of all payments under the contract, including the sum which had been held back from the contractor by the city by virtue of the right given to it by the contract. The figures expressive of the sum so reserved are-$8,215.67.
The contractor, subsequently to the default, went into bankruptcy. The date is agreed to be August 1, 1916. The plaintiff, as trustee in-bankruptcy, brought this action against the city. The latter, admitting its possession of the fund and having no interest in the controversy over the ownership of it, asked and was given leave to pay the money into court. These further proceedings are in effect an inter-pleader to determine to whom the money belongs, and the question is presented through and by a case stated.
The plaintiff advances the claim of the bankrupt estate from two. positions. One is in effect that the question of to whom this money belongs is a question for the determination of the court in bankruptcy,, and because of this the fund should be taken in charge by the trustee. The underlying principle upon which the trustee relies must be accepted, but the acceptance of the conclusion involves a begging of the real question. The right to the money determines the question, before us, but the question is, not the right to the money, but the right of the plaintiff to recover in this action.
It is fairly presented by a statement of the defense as really made. It is that the defendant owes the plaintiff nothing, because the debt, although admitted to be due, is due, not to the plaintiff, but to another. If this defense is made out, the plaintiff cannot recover. Ordinarily,, it is true, a defendant has no concern with the ownership of the debt which he owes, if the plaintiff has a right of action in the sense of being the legal plaintiff. If he owes the money, and owes it to the-plaintiff, he cannot escape judgment by setting up that the ownership, of the fruits of the action has passed to a third party. His only legal ( defense is that he does not owe'the plaintiff. Herein lies the distinction between the legal and an equitable, or, as the Pennsylvania practice has it, a use, plaintiff. It may be, however, that the circumstances-are such as to give the defendant a real interest in the question of to-
Aside from all other considerations, the common sense of the situation would command that the real question be finally, so far as concerns that court, determined. This is particularly true when the court which may pronounce judgment and the court to which the question would be referred are one and the same, although sitting in the one case as a court of equity and in the other as a bankruptcy court.
The modification of the doctrine is recognized to the extent that such transfers are good as against the grantor and persons claiming title through him, and that no further change of possession is required than that called for by the nature of the thing transferred, but that such transfers are not valid against execution creditors, unless there has been a change of possession or its equivalent. The principle, it is asserted, applies to dioses in action as well as to things tangible. 'When a chose in action, in the form, for instance, of a ■claim of debt, is assigned, it is reasonably possible to have the assign
As against this view there are two things to be said. In the first place, the fund here was in a very substantial, although somewhat technical, sense, earned by the surety, and not by the bankrupt. The latter had na claim whatever to the money until the contract was completé'd, although it is true that the money represents work done by the bankrupt. The contract was completed by the surety and the-reserve money thus saved. There is, because of this, great force in the- equitable consideration that the salvor should not be at a loss.
In the second place, and as a finality, the question sought to be raised has been set at rest by the case of Hawley Down-Draft Furnace Co., 238 Fed. 122, 151 C. C. A. 198. In that case there was a secret assignment of dioses in action in the form of book accounts. Not only was no notice given to those who owed the accounts, but the assignor collected them as if still the owner. It was, it is true, agreed between the grantee and grantor that in making collections the graptor acted as the agent of the grantee; but this relationship-was in no way disclosed to others. A receiver was appointed by a state court, who collected the outstanding accounts. Bankruptcy proceedings followed, and the receiver paid over the fund to the-trustee in bankruptcy. The assignee made claim to the moneys under his assignment, and his title was upheld against that of the trustee.
This ruling is decisive of the question of ownership. The conclusion reached is based upon the finding that by the assignment of this reserved fund title thereto was in the Maryland Casualty Company. We, in consequence, answer questions (a) and (b) submitted for our decision, but see no occasion to answer question (c).
These answers are as follows: (a) No. (b) Yes.