Bank of San Francisco v. Paul Welles
| Decision Date | 13 November 1916 |
| Docket Number | PORTUGUESE-AMERICAN,No. 45,45 |
| Parties | BANK OF SAN FRANCISCO, Appt., v. PAUL I. WELLES, John Daniel, Trustee of Metropolis Construction Company, Bankrupt, and Thomas F. Boyle |
| Court | U.S. Supreme Court |
Messrs.William R. Harr, George A. Knight, Charles J. Heggerty, James B. Feehan, and Joseph W. Beretta for appellant.
Messrs. Harold Remington, F. H. Dam, R. T. Devlin, W. H. Devlin, A. F. Morrison, P. F. Dunne, W. I. Brobeck, Milton J. Green, and George J. Hatfield for appellees.
[Argument of Counsel from page 8 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:
This is a suit brought by the appellee Welles to establish a lien upon a debt of $6,830.85, due under a construction contract from the city of San Francisco, represented by the appellee Boyle, to the bankrupt, Metropolis Construction Company. The district court approved the report of the referee against the claim and in favor of the appellant, but this decree was reversed by the circuit court of appeals. 128 C. C. A. 161, 211 Fed. 561; 131 C. C. A. 389, 215 Fed. 81. The subject-matter is the fourth progress payment, which, on December 5, 1910, had been authorized by the board of public works of the city. On that day the Construction Company applied to the appellant bank for a loan of $30,000, secured by an order on the auditor of the city, authorizing the bank to draw from the city for the above and other amounts not in controversy here. The bank declined until the order should be accepted by the auditor, whereupon, on the next day, the order was presented to the auditor's office and stamped as received on December 6. The order was intended and taken as an assignment, and, after it had been stamped, was accepted by the bank as security and the money was advanced. The next day $5,000 more was advanced on the same security, notes being given for each sum. The appellee Welles was a subcontractor, and on December 12 and 16 served notice on the city to withhold payment, as permitted by § 1184 of the Code of Civil Procedure of the state of California. It is admitted by Welles that if the assignment was valid, his rights are subordinate to it (Newport Wharf & Lumber Co. v. Drew, 125 Cal. 585, 58 Pac. 187); and the only question argued on his behalf is whether the terms of the contract between the bankrupt and the city made the assignment void.
The contract provided that the contractor should keep the work under his personal control, and should not assign or sublet the whole or any part thereof without the consent of the board of public works. It further declared that no subcontract should relieve the contractor of any of his obligations, and that he should not, 'either legally or equitably, assign any of the moneys payable under the contract or his claim thereto unless with the like consent.' The city has made no objection to the assignment to the bank, and the money now awaits the decision of this court as between the claimant of the lien and the prior assignee.
There is a logical difficulty in putting another man into the relation of the covenantee to the covenantor, because the facts that give rise to the obligation are true only of the covenantee, a difficulty that has been met by the fiction of identity of person and in other ways not material here. Of course, a covenantor is not to be held beyond his undertaking, and he may make that as narrow as he likes. Arkansas Valley Smelting Co. v. Belden Min. Co. 127 U. S. 379, 32 L. ed. 246, 8 Sup. Ct. Rep. 1308. But when he has incurred a debt, which is property in the hands of the creditor, it is a different thing to say that, as between the creditor and a third person, the debtor can restrain his alienation of that, although he could not forbid the sale or pledge of other chattels. When a man sells a horse, what he does,...
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