Engeldinger v. Swift & Co. (In re Nelson's Estate), 40564.

• Court: Iowa Supreme Court
• Writing for the Court: GRIMM
• Citation: Engeldinger v. Swift & Co. (In re Nelson's Estate), 211 Iowa 168, 233 N.W. 115 (Iowa 1930)
• Decision Date: 18 November 1930
• Docket Number: No. 40564.,40564.
• Parties: IN RE NELSON'S ESTATE. ENGELDINGER v. SWIFT & CO. ET AL.

211 Iowa 168

233 N.W. 115

IN RE NELSON'S ESTATE.ENGELDINGER

v.SWIFT & CO. ET AL.

No. 40564.

Supreme Court of Iowa.

Nov. 18, 1930.

Appeal from District Court, Story County; F. E. Fry, Judge.

Claimants and appellants filed an application in the estate of John I. Nelson, deceased, asking for an order of the court, authorizing and directing the administrator to account to the appellants for the proceeds received by the administrator from the collection of certain accounts previously assigned by the deceased to the applicants, and to turn over to the applicants all money received in payment of said accounts to the extent of the claim of the applicants. The trial court held for the claimants in so far as the accounts had accrued at the time of the assignment and against them on the balance. The claimants appeal. The facts appear in the opinion.

Affirmed.

Lee, Steinberg & Walsh, of Ames, for appellants.

Nichol & Nichol, of Ames, for appellee.

GRIMM, J.

On May 1, 1929, Swift & Co. and the Iowa Packing Company, corporations, each filed in the estate of John I. Nelson, deceased, in Story county, Iowa, applications for orders of the court directing the administrator to account to the applicants for the proceeds received by the administrator from the collection of accounts, previously assigned by John I. Nelson, as security, to the said claimants. On the 20th day of June, 1929, the administrator filed an amended and substituted resistance to the applications of Swift & Co. and the Iowa Packing Company.

The facts are not much in dispute, and we have here largely a question of law. It appears from the record that John I. Nelson was engaged in the retailing of groceries and meats in Ames, Iowa. During the latter part of 1928 and the fore part of 1929 he became indebted to Swift & Co. in a sum in excess of $3,800, and he also became indebted to the Iowa Packing Company in a sum in excess of $2,500. These accounts were for merchandise sold to Nelson. On February 12, 1929, the said packing companies sent an agent to Ames to collect the accounts or get security for the same. On that day Nelson executed and delivered to these companies separate assignments, the material parts of which are as follows:

“That the undersigned, in consideration of One Dollar ($1.00) in hand paid, the receipt whereof is hereby acknowledged, and other (good and valuable) consideration, has assigned, transferred and set over, and by these presents does assign, transfer and set over unto Swift & Company, Omaha, all book debts, accounts, choses in action, now due or accruing due, to the undersigned from (here follows names of parties), and also all book debts, accounts and choses in action which may at any time hereafter become due and owing, to the undersigned from the above listed customers.”

The instrument then constituted Swift & Co., the authorized agent and lawful attorney, irrevocably, to collect these claims. The instrument further contains:

“This assignment is executed as a continuing security for the payment of any indebtedness, liability or liabilities of the undersigned to said Swift & Company, due or to become due or that may have been heretofore or may be hereafter contracted by said undersigned.”

A similar instrument was executed to the Iowa Packing Company. On the same day Nelson executed and delivered to the agent of these packing companies what is termed a “trust receipt,” by the terms of which it was attempted to turn back these accounts to Nelson for collection and account. The assignments were not recorded. None of the customers were notified of the assignment, nor was any notice given to other creditors. Nelson was explicitly authorized in writing to retain possession of the accounts, and to continue collecting the same in the usual course of business; such authorization being set forth in the so-called “trust receipts.”

It clearly appears from the record that it was understood and intended that the assignments were to be kept secret and confidential, and that it was intended by the parties that neither the retail customers nor the wholesale or other creditors of Nelson should learn of the assignments.

Nelson died March 29, 1929. Many of the accounts in question were collected in whole or in part by Nelson and the proceeds retained and used by him. Many of the items were active accounts on which payments were made from time to time by customers, and additional items were added for goods delivered. Many of the accounts, as they stood on the books as on the date of Nelson's death, were collected in whole or in part by the administrator. The appellants claim that the administrator is accountable for all moneys collected on these accounts, both as they stood on the date of the assignment and as they subsequently accrued, whether they were collected by the administrator himself or by Nelson in his lifetime.

It clearly appears that the estate is wholly insolvent and can pay only a small per cent. on the claims filed. The money collected by Nelson on these accounts was dissipated by him; there being no showing that any of these proceeds came into the hands of the administrator. If it be conceded that Nelson, in the collection of accounts, acted as an agent for the packing companies and received and held the proceeds in trust for them, no part of such funds has been traced in the hands of the administrator.

I. The most important question in this case is whether the assignment to the packing companies by Nelson on February 12, 1929, passed anything to the packing companies as to the indebtedness of Nelson's customers accruing after February 12, 1929. The courts of this country are, to some extent, out of harmony on this question. Some confusion arises in considering the cases by reason of the existence of statutes bearing upon the subject in various states.

Section 9453 of the 1927 Code, found in chapter 422, entitled “Assignment of Accounts and Nonnegotiable Instruments,” provides as follows:

“Assignment of open account. An open account of sums of money due on contract may be assigned, and the assignee will have a right of action thereon in his own name, subject to such defenses and counterclaims as are allowed against the instruments mentioned in the preceding section, before notice of such assignment is given to the debtor in writing by the assignee.” (Writer's italics.)

In Metcalf v. Kincaid (1893), 87 Iowa, 443, 54 N. W. 867, 869, 43 Am. St. Rep. 391, Kincaid made a written assignment dated October 29, 1889, for the months of October, November, and December, 1889, and January, February, March, and April, 1890, to the auditor of the Union Pacific Railroad Company. He was at that time in the service of the railroad company. This court said, among other things:

“The first question certified, in substance, is whether one can assign his future earnings so as to vest the same in his assignee, free from the claims of attaching creditors; and, if so, can a valid assignment be made of wages in the absence of a contract under which the wages are to be earned? * * *

“It has been held that a school teacher who was indebted to another had the legal right to make an assignment of his wages to accrue under his contract with the district, * * * Johnson v. Pace, 78 Ill. 143;Ruple v. Bindley, 91 Pa. 296. So it has often been held that when one assigns wages to be earned under an engagement then existing, and when he was actually at work thereunder, at a fixed price, payable at a certain time, though no contract of employment existed for any stipulated time, yet such an assignment, if accepted, would be good as against a garnishment by creditors of the assignor. Taylor v. Lynch, 5 Gray [Mass.] 49;Lannan v. Smith, 7 Gray [Mass.] 150; Hartley v. Tapley, 2 Gray [Mass.] 566; Weed v. Jewett, 2 Metc. (Mass.) 608 [37 Am. Dec. 115];Brackett v. Blake, 7 Metc. [Mass.] 335 ;Emery v. Lawrence, 8 Cush. [Mass.] 152;Thayer v. Kelley, 28 Vt. 19 [65 Am. Dec. 220];Augur v. Packing Co., 39 Conn. 536; Garland v. Harrington, 51 N. H. 409; Wallace v. Chair Co., 16 Gray [Mass.] 209; 3 Pom. Eq. Jur. § 1286; Drake, Attachm. § 612; 1 Amer. & Eng. Enc. Law, p. 828. * * *

“It is equally well settled that an assignment of wages expected to be earned in the future, and not based upon an existing contract, engagement, or employment, is void. Mulhall v. Quinn, 1 Gray [Mass.] 105 ;Jermyn v. Moffitt, 75 Pa. 402;Ruple v. Bindley, 91 Pa. 296; Morrill v. Noyes, 56 Me. 458 [96 Am. Dec. 486]; Runnells v. Bosquet, 60 N. H. 38;Lehigh Valley Railroad Co. v. Woodring, 116 Pa. 513, 9 A. 58. The distinction between the two classes of cases is this: In the one an attempt is made to assign something which exists in expectancy only. In such a case it is apparent that there is nothing to assign. The expectancy may never become a reality. The earning of wages or the accumulation of property in such a case will depend on the ability of the assignor to procure employment in the future. There is no present employment which may reasonably be expected to result in the earning of wages. In the other class of cases one has entered into a contract or upon an employment whereby, in the ordinary course of events, wages will be earned or property acquired as the direct result of the contract, employment, or engagement. The true rule is that an assignment of wages to be earned is good if accepted, and if at the time it is made there is an existing engagement or employment by virtue of which wages are being, and in future may reasonably be expected to be, earned, even though there is no contract or fixed time of employment. And in the case of a contract for work or labor an assignment of the fruits of it may be good though the labor to be performed under it has not yet been commenced.” (Writer's italics.)

See, also, Seymour v. Aultman & Co., 109 Iowa, 297, 80 N. W. 401;Carey v. Chase, 187 Iowa, 1239, 175 N. W. 60.

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