Fairbanks v. Sargent

• Decision Date: 18 January 1887
• Parties: FAIRBANKS, Jr., v. SARGENT, Ex'r, etc.
• Court: New York Court of Appeals Court of Appeals

104 N.Y. 108

9 N.E. 870

FAIRBANKS, Jr.,

v.SARGENT, Ex'r, etc.¹

Court of Appeals of New York.

January 18, 1887.

Action by an attorney to recover, under an agreement with his client, onethird of certain bonds which were alleged to have been accepted by the client in settlement of a suit brought by the client, and transferred to the defendant by an assignment subsequent to the date of the agreement with the plaintiff. The transactions out of which the action arose are fully stated in the opinion. Judgment for the defendant by the special term of the supreme court for the city and county of New York; affirmed by the general term, First department. Plaintiff appeals.

The agreement between the plaintiff and his client was lawful. They had the right to determine the measure and mode of compensation to be made to the plaintiff for his services. Rooney v. Second Ave. R. Co., 18 N. Y. 368, 373;Ely v. Cooke, 28 N. Y. 365;S. C. 2 Hilt. 406;Coughlin v. New York Cent. & H. R. R. Co., 71 N. Y. 443, 449;Fowler v. Callan, 102 N. Y. 399; S. C. 7 N. E. Rep. 169.

The court below erred in holding that the agreement constituted no assignment of the action against Zabriskie to the plaintiff, nor of the cause of action therein, or any part thereof, nor of the proceeds of any settlement or judgment therein, and in no respect constituted him either an actual or an equitable assignee of the same, or any part thereof. Trist v. Child, 21 Wall. 441;Hoyt v. Story, 3 Barb. 262; and Wright v. Wright, 70 N. Y. 96,-cited by the court,-are not in point. These cases only establish that an agreement merely to pay a debt out of a designated fund does not give an equitable lien upon the fund, or operate as an equitable assignment thereof. The matter in controversy falls within the principles laid down in Wylie v. Coxe, 15 How. 415;Creighton v. Ingersoll, 30 Barb. 541;Coughlin v. New York Cent & H. R. R. Co., 71 N. Y. 443;Williams v. Ingersoll, 89 N. Y. 508;Wheeler v. Wheeler, 9 Cow. 34. In Brown v. Mayor of New York, 9 Hun, 587-596, (cited by the trial judge,) it was held that persons merely occupying the relation of counsel could have no lien on the recovery; but in Harland v. Lilienthal, 53 N. Y. 438, it was decided that an attorney, although not admitted to practice in the court in which the services were performed, could nevertheless recover for his services as an attorney; and in Zogbaum v. Parker, 55 N. Y. 120, it was decided that counsel, under an agreement therefor, had a lien on the recovery. In Davies v. Lowndes, 3 C. B. 823, approved in Slater v. Mayor of Sunderland, 33 Law J. (N. S.) Q. B. 37, it was held that the lien of an attorney attached upon money received by way of compromise, although the verdict and judgment in the case were against his client; and in Adams v. Fox, 40 N. Y. 578, it was held that an agreement might make the services in two actions a lien upon the judgment in one of them. The agreement operated as an equitable assignment, pro tanto, of the cause of action. In Brown v. Mayor of New York, supra, it was held that an assignment of ‘claims' (which, of course, are ‘causes of action’) was an assignment of the fund realized. Assuming that there was no assignment of the cause of action, there was an equitable assignment of the fund as soon as it should be realized. Creighton v. Ingersoll, 30 Barb. 541;Slater v. Mayor of Sunderland, 33 Law J. (N. S.) Q. B. 37.

The general term having held that the plaintiff had a lien upon the bonds, in order to entitle the defendant's testator to protection as a bona fide purchaser, the bonds must be held to have been negotiable, and the defendant's testator must be held to have taken them without notice of plaintiff's lien, and for value. But the bonds were non-negotiable. No statute of New York makes the bonds of an individual negotiable. In the only statute providing for the negotiability of the obligations of an individual, (1 Rev. St. N. Y. c. 4, tit. 2,) promissory notes alone are mentioned, and there is no usage or custom in the commercial world conferring negotiability on the bonds of individuals. They are still in the business community promissory notes, under seal, secured by a mortgage. They are what is known as ‘single bills,’ or ‘bills obligatory,’ i. e., ‘written engagements, under seal, for the payment of money without a penalty.’ 1 Burrill, Law Dict. ‘Bills, Single and Penal;’ 2 Burrill, Law Dict. 470: ‘Bonds without conditions, * * * and differing from promissory notes in nothing but the seals.’ Bouv. Law Dict. ‘Bills Obligatory;’ Farmers' & Mechanics' Bank v. Greiner, 2 Serg. & R. 115. The special contract embraced in the bonds in suit, for securing the payment of money, did not deprive them of the character of promissory notes. Arnold v. Rock River Valley Union R. Co., 5 Duer, 207. Nor did the annexing of interest warrants change their character. Hodges v. Shuler, 22 N. Y. 114. They therefore differed in no essential particular from the instrument in question in Merritt v. Cole, 9 Hun, 98, which was held to be a promissory note under seal. But a promissory note under seal, where the seal is mentioned in the note, is not negotiable. 1 Pars. Cont. 26; Chit. Bills, marg. 166; Clark v. Farmers' Woollen Manuf'g Co., 15 Wend. 256;Warren v. Lynch, 5 Johns. 239;Helfer v. Alden, 3 Minn. 332, (Gil. 232;)Covell v. Tradesman's Bank, 1 Paige, 131;Foster v. Floyd, 4 McCord, 159;Conine v. Junction, etc., R. Co. 3 Houst. 288; Hooker v. Gallagher, 6 Fla. 357;Dinsmore v. Duncan, 57 N. Y. 573, 577;Merritt v. Cole, 9 Hun, 98; Rawson v. Davidson, 49 Mich. 607;S. C. 14 N. W. Rep. 565;Walker v. Scott, 13 Ark. 644; Miller v. McIntyre, 9 Ala. 638; Sayre v. Lucas, 2 Stew. 259; Parks v. Duke, 2 McCord, 381;Mann v. Sutton, 4 Rand. 253;brown v. Jordhal, 32 Minn. 135;S. C. 19 N. W. Rep. 650;Osborn v. Kistler, 35 Ohio St. 99; Biddle, Stock Brok. 157. Special contracts, other than bills of exchange and promissory notes, are not negotiable instruments. Birckhead v. Brown, 5 Hill, 635, 646. See, also, Glyn v. Baker, 13 East. 590; Crouch v. Credit Foncier of England, 29 Law T. (N. S.) 259; Dinsmore v. Duncan, 57 N. Y. 577;Railroad Co. v. Heward, 7 Wall. 415;Richards v. Warring, 39 Barb. 42; affirmed, 40* N. Y. 576, Daniel, Neg. Inst. (3d Ed.) 488. He who takes a non-negotiable obligation takes it ‘subject to every legal defendse arising on the contract.’ Edw. Bills, (2d Ed.) marg. 209; Hopkins v. Railroad Co., 3 Watts & S. 410.

These non-negotiable bonds were choses in action, and the defendant's testator was the assignee thereof, of Underwood, the plaintiff's client. But the assignee of a chose in action can take no greater right than his assignor possessed, and is chargeable with all the equities that apply to him; and this is so, even though he purchases without notice, and for value. Ely v. McNight, 30 How. Pr. 97;Commercial Bank of Rochester v. Colt, 15 Barb. 506;Blydenburgh v. Thayer, 42* N. Y. 295; Weaver v. Barden, 49 N. Y. 286;Mechanics' Bank v. New York & N. H. R. Co., 13 N. Y. 629;Callanan v. Edwards, 32 N. Y. 486;Anderson v. Nicholas, 28 N. Y. 603;Ballard v. Burgett, 40 N. Y. 314; Lewin, Trusts, (5th Eng. Ed.) 619; Mangles v. Dixon, 3 H. L. Cas. 702. He takes a purely equitable title, and the purchaser of an equitable interest has no protection, whether it relates to real or personal estate; Ford v. White, 16 Beav. 120; Phillips v. Phillips, 4 De Gex, F. & J. 208.

Something more is needed to create an equitable lien or assignment of a fund than a mere agreement to pay out of that fund. There must be an appropriation of the fund by appropriate words transferring it, or giving some power or authority over it. There must be something more than a mere personal agreement. Trist v. Child, 21 Wall. 441;Rogers v. Hosack's Ex'rs, 18 Wend. 334;Hoyt v. Story, 3 Barb. 264;Bradley's Case, Ridg. Hard. 194; Williams v. Ingersoll, 89 N. Y. 518;Wright v. Wright, 70 N. Y. 96;Pulver v. Harris, 52 N. Y. 73. In one view of the case, the absolute title to the bonds passed with their possession to the defendant, if without notice; and in the other view, as the defendant surrendered collaterals, and relinquished rights to obtain this payment, a present valuable consideration passed. Raphael v. Bank of England, 17 C. B. 161. For motives of policy, and for the sake of safety in commercial transactions, the court should not interfere with defendant's possession of the bonds in question; for they were negotiable coupon bonds, payable to bearer, and passed by delivery. Murray v. Lardner, 2 Wall. 110. See, also, Mercer Co. v. Hackett, 1 Wall. 83;Gelpcke v. Dubuque City, Id. 206; Grant v. Vaughan, 3 Burr, 1516; Collins v. Martin, 1 Bos. & P. 648; Matter of Leland, 6 Ben. 175;Brainerd v. Railroad Co., 25 N. Y. 498. As to the negotiability of the bonds, see, also, Matter of Leland, 6 Ben. 175; Daniel, Neg. Inst. (3d. Ed.) § 1487; Brainerd v. New York & H. R. Co., 25 N. Y. 498. If there is a mere balancing of equities, the court will not interfere; or, if defendant stands in at least as favorable a position as plaintiff, the court will not interfere to enforce plaintiff's claim. Rice v. Rice, 2 Drew. 73; Colyer v. Finch, 5 H. L. Cas. 905, 920; Livingston v. Dean, 2 Johns. Ch. 479;Murray v. Lylburn, Id. 441; Taylor v. Gitt, 10 Pa. St. 428; Mott v. Clark, 9 Pa. St. 399. Priority of time is the last ground of preference resorted to, and will never be considered if there is anything else to turn the scale. Rice v. Rice, supra.

The defendant is in the position to avail himself of the plea that his testator was a bona fide holder for value without notice, and it is now well settled that such a plea is available for the protection of an equitable as well as a legal holder. Moore v. Metropolitan Bank, 55 N. Y. 41;McNeil v. Tenth Nat. Bank, 46 N. Y. 325;Park Bank v. Watson, 42 N. Y. 490;Coddington v. Bay, 20 Johns. 637;Colyer v. Finch, 5 H. L. Cas. 920. The plaintiff suffered Underwood to retain all the indic...