Fairbanks v. Sargent

• Decision Date: 26 November 1889
• Citation: 22 N.E. 1039,117 N.Y. 320
• Parties: FAIRBANKS v. SARGENT.
• Court: New York Court of Appeals Court of Appeals

117 N.Y. 320

22 N.E. 1039

FAIRBANKS

v.SARGENT.¹

Court of Appeals of New York.

Nov. 26, 1889.

Appeal from supreme court, general term, first department.

Action by Leland Fairbanks, Jr., against Winthrop Sargent, executor of Henry W. Sargent, deceased, to recover the value of one-third of certain bonds used and converted by said testator. There was a judgment for defendant, which was affirmed at general term, (39 Hun, 588,) and this judgment was reversed by the court of appeals, (9 N. E. Rep. 870.) A new trial resulted in a judgment for plaintiff, which was reversed and a new trial ordered, (4 N. Y. Supp. 162,) and plaintiff appeals.

A. C. Brown, for appellant.

James C. Curter and Edward Perkins, for respondent.

FINCH, J.

Our first inquiry respects the character and extent of the right which Fairbanks acquired under his contract. We have already held that its terms operated as an equitable assignment to him of one-third or one-sixth of whatever money or property should be collected out of or received from Zabriskie in discharge of the latter's debt. 104 N. Y. 108, 9 N. E. Rep. 870. Ordinarily, we should content ourselves with a simple reference to that decision. But its correctness has been so challenged on this appeal, and assailed with so much of force and ability, as to justify on our part a reconsideration of the question in the light of the later argument. Let us therefore give our attention to the terms of the contract. Underwood's claim against Zabriskie grew out of stock transactions. Fairbanks was a lawyer, and, not only that, but one exceptionally versed in the peculiar rules and customs of the stock exchange, and the law governing that class of transactions. He had already rendered services to Underwood, for which the latter was in his debt, with probably slight ability to pay, unless out of uncertain claims against others. Standing in this relation, the parties contracted. Fairbanks agreed to prosecute, and, as far as he was able, collect the specified claims, of which that against Zabriskie was one. To that extent, his agreement was for the rendition of future services. He also agreed to extinguish, and by his contract did extinguish, the debt due him for past services, taking in exchange the covenants of the new agreement. There was therefore ample consideration for the promises of Underwood which followed. These were that for the services rendered and to be rendered by Fairbanks the latter should receive a fixed share of the money, property, or securities which should be obtained from the debtors named. The claims themselves against such debtors were not attempted to be assigned. The title to them remained in Underwood, as the legal owner. Suits against the debtors were to be, and were, brought in the name of Underwood; and he alone, by the stipulations of the agreement, was authorized to dictate on what terms settlements should be made, and when and against whom actions should be brought. He thus never transferred to Fairbanks the legal title to the claim against Zabriskie; and what he did do was, in its ultimate effect, one of two things, as it seems to me, necessarily and inevitably. The contract was either a simple agreement for compensation to be enforced against Underwood, or it was an equitable assignment of a definite share of the proceeds of the claim against Zabriskie. Obviously, it was something more than, and quite different from, a mere agreement for compensation measured by results. That would have given to Fairbanks only a personal claim against Underwood, and scarcely served to induce on his part further services and expenses upon a credit already precarious. And, not compensation in general, but a specific share in a specific fund or specific property, was the exact and material point of the contract, upon which the rights of both parties hinged. Underwood, having liberty to take in settlement from his debtors property or securities, was not to be called upon for a share of their value in cash, or liable generally for a due reward, but was free to throw Fairbanks upon his contract claim for a share of the precise thing received, as his sole right and only remedy. On the other hand, the latter was not to depend upon the solvency or promise of Underwood for his pay, but was made secure by a stipulated right to have, as owner, a defined share of the fund or proceeds expected to result from his labor and skill. There could be no legal assignment of a fund not in existence, or proceeds not realized; but equity treats them as if existing or realized, and the contract for their receipt by Fairbanks as an equitable assignment of the stipulated share to him, and, as a consequence, makes him the equitable assignee of so much of the debt or demand as is represented by his share of the proceeds. I think we have never failed to hold this doctrine on a similar state of facts. We discussed the subject somewhat in Williams v. Ingersoll, 89 N. Y. 508, and there said: ‘It is a rule in equity that anything which shows an intention to assign on the one side, and from which an assent to receive may be inferred on the other, will operate as an assignment, if sustained by a sufficient consideration.’ In Thurber v. Chambers, 66 N. Y. 49, we inferred an equitable assignment upon facts vastly weaker than those in the present case, and the cases in the federal court of Wylie v. Coxe, 15 How. 415, and Trist v. Child, 21 Wall. 441, are to the same purport. The test is an inquiry whether the debtor would be justified in paying the debt, or the portion contracted about, to the person claiming to be assignee. It is not at all doubtful that Zabriskie, after his liability had been settled at the amount of the bonds which he delivered, and leaving out of view the transaction with Sargent, would have been perfectly protected in paying over one-third of them to Fairbanks. Up to this point, the general term do not differ with us. On the first hearing, they explicitly took this ground, and on the last they intimate no change of opinion. They concede the attitude of the plaintiff as an equitable assignee of one-third of the Zabriskie debt. It was reserved for the learned counsel of the respondent to attack that doctrine on the argument here. The pith of his contention is that Fairbanks had none of the powers and rights which make an assignee, and so was none at all; and this because the agreement reserved to Underwood the right to determine when suits should be brought, and what compromise should be made. But these reserved rights may have lessened the avlue of the thing assigned without neutralizing or destroying the assignment itself. They related to the process of collection, and not to the right assigned, except as possibly lessened by that process. If no collection had been needed, if Zabriskie had come with the money in his hand to pay the whole debt, and had been apprised of the contract with Fairbanks, he could have paid over, and it would have been his legal duty to have paid over, to the latter his share of the debt as the equitable owner and assignee of that share. That, under the arrangement made, he was at liberty to pay less, and that Fairbanks could not object to his paying less, does not prevent Fairbanks from being the equitable assignee of his share of the debt as settled. The learned counsel for the respondent criticises the language of the agreement, in comparison with that used in the Williams Case. In that, he says, the assignee was given a lien upon the fund in express terms. It seems to me that in the present case the language is stronger, instead of weaker. Fairbanks was armed with more than a mere lien by its words. He was ‘to have one-sixth of whatever amount of money, securities, or property shall be received.’ That is, he was to have, to possess, to own, as his, the stipulated proportion of the precise thing received; that proportion to be ascertained and measured by its amount or value. And that such was the meaning is further indicated by the expression relating to his monthly salary of ‘money compensation.’ It is in that manner distinguished from the realized proceeds, which he was to have only in their realized form. I have no doubt remaining that up to this stage of the case, at least, our previous conclusion was entirely sound.

But it does not follow that we are yet absolved from a recollection of the reservations to Underwood which accompanied his equitable assignment to Fairbanks, or a further consideration of their effect; for the former followed that transfer by an assignment of his claim against Zabriskie to Sargent as collateral security for a debt due to him. There is no real foundation for the distinction now asserted between the facts on the previous trial and those in the present record, as it respects the character of that assignment. The distinction was kindly meant as a route of retreat from an indefensible position; but we must decline to avail ourselves of it. It may be that we then supposed that the written assignment was absolute in form, but delivered and taking effect as a collateral security, while now it appears that the collateral character of the transfer was expressed in the writing itself. The form is of no consequence. Whether the collateral character of the assignment was evidenced by the writing or by the parol delivery is immaterial; for the fact itself was fully recognized in our previous opinion. Again and again, and with even further reiteration, the transfer was described as collateral, and none of us were for a moment misled in that respect; and so we cannot travel the bridge carefully constructed to encourage a retreat, but should consider the question whether we were right or wrong, which is raised anew by the decision of the general term.

What, then, were the rights which Sargent acquired by the assignment of the Zabriskie debt- First, as against Underwood; and, second, as against Fairbanks? The counsel on both sides appear...