Inter-Southern Life Ins. Co. v. Humphrey

Decision Date08 December 1919
Docket Number21068
Citation84 So. 625,122 Miss. 579
CourtMississippi Supreme Court
PartiesINTER-SOUTHERN LIFE INS. CO. et al. v. HUMPHREY

1 ASSIGNMENTS. Assignment of debt to secure note is assignment as collateral.

A debt due for commissions under an agency contract when assigned to secure the payment of a note is an assignment as collateral security, and not a general, unconditional assignment of the debt.

2 ASSIGNMENTS. Provision against assignment without debtor's authority does not prevent assignment as collateral.

The assignment of a debt as collateral security does not violate the stipulation in the contract against assignment, unless authorized by the debtor, because the prohibition against assignment merely contemplates a general, unconditional assignment, and not one as collateral security.

HON. W F. GEE, chancellor.

APPEAL from the chancery court of Leflore county, HON. W. F. GEE chancellor.

Suit by W. R. Humphrey, executor, against the inter-Southern Life Insurance Company and others, for discovery and an accounting. Demurrer to bill overruled, and defendants appeal. Affirmed, and cause remanded, with leave to plead further.

Decree affirmed, and cause remanded.

Whittington & Osborne, for appellant.

The only question raised by the demurrer and now before this court for decision is whether or not the provision in the two contracts between Forrester and Loggins and the insurance company prohibiting the assignment of commissions accruing under the contracts to Forrester and Loggins is valid and binding. The court will observe that not only did Forrester and Loggins assign to Mrs. Humphrey all claim and interest which they had to commissions accrued or thereafter accruing under their said contracts, but went so far as to authorize the said Mrs. Humphrey or her legal representative to collect said Commissions from the insurance companies, and also consented and agreed that all such commissions should be paid to the said Mrs. Humphrey.

Under the common law a chose in action or a claim or right to money to become due on a contingency was not assignable. 5 C. J 846, 2 R. C. L. 595 and 596. Various statutes have been adopted by the different states making choses in action and all rights to property assignable. The usual test applied is whether or not the claim or right of action would survive to the personal representative of the assignor.

In any event, there is no question but what Forrester and Loggins would have had the perfect right to assign to Mrs. Humphrey the commissions earned or to be earned by them under said contracts, had it not been for the provision in the contract expressly prohibiting the same; and on the other hand, there can be no question but that such provision prohibiting the assignment of the premiums accruing under the contracts is perfectly legal and binding on the parties to the contracts, as well as all others claiming thereunder.

"The parties to a contract otherwise not assignable may render it assignable by incorporating a provision that it shall bind their assigns; or they may in terms prohibit its assignment, so that neither personal representative nor assignees can succeed to any rights in virtue of it, or be bound by its obligations, and an attempted transfer in such a case creates a simple personal obligation which can be enforced only against the assignor." 5 C. J. 875; Burck v. Taylor, 152 U.S. 634, 38 L.E. 578.

Indeed, there is no dissent as to this proposition. Arkansas Valley Smelting Company v. Bedden Mining Co., 127 U.S. 379, 32 L.E. 246; Omaha v. Standard Oil Company, 55 Neb. 337, 75 N.W. 859; Zetterlund v. Texas Land & Cattle Co., 55 Neb. 355, 75 N.W. 860; Tibler v. Sheffield Land, Iron & Coal Co., 79 Ala. 377, 58 Am. Rep. 593; Barringer v. Bes. Construction Co., 23 Okla. 131, 21 L. R. A. (N. S.) 597; LaRue v. Groezinger, 84 Cal. 281, 18 Am. St. Rep. 179; Mueller v. Northwestern University, 195 Ills. 236, 63 N.E. 110, 88 Am. St. Rep. 194; Delaward County v. Diebold Safe, etc., Co., 133 U.S. 473, 33 L.Ed. 674; Devlin v. Mayer, 63 N.Y. 8, 50 How. Pr. 1-9.

As explained in the case of City of Omaha v. Standard Oil Company, supra, the reason and purpose of these covenants preventing assignments of contracts or of the avails thereof is that the assignor may not be troubled in determining at his peril which of contesting claimants are entitled to the fund, and then another object in view is to prevent the party making such an agreement from losing interest in the performance of the contract by divesting himself of all beneficial interest thereunder.

It has always been and still is the rule that regardless of the statutes to the contrary, a purely personal contract or a contract involving the personal equasion or the performance of a contract by a party to the exclusion of all others, is not assignable.

We direct the court's attention to this fact, that in each and every case where the courts have held that an assignment of a lease contract as collateral security was not in violation of the provision against assignment, the decision has rested upon the fact that the actual transfer or vesting of the title in the assignee was not voluntary on the part of the assignor; that the provision against assignment meant that the party making the agreement not to assign, should not assign voluntarily and in every instance the actual transfer and assignment has been by operation of law, or by decree of the court, or by sale of the lease, or an interest in land under an execution, or by bankruptcy of the party, in which last-mentioned case the assignment is made by virtue of the bankruptcy statute and not by any wilful act of the assignor.

In support of his contention, counsel in his argument before the chancellor cited 4 Cyc., 75, and the three cases cited in support of the statement laid down in Cyc. (which is also laid down in Corpus Juris. and the same three cases cited). These three cases are: Butler v. Rockwell, 14 Colo. 125, 23 P. 462; Norton v. Whitehead, 84 Cal. 263, 24 P. 154, 18 A. S. R. 172; Crouse v. Mitchell, 130 Mich. 347, 90 N.W. 32, 97 A. S. R. 479. The statement in Cyc. above referred to is as follows: "Stipulations against assignments are not intended to prevent assignments as collateral, but parties may expressly or impliedly stipulate that an assignment shall make the contract void, and an assignment in violation of such stipulation would not vest any rights in the assignee."

We are not at war with this statement because as hereinabove indicated, we agree that the party to a contract cannot declare same breached or forfeited merely because the other party to the contract puts up his contract as collateral security, even though the contract contains a stipulation against assignment, but this proposition we undertake to say only applies to controversies arising between the original parties to the contract, by assignment from a party to the contract which does not prejudice in any way the rights and privileges of the other party to the contract. It has long been held that a provision against assignment of a contract or the avails thereof is solely for the benefit and protection of the party to the contract who required the insertion of such provision in the contract.

This principle is recognized and followed in the case of Eqell v. American Surety Co., 80 Miss. 782. Another good example of this principle is Fortunate v. Patton, 147 N.Y. 277, 41 N.E. 572. The same principle is recognized in Hobbs v. McLean, 117 U.S. 567, 29 L.E. 940. But, returning to the three cases hereinbefore mentioned and relied upon by counsel. First, Butler v. Rockwell, supra.

In that case in a contract of sale between vendor and purchaser, there was a stipulation that the money should be paid to the vendor and the vendor only. The vendor assigned his contract as collateral security. The vendee sought to prevent payment because of the assignment, and the court held that the provision was for the purpose of allowing the vendee to set up any equity he might have against the vendor at the time of the closing of the transaction, that is, the actual purchase of the land, and inasmuch as there were no equities set up, he could not complain. This is but another case, if the court please, where a forfeiture of the contract itself was sought as between parties because of the assignment of the contract as collateral security, and we repeat again that it would be idle and useless for the Life Insurance Company in the case at bar, had this suit been brought by Forrester and Loggins against it to enforce payment of premiums due them under their contracts, to seek to prevent payment by setting up this assignment to Mrs. Humphrey, at the same time admitting that it had paid Mrs. Humphrey nothing whatever on account of the assignment.

Norton v. Whitehead, supra, does not in any way support counsel in his contention. The contract was one for work on the harbor in the city of San Francisco, and made by a man by the name of Finley with the Harbor Commissioners. The contract did provide that it should not be assigned without the written consent of the board. The syllabus of the case is somewhat misleading because as we read the case, and we have read it several times carefully, the question of the illegal assignment of the contract was not involved. The commissioners were perfectly willing to pay the money either to the assignee or to anyone else whom the court might direct. Finley died before the consummation of the contract and although his assignee had actually completed the contract and there was really a novation, the Harbor Commissioners were not willing to pay the money to the assignee because of the peculiar wording of the assignment under which the assignee claimed, until after the court...

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    ...contract by a certain party to the exclusion of all others is obviously legitimate.” Id. at 820 (quoting Inter–S. Life Ins. Co. v. Humphrey, 122 Miss. 579, 592, 84 So. 625, 626 (1919)). Reasons for a nonassignability clause include protecting the insurer from having to deal with individuals......
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