Sherman v. Harris
| Decision Date | 07 August 1915 |
| Docket Number | 3593. |
| Citation | 153 N.W. 925,36 S.D. 50 |
| Parties | SHERMAN v. HARRIS. |
| Court | South Dakota Supreme Court |
Appeal from Circuit Court, Walworth County; J. H. Bottum, Judge.
Action by T. C. Sherman against J. W. Harris. From an adverse judgment and order, defendant appeals. Affirmed.
L. W Crofoot, of Aberdeen, and W. M. Potts, of Mobridge, for appellant.
C. M Stillwill, of Aberdeen, for respondent.
This is an action for damages for deceit in procuring subscriptions for the capital stock of the Evarts State Bank, claimed to have been induced by the false representations of the defendant, as president of said bank, that the notes constituting a part of the assets of the bank were good and collectible. There are three causes of action. The first cause is based upon representations made to the plaintiff. The third cause is based upon representations made to W. V Wade, the right of action for which was assigned to the plaintiff. The second cause of action was decided favorably to the defendant, and were are not now concerned therewith. The court made findings of fact and conclusions of law, from which it appears that the plaintiff suffered damage to the amount of $1,000 under the first cause of action, and that the said W. V. Wade suffered damage to the amount of $200 under the claim set forth in the third cause of action. From the judgment entered pursuant thereto, and an order denying a new trial, the defendant has appealed.
We are first confronted with a proposition which affects only the third cause of action, to wit, that a claim for damages for deceit is not assignable, hence that respondent could not maintain that cause of action. It is asserted by counsel for both appellant and respondent that the general test of assignability is whether the cause of action is one which would survive the death of the assignor. Reasoning from this common ground, the appellant insists that he has proven his contention that the third cause of action was not assignable, and the respondent claims to have demonstrated that said cause of action was assignable. We are, however, unable to agree with the parties as to this common ground. To admit the above test as to the assignability of a thing in action would, in effect, nullify certain sections of our Codes. Sections 383 and 384, Civil Code, provide (the italics are ours):
In sections 1114 and 1115, Civil Code, we find "obligation" defined as follows:
Division third of our Civil Code embraces sections 1114 to 2283, inclusive, dealing with the subject of "Obligations." This division is subdivided into four parts. Part I relates to obligations in general. Part II relates to contracts. Part III relates to obligations imposed by law. Part IV relates to obligations arising from particular transactions. It is under part III, §§ 1291-1293, that the present cause of action arises.
We are of the opinion that the word "obligation" in section 384, C. C., was used by the Legislature in its broad sense, as covering all of the matters embraced within division third of the Civil Code and as defined in sections 1114 and 1115, C. C. Section 2444, C. C., provides:
"Whenever the meaning of a word or phrase is defined in any statute, such definition is applicable to the same word or phrase wherever it occurs, except where a contrary intention plainly appears."
See, also, In re State Bonds, 7 S. D. 42, 46, 63 N.W. 223; State ex rel. Holmes v. Shannon, 7 S. D. 319, 322, 64 N.W. 175; Sutherland on Statutory Construction, § 255. Our conclusion that the word "obligation" in section 384 means the same as defined in section 1114, C. C. is also fortified by section 1134, C. C., which appears under part I of division third of the Civil Code, viz., Obligations in General, and is as follows:
"A right arising out of an obligation is the property of the person to whom it is due, and may be transferred as such."
From its context it is certain that the word "obligation" in this section means the same as defined in sections 1114 and 1115, C. C. It is also observed that the proposed Field New York Civil Code contains this section as No. 690, and in the note thereto reference is made to section 367, which is the same as our section 384, C. C. It would thus appear that all causes of action arising out of a violation of a right of property, or out of an obligation arising from contract, or out of an obligation arising by operation of law, are assignable. Generally speaking, that is so. But the several sections of the Codes must be read and interpreted together. An assignment of a cause of action must conform to the fundamental tests applied to any contract prescribed by section 1189, C. C. It would therefore seem to us that in states having a provision similar to our section 384, C. C. (), the criterion as to the assignability of a cause of action is whether it is lawful to make the assignment. For instance, it must not be within the inhibition of sections 918 and 919, C. C., as to subject-matter. It must not violate section 1271, C. C.; that is to say, the assignment must not be: (a) Contrary to the express provisions of law; (b) contrary to the policy of express law thereof, though not expressly prohibited; (c) contrary to good morals. It is true that at common law, and at present in a large number of the states, a cause of action for deceit was not and is not assignable. 2 R. C. L. p. 610; 1 Corpus Juris, pp. 174-215, particularly page 194, notes 78 and 79. The violation of the rule against champerty and maintenance was the foundation of this principle. More v. Massini, 32 Cal. 590.
While under our Codes, as is the general rule, the assignability of a thing in action and the survival of a thing in action are "convertible terms," the one is not, with us, the test of the other, but both are to be tested by the legality of such assignment as defined by law or by the doctrine of public policy. We are aware that this court in Erickson v. Brookings County, 3 S. D. 434, 53 N.W. 857, 18 L. R. A. 347, and the California courts in many cases, have, in effect, ignored the provisions of section 384, C. C., and adopted the old criterion of assignability, yet that does not justify us in continuing the error. The decision in the Brookings County Case seems to have been based largely upon the discussion of the subject by that learned author, John Norton Pomeroy, in his work on Remedies and Remedial Rights. In the sections quoted the author was dealing with the law generally and he expressly said in section 146:
So Sutherland in his work (Code Pl., Pr. & Forms, §§ 3270, 3272) refers to the section corresponding to our section 80, C. C. P., but entirely ignores the provisions of section 954, C. C. Cal., the same as our section 384, C. C. Section 384, C. C., was first set forth by David Dudley Field in the proposed New York Civil Code. Of it he said:
"This section is proposed to establish one rule for the assignability and the survivorship of things in action."
It may also be observed that the California decisions cited in the Brookings County Case were all decisions rendered prior to the adoption in California of the Field Code. In Cross v. Sacramento Savings Bank, 66 Cal. 462, 6 P. 94, the court, while not referring to the Code sections, decided that the right to impeach an account stated was not assignable: (a) Because there was no valid enforceable possibility or expectancy (see section 918 of our Civil Code); and (b) because it was contrary to sound policy (see section 1271 of our Civil Code). Yet we find the California court in Rued v. Cooper, 109 Cal. 682, 34 P. 98, referring to survivability as the test of assignability.
Is it contrary to public policy to allow an assignment of a cause of action for deceit? In the states having provisions similar to our section 384, C. C., we are unable to find that any court other than that of California has held such an assignment to be against public policy. In Emmons v. Barton, 109 Cal. 662, 42 P. 303, that court tersely said that fraud is not a vendible commodity. Yet we find that court recognizing, in Fox v. Hale & Norcross S. M. Co., 108 Cal. 478, 41 P. 328, under the authority of section 1584, C. C. P. Cal., the survivability of an action for deceit. In Henderson v. Henshall, 4 C. C. A. 357, 54 F. 320, the court quoted the California sections similar to our sections 383 and 384, C. C., with others, and held that a cause of action for deceit survived; but the decision was based on the ground that the tort was a wrong to the estate of the original plaintiff, viz., that it arose "out of the violation of a right of property."
In Wisconsin, until lately, it has been consistently held that actions for deceit...
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