Phillips's Estate , 205 Pa. 515 ( 1903 )

Opinion by

Me,. Justice Brown,

On July 2, 1895, H. Cleremont Moses, a nephew of Henry M. Phillips, assigned to his wife, Andrena Moses, $15,000 of his interest in his uncle’s estate. On February 28, 1899, he and his brother, Altamont, executed a joint assignment of their interests in the estate to the United Security Life Insurance & Trust Company of Pennsylvania for $60,000. Notice of this second assignment was at once given to the accountants by the assignee, and to it the court below awarded the share of H. Cleremont Moses in decedent’s estate, on the ground that, though the assignment to Mrs. Andrena Moses was first in time, as she had not given the accountants any notice of it until July 23,1901, it was postponed to that held by the appellee.

Whether, as between successive assignees of a fund in the hands of a third person, that assignee, without regard to the date of his assignment, who first gives the debtor notice of it, is entitled to be first paid, is a question upon which the American decisions cannot be reconciled. In England it is well settled that the claims of competing assignees of a fund rank, as between themselves, not in the order of the dates of the assignments to them, but according to the dates when they respectively give notice to the debtor of their assignments: Dearle v. Hall, and Loveridge v. Cooper, 3 Rus. 1-38; Pollock on Contracts, 209 (2 Am. from 4th Eng. ed.). The Supreme Court of the United States seem to have adopted the same view: Judson v. Corcoran, 17 How. 612; Spain v. Hamilton’s Admr., 1 Wallace, 604. To review the conflicting views entertained by the courts of our different states would needlessly consume pages. With us the question does not seem ever to have been definitely settled. The learned auditing judge, sustained by the court in banc, adopted the rule, that the assignee who first gives notice has the first right to participate in the assigned fund. In adopting this as the better rule, he reasoned by analogy, saying what all of us now approve: “ The analogies with regard to sales of personal property in possession are certainly in favor of the view taken in the decisions last referred to, the vendee, in such case,'being required for the protection of subsequent purchasers, to take possession, to the exclusion of the vendor, where the property is capable of actual possession, or by assuming such open ownership as the case admits of, where it is not. Why should a different rule apply to purchasers of dioses in action ? Why should the purchaser not be required to do all that lies in his power to make it impossible for the assignor to commit a fraud orto do an injury to subsequent purchasers, relying on his integrity and having no means of knowing that he has ceased to be the owner except by inquiry of the person in whose hands the fund is ? The failure to give notice to such person puts it in the power of the assignor to do this wrong, and the consequences of the failure ought, therefore, to be upon him who commits it.”

As in conflict with the view entertained by the court below, stress seems to belaid by counsel for appellant on Chew v. Barnet, 11 S. & R. 389; but the general principle there announced applies to a state of facts very different from those here involved. Chew, as the vendee of Wilson, had acquired from the latter nothing but an equitable estate in the land purchased, because at the time Wilson sold he did not hold the legal title. Subsequently, when that title was conveyed to him, he gave a purchase money mortgage to his vendor, and, on a sheriff’s sale upon the same, it was simply decided that the title of the sheriff’s vendee was superior to that of Chew, just as the legal title of Wilson’s vendor had all the time been superior to that of the equitable title conveyed to Chew. The opinion in that case was written by Gibson, J., who, twenty-five years afterwards, as Chief Justice, in Fisher v. Knox, 13 Pa. 622, very clearly indicated how he would have decided the present question, if it had then been before him: “ The maxim prior in tempore potior in jure, holds, it is true, wherever it has not been inverted by enactment, as it has been by the recording laws, so far as it regards conveyances of land, or where the benefit of it has not been lost by misconduct or imprudence; but it must not be allowed to protect a party who has neglected a requisite precaution to protect from imposition those who may come after him. That a man is bound to enjoy his property so as to do no injury to another which can be prevented, is also a maxim entirely consistent with the preceding one, and equally potent. It contains the ruling principle of an extensive range of cases, and among other cases of injury from negligence. . . . Was there not on the part of the prior assignee in these instances culpable indifference to the interest of others ? Though no law requires such an assignment to be docketed, the practice to mark the judgment to the use of the assignee is universal, and it ought to have been pursued here; for no prudent purchaser of a judgment invests his money in it before the record has been inspected. From what else could he derive information ? He has nothing for it, but the honor of the assignor: and anyone who leaves it in the power of another to deceive, may be said to collude with him beforehand. Certainly, a chancellor would not execute an equitable assignment in his favor.” Campbell’s Appeal, 29 Pa. 401, and Pratt’s Appeal, 77 Pa. 378, are in harmony with what was said in Fisher v. Knox.

Business transactions constantly require the assignments of choses in action. In many instances personal credit cannot be maintained in any other way, and for assignees who purchase in good faith there ought to be protection. None is found in the recording act, but a measure of it ought not, on that account, to be withheld if it can be extended by courts of equity on equitable principles. The protection invoked by the appellee is against the latent equity of the appellant. If it had been informed of this prior assignment, it is not likely it would have taken the second one from the assignor, who failed to say anything about the first when he made the second. Protection can hardly be expected from an assignor who will sell twice what he knows he has a right to sell but once, for, if conscienceless enough to make a second sale, he will conceal the first in his scheme to cheat one or the other of his assignees. Protection can come only from him who owes the money and who, by notice to him, may be able to give protection. He is a mere stakeholder, and it is immaterial to him whom he pays. There is no reason why he should not be frank with a prospective purchaser of the whole or a portion of what he owes, or that, upon inquiry from such an one, he should conceal notice of any other prior purchase or assignment, if notice of it was given him. If it be understood that each assignee of a fund, or a portion of it, can'protect himself against subsequent assignees only by giving immediate notice to the debtor, such notice will be given and, when given, the instances will be very rare when subsequent assignees are imposed upon. With the question now fairly before us, we adopt and announce as the only safe rule that, if an assignee fails to give notice to the person holding the fund assigned to him, a subsequent assignee, without notice of the former assignment, will, upon giving notice of his assignment, acquire priority. “By such notice, the legal holders are converted into trustees for the new purchaser, and are charged with the responsibility towards him; and the cestui que trust is deprived of the power of carrying the same security repeatedly into the market, and of inducing third persons to advance money upon it, under the erroneous belief that it continues to belong to him absolutely, free from encumbrances, and that the trustees are still trustees for him and no one else. That precaution is always taken by diligent purchasers and encumbrancers; if it is not taken, there is neglect: ” Dearie v. Hall, supra. This rule is recognized and approved by the best text writers: Story’s Equity Jurisprudence, secs. 1085a, 1047; Beach on Modern Equity Jurisprudence, sec. 344; Pomeroy on Equity Jurisprudence, sec. 695; Bispham’s Principles of Equity, secs. 168, 169. In the last the learned text-writer says: “ The decisions, however, in favor of the English rule, appear to be based on the more correct view of the law.” As the appellee is claiming under the assignment to it, and not under the attachment issued by it, the second question raised on the appeal need not be considered. Appeal dismissed at appellant’s costs, and as to her the decree is affirmed.