Massey-Harris Harvester Co. v. Freeze

LEWIS, Circuit Judge.

This action was brought by appellant as assignee. A demurrer thereto was sustained and counsel for appellee argue that the trial court was not in error because (1) the claim assigned and sued on was a tort and tortious claims are not assignable in Kansas, where the assignment was made; (2) if the action was not ex delicto it was on a chose in action, and the assignor and defendant being both citizens and residents of Kansas the Federal court was without jurisdiction under the terms of section 41 of title 28, U. S. Code (28 USCA § 41):

“No District Court shall have cognizance of any suit * * * to recover upon any promissory note or other chose in action in favor of any assignee, * * * unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made.”

■ The third count of the complaint, here involved, states in substance that one Blaser, who assigned the claim sued on to plaintiff, was the owner of 200 acres of wheat, that by arrangement between Blaser and defendant, Blaser harvested and marketed the wheat, and the money received therefor, $5,119.46, was turned over to Freeze under agreement that Freezes should distribute and pay over said sum to Glaser’s creditors, retaining for his services $150, that Freeze distributed and paid out only $1,583.77, including $150 to himself, and has retained the remainder thereof, $3,535.69, and has converted said last-named sum to his own use and benefit, and thus has fraudulently failed to make distribution as he agreed to do; that for value Blaser “sold, assigned, transferred, and delivered to this plaintiff all of his rights, elaims, demands and cause of action which he had against the defendant growing out of said transaction and this plaintiff is now the owner thereof and was at and before the filing of this suit.” The Kansas rule as to assignability of elaims is stated in Hewey v. Fouts, 91 Kan. 680, 139 P. 407, 408.

“There is a conflict of authority as to whether a cause of action is assignable which is founded upon a tort, where the estate of the tort-feasor has not been benefited. 5 Enc. L. & P. 889. In this state it has been held that only the original claimant can sue upon such a demand. K. M. Ry. Co. v. Brehm, 54 Kan. 751, 39 P. 690. That decision was based upon the language of the Code to the effect that the provision that an action must be prosecuted in the name of the real party in interest shall not be deemed to authorize the assignment of a thing in action not arising out of contract. This language remains unchanged (Civ. Code, § 25 [Gen. St. 1909, § 5618]), and the interpretation already placed upon it must be regarded as controlling. Davis could, however, make a valid assignment of his right to reclaim the money the defendants had wrongfully obtained from him, because he was privileged to regard them as having agreed to restore it to him. ‘Whenever one person commits a wrong or tort against the estate of another, with the intention of benefiting his own estate, the law will, at the election of the party injured, imply or presume a contract on the part of - the wrongdoer to pay to the party injured the full value of all benefits resulting to such wrongdoer.’ Fanson v. Linsley, 20 Kan. 235, syl. par. 2. Therefore Hewey could maintain an aetion upon the claim that originally accrued in favor of Davis, to the extent of recovering whatever Fouts profited by the transaction, but no further.”

That court again considered the question in Flick v. Murdock, 115 Kan. 862, 225 P. 119, 120, and held:

“Modem authorities make the distinction between the sale of an interest to which a right to sue is incident and the sale of a mere right to sue. The former is good; the latter is not.”

Authorities on the point are there reviewed, including Traer v. Clews, 115 U. S. 528, 6 S. Ct. 155, 159, 29 L. Ed. 467. In that case the language of the assignment was this:

“I hereby sell, assign, transfer, and set over unto the said Henry Clews any and all claims and demands of every name, nature, and description that I may now have or be entitled to on account of the fifty shares of the capital stock in the Cedar Rapids & Northwestern Construction Company, which was subscribed for said Henry Clews.”

It was there contended that this was not a sale of a right of property in the stock of the construction company, and of the dividends, but merely the transfer of a right to sue Traer and his wife for fraud, and was, therefore, void. The contention was rejected. It was field that tfie language of tfie assignment conveyed tfie dividends, wfiicfi fiad been declared, and an interest in tfie property of tfie company in proportion to tfie fifty sfiares of stock, and did not transfer a mere right to sue Traer. After noting tfie rule that tfie assignment of a mere rigfit to file a bill in equity for fraud committed upon tfie assign- or will be void as contrary to public policy and savoring of maintenance, it was said:

“But when property is conveyed, tfie fact that tfie grantee may be compelled to bring a suit to enforce fiis rigfit to tfie property does not render tfie conveyance void.”

Dickinson v. Burrell, L. R. 1 Eq. 337, was cited and quoted, wfierein it was field:

“Tfie distinction is this: If James Dickinson fiad sold or conveyed tfie rigfit to sue to set aside tfie indenture of December, 1860, without conveying the property, or fiis interest in tfie property, which is tfie subject of that indenture, that would not have enabled tfie grantee, A. B., to maintain this bill; but if A. B. had bought the whole of tfie interest of James Dickinson in tfie property, then it would. Tfie rigfit of suit is a right incidental to tfie property conveyed.”

See also Erwin v. United States, 97 U. S. 392, 24. L. Ed. 1065. Tfie assignment to plaintiff was more than Blaser’s cause of action. It transferred to plaintiff for value all of Blaser’s rights and claims to tfie $3,535.69.

In considering the section of tfie Code quoted supra, in Ambler v. Eppinger, 137 U. S. 480, 11 S. Ct. 173, 174, 34 L. Ed. 765, tfie court, in referring to Deshler v. Dodge, 16 How. 622, 14 L. Ed. 1084, in wfiicfi tfie section was again under consideration, said of that case:

“It was there field that the exception by that section of tfie jurisdiction of those courts [circuit and district] of suits by an assignee did not extend to a suit on a chose of action to recover possession of a specific chattel or damages for its wrongful caption or detention, although tfie assignee [assignor] could not himself sue in that court. And in tfie subsequent ease of Bushnell v. Kennedy, 9 Wall. 387 [19 L. Ed. 736], it was said that tfie exceptions to tfie jurisdiction applied only to rights of action founded on contracts which contained within themselves some promise or duty to be performed, and not to mere naked rights of action founded on some wrongful act or some neglect of duty to wfiicfi tfie law attaches damages.”

Tfie same principle was again announced in Brown v. Fletcher, 235 U. S. 589, 35 S. Ct. 154, 59 L. Ed. 374. There was no contractual relation in fact between Blaser and Freeze for a return of the money, and hence Blaser had no chose in action against Freeze. Tfie agreement was to tfie contrary, that Freeze should pay all of it to Blaser’s creditors. When fie failed to do so tfie law made it tfie duty of Freeze to return tfie money in hand to Blaser. Their relation in that respect is described by present-day authority as quasieontraetual. City of New York v. Davis (C. C. A.) 7 F.(2d) 566, 573. But no authority, so far as we are advised, has field that it created a chose in action in behalf of Blaser, and we think it did not within tfie meaning of said section 41 (28 USCA). Tfie contractual relation is a mere fiction. Tfie Ninth Circuit field in Menasha Wooden Ware Co. v. Southern Oregon Co., 244 F. 83, that an action for money fiad and received was' not a chose in action within tfie meaning of tfie Code section. It would seem to follow that tfie objection is not well taken, whether tfie assignment be regarded as Blaser’s rigfit and interest in tfie $3,535.69 or of fiis rigfit of action against Freeze. Neither contention being sustainable, tfie order of dismissal is reversed with directions to reinstate said third cause of action, overrule tfie demurrer thereto and permit defendant to plead.

COTTERAL, Circuit Judge, dissents,