Story Case

Albert Murphree owed James Wilson $600 for ten cars of brick, delivered in accordance with a written contract. Wilson sold the claim to Walter Ames for $500 on January 4,1915. On January 10,1915, Wilson sold the same claim to Howard Judson. Judson immediately notified Murphree of the assignment and Murphree agreed to pay him the money. Two days later, Ames informed Murphree of the transfer made to him on January 4. To whom should Murphree pay the money?

Ruling Court Case. Vanbuskirk Vs. Hartford Fire Insurance Company, Volume 14 Connecticut Reports, Page 141

Joseph Martimer insured property in the Hartford Fire Insurance Company. The property was destroyed by fire, and a claim for damages arose for the loss in favor of Joseph Martimer. When the company refused to pay, suit was brought by Joseph and he recovered a judgment of $2,366 against the insurance company. On February 14, Joseph assigned this claim to John Martimer, the latter paying a valuable consideration therefor. Vanbuskirk, to whom Joseph was indebted, attached this claim by a writ served upon the insurance company. On the third day of April, John gave notice to the insurance company of the fact that the claim had been assigned to him.

The insurance company contended that Vanbuskirk was not entitled to collect the claim as property of Joseph, because it was assigned to John before it was attached, and that the fact that notice of assignment was not made until attachment is not material.

Decision: In order to perfect an assignment of a chose-in-action, as against a third person, it is necessary that notice of such assignment be given to the debtor. Until such notice is given, third persons, without notice of assignment, are not affected by it. In this case Vanbuskirk acquired a lien on the claim, because he attached the debt before notice of assignment was given to the assignor.

Mr. Justice Waite said: "The rule here is well settled that, in order to perfect an assignment of a chosein-action, as against bona fide creditors and purchasers without notice, notice of such assignment must be given to the debtor within a reasonable time; and unless such notice is given, creditors may attach and acquire a valid lien; and others may purchase the debt, and gain a title superior to that of the first assignee." Judgment was given for Vanbuskirk.

Ruling Law. Story Case Answer

An ordinary chose-in-action, or claim, may be assigned, as we have seen heretofore, but such assignment is not complete as against third persons, until notice of the assignment is given the debtor or obligor. Now if two assignments of a chose-in-action are made, the assignee who first gives notice of the assignment to the debtor is the one who is entitled to collect the same, even though he may have been the second assignee. In the Story case, therefore, Judson will have the first right to the money. On the other hand, a proper indorsement and delivery of a negotiable instrument passes title immediately, and the person to whom it is indorsed, called the indorsee, is under no obligation to notify the obligor or debtor, in order to protect his interest in the instrument.