It was early decided that the assignor of a claim impliedly covenanted against any acts of his own, or of any one claiming under him, in derogation of the assignment.2 Therefore if the assignor collects the claim, he holds what he has collected as constructive trustee for the assignee.3 Under the early law no further warranty was implied.4 But the development of the law of implied warranty in the sale of goods during the nineteenth century has naturally resulted in the implication of analogous warranties in the sale of choses in action. Accordingly, one who assigns for value a chose in action impliedly warrants in the absence of a manifestation of a contrary intention that the claim is genuine and legally enforceable to the amount, if any, specified in the assignment.5 It has been held,
Co.v. Stubbe (Tex. Civ. App.), 166 S. W. 699; Quick v. Colchester South, 30 Ont. 645; and see cases of orders to pay part of a fund, cited supra, Sec. 425.
99 The right of a defendant in a tort action to settle with the plaintiff, in spite of notice of a partial assignment to the plaintiff's attorney, was upheld in Weller v. Jersey City, etc., R. Co., 66 N. J. Eq. 11, 57 Atl. 730.
99aTrinity County Lumber Co. v. Holt (Tex. Civ. App.), 144 8. W. 1029.
1 Garrett v. Morgan, 11 Rob. (La.), 447. But where the partial assignment was made after action brought on the claim by the assignor, the assignee though not affected by payment to the assignor of the judgment subsequently obtained (the payment being made with notice of the assignment), was held bound by the amount of the judgment. Trinity County Lumber Co. v. Holt (Tex. Civ. App.), 144 8. W. 1029.
2 Deering v. Farrington, 1 Mod. 113, a. c. 3 Keb. 304. See to the same effect, Eaton v. Melius, 7 Gray, 566, and remarks by Isaac, J., in Anning v. Aiming, 4 Coram. L. Rep. 1049 (Australia, 1907).
3 MacDonald v. Kneeland, 5 Minn. 352; Watson v. McManus, 224 Pa. 430, 73 Atl. 931.
4 In Deering v. Farrington, 1 Mod. 113, s. c, 3 Keb. 304, Lord Hale expressly states that no covenant is implied against an elder title.
5 Galbreath v. Wallrich, 45 Col. 537, however, that the invalidity of a chose in action due to lack of authority on the part of the signer of the obligation to bind his principal (the supposed debtor) as he attempted to do, is not covered by the implied warranty of one who sells the chose in action.6 But unless it can be rested on an exceptional rule limiting warranties implied on sales of public securities, this decision seems erroneous. There is no reason why an assignor should not be held to warrant as fully that the instrument assigned is executed by an authorized agent as any other fact involving the genuineness or validity of the obligation.7 Indeed there seems no reason to distinguish the warranties to be implied on the assignment of a non-negotiable chose in action from those implied when negotiable instruments are sold without indorsement or with only a qualified indorsement. In regard to such instruments the Negotiable Instruments Law provides:8
"Every person negotiating an instrument by delivery or by a qualified indorsement, warrants, -
1. That the instrument is genuine and in all respects what it purports to be;
2. That he has a good title to it;
102 Pac. 1085; Decker v. Adams, 4 Dutch. 511, 513; Wood v. Sheldon, 42 N. J. L. 421, 36 Am. Rep. 523; Koch v. Hinkle, 35 Pa. Super. 421; Kingsley v. Fitta, 55 Vt. 293; Trustees v. Slots, 68 W. Va. 125, 69 S. E. 468. See also Valentine v. Berrien Springs Water Power Co., 128 Mich. 280, 87 N. W. 370; Miners' Bank v. Burress, 164 Mo. App. 690, 147 S. W. 1110; Bank of Commerce v. Ruffin (Mo. App.), 175 S. W. 303. But see Pierce v. Coryn, 126 111. App. 244. For a case where by the express terms of the assignment the assignor undertook to transfer only such rights as he might have, see Maxfield v. Jones, 106 Ark. 346, 153 S. W. 584. Cf. Trustees v. Siers, 68 W. Va. 125, 69 S. E. 468. In Bonds-Foster Lumber Co. v. Northern Pac. R. Co., 53 Wash. 302, 306, 101 Pac.
877, the court said: "One who accepts an assignment of a contract, which by express terms is made nonassignable, acquires only a cause of action against the assignor."
6 First Nat. Bank v. Drew, 191 111. 186, 60 N. E. 856. In this case the court held: "The seller of orders issued to him by drainage commissioners for his services impliedly warrants that the instruments are genuine and that he is the owner thereof and authorised to transfer title, but there is no implied warranty that they are issued by authority of law or that they are worth what they represent."
7 In Flynn v. Allen, 57 Pa. 482, the assignor was held to warrant the authority of the agent who executed the obligation.
4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.
Undoubtedly an assignor may by express agreement limit the warranties which would otherwise be implied. How far this is done by the words "without recourse" has occasioned some dispute. It has been held that this throws the risk, even of forgery of the obligation, upon the assignee; 10 but the more reasonable construction of these words is that the assignor is only seeking to make certain what the law would indeed, in any event, imply from a mere assignment, that he is not responsible for the solvency of the debtor;11 for an assignor unlike the indorser of negotiable paper, warrants only that the assigned claim is legally valid. He does not guarantee that the debtor will fulfil his obligations.12 It seems probable that the warranty on assignment extends only to the immediate assignee. This is the law in regard to chattels.13 And authority seems also to point that way in regard to choses in action.14