This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
These two cases were regarded as determining the law in England; and in the following cases it was assumed that priority of notice, and not priority of time, fixed the rights of the bona fide assignees, whether or not the cases were cases of bankruptcy and whether or not elements of negligence or laches on the part of the first assignee were present.11 The principle was applied to cases in which it appeared affirmatively that the second assignee had made no inquiry of the trustee, and was not misled by the failure of the first assignee to give notice.12 The principle was not limited to assignments of contracts, but it applied to assignments of equitable interests in personalty,13 although it did not apply to assignments of interests in realty,14 or to an assignment of an equitable interest in a chattel real.15 It applied to an assignment of an interest in property which was in fact realty, but which was treated in equity as personalty under the doctrine of conversion, by reason of a direction to sell.16
10 Dearie v. Hall; Loveridge v. Cooper, 3 Russ. 1 (58).
11 Ex parte Arkwright, 3 Mont. D. & D. G. 120; Addison v. Cox, L. R 8 ch. 76.
"This was a question of priority between two equitable incumbrancers - a question whether the subsequent incumbrancer of the equity, having given notice to the trustees of the fund, was entitled to priority over the former incumbrancer. Now, that question has been settled, after much deliberate discussion, in the cases of Dearie v. Hall, 3 Russ 1, 27 R. R. 1 and Loveridge v. Cooper, 3 Russ. 30, 27 R. R. 1. Those two cases were argued before Sir Thomas Plumer as Master of the Rolls with great learning and attention to the subject. The Master of the Rolls, after considering the question, pronounced a very elaborate judgment, deciding that in cases of this description the party who gave notice to the trustees was entitled to the priority; and, without adverting to the particular facts of those cases, the principle upon which the decision was founded was this: that it a contrary doctrine were to prevail, it would enable a cestui que trust to commit a fraud; he might assign his interest first to one and then to a second incumbrancer, and that second incumbrancer would have no opportunity by any communication with the trustees of ascertaining whether or not there had been a prior assignment of the interest. There was also another principle upon which he decided that case, which was this, that a party till he gives notice to the trustees has not done everything necessary to complete his title. In such cases it is necessary for the parties to do everything in their power. Further than that he assigns, as an additional reason, that until notice was given to the trustees, they did not in fact become trustees for the assignee. It was upon these distinct grounds that he laid down as a general rule, that in case of an equitable assignment, the party giving notice to the trustees, although he was the second incumbrancer, was entitled to priority, if the former incumbrancer had given no such notice. • * * The principle of those authorities applies directly to the present case.' [Quoted from Foster v. Cockerell, 9 Bligh (N.S.) 332, 375.] According to that authority, the rule which prefers that assignee who has given prior notice does not depend solely on the imputation of laches to those who have not given notice; and even in the absence of laches the other grounds for the rule exist. Nor, I think, has the question ever been treated as one merely of laches The courts seem to me to have in modern times asked only which assignee was the drst to perfect his security by notice/' In action, in the possession of the bankrupt, it would be within the statute. 21 Jac. from the case of Ryall v. Rowles, 1 Vesey, 348. There is no difference as to pawns, whether the goods have been in the possession of the pawner, or come into the possession of the pawnee. So, where there is a lien, there is no difference whether the special property be by the act of the pawner or any other way. Then, suppose there was no such statute. In this case, there is no doubt the plaintiff [testator] obtained the property. When Case made the assignment, Crowder acquired the property, and had a right to come here for the specific performance. Whatever binds the property in the hands of the bankrupt, binds it also in the hands of the assignee. Therefore, if it stands clear of the statute, Crowder is in the case of the bankrupt whilst solvent." Falkner v. Case. 1 Brown, Ch. 125, 2 T. R. 491 (holding that the bankrupt act did not apply to the facts of the case at bar).
In some cases actual knowledge on the part of the debtor seems to be sufficient, although the assignee has not given notice.17 In other cases the actual knowledge of the creditor was regarded as insufficient. A definite notice had to be given by the assignee.18
In reaching the result that priority depended on notice, and not on the time of the assignment, the courts overlooked or ignored the cases in which it was held that, apart from statute or apart from negligence or laches, priority of notice was not of itself sufficient to prefer the later assignee to the earlier assignee.19 Notice was held to be unnecessary where the assignor had only an equitable interest in an insurance policy of which the broker retained custody as a lien for the premium,20 on the theory that in the case at bar the chose was not in the possession of the assignor. Notice was said to be necessary only for the protection of the debtor.21 re Lake , 1 K. B. 151. In some of the bankruptcy cases the real question decided is whether a chose in action is included in the term "goods in possession." Williams v. Thorpe, 2 Sim. 257, ex parte Tennyson, Mont. & B. 67.
12 Foster v. Cockerell, 9 Bligh (N.S.) 376 [affirming, Foster v. Blackstone, 1 Mylne & K. 297; In re Lake , 1 K. B. 147.
13Timson v. Ramsbottom, 2 Keen 35; Martin v. Sedgwick, 9 Beav. 333; Foster v. Cockerell, 3 Cl.& Fin. 456; Etty v. Bridges, 2 Y. & Coll. 486.
14 Lee v. Howlett, 2 Kay & J. 531.
15 Wiltshire v. Rabbits, 14 Sims. 76.
16 Lee v. Howlett, 2 Kay & J. 531.
17 Meux v. Bell, 1 Hare 73; In re Tichener, 35 Beav. 317.
16 Lloyd v. Banks, L. R. 4 Eq. 222; In re Brown L. R. 5 Eq. 88; Arden v. Arden, 29 Ch. D. 702.
19 Univen v. Grosvenor, West. Ch. 647 (a bankruptcy case); Evans v. Bick-nell, 6 Ves. 174; Cooper v. Fynmore, 3 Russ. 60. "If the question were con-eerning a bond, or any other chose in assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this act had not passed), to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor: Provided, always, that if the debtor, trustee, or other person liable in respect of such debt or chose in action shall have had notice that such assignment is disputed by the assignor or any one claiming under him, or of any other opposing or conflicting claims to such debt or chose in action, he shall be entitled, if he think fit, to call upon the several persons making claim thereto to interplead concerning the same, or he may, if he think fit, pay the same into the High Court of Justice under and in conformity with the provisions of the acts for the relief of trustees." 36 & 37 Vict. c. 66, Sec. 25 (6).
The rule requiring notice was subsequently enacted in statutory form in the Judicature Act.22 The cases which have been decided since the enactment of this statute construe it and apply it; but since the enactment of the Judicature Act, the English rule is purely statutory. In cases which do not fall within the operation of the statute, the rule requiring notice is recognized as still in effect.23
20Falkner v. Case, 1 Brown, Ch. 125, 2 T. R. 491 (a case of bankruptcy, distinguishing Ryall v. Rowles, 1 Ves. Sr. 348, 9 Bligh (N.S.) 377 [sub nomine, Ryall v. Rolle, 1 Atk. 165].
21 "It is again objected that this is fraudulent, because no notice is given to the debtors whose debts are assigned. It would be a defense, indeed, for them if they had paid it to the assignor, and were afterwards sued by the assignee, but it is no defense on the part of the present defendants; and it is objected that this assignment, according to the doctrine of Tywne's case, 3 Co. 81, is fraudulent, because the property remained still in the assignor. But that doctrine extends not to such an assignment as this, but only to an assignment or sale of chattels which lie in livery. Choses in action will always remain in some measure in the power of the assirrnor." Univen v. Grosvenor, West. Ch. 647 (holding that a chose in action 'is not in the 'possession' of the bankrupt).
22 "Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only), of any debt or other legal chose in action, of which express notice in writing shall have been given to the debtor, trustee, or other person from whom the
23 In re Lake , 1 K. B. 151; In re Phillips' Trusts , 1 ch. 183; Montefiore v. Guedalla , 2 ch. 26.