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.
If the assignor has assigned the same claim at different times to different assignees, each of whom has paid value, and the second of whom has taken without notice, the difference in the application of the two theories as to the necessity of notice is the most sharply marked, since the subsequent bona fide assignee is to be given the fullest protection that is possible. In jurisdictions in which it is held that the first assignment passes the interest of the assignor to the assignee even before notice is given by the assignee to the debtor, there is no interest left in the assignor to assign to the second assignee, and accordingly the first assignee in point of time prevails.1 so that if assignments are made at the same time their priorities arc equal, even if one assignee gives notice to the debtor before the others do.2 This is the logical result of the theory that notice is intended only for the benefit of the debtor. It assumes that the first assignee has not been guilty of laches or negligence which will justify the court in postponing his right in favor of the second assignee whom he has thus misled.
9 Bernard v. Whitney National Bank, 43 La. Ann. 50, 12 L. R. A. 302, 8 So. 702.
10Vanbuskirk v. Hartford Fire Ins. Co., 14 Conn. 141, 36 Am. Dec. 473.
11 Vermont. Acts of 1841, p. 6.
12Barney v. Douglass, 19 Vt. 98; Webster v. Moranville, 30 Vt. 701.
13 Peck v. Walton, 25 Vt. 33.
14 Ward v. Morrison, 25 Vt. 593.
15 Nichols v. Hooper, 61 Vt. 295. 17 Atl. 134.
1 District of Columbia. Metropolitan Loan & Trust Co. v. Schafer, 44 D. C App. 356.
Illinois. Sutherland Reeve, 151 111. 384, 38 N. E. 130.
Indiana. White v. Wiley, 14 Ind. 496.
Kentucky. Columbia, etc., Co. v. Bank 116 Ky. 364, 76 S. W. 156; Lexington Brewing Co. v. Hamon, 155 Ky. 711, 160 S. W. 264.
Massachusetts. Herman v. Connecticut Mutual Life Ins. Co., 218 Mass. 181, 105 N. E. 450 (obiter).
Minnesota. MacDonald v. Kneeland, 5 Minn. 352.
New Jersey. Kennedy v. Parke, 17 N. J. Eq. 415.
New York. Fortunato v. Patten, 147 N. Y. 277, 41 N. E. 572.
Oregon. Mefer v. Hess, 23 Or. 599, 32 Pac. 755.
A different question arises where the conduct of the first assignee has been such as to enable the assignor to mislead the second assignee. Where it is a general principle of law that wherever "an owner has so acted as to mislead a third person into an honest belief that the one dealing with the property had a right to do so, he is estopped from showing the truth,"3 the first assignee may estop himself by his negligence in perfecting the indicia of the owner to remain in the hands of the assignor, and under such circumstances he will be postponed to a subsequent bona fide purchaser who was misled thereby, even in jurisdictions in which, in the absence of estoppel, priority of the time of assignment would prevail rather than priority of the time of notice.4 If the assignee of an insurance policy which contains a provision to the effect that assignment thereof must be in writing, permits it to remain in the hands of the assignor or his agent and he accepts a separate assignment in writing,5 or if he permits such policy and assignment to remain in the hands of the assignor, the assignment being fastened to the policy with paste so that it could be removed readily,6 or if he permits the original of a public contract to remain in the hands of the assignor, knowing that such contract is to be paid for by orders which will be made payable to the assignor unless the assignee notifies the public corporation of his interest therein,7 such conduct on the part of the first assignee is held to estop him from setting up his prior assignment as against a subsequent assignee who takes for value and without notice of the prior assignment. If the first assignee has in fact given notice to the debtor, he is not guilty of negligence in omitting to bring action to recover the assigned debt when it became due; and if after such notice the debtor pays the assignor upon his demand that the debtor pay no attention to assignments, the assignor may recover such payment from the debtor.8
Texas. Brander v. Young, 12 Tex. 332.
West Virginia. Turk v. Skiles, 45 W Va. 82, 30 S. E. 234.
2Skobis v. Ferge, 102 Wis. 122, 78 N. W. 426.
3 Baker v. Davie, 211 Mass. 420. 97 N. E. 1094.
See to the same effect. London Joint Stock Bank v. Simmons , A. C. 201; Brocklesby v. Temperance Permanent Building Society fl895], A. C. 173; Farquaharson v. King , 2 K. B. 697; Scollans v. Rollins, 173 Mass. 275, 53 N. E. 863; Gardner v. Beacon Trust Co., 190 Mass. 27, 76 N. E. 455; Washington v. First National Bank, 147 Mich. 571. 1ll N. W. 340.
4 Bridge v. Connecticut Mutual Life Ins. Co., 152 Mass. 343. 25 N. E. 612; Herman v. Connecticut Mutual Life Ins. Co., 218 Mass. 181, 105 N. E. 450; Washington Township v. Huntington
First National Bank, 147 Mich. 571, 11 L. R. A. (N.S.) 471, 111 N. W. 349 [distinguishing, Miner v. Vedder, 66 Mich. 101, 33 N. W. 47, as a case in which the second assignee was not a bona fide purchaser]. "The bridge company was permitted to retain the original contract, and this without notice of any rights of the prior assignees. It was known that the only method of payment was by orders drawn on the township treasurer, and that these must come to the hands of the bridge company as the apparent owner. The bridge company was thus invested with every indicia of ownership, and, within the rule stated, one who was thus induced to purchase these orders, and who parts with value upon the strength of this apparent ownership, may well assert that the prior assignees have estopped themselves." Washington Township v. First National Bank, 147 Mich. 571, 11 L. R. A. (N.S.) 471, 111 N. W. 349.
In other jurisdictions the English rule is adopted, and it is held that as between two bona fide assignees the one who gives notice to the debtor first has priority, although his assignment may have been later in point of time.9 In some of the jurisdictions in which this rule has been adopted, it has been justified upon the same theory as that upon which the English courts have justified the rule,10 and it is said that the first assignee does not divest the assignor of his interest in the fund until he has given notice of the assignment to the debtor.11 In other jurisdictions the same rule has been adopted, but for different reasons. This rule is said to be adopted by the courts of Tennessee, contrary to the weight of American authority, "not to prevent a multiplicity of suits, but because it was considered to be the more reasonable and safe, practical rule."12 In Oklahoma it was first held that priority in time of assignment was the test.13 This case was subsequently overruled, without discussion, on the theory that since Oklahoma was then a territory, the decisions of the United States courts were "binding and conclusive" upon the courts of Oklahoma.14 The latter case was followed in turn, without discussion, after the admission of Oklahoma as a state.15 Sometimes the reasons given for ignoring the first assignment go far beyond all questions of notice.16