Opinion
June 6, 1913.
Frederick Hulse [ Martin A. Schenck with him on the brief], for the appellant.
George W. Field [ Frank H. Platt and Paul Moore with him on the brief], for the respondent.
The jury has found that the Eastern Paving Brick Company, the original assignor, broke its contract to sell the defendant whatever vitrified brick he should require for building a sewer for the city of New York, and the court dismissed the counterclaim and directed a verdict for plaintiff for the balance due on bricks delivered to defendant under the contract. The question is whether in this action by the assignee of the amount unpaid the defendant can interpose the defense that the assignor broke the contract, and counterclaim for damages for such breach. It is necessary to notice the dates severally of the first assignment, the breach and when the debt fell due. In July and November, 1900, the company delivered brick, the price whereof, after allowance for defective brick, was $7,171.50, or, less ten per cent reserved payment, $6,454.35, whereon the defendant paid, including freight bills, $3,724.20, leaving a balance of $2,730.15. But such amount was not payable until the fifteenth day of the month succeeding the engineer's certificate of the bricks laid, which was August 15, 1902, and interest to the amount of $1,365.08 has been allowed from August 15, 1902, the due date, to December 16, 1910, the time of the verdict. The company assigned the claim to its president on June 20, 1901, and the latter assigned to plaintiff. A receiver of the company was appointed in May, 1902. As early as March, 1902, the company asserted a balance due of $761.90, and in May the manager under the receiver indicated his opinion that the company would not resume work. On July 7, 1902, the defendant by letter asked when further shipment could be made. The manager in reply referred to his letter of March twenty-fourth and in effect declined to make shipments until "you have paid in full for what you should pay under the contract." Thereupon the defendant visited the plaintiff's plant and found that it was not manned or operated, and again the manager asserted that the defendant was indebted. The breach of the contract by plaintiff, if any there was, relates to the month of May or July. But the jury has found a breach which could not be earlier than May nor later than July. It is quite certain that the company and receiver were mistaken in the amount demanded in March, but plaintiff asserts that $375.22 was due May fifteenth and $1,333.37 on June fifteenth, while defendant considers that against a balance on July 7, 1902 (when defendant's letter was dated), of $102.57 should be debited $375 for defective brick. This is only of present importance as it shows the date of the breach. All the bricks were delivered in 1900 and defendant owed a sum for them, but it was payable to the extent of ninety per cent on the fifteenth day of the month after the engineer had certified to the amount. The defendant urges that there was no debt assigned until the certificate of measurement, and that the breach then existed. There was a debt, but the amount was ascertained through the certificate, and the date of payment was fixed thereby on the fifteenth day of the month following the certificate. As a claim was assigned unpaid at a time when it was subject to no defense or counterclaim the usual rule is that the assignee continued to hold it immune from such defense or counterclaim. (Code Civ. Proc. § 502.) A similar policy is enforced by section 41 of the Personal Property Law (Consol. Laws, chap. 41; Laws of 1909, chap. 45), formerly section 1909 of the Code of Civil Procedure, under which, in Michigan Savings Bank v. Millar ( 110 App. Div. 670), it was decided that against an assigned account the defendant could not counterclaim a note made by the assignor not due at the time of the assignment, and that even a claim acquired before notice of the assignment but not then due could not be offset, for which authority was found in Fera v. Wickham ( 135 N.Y. 223). But the appellant denies the application of this well-known rule. His contention is that the brick company undertaking was entire in the sense that it agreed to furnish and the defendant agreed to buy "all the vitrified brick which the party of the first part [Dunn] may require in the performance of the work under his contract," for which the defendant agreed "To pay in cash about the 15th of each month ninety per cent * * * of the monthly estimate or certificate showing the quantity of brick laid during the preceding month given by the City authorities or engineer." Hence, it is urged that the company broke its contract in 1902, and that it cannot recover for the brick delivered in 1900, for which payment was due in 1902. In other words, as the action was brought by the plaintiff after breach of the contract by the company, such failure to perform is a defense and the damages flowing therefrom a counterclaim. The bricks were deliverable in lots in the course of a work that required a number of years for completion, and for deliveries payment was due upon a date following certification. If the defendant did not pay accordingly the company had a cause of action, and it would not be necessary for the company to plead or to prove performance on its part of the entire contract, but rather to show such part performance as entitled it to the money claimed. The company performed by delivering the brick, but the payment awaited certificate of quantities used. But as to the brick delivered in 1900 there was complete performance save as to imperfect brick, and the claim therefor was assignable, and the assignee took free from any defense that might arise by reason of some subsequent happening. If the company had retained the claim the defendant could have interposed a counterclaim for its breach, for the reason that it had such a claim before the action was begun. But the claim was severable and as such assignable, so the assignee took with the protection that comes from the assignment of an independent cause of action. Assume that payment for the brick was due upon delivery. Thereupon a debt arose. If at that time there had been no default, the obligation to pay was perfect, and it would not become imperfect by some future default on the part of the company arising before suit was brought, although a counterclaim therefor could be interposed by the defendant. Nor would it be different if the payment for the brick delivered was not due until certification. As to such brick, the company would have performed, and when it sued it would not be bound to plead and prove that there had been no default prior to the action brought. So when the company assigned the account, the assignee took a title that did not become infirm by any subsequent default, and by the law relating to assignments the counterclaim that would have been available against the first assignor was not so against the assignee. In other words, the promise to pay for the brick delivered in 1900 was not conditional upon entire performance by the vendor. ( Clark v. West, 137 App. Div. 23.) It is objected that the company had not paid the license tax provided by section 181 of the former Tax Law (Gen. Laws, chap. 24; Laws of 1896, chap. 908), as amended by chapter 558 of the Laws of 1901, which took effect April 26, 1901. The Eastern Paving Brick Company, a foreign corporation, was authorized to do business here in March, 1900, and began such business within two months thereafter. There is evidence that the license fee had not been paid, but there is no evidence that the tax had been assessed, and so the objection fails. ( Halsey v. Jewett Dramatic Co., 190 N.Y. 231.) The account drew interest. The number of brick was certified each month and the price was fixed. Computation alone was necessary. ( Sweeny v. City of New York, 173 N.Y. 414; Cutter v. Gudebrod Brothers Co., 190 id. 252.)
The judgment and order should be affirmed, with costs.
JENKS, P.J., CARR, STAPLETON and PUTNAM, JJ., concurred.
Judgment and order affirmed, with costs.