S. contracted with the State of Texas, in writing, January 18,
1882, to build a new capitol building for it for an agreed
compensation, and not to assign the contract without the consent of
the state. On the 31st of January, 1882, S., with the consent of
the State, assigned an undivided three-fourths interest in the
contract to F., G., and T., who were partners. On the same day,
without the consent or knowledge of the State, S. assigned to B.,
C., and D., each one-fourth of the one-fourth interest remaining in
him. On the 9th of May, 1882, S. conveyed to F., G., and T. all the
right and interest which he had in and under the contract, and the
state gave its assent to this transfer on the 10th of May. It did
not appear that the assignees in the last conveyance knew of the
transfer to B., C., and D. On the 20th of June, 1882, F. and G.
transferred, with the consent of the state, all their interest in
the contract to T., who then performed the work to the satisfaction
of the state and received the agreed compensation therefor. On the
1st of April, 1883, D. transferred to E. the interest in the
contract which had been transferred to him, January 31, 1882, and
on the 27th of May, 1884, he transferred the same interest to T.
Most of these conveyances were filed and recorded in the office of
the County Clerk for Travis County, Texas, and some were filed in
the office of the Comptroller of Public Accounts of the State. In a
suit brought by E. against T. to recover what he claimed to be his
share of the profits under the contract,
Held:
(1) That it was not competent for S., by his own act, and
without the consent of the State, to transfer any interest in the
contract.
(2) That all that could have been acquired by an assignment by
S. without the consent of the state was a right to maintain an
action against S. for the share of the profits which he had
attempted to transfer.
(3) That when the contract was transferred to T., who was
accepted by the State in lieu of the original contractor, T.
entered upon its performance free from any disposition of the
profits made by the original contract.
(4) That the filing of an instrument for record in a public
office of the state, for the record of which the statutes of the
state made no provision, carried with it no notice to other
parties.
Page 152 U. S. 635
This was a suit brought by S. B. Burck against Abner Taylor for
an accounting for a share of defendant's profits from a certain
contract, brought in a court of the State of Texas and removed by
defendant to the United States circuit court. A motion by plaintiff
to remand was denied. 39 F. 581. A demurrer to the bill was
sustained, and the bill dismissed. Plaintiff appeals.
On December 8, 1888, appellant filed his petition in the
District Court of Travis County, Texas, to recover of defendant the
sum of $231,417, alleged to be his share of the profits of the
contract made with the State of Texas for the building of its
capitol. The suit thus commenced was thereafter removed to the
United States Circuit Court for the Western District of Texas, and
on October 7, 1889, upon leave obtained, the plaintiff filed an
amended bill. To this bill, on November 4, defendant demurred. On
March 4, 1890, the demurrer was sustained, and, the plaintiff
electing to stand upon his bill, and declining to amend it, a
decree was entered dismissing the same with costs. From such decree
of dismissal the plaintiff appealed to this Court.
The matters set forth in the bill are as follows: on January 18,
1882, the State of Texas, by Joseph Lee and N. L. Norton, capitol
commissioners, with the approval of O. M. Roberts, Governor, made
and executed a contract with Matthias Schnell for the erection of
the capitol building, according to certain plans and
specifications, Schnell to furnish all the material and do all the
work, and the state, as the consideration therefor, to convey
3,000,000 acres of land. The twenty-sixth clause of the contract is
as follows:
"It is further agreed, covenanted, and stipulated by the party
of the second part that this contract shall not be assigned, in
whole or in part, by the party of the second part without the
consent in writing of the party of the first part, signed by the
Governor of Texas and the Capitol Building Commissioners, with the
advice and consent of the heads of departments."
On January 31, 1882, Matthias Schnell, Charles B. Farwell, John
v. Farwell, Amos C. Babcock, and the defendant, Abner Taylor,
entered into a contract by which Schnell assigned and set over to
the other parties an undivided three-fourths interest in said
Page 152 U. S. 636
contract. The material portions of this contract are as
follows:
"It is hereby agreed by and between the parties hereto that the
said Matthias Schnell shall assign and set over, and by these
presents does assign and set over, to the parties of the second
part, an undivided three-fourths (3/4) interest in said contract,
for the purpose that the said parties of the second part may share
in any and all the profits that may arise from same, the same as
the party of the first part, as their interests may appear, which
is hereby agreed to be equal."
"And it is understood and agreed by and between the parties
hereto that the parties of the second part are to furnish whatever
money may be needed or necessary for the proper construction of
said statehouse, or for the execution of the said contract, as the
same may be required from time to time."
"It is further agreed and understood by and between the parties
hereto that the said Matthias Schnell shall have the management and
superintendence of the building and construction of said statehouse
from the commencement to its completion, subject to the direction
and control of the majority in interest herein at a salary of five
thousand ($5,000) dollars per annum, payable monthly."
"* * * *"
"And it is further agreed that the said superintendent shall be
personally responsible to the parties of the second part for any
loss or damages caused or sustained by reason of his neglect or
mistakes in prosecution of his duties as such superintendent,
willfully done."
"And it is hereby understood and agreed that this agreement
shall be binding and operative from the date of its approval by the
Governor of Texas and the heads of departments."
In accordance with clause 26 of the original contract, the
following consent to the assignment was endorsed on the back:
"State of Texas"
"County of Travis"
"We hereby consent to the within assignment of an interest in
the contract referred to this the eleventh day of February,
1882."
"[Signed] Joseph Lee"
"N. L. Norton"
"
Capitol Building Commissioners"
"O. M. Roberts,
Governor"
Page 152 U. S. 637
"We advise and consent to the above consent given by the Capitol
Building Commissioners and Governor this eleventh February,
1882."
"[Signed] F. R. Lubbock,
Treasurer ~ J. H. McLeary"
"
Attorney General ~ W. C. Walsh"
"
Commissioner General Land Office "
"W. M. Brown,
Comptroller"
On January 31, 1882, Schnell made an agreement with James M.
Beardsley, James S. Drake, and A. A. Burck, which, after referring
to the prior contracts, purported to be an assignment and transfer
to each of the three of an undivided one-fourth of the one-fourth
interest in the contract remaining in Schnell. This contract,
although signed and acknowledged by all four of the parties, was
without the consent in writing of the State of Texas. Afterwards,
and on May 9, 1882, Schnell executed in writing a further
assignment in the following language:
"The State of Texas"
"County of Travis"
"Know all men by these presents that I, Matthias Schnell, a
citizen of Rock Island, in the State of Illinois, for and in
consideration of the sum of fifteen thousand five hundred dollars
to me now paid, the receipt whereof I do now acknowledge, have
transferred, released, and conveyed to Charles B. Farwell, John v.
Farwell, Abner Taylor, and Amos C. Babcock, who compose the firm of
Taylor, Babcock & Co., all the rights and interest which I have
in and under a certain contract made by me with Joseph Lee and N.
L. Norton, capitol commissioners, for the construction of a new
statehouse for the State of Texas. And I do also, for the
consideration hereinbefore expressed, transfer, assign, and release
to said parties above named all interests, rights, or claims which
I may now or might hereafter assert by virtue of any contract made
by me with said
Page 152 U. S. 638
parties regarding the construction of said statehouse or the
superintendency thereof, and all interest accruing to me from any
contract regarding the building of said statehouse for the State of
Texas."
"In testimony whereof I have hereunto set my hand this the 9th
day of May, A.D. 1882."
"[Signed] Matthias Schnell"
which assignment was duly acknowledged, the assignment accepted
in writing, and a written consent endorsed upon it as follows:
"This certifies that we, the Governor of Texas and the Capitol
Building Commissioners, with the advice and consent of the heads of
departments, consent to the assignment in the foregoing instrument,
made to take effect on the filing of the formal adoption of the
contract referred to, and the execution and approval of the bond to
carry out the same this tenth day of May, A.D. 1882."
"O. M. Roberts,
Governor ~ Joseph Lee"
"N. L. Norton"
"
Capital Building Commissioners ~ F. R. Lubbock,
Treasurer."
"W. M. Brown,
Comptroller ~ W. C. Walsh"
"
Comm'r Gem's Land Office"
"J. H. McLeary"
"
Attorney General"
On June 20, 1882, the firm of Taylor, Babcock & Co. assigned
and transferred the entire contract to Abner Taylor, the language
of the transfer being as follows:
". . . do hereby transfer and assign, and have transferred and
assigned, to Abner Taylor, the said contract to construct, build,
erect, complete, and deliver to the State of Texas a capitol
building and appurtenances thereto, according to the plans and
specifications therein referred to and made a part thereof, and
each and every, all and singular, the rights, profits, and benefits
thereunder, the same to be by him carried
Page 152 U. S. 639
out in the same manner as provided for in the original contract
between the State of Texas and Matthias Schnell as aforesaid,"
which assignment was accepted in writing by Abner Taylor, whose
acceptance contained this covenant on his part:
"Now therefore, in consideration of the fact that, by virtue of
the transfers and assignments herein set out, I, the said Abner
Taylor, have become the contractor with the State of Texas for the
building of the capitol aforesaid, and in consideration of the fact
that the Capitol Building Commissioners, together with the Governor
of Texas and the several heads of departments, have consented to
the several transfers and assignments aforesaid, and in further
consideration of the stipulations, covenants, and agreements set
forth in the original contract between the State of Texas and
Matthias Schnell, to the profits, rights, and benefits of which I
have succeeded by virtue of the said contract and the several
transfers and assignments aforesaid, I, the said Abner Taylor, have
agreed, covenanted, and bound myself, and do by these presents
agree, covenant, and bind myself unto the State of Texas through
its Capitol Building Commissioners, that I will in every particular
carry out, finish, and perform the contract made and entered into
by and between the State of Texas and Matthias Schnell, a printed
copy of which is hereto attached as aforesaid, in the same manner,
style, and method, and according to he said terms, tenor, and
effect, that the said Matthias Schnell was originally bound to do,
and I hereby adopt the said contract as my own and assume each and
every, all and singular, the obligations therein imposed on the
party of the second part as my own as fully and completely as if
they had originally been assumed, incurred, and undertaken by me in
person, the said contract, of which the printed copy is hereto
attached, being hereby incorporated into this contract and made a
part thereof. And I, the said Abner Taylor, do hereby bind myself,
my heirs, executors, and administrators, to keep and perform this
covenant, agreement, and contract according to its full intent
Page 152 U. S. 640
and meaning in each and every, all and singular, of its parts
and stipulations in every particular whatsoever. In testimony
whereof I hereto set my signature this the twentieth day of June,
A.D. 1882 (one thousand eight hundred and eighty-two)."
"[Seal] [Signed] Abner Taylor"
and this assignment and acceptance, both being duly
acknowledged, were also assented to in writing, endorsed on the
back, the consent being in these words:
"State of Texas"
"County of Travis"
"In accordance with the provisions of section 26 of the original
contract between the State of Texas and Matthias Schnell for
building a new capitol, dated eighteenth of January, 1882, we, O.
M. Roberts, Governor of Texas, and Joseph Lee and N. L. Norton,
Capitol Building Commissioners, acting by and with the advice and
consent of the heads of departments, do hereby consent in writing
to the assignment made by Matthias Schnell of his contract to
Taylor, Babcock & Co., and to the further assignment made by
Taylor, Babcock & Co. of the said contract to Abner Taylor, and
we, the said Governor, Capitol Building Commissioners, and heads of
departments, do hereby recognize Abner Taylor as the contractor,
bound in all respects to carry out the contract with the State of
Texas in like manner as the original contractor, Matthias Schnell,
was bound, and in testimony of our advice and consent having been
so given, we hereunto subscribe our names officially this the
twelfth day of July, 1882."
"[Signed] Joseph Lee"
"N. L. Norton"
"Approved by and with the advice and consent of the heads of the
departments."
"[Signed] O. M. Roberts,
Governor"
On April 14, 1883, A. A. Burck executed to plaintiff the
following conveyance:
Page 152 U. S. 641
The State of Texas
County of Travis
"Know all men by these presents that I, A. A. Burck, of the
County of Milam and State of Texas, in consideration of the sum of
ten thousand dollars to me in hand paid, by S. B. Burck, of the
County of Galveston and State of Texas, the receipt of which is
hereby acknowledged, have granted, bargained, sold, conveyed, and
released, and by these presents do grant, bargain, sell, convey,
and release, unto the said S. B. Burck, heirs and assigns, the
following described property, to-wit: one undivided one-half
interest in one-sixteenth interest in the capitol contract which
was awarded to M. Schnell by the Texas State Capitol Commissioners,
Joseph Lee and N. L. Norton, and transferred to me by said Schnell,
together with all and singular the rights, members, improvements,
hereditaments, and appurtenances to the same belonging or in any
wise incident or appertaining,"
"To have and to hold all and singular the premises above
mentioned unto the said S. B. Burck, heirs and assigns forever, and
I do hereby bind myself, heirs, executors, and administrators to
warrant and forever defend all and singular the said premises unto
the said S. B. Burck, heirs and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part
thereof."
Witness my hand at Austin, this 14th day of April, A.D.
1883.
"A. A. Burck. [Seal.]"
which conveyance was duly acknowledged. On May 27, 1884, A. A.
Burck made an assignment to Taylor and Babcock in these words:
"Austin, Texas, May 27, 1884"
"For and in consideration of one dollar in hand paid and other
valuable considerations, I hereby sell, assign, and transfer to
Abner Taylor, of the County of Cook, State of Illinois, and A. C.
Babcock, of the County of Fulton, said state, all my rights,
interest, and claim in and to the contract or contracts from the
State of Texas to build or erect a statehouse or
Page 152 U. S. 642
capitol building in the City of Austin and last-mentioned state,
derived from a contract or agreement made with Matthias Schnell in
Chicago, Cook county, Illinois, bearing date January 31st, 1882, or
any interest I may have for building or erecting a statehouse or
capitol building in the City of Austin, Texas, derived from said
Schnell at any time or from any other source, hereby relinquishing
to said Taylor and Babcock all right or claim of any character to
any and all contracts or agreements that I may have heretofore had
or now possess pertaining to building, erecting, or constructing a
statehouse or capitol building in the City of Austin, State of
Texas."
"Witness my hand and seal this 27th day of May, A.D. 1884."
"A. A. Burck. [Seal]"
(which was also duly acknowledged).
It further appears that the instrument dated January 31 by which
Schnell transferred a three-fourths interest in the contract to the
two Farwells, Babcock, and Taylor, was filed for registration on
February 13 in the office of the Clerk of the County Court of the
County of Travis, that being the county in which the capitol
building was situated, and thereafter recorded in the records of
said county; that the instrument executed between Schnell, Drake,
Beardsley, and Burck was also filed and recorded in the same office
on February 14, 1882; likewise the assignment of May 9, 1882, from
Schnell to Taylor, Babcock & Co., on May 10, 1882, and the deed
from A. A. Burck to S. B. Burck, of date April 14, 1883, on April
20, 1883; also the conveyance from Burck to Taylor and Babcock, of
date May 27, 1884, on May 27, 1884. It also appears from the
certificate of the Comptroller of Public Accounts of the State of
Texas that the original contract of the state with Schnell,
together with the assignment from Schnell to the two Farwells,
Babcock, and Taylor, of date January 31, the assignment, of date
May 9, from Schnell to Taylor, Babcock & Co., and the
assignment from Taylor, Babcock & Co. to Abner Taylor, were all
on file in his office, though when so filed is not stated. With
reference to the
Page 152 U. S. 643
effect of the filing in the office of the clerk of Travis
County, the bill avers as follows:
"And your orator further says that the account between your
orator and defendant as to this matter is still open and unsettled,
and that for reason why your orator should not have an account or
relief against him, the defendant pretends that he had no notice
that the said A. A. Burck assigned or transferred to your orator a
one-half interest in his, the said A. A. Burck's, one-sixteenth
interest in the profits that might arise from the building of said
capitol contract, and that the defendant, in good faith and without
notice, purchased from said A. A. Burck for a valuable
consideration the said Burck's one-sixteenth interest in said
profits after the said A. A. Burck had sold one-half of his said
interest to your orator, and therefore refuses to account with
plaintiff, whereas the truth is that the said transfer by A. A.
Burck to your orator, which has been hereinbefore stated, and made
a part of this bill as an exhibit, was duly authenticated for
registration in the office of the county clerk, and was duly
recorded in the records of deeds of Travis County, Texas, on the
14th day of April, A.D. 1883, and said Abner Taylor then had notice
of the same; whereas the said A. A. Burck did not sell or transfer
any of his said interest in said profits to said Abner Taylor until
the 27th day of May, 1884."
"That the said Abner Taylor ought not to be heard to aver that
said registration was not notice to him of the said assignment by
A. A. Burck to your orator, for that the formation of the
co-partnership between Matthias Schnell, Abner Taylor, Amos C.
Babcock, Charles B. Farwell, and John v. Farwell, as hereinbefore
alleged, wherein it was stipulated that the profits arising from
building the capitol should be divided between said parties, or
with the assignees of either party, the said co-partnership caused
said contract of co-partnership, which contained an assignment by
said Schnell of three-fourths of his interest in said capitol
contract, to be recorded in the register of deeds of Travis County,
whereupon the said A. A. Burck, J. M. Beardsley, and James S.
Drake, acting on this means of giving notice of assignments adopted
by said partnership,
Page 152 U. S. 644
caused their said assignment to be recorded in the office of the
Clerk of the County Court of Travis County in the records of deeds,
and afterwards, when the said Schnell assigned his remaining
interest in said contract and in the profits that might arise from
the fulfillment of the same to the other members of said firm
styled Taylor, Babcock & Co., the said firm caused said
last-mentioned assignment to be also recorded in the said register
of deeds, as a means of giving notice thereof; that when the said
firm of Taylor, Babcock & Co. and the individual members
thereof assigned their interests in said contract to Abner Taylor,
the defendant herein, they and said Taylor in their contract of
assignment referred to the several mesne assignments of interests
in said contract as being of record in the office of the Clerk of
the County Court of Travis County, and referred to said records for
full particulars as to said mesne assignments, whereby the said
parties concerned in said contract for building said capitol
building agreed and established a custom among themselves to give
notice of assignments of interests in said capitol contract or in
the profits that might arise from the fulfillment of the same by
recording such assignments in the records of deeds of Travis
County, Texas, and by their conduct in so recording such
assignments, and referring to said records, and not otherwise
giving notice of such assignments, led your orator to believe, and
justified him in believing, that said partnership and its assigns
would take notice of the assignment by said A. A. Burck to your
orator when your orator placed the same on record in the records of
deeds of Travis County, duly authenticated for record; that your
orator, fully believing that such record would be accepted as
notice of the said assignment to your orator, caused his said
assignment to be promptly recorded in the records of deeds of
Travis County on the 14th day of April, 1883, which was more than a
year before the said Abner Taylor purchased any interest from the
said A. A. Burck."
And with regard to the rights acquired by defendant, through the
conveyance of May 27, 1884, from A. A. Burck to him, it avers as
follows:
Page 152 U. S. 645
"And your orator further says that said assignment by A. A.
Burck to Abner Taylor did not purport on its face to sell or assign
to said Taylor the interests in the profits of said capitol
contract which the said A. A. Burck had assigned to your orator,
but only purported to assign to said Taylor whatever interest the
said A. A. Burck had at the time of the said assignment to Abner
Taylor or might thereafter have; the said Abner Taylor, defendant,
was placed upon notice and inquiry as to whether A. A. Burck had
parted with any of his interest before the assignment of his
remaining interest to the said Abner Taylor, but the said Abner
Taylor made no inquiry of said A. A. Burck as to whether he had
parted with any of his, the said Burck's, interest, nor did the
said Taylor examine or cause to be examined the records of deeds of
Travis County for any record of an assignment by said A. A. Burck,
notwithstanding the said custom and practice of all the parties
concerned in assignments affecting said capitol contract or
interest in the profits thereof to record all such assignments and
the agreement thereby affected to that [as their?] method of giving
notice of assignments."
The bill further alleges the performance of the contract by
Taylor, large profits as the result thereof, and prays an
accounting.
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
That which arrests the attention is that, though the defendant
furnished all the means and did all the work of building the
capitol, and although the authorities of the state expressly
recognized him as the contractor, bound in all respects to carry
out the contract with the state in the same manner as the original
contractor, and though he had no knowledge of any claim of
plaintiff, the court is asked to recognize the latter as the owner
of one thirty-second of the profits of the contract
Page 152 U. S. 646
and to compel the defendant to pay him that amount. While only
one thirty-second of the profits is asked for, the rule would be
the same if thirty-one thirty-seconds were sued for, and the first
and principal question which arises is whether these transactions
between Schnell and A. A. Burck and between A. A. Burck and
plaintiff had, without the knowledge of the defendant, operated to
create in the plaintiff a valid claim to a share of the profits.
The contract, in its twenty-sixth clause, stipulated that there
should be no assignment, in whole or in part, by the contractor
without the consent in writing of the state authorities. No such
consent was given to the assignment by Schnell to Burck, nor does
it appear that the state ever in any form recognized the plaintiff,
or his immediate grantor, as having any interest in or control of
the contract or any part thereof. He was to both the state and the
defendant, who did the work, an unknown party until after the full
completion of the contract, when for the first time he appears
claiming an interest in the profits by virtue of an assignment and
transfer, made before the work was done and in disregard of the
terms of the contract.
It is earnestly insisted by counsel that this provision
forbidding an assignment without the written consent of the state
authorities was solely for the benefit and protection of the state;
that it did not restrict or interfere with the right of the
contractor to dispose in any way he saw fit, of an interest in the
contract, or the profits thereof, so long at the party to whom such
transfer was made attempted no interference with the actual work
and presented no claim against the state. The contract in the
possession of the contractor was his property, and the profits
arising therefrom, and any interest therein, were as much the
subject of disposal as any other property, and the only limitation
was one for the benefit of the state, and could not be claimed by
any subsequent assignee from the contractor. The case of
Hobbs
v. McLean, 117 U. S. 567, is
relied upon as authority for this contention. In that case, one
Peck, having, in response to an advertisement from the proper
authorities, put in a bid for furnishing wood and hay to the
government, and expecting that the contract
Page 152 U. S. 647
would be awarded to him, entered into a partnership with McLean
and Harmon by which Peck was to furnish one-half of the capital
necessary to carry on the partnership business, and McLean and
Harmon each one-fourth, the profits and losses of the partnership
to be divided in like proportion. The partnership was for the
purpose of carrying out this expected contract. Subsequently the
contract with the government was obtained, and, after it had been
performed, and the money therefor paid to an assignee in bankruptcy
of Peck, the other partners, McLean and Harmon, filed their bill to
recover their proportionate share of the profits, as fixed by the
terms of this partnership. Among the defenses was that the
partnership was invalid by reason of section 3737, Revised Statutes
which reads as follows:
"No contract or order, or any interest therein, shall be
transferred by the party to whom such contract or order is given to
any other party, and any such transfer shall cause the annulment of
the contract or order transferred so far as the United States are
concerned. All rights of action, however, for any breach of such
contract by the contracting parties are reserved to the United
States."
But this defense was overruled, the Court, by Mr. Justice Woods,
observing in respect thereto:
"Interpreting the articles in the light of the statute, as it is
the duty of the court to do, they were not intended to transfer,
and do not transfer, to the plaintiffs any claim or demand, legal
or equitable, against the United States, or any right to exact
payment from the government by suit or otherwise. They may be
fairly construed to be the personal contract of Peck, by which, in
consideration of money to be advanced and services to be performed
by the plaintiffs, he agreed to divide with them a fund which he
expected to receive from the United States on a contract which he
had not yet entered into. This is the plainly expressed meaning of
the partnership contract, and it is only by a strained and forced
construction that it can be held to effect a transfer of Peck's
contract with the United States and to be a violation of the
statute. "
Page 152 U. S. 648
"We are of opinion that the partnership contract was not opposed
to the policy of the statute. The sections under consideration were
passed for the protection of the government.
Goodman v.
Niblack, 102 U. S. 556. They were passed
in order that the government might not be harassed by multiplying
the number of persons with whom it had to deal, and might always
know with whom it was dealing until the contract was completed and
a settlement made. Their purpose was not to dictate to the
contractor what he should do with the money received on his
contract after the contract had been performed."
It is insisted that, tested by the rule thus laid down, this
stipulation of clause 26 was one solely for the benefit of the
state, and worked no restriction on the right of the contractor to
dispose, in advance of the completion of the contract, of the
profits which should inure therefrom.
We cannot concur in these views. By the section quoted, not only
was a transfer of the contract prohibited, but also the result of
such a forbidden transfer declared. In terms, it was said that any
"such transfer shall cause the annulment of the contract or order
transferred, so far as the United States are concerned."
Expressio unius est exclusio alterius. The express
declaration that so far as the United States are concerned, a
transfer shall work an annulment of the contract carries by clear
implication the declaration that it shall have no such effect as
between the contractor and his transferee. In other words, as to
them, the transfer is like any other transfer of property, and
controlled by the same rules. Its invalidity is only so far as the
government is concerned, and it alone can raise any question of the
violation of the statute. The government, in effect, by this
section said to every contractor,
"You may deal with your contract as you please, and as you may
deal with any other property belonging to you, but so far as we are
concerned, you and you only will be recognized either in the
execution of the contract or in the payment of the
consideration."
It is familiar law that not every contract in contravention of
the terms of a statute is void, and the courts will search
Page 152 U. S. 649
the language of the statute to see whether it was the intent of
the makers that a contract in contravention of it should be void or
not.
Harris v.
Runnels, 12 How. 79;
Miller v. Ammon,
145 U. S. 421;
Pangborn v. Westlake, 36 Ia. 546.
It was in pursuance of this line of thought that the Court, in
Hobbs v. McLean, ruled as it did as to the effect of a
transfer by a contractor with the United States of an interest in
his contract to a third party. But it has never been doubted that
as a general rule a contract made in contravention of a statute is
void, and cannot be enforced, and the only exception arises when,
from an examination of the statute, the courts are able to discern
a different or a limited purpose on the part of the lawmakers.
It is true that in the case at bar, we have no construction of a
statute, but only of the terms of a contract. That contract,
however, was as binding on the one party as the other. The
contractor assented to its terms precisely as did the state, and
his promise was not to assign the contract in whole or in part
without the consent in writing of the state authorities. It was a
promise which entered into and became one of the terms of the
contract, and one which was binding not only upon the parties, but
upon all others who sought to acquire rights in it. It may be
conceded that primarily it was a provision intended, although not
expressed, for the benefit of the state and to protect it from
interference by other parties in the performance of the contract,
to secure the constant and sole service of a contractor with whom
the state was willing to deal, and to relieve itself from the
annoyance of claims springing up during or after the completion of
the contract in favor of parties of whose interests in the contract
it had no previous knowledge, and to the acquisition of whose
interests it had not consented. Concede all this, and yet it
remains true that it was a stipulation which was one of the terms
of the contract, and binding upon the contractor, and equally
binding upon all who dealt with him. It is unnecessary to hold that
the contractor might not be personally bound upon his promise made
before the performance of the contract to
Page 152 U. S. 650
transfer a portion of his profits to any third party. Whatever
liabilities he might assume by such a promise, it would be an
independent promise on his part, and would not let the promisee
into an interest in the contract. It would give him no right to
take part in the work, no right to receive anything from the state,
and all that it would give him would be an independent right of
action against the contractor for the failure to pay that which he
had promised to pay; the contract remaining all the time the
property of the contractor, subject to disposal by and with the
consent of the state. To him alone the state would remain under
obligations, and with him alone would the state be required to
deal. In no way -- by garnishment, injunction, or otherwise --
could the promisee prevent the state from carrying out the entire
contract with the contractor, paying to him the whole consideration
and receiving from him a full release. By the three instruments of
January 31, May 9, and June 20, 1882, this contract was wholly
transferred to and accepted by the defendant. This was while the
contract was executory, and before the work was done, and these
transfers were with the written consent and approval of the state
authorities, and by them the state in terms recognized
"Abner Taylor as the contractor, bound in all respects to carry
out the contract with the State of Texas in like manner as the
original contractor, Matthias Schnell, was bound."
In other words, by the consent of parties and in accordance with
the express provisions of the contract, before the work was done,
Abner Taylor, the defendant, was substituted for Schnell as the
contractor. It was precisely the same as though the contract with
Schnell had been surrendered and a new one made with Taylor. The
contract was still executory. Nothing had been earned by Schnell
and nothing was due to him. He steps out of the contract and Taylor
steps in. Taylor is accepted as the contractor, and proceeds with
the work. Would it not be strange if, after having thus completed
the contract, some person could, on the strength of an unknown
transfer of the entire profits of the contract made before the
transfer to Taylor, compel the latter to pay to him such entire
profits? And yet if one
Page 152 U. S. 651
thirty-second of the entire profits can be so obtained, all the
profits could in like manner have been obtained.
It will be borne in mind that the instrument of date January 31,
1882, by which Schnell transferred to Taylor, Babcock & Co. a
three-fourths interest in the contract did not operate to make
Schnell a mere beneficiary of profits. He and they became thereby
joint contractors with the state. He was under the same obligation
of performance as they, and for any failure in respect thereto the
state could hold him responsible equally with them. The mere fact
that there was a division between themselves as to duties in no
manner abridged the fact that he was a joint contractor with them.
They, it is true, were to furnish the money, but he was to have the
management and superintendence. He was to take his part in the
performance of the contract. Not only that, but, as seen, he was to
be personally responsible to them for any loss or damage caused or
sustained by reason of his neglect or mistakes. So that if he had
gone on jointly with them in the performance of the contract as
provided for, out of the profits earned in the performance of the
contract they would have had a right to deduct from the amount
coming to him all the loss and damages which they had sustained by
reason of his neglect and mistakes.
We have thus far rested the nonassignability of this contract,
or any interest therein, to plaintiff's grantor upon the express
stipulation of clause 26; but even in the absence of such a clause,
it was not competent for Schnell, by his own act and without the
consent of the state, the other contracting party, to transfer any
interest in this contract. It is a contract of that nature which is
not susceptible of assignment without the consent of the other
party.
Arkansas Valley Smelting Co. v. Belden Mining Co.,
127 U. S. 379;
Delaware County v. Diebold Safe & Lock Co.,
133 U. S. 473,
133 U. S. 488.
In the latter case, it was said by this Court:
"A contract to pay money may doubtless be assigned by the person
to whom the money is payable if there is nothing in the terms of
the contract which manifests the intention of the parties to it
that it shall not be assignable. But when
Page 152 U. S. 652
rights arising out of contract are coupled with obligations to
be performed by the contractor, and involve such a relation of
personal confidence that it must have been intended that the rights
should be exercised and the obligations performed by him alone, the
contract, including both his rights and his obligations, cannot be
assigned without the consent of the other party to the original
contract."
So that, even if clause 26 had been omitted from the contract,
Schnell, the contractor, could never have transferred an interest
in it to the grantor of plaintiff so as to vest in him a right to
take part in the work, or a subsequent right to recover from the
state on the completion of the work. All that could ever have been
acquired by an assignment or transfer by Schnell without the
consent of the state was a right to maintain an independent action
against him for whatever share of the profits he had attempted to
transfer. But that obligation would be personal to Schnell, and was
not assumed by the defendant, or Taylor, Babcock & Co. when
they took an assignment of the entire contract from Schnell.
Assuming to the state the performance of the contract carried with
it no assumption of Schnell's unauthorized assignments or of his
promises to pay over certain portions of the profits he would have
received had he performed the contract. In other words, stepping
into the place of Schnell in this contract with the state, they did
not assume his personal liabilities to third parties. They assumed
his obligations to the state, and they took with those obligations
a right to receive the entire consideration promised by the state,
and they did not agree to become liable for all or any independent
promises he had made in reference to the contract.
It is true that in that assignment it was stipulated that the
profits were "to be divided as the interests of the parties appear
under the contract, or to their heirs or assigns." If Schnell, with
Taylor, Babcock & Co., had under that assignment performed the
contract with the state and had made profits thereby, it may be
that this plaintiff, after giving notice, could have enforced both
against Schnell and this defendant a one-thirty-second of such
profits, resting upon this stipulation
Page 152 U. S. 653
for division among the parties or their assigns; but, as Schnell
never earned any share in the profits, there is nothing upon which
that stipulation can take effect. The profits which would have
resulted if Schnell, with Taylor, Babcock & Co., had performed
the contract might have been very different from that which did
result from the performance of the contract by Taylor alone. It is
a mistake to suppose that the profits to be derived from the
performance of a contract as yet unexecuted are something separable
from the performance -- as a coupon is detachable from a bond --
and can be sent floating through the channels of commerce as a
separate obligation. The profits are tied up in the contract to
such an extent that the promise in respect to them becomes of value
only when he who makes the promise shall have earned the profits
through the performance of the contract. And when the contract,
being wholly executory, is transferred to a third party who is
accepted by the promisor in lieu of the original contractor, such
third party enters upon the performance of the contract free from
any disposition of the profits made by the original contract before
the substitution.
We have thus far considered this case on the assumption that the
defendant proceeded with the completion of his contract in
ignorance of any transfer to plaintiff, and that such was the case
is, we think, a fair inference from the allegations of the bill.
The pleader has evidently sought to charge constructive notice from
the fact of record in the office of the clerk of the county in
which the work was done, but in which none of the land promised and
deeded was situated. It is not pretended that there was any statute
providing for such record or making the record notice to subsequent
assignees or purchasers, Rev.Stat.Texas, art. 4331;
Burnham v.
Chandler, 15 Tex. 441;
Wright v. Lancaster, 48 Tex.
250, but it is alleged that the assignments and transfers under
which the defendant claims were recorded in that office. The
argument seems to be that the defendant and his assignors selected
filing and record in that office as a means of giving notice to
other parties of their rights, and that having made such selection
was equivalent to an admission
Page 152 U. S. 654
that they would accept a like filing and record as notice to
them; but that argument cannot be sustained. The defendant and his
assignors may have desired to give as much publicity as possible to
the fact of the transfers to themselves, and in seeking to give
such publicity may have selected the filing and record in one of
the principal offices of the county as a means thereto, but they
did not thereby create a new law in respect to notice. They never
in terms declared, and their own acts of filing for record carried
no implied declaration of, their willingness to accept a similar
record as notice to themselves. They had a right to rely upon the
law of the state as enacted by its legislature, and were not bound
by any constructive notice other than those laws provided. If
notice was essential to charge them, actual notice should have been
given, at least in the absence of a statute providing some means
for constructive notice. Indeed it is a mere, and not very
reasonable, inference from the fact that they placed these
instruments on record that their purpose was thereby to give
notice. As well might it be assumed that they simply sought to have
preserved for their own use a recorded copy of their assignments,
rather than rest upon their own possession of the original papers.
It is true, in this part of the bill there is a statement that
"said Abner Taylor then had notice of the same." This language,
standing by itself, is open to a construction that actual notice
was charged; but that no such construction should be given to it is
evident from the paragraph immediately following, in which the
pleader alleges that notice was given by filing and record, and
states the reasons why such filing and record should be accepted as
constructive notice. Indeed, we do not understand from counsel's
brief or argument that there is a claim that there was actual
notice given of these transfers.
Finally, it is claimed that the defendant was chargeable with
notice because the assignment which he took from A. A. Burck on May
27, 1884, was really nothing but a quitclaim; that a party taking
under a quitclaim deed cannot be a
bona fide purchaser,
but takes with notice of all limitations of his grantor's rights,
and in respect thereto several authorities are
Page 152 U. S. 655
cited from the State of Texas and elsewhere as to the rights of
one taking under such a deed.
We do not care to enter into the consideration of this question,
for while the instrument is open to two constructions, yet,
conceding that it in terms only quitclaimed, it took nothing away
from Taylor's rights. It was not executed until two years and over
after Schnell had parted with all his interest in the contract to
Taylor, Babcock & Co., and it could not possibly have the
retroactive effect of vesting in the plaintiff a right as against
Taylor which he did not theretofore have. All that can be inferred
from that instrument is that more than two years after Schnell had
parted with his entire interest in the contract to defendant and
his associates, and they had assumed full responsibility to the
state, and nearly two years after defendant had accepted the sole
responsibility of the contract and after he had partially performed
its obligations, he ascertained in some way the existence of an
outstanding claim in favor of A. A. Burck, and, rather than
litigate with him the validity of that claim, purchased it. It was
not an admission that A. A. Burck had a valid claim to the extent
of the attempted assignment from Schnell to him, and the fact that
it was in the mere language of a quitclaim as likely resulted from
the unwillingness of A. A. Burck to assume the obligations of a
covenant or warranty as from any other reason.
In conclusion, we hold that, by the nature of the contract as
well as its express stipulation, Schnell was incapacitated from
transferring an interest therein without the consent of the state;
that the attempted transfers from him to A. A. Burck and from A. A.
Burck to S. B. Burck created simply a personal obligation which
could be enforced against him alone; that the assignments and
transfers with the consent of the state vested the absolute and
sole interest in the contract in the defendant, Abner Taylor, that
the latter took without notice of the plaintiff's claim, and that,
by his performance of the contract, he acquired the right to the
entire consideration promised by the state, and assumed no
liability to Schnell and no obligation to perform any promise which
Schnell made
Page 152 U. S. 656
to plaintiff or plaintiff's assignor. The judgment of the
circuit court is
Affirmed.
MR. JUSTICE JACKSON, with whom concurred MR. JUSTICE SHIRAS,
dissenting.
I am unable to concur in the opinion and judgment of the Court
in this case, and will briefly state the grounds of my dissent.
The case stands upon the bill, original and amended, and
demurrer thereto. From the nature of the building contract between
the State of Texas and Schnell as well as the covenant contained in
the twenty-sixth clause thereof providing that the contract should
not be assigned, in whole or in part, by the contractor without the
consent in writing of the designated state officials, "with the
advice and consent of the heads of departments," the conclusion is
reached by the Court that
"Schnell was incapacitated from transferring an interest therein
without the consent of the state; that the admitted transfers from
him to A. A. Burck and from A. A. Burck to S. B. Burck
(complainant) created simply a personal obligation, which could be
enforced against him alone; that the assignments and transfers with
the consent of the state vested the absolute and sole interest in
the contract in the defendant, Abner Taylor; that the latter took
without notice of the plaintiff's claim; that by his performance of
the contract, he acquired the right to the entire consideration
promised by the state, and assumed no liability to Schnell and no
obligation to perform any promise which Schnell made to plaintiff
or plaintiff's assignor."
I find nothing in the allegations of the bill or in the exhibits
made a part thereof which sustains the statement that Taylor "took
without notice of the plaintiff's claim." The bill certainly does
not admit that Taylor took the transfer to himself and Babcock from
A. A. Burck without notice of the previous transfer to S. B. Burck.
The other conclusions involve legal and equitable propositions
which, as applied to
Page 152 U. S. 657
the admitted facts of this case, are not, in my opinion,
correct.
There are important allegations in the bill, and provisions in
some of the contracts, made exhibits thereto and parts thereof,
which are admitted by the demurrer, but which are not noticed or
considered in the opinion. By the contract of January 31, 1882
(Exhibit L), Schnell assigned and set over to Charles B. Farwell,
John v. Farwell, Amos C Babcock, and Abner Taylor
"an undivided three-fourths interest in said [state] contract,
for the purpose that the said parties of the second part may share
in any and all the profits that may arise from same, the same as
the party of the first part [Schell] as their interests may appear,
which is hereby agreed to be equal;"
that is, the assignees collectively were interested in the
three-fourths interest transferred to them. This contract further
provided that the assignees were
"to furnish whatever money may be needed or necessary for the
proper construction of said statehouse, or for the execution of the
said contract, as the same may be required from time to time."
The sum of $13,000, which the parties acknowledged to be then
due Schnell, was to be paid with interest "whenever the sum of
$50,000 shall have been realized by the sale of lands named in said
(state) contract." After the payment of that sum, the contract
provides
"that the said parties of the second part are to have all the
remaining profits until all the money advanced as above stipulated
shall be paid, with six percent interest thereon per annum from the
time said money is advanced, and all the other profits are to be
divided as the interests of the parties appear under the contract
or to their heirs or assigns. It is further agreed by and between
the parties hereto that Amos C. Babcock, one of the parties of the
second part, shall be the trustee for the parties herein named of
each part, to act as and be the trustee to receive the title to be
conveyed in pursuance of the contract between the State of Texas
and the said Matthias Schnell, and receipt for same to the proper
officers of said state, and do all other things required of the
said Schnell pertaining to the conveyance of the lands under said
contract with the State of Texas or
Page 152 U. S. 658
Capitol Building Commissioners, and to hold the same, and to
make such conveyances or sales of said lands, or any portion
thereof, from time to time, as the parties hereto may direct."
The State of Texas, by its proper officials, gave its written
consent to this contract of assignment, which operated to
substitute Schnell and his assignees, composing a partnership under
the style of Taylor, Babcock & Co., as the contractors with the
state in place of the original contractor. In thus becoming the
substituted contractors with the state instead of Schnell, the
members of the partnership in no way abrogated or terminated the
provisions of their private contract
inter sese as above
set forth. It admits of no question that by the terms of this
partnership contract, Schnell was not required to make any advances
or incur any expenditures in executing the state contract and
completing the capitol building, as the four assignees of an
undivided three-fourths interest of the state contract were to
advance all the funds required for that purpose, and obtain their
reimbursement from the sales of the lands to be received from the
state in settlement for the work. It is equally clear that Schnell
retained a one-fourth share of the profits that might be realized
on the contract after refunding advances made by his co-partners in
completing the capitol building. Now the State of Texas certainly
had no concern with these private matters and agreements between
the new contractors. It was not interested in or in any way
affected by the relative or respective shares of the contractors in
the profits which might be made. Neither had the state any interest
in the question as to how, or among whom, such profits, if any,
should be divided. These were matters to be settled among the
co-partners or associate contractors, and they were settled by them
in the provision of their private contract, which provided that,
after repaying the amount expended in constructing the state
capitol, "all the other profits are to be divided as the interests
of the parties appear under the contract, or to their heirs or
assigns." It can hardly be doubted that this language permitted and
provided for the assignment by either or all of the partners of his
or their share in the profits, and that such
Page 152 U. S. 659
assignee could equitably assert a right thereto against any
person into whose hands such profits might come or be found, except
a
bona fide purchaser thereof for value without notice of
the assignee's rights. Such an assignee of a share in the profits
of the enterprise would have nothing to do with the execution of
the state contract out or which profits might arise. Nor would he
touch the state at any point or in any way affect its rights,
interest, or convenience. The contractor's covenant not to assign
the building contract without the consent in writing of designated
state officials did not extend to or cover an assignment by the
contractor of a share or interest in the profits which it was
expected would arise from the execution of the contract. The state
had notice of the provisions of the private partnership contract,
which included "assigns" among those entitled to share in the
division of the profits, and in consenting to the arrangements made
by that contract it may be fairly assumed to have assented to such
provisions. The right to assign a share or interest in the profits
was one of the terms of the co-partnership which the state accepted
as contractor in the place of Schnell. In thus accepting the firm
as contractor, with notice that its members had provided for their
"assigns" to share in the profits of the building contract, the
state itself could not thereafter have objected to Schnell's
assignment of his interest, wholly or partially, in the profits
that the firm might make out of the contract, whether such
assignment was made before the completion of the work or after.
Suppose the firm of Taylor, Babcock & Co., having the same
co-partnership articles and agreements as to how the members should
share in the profits of the business, had been the original,
instead of the substituted, contractors, could or would it be held
that the contract with the state, or the twenty-sixth clause
thereof, would operate or have the effect to prevent any member of
the firm from assigning a part of his interest in the profits that
might be realized in completing the state building? Such a
proposition as this could not be maintained. It would be too clear
for argument that the state contract with the partnership could not
control the
Page 152 U. S. 660
articles of co-partnership as between the partners and third
parties in respect to what might be realized by the firm out of the
contract with the state. Each partner of a firm has an undoubted
right to make a valid assignment, either absolutely or as security,
in the profits of a partnership. No partner owns absolutely any
part of the partnership property. He cannot assign any particular
part of such property, or any specific amount of the profits of the
concern. But the assignment of his share, or any part thereof, in
such profits will pass such part of the profits as may remain after
payment of the firm's debts and settlement of the partnership
accounts. The right conferred by the assignment is an intangible
thing, and can only be reduced to possession by a demand for
account, and no notice of such an assignment need be given other
than a demand for an account of such profits. This is the rule laid
down in
Wallace's Appeal, 104 Penn.St. 559, where it was
held
"that a purchaser of a partner's interest, whether at private or
judicial sale, acquires merely the right to demand an account from
the other partners and receive a certain share of the balance
remaining after the payment of the partners' debts and the
adjustment of the partners' equities. This right is an intangible
thing, and can only be reduced to possession by a demand for an
account."
In that case, it was further held that the assignee of a
partner's interest was superior to the claim of general creditors
and all others claiming under the partnership except the purchasers
for value without notice.
The right of the partners, under the articles of co-partnership,
as well as under the general law, to make a transfer or assignment
of their interest in the profits of the firm, should not be
confounded with the right of the firm to make an assignment of the
contract, so far as the state is concerned. In accepting the
co-partnership as its contractor, the state did not undertake to
control the ordinary rights of partners nor abrogate their private
agreement. The opinion of the Court asserts the proposition and
reaches the conclusion that, notwithstanding the terms of the
partnership agreement, which provided that the "assigns" of any
member of the firm should
Page 152 U. S. 661
be included among those who were to share in the profits of the
enterprise as their interest might appear, still such an assignee
could acquire no right or title to the profits as against the firm,
or members thereof, into whose hands such profits might come,
without the consent of the state to such assignment, and as the
result of this startling proposition holds that the appellee,
Taylor, who was a member of the firm, and a party to that
agreement, is relieved from liability to account for profits which
belong to the appellant, as the assignee of Schnell. I know of no
principle or authority upon with this can be sustained.
Having retained a one-fourth interest in the profits of the
building contract, Schnell, on January 31, 1882, by written
contract, after reciting the contracts with the state and with
Taylor, Babcock, and the Farwells, transferred and assigned to A.
A. Burck and two others, separately and severally, an undivided
one-fourth part
"of all and whatever share, interest, or advantage, whether in
money, lands, or otherwise, which he [said Schnell] may be entitled
to have or receive under or by virtue of the contracts herein
mentioned and referred to,"
excepting only the $5,000 to be paid for his services as
superintendent and $13,000 coming to him out of the first $50,000
proceeds of land sales. This assignment contained the provision
"that this contract shall be binding upon and inure to the
executors, administrators, heirs, and assigns of the several
parties hereto respectively, and that the same shall be recognized
by the parties and trustee named in the contracts herein referred
to."
This assignment to A. A. Burck was witnessed by A. C. Babcock,
of the firm of Taylor, Babcock & Co., and trustee of the
parties to receive and sell the lands to be acquired under the
building contract. He not only witnessed the contract, but appeared
before the proper officers and proved its execution for
registration. The firm of Taylor, Babcock & Co. thus had notice
through one member thereof of the assignment. In addition to this,
it is distinctly alleged in the amended bill that this transfer was
executed by Schnell "with the knowledge and assent of said
partnership,"
Page 152 U. S. 662
meaning Taylor, Babcock & Co. It is further alleged
"that, the said Matthias Schnell having assigned to the said A.
A. Burck a right to one-sixteenth interest in the profits that
might arise from the construction of said capitol under said
contract with the State of Texas, and having made such assignment
to said Burck at the time said partnership was existing, as
hereinbefore alleged, with the knowledge and assent of said firm as
it then existed, the right of the said A. A. Burck to have
one-sixteenth of the profits that might arise from the carrying out
of said contract, and to have an accounting therefor, became
binding upon said firm and its assignees."
On May 9, 1822, Schnell, by written contract, transferred his
remaining interest in the contracts (consisting of his claim of
$13,000, and an undivided one-sixteenth interest or share in the
profits that might be realized) to Charles B. and John v. Farwell,
Abner Taylor, and A. C. Babcock, "who composed the firm of Taylor,
Babcock & Co." In respect to this assignment, which the state
approved, the original petition charges
"that the said Taylor, Babcock & Co. received said
assignment from Matthias Schnell of all his interest in said
contract to complete said state capitol with full notice of the
interest of said A. A. Burck, as hereinbefore alleged, an undivided
one-half of which interest A. A. Burck subsequently transferred to
plaintiff, S. B. Burck, as aforesaid, and that the said Abner
Taylor had full notice of the interest of the said A. A. Burck at
the time of the said transfer of Taylor, Babcock & Co. to him,
the said Abner Taylor, and with full notice that by the terms of
the agreement and assignment executed by and between said Matthias
Schnell, of the first part, and J. M. Beardsley, James S. Drake, A.
A. Burck, of the second part, that the same should be binding on
and inure to the executors, administrators, heirs, or assigns of
the several parties to the said contract."
Now after this transfer by Schnell of his interest to the firm
of Taylor, Babcock & Co., what was the situation in respect to
the profits that might be realized from the building contract? It
was clearly this: Taylor, Babcock & Co.
Page 152 U. S. 663
thereafter held and owned the three-fourths interest acquired
under the partnership contract of January 31, 1882, and
one-sixteenth interest derived from the assignment of May 9, 1882,
aggregating thirteen-sixteenths interest in the profits, leaving
the outstanding three-sixteenths assigned to A. A. Burk and others
by Schnell on January 31, 1882. The stipulations of the partnership
contract were in no way changed or affected by Schnell's assignment
of his remaining interest to the firm of Taylor, Babcock & Co.
The obligation of Taylor and his associates, Babcock and the
Farwells, to furnish the money required to complete the contract
was not altered or abrogated in any way, and, if the contract had
been completed by Taylor, Babcock & Co., the profits realized
from the sales of the lands, after refunding the expenditures made
in completing the contract, would have been distributable between
the parties in the proportion of thirteen-sixteenths to Taylor,
Babcock & Co., one-sixteenth to A. A. Burck, and two-sixteenths
to the other two assignees of Schnell.
On June 20, 1882, the firm of Taylor, Babcock & Co.
transferred the building contract to Abner Taylor, which was
assented to by the state, and Taylor thereby became the contractor;
but in so doing, he did not cease to be bound by the terms of the
partnership contract under which Schnell retained his one-fourth
interest in the profits, and a right to assign it, as he did. In
other words, Taylor, in acquiring the shares of the members of the
firm of Taylor, Babcock & Co., in no way either terminated or
affected the interest of the parties holding the outstanding
interests in the profits assigned by Schnell to A. A. Burck, with
the knowledge and consent of both Taylor and the firm of Taylor,
Babcock & Co. Nor did the transfer to Taylor by Babcock and the
Farwells, as members of the firm of Taylor, Babcock & Co., in
any way relieve Taylor from the provisions of the contract of
January 31, 1882, which required himself and associates, other than
Schnell, to furnish all the money needed to complete the building.
The only effect of that transfer was simply to place Taylor in the
shoes of Taylor, Babcock & Co., subjecting him to all the
obligations resting upon himself and assignors,
Page 152 U. S. 664
and affected by all the rights and equities which were binding
upon the firm, not only in respect to the state, but as to all
others interested in the result of the enterprise.
It is held in the opinion of the Court that this assignment by
the members of the firm of Taylor, Babcock & Co. to the
appellee, Taylor, with the consent of the state, vested in him the
absolute and sole interest in the contract and profits arising
therefrom, and that by his completion of the contract, he acquired
the right to the entire consideration promised by the state, and
assumed no liability to either Schnell or to others claiming under
Schnell. Schnell's assignee, holding the outstanding one-sixteenth
interest in the profits, was no party to that arrangement. His
rights were fixed by the partnership articles, and how and upon
what principle can it be maintained that Taylor's acquisition of
the interest of Babcock and the Farwells in the contract and the
profits thence to arise can cut off this outstanding interest held
by Burck? By taking the assignment from his co-partners, Taylor was
in no way released from the obligation to furnish money and
complete the contract which rested upon the firm of Taylor, Babcock
& Co.; and how is it, then, that by acquiring the interest of
his co-partners, he can terminate or extinguish the right of
Schnell's assignee previously acquired with the knowledge and
consent of the firm of Taylor, Babcock & Co.? Can rights
acquired with Taylor's knowledge and consent be cut off and
extinguished by the private dealings between himself and partners,
even though it be with the consent of the state? No such
proposition can be sustained either upon principle or
authority.
By the transfer of April 14, 1883, from A A. Burck to the
complainant, S. B. Burch (Exhibit O), the latter acquired an
undivided one-half interest in the one-sixteenth interest held by
the former, and thereby became entitled to one thirty-second part
of the profits that might arise upon the completion of the contract
and the sales of the land to be received therefor. This transfer
left A. A. Burck the holder of one thirty-second interest in the
profits, and thereafter, on May 27, 1884, he assigned to Abner
Taylor and A. C.
Page 152 U. S. 665
Babcock all his right, interest, and claim in and to the
contract with the State of Texas derived from Schnell, or any
interest he might have in the erection of the capitol building.
These two assignments by A. A. Burck are not, upon their faces,
in conflict. They may well stand together. That to S. B. Burck was
of a specific interest; that to Taylor and Babcock may be fairly
construed to cover A. A. Burck's remaining interest of one
thirty-second share of the profits. This last transfer does not
purport to convey the one thirty-second interest previously
transferred to S. B. Burck, and there is no allegation in the bill
to give color to the idea that Taylor and Babcock, in taking the
assignment of May 27, 1884, from A. A. Burck, supposed that they
were getting a one-sixteenth interest instead of a one
thirty-second interest. When that assignment was made to them,
Taylor and Babcock both knew that A. A. Burck had acquired from
Schnell a one-sixteenth interest in the profits, and it is somewhat
significant that they accepted an assignment from him, general in
its character, without specification as to the interest conveyed.
It is alleged that this transfer from A. A. Burch to Taylor and
Babcock did not upon its face purport to convey the interest
previously conveyed to S. B. Burck. Upon demurrer, this statement
of the bill with respect to the purport of that transfer must be
taken as true. In
Campbell v. Mackay, 1 Myl. & Cr.
603, Lord Chancellor Cottenham laid down the rule
"that the court upon demurrer must assume the statement of the
bill with respect to the purport of a deed to be true, and the
demurring party is not at liberty to read the instrument itself for
the purpose of disproving the statement, notwithstanding that for
greater certainty as to its contents the bill expressly refers to
it as being in the demurring party's possession."
When this assignment of May 27, 1884, was made to Taylor and
Babcock, the latter had ceased to be a co-contractor for the
erection of the building.
The state never assented to either of these assignments by A. A.
Burck. The want of that assent is held to violate the transfer to
S. B. Burck, while it does not affect that made to
Page 152 U. S. 666
Taylor and Babcock. In reference to these A. A. Burck
assignments, the bill charges
"that for reason why your orator should not have an account or
relief against him, the defendant pretends that he had no notice
that the said A. A. Burck assigned or transferred to your orator a
one-half interest in his, the said A. A. Burck's, one-sixteenth
interest in the profits that might arise from the building of said
capitol contract, and that the defendant in good faith and without
notice purchased from said A. A. Burck, for valuable consideration,
the said Burck's one-sixteenth in said profits after the said A. A.
Burck had sold one-half of his said interest to your orator, and
therefore refuses to account with plaintiff, whereas the truth is
that the said transfer by A. A. Burck to your orator, which has
been hereinbefore stated and made a part of this bill as an
exhibit, was duly authenticated for registration in the office of
county clerk, and was duly recorded in the records of deeds of
Travis County, Texas, on the 14th day of April 1883, and said Abner
Taylor then had notice of the same, whereas the said A. A. Burck
did not sell or transfer any of his said interest in said profits
to said Abner Taylor until the 27th day of May, 1884."
Suppose, as suggested in the opinion of the Court, that this
does not amount to anything more than an averment of constructive
notice arising from the registration of the transfer, it was
certainly not an admission that Taylor had no notice of that
assignment. But considering the subject matter of the interest
transferred by Schnell to A. A. Burck, and by him to S. B. Burck,
and the situation of the parties, the question arises whether want
of a definite allegation that Taylor and Babcock had notice of the
complainant's interest when they took their assignment from A. A.
Burck can in any way affect or defeat the complainant's rights
according to the allegations of the bill.
The interest involved was to arise out of the sales of lands
then being and thereafter to be acquired, without expense to
Schnell or his assignees. To whom was an assignee of an interest in
the profits under duty and obligation to give notice? The ordinary
rule applicable to the transfer of debts or choses
Page 152 U. S. 667
in action has no application to the case, as shown in
Wallace's Appeal, 104 Penn.St. 563. The principle which
would govern and control the question and the conflicting rights of
complainant and Taylor and Babcock, if there is any real conflict
between them, is the equitable doctrine of a
bona fide
purchaser for value without notice. This is a matter of defense on
the part of such purchaser. There is certainly nothing on the face
of either the bill or the contracts, made exhibits thereto, to
indicate that Taylor or Taylor and Babcock has or can assert any
such defense, and yet the Court's opinion and conclusion gives
Taylor the full benefit of that position as effectually as though
he had set it up by answer and established it by proof.
There is a clear distinction between choses in action and
chattel or freehold interests. This distinction is pointed out in
Wiltshire v. Rabbits, 14 Sim. 75, 77, in which it was held
that the person who took the first assignment of an annuity charged
on leaseholds was entitled to priority over the person who took the
second, notwithstanding the latter may have been beforehand with
the former in giving the trustee notice of his security. The same
general principle is asserted in
McCreight v. Foster, 5
Ch.App. 604, 610. And in
Wilmost v. Pike, 5 Hare 14, it
was distinctly held that the doctrine of notice applicable in
determining the priority of changes on choses in action does not
prevail as to equitable estates in land. In that case, several
mortgages were held to take effect with regard to interests arising
out of real estate according to the order of time at which they
were respectively created, and that their priorities were not
affected by the giving or failing to give notice to the party in
whom the legal estate was vested.
But even treating the interest here involved as an ordinary
chose in action, no proposition is better settled than that an
assignee of such a right can take only such interest as his
assignor has to transfer, and will be bound by all equities binding
on the latter unless it affirmatively appears that the subsequent
assignee took without notice.
Davies v. Austen, 1 Ves.Jr.
247;
Brashear v.
West, 7 Pet. 608;
Allen v. Randolph, 4
Johns.Ch. 693;
McKinnie v. Rutherford, 1
Page 152 U. S. 668
Dev. & Bat. (Eq.) 14;
Webster v. Wise, 1 Paige 319;
Gay v. Gay, 10 Paige 369.
There is no allegation in the bill which can be tortured into an
admission that Taylor occupies the position of a
bona fide
purchaser for value without notice of the interest of A. A. Burck
previously conveyed to S. B. Burck. The opinion of the Court goes
far beyond giving Taylor the benefit of such position. It in
principle and effect gives to the covenant against transferring the
state contract a greater effect than a law or a statute could have
had. How can the rule laid down by the Court, that the covenant
against transferring the state contract has the effect to defeat
the rights of an assignee from a member of the firm of contractors,
be reconciled with the principle announced in
McBlair v.
Gibbes, 17 How. 232,
58 U. S. 239;
Brooks v.
Martin, 2 Wall. 70,
69
U. S. 87;
Railroad Co. v. Durant, 95 U. S.
576, and also in
Sharp v. Taylor, 2 Phillips
801, 818? In these cases, it was held that there was a distinction
between enforcing an illegal or prohibited contract and the
assertion of a title to funds that had been realized out of such
transactions. Here, the contract with the state has been completed.
The state is not objecting to the assignment made by Schnell to A.
A. Burck, and by A. A. Burck to S. B. Burck, and certainly Taylor,
who not only had knowledge of Schnell's assignment to A. A. Burck,
but is charged with having assented thereto, is not in a position
to interpose an objection which even the state could not urge, in
order to withhold funds that do not belong to him. What the Lord
Chancellor said in
Sharp v. Taylor, supra, is directly in
point here:
"As between these two, can this supposed evasion of the law be
set up as a defense by one against the otherwise clear title of the
other? In this particular suit, can the one tenant in common
dispute the title common to both? Can one of two partners possess
himself of the property of the firm, and be permitted to retain it,
if he can show that in realizing it, some provision in some act of
Parliament has been violated or neglected? Can one of two partners
in any import trade defeat the other by showing that there was some
irregularity in passing the goods through the custom-house? The
answer
Page 152 U. S. 669
to this, as to the former case, will be that the transaction
alleged to be illegal is completed and closed, and will not be in
any manner affected by what the court is asked to do as between the
parties. Do the authorities negative this view of the case? The
difference between enforcing illegal contracts and asserting title
to money which has arisen from them is distinctly taken in
Tenant v. Elliott, 1 Bos. & Pull. 3, and
Farmer v.
Russell, 1 Bos. & Pull. 296, and recognized and approved
by Sir William Grant in
Thomson v. Thomson, 7 Ves.
473."
The same principle is laid down in the recent case of
Kingsbury v. Burrill 151 Mass. 199, where it was held that
an assignment of a fractional part of a claim is good in equity
where the person who it to pay raises no objection, following
James v. Newton, 142 Mass. 366.
The present case cannot be distinguished in principle from the
rule announced in
Hobbs v. McLean, 117 U.
S. 567, in which, A. having contracted with the United
States to furnish supplies of wood and hay to troops in Montana,
entered into partnership with B. and C. for the purpose of
executing the contract. A. was to furnish half the capital, B. and
C. one-fourth each, and profits and losses were to be divided on
that basis; but in fact the capital was furnished by B. and C. A.
delivered the wood according to the contract, but failed to deliver
the hay, and, payment being refused, he brought suit in his own
name in the Court of Claims against the United States to recover
the contract price of the wood. In this suit, B. and C. each was a
witness on behalf of A. and each testified that he had no
"interest, direct or indirect, in the claim," except as a creditor
of A. holding his note. Pending the suit, A. became bankrupt, and
then died. His administratrix was admitted to prosecute the suit,
but before entry of final judgment, his assignee in bankruptcy was
substituted in her place. Final judgment was then rendered in favor
of the assignee, and the amount of the judgment was paid him. B.
and C., as surviving partners, then filed a bill in equity against
the assignee and the attorneys and counsel to recover their shares
in the partnership property, and the court sustained their right to
recover.
Page 152 U. S. 670
The attempt to draw distinctions between decisions which involve
no substantial differences in principle is not only unwise, but is
attended inevitably with embarrassment in the administration of the
law. The cases of
Arkansas Valley Smelting Co. v. Belden Mining
Co., 127 U. S. 379, and
Delaware County v. Diebold Safe & Lock Co.,
133 U. S. 488,
cited in the opinion of the Court, fall far short of asserting the
proposition that a member of the firm of Taylor, Babcock & Co.
(the substituted contractors with the state) could not transfer an
interest in the profits to arise out of the building contract
without the consent of the state. There is a class of cases where
the services to be rendered are of such a personal character that
they cannot be assigned; but where is the authority that holds that
where a firm is a contractor to do certain work, a member of such
firm cannot assign or transfer his share of the profits to arise
therefrom? I have looked in vain for such an authority.
The real question before the Court upon the bill and the
demurrer thereto is not whether Schnell could have assigned to A.
A. Burck the right to take part in or assert any control over the
construction of the state capitol, or to have recovered from the
state the compensation it had promised to pay therefor, but the
question is: can Taylor retain a share of the profits which belong
to Schnell by the partnership agreement, made with himself and his
associates upon full consideration, a portion of which profits
Schnell, "with his knowledge and consent," transferred to A. A.
Burck, who assigned a part thereof to the complainant? Under and by
what provision of the contract described in the record did Taylor
become entitled to hold that share for his own benefit?
The bill shows that the building cost about $3,700,000; that the
lands received from the state as compensation for the work, and
since sold, were worth from ten to eleven millions of dollars, and
the profits made on the transaction were between seven and eight
millions of dollars. By the terms of the partnership contract, all
the expenditures connected with the completion of the building were
to be refunded with interest, and the remaining profits were to be
divided "as the interests of the
Page 152 U. S. 671
parties or their assigns might appear." The complainant, as an
"assign," holds title to one thirty-second interest of those
profits. The bill clearly discloses his right thereto, and I fail
to see upon what principle Taylor can dispute his claim or deny the
account which he seeks. To allow him to do so under the allegations
in this bill, and upon the ground on which it is rested -- that the
state did not assent to the complainant's acquisition of the
interest he holds -- is not only a perversion of right and justice,
but finds no sanction or support in either principle or
authority.
MR. JUSTICE SHIRAS concurs in this dissent.
MR. JUSTICE WHITE was not a member of this Court when this case
was argued, and takes no part in its decision.
