Rights of Assignees and Transferees in Equity: A Study of Choses in Action and Trusts, Schemes and Mind Maps of Law

Download Rights of Assignees and Transferees in Equity: A Study of Choses in Action and Trusts and more Schemes and Mind Maps Law in PDF only on Docsity! PURCHASE FOR VALUE WITHOUT NOTICE Although conscious of repeating what has been said better else- -where, I would like to say a few words upon an article in the YALE LAW JOURNAL for January by Professor Kenneson. 1 In this the learned writer, in the form of a criticism of the well known views of Dean Ames, presents an exposition of the rights of the assignee of a chose in action and the transferee from a cestui que trust where there has been a prior equity created by the assignor. The case stated is this: T, the owner of a chose in action, makes himself trustee of it for the benefit of C; then assigns it to A, who learns of the rights of C before collection is made. Professor Kenneson holds that C should be preferred to A, basing his contention upon two main points. First, he says that the assignee of a chose in action, because his right may be defeated by the debtor's making payment either to the original creditor or another assignee, has only an equitable right.2 As to this, it niay be suggested that a legal right is. one which will be enforced in a court of law and certainly the as- signee has this sort of a right. But further, the fact that it may be cut off or destroyed by the action of another does not indicate that there is only an equitable right here. The same is true of many legal rights. Thus the owner of property may have his legal title destroyed by its sale in market overt, if that now any- where exists, or by an agent who has been authorized by him to do so. If one buys personal property and suffers it to remain in the hands of the seller, it is possible for the latter to defeat his title in many cases by sale to a third person, and the same is true of course where the buyer of real estate fails to record the con- veyance. In all of these cases the title is in one person while a power to affect that title resides in another, though the exercise of that power may be wrongful. The legal owner in these cases may have redress in equity to prevent the destruction of his right, but that would not justify us in saying that his rights are only equitable. So in the case of an assignment of a chose in action, the power which the assignor or a subsequent assignee has to defeat the rights of the assignee whose rights are in ques- tion does not indicate in any way that his rights are only equit- '23 Yale Law Journal, p. 193. 2 Page 212. YALE LAW JOURNAL able. Is it true that only equitable rights can be wrongfully de- stroyed? There is some room in a court of law for a bona fide purchaser. Professor Kenneson's co-ordinate point is that upon collection of the debt by the assignee, the title to the chose in possession which is received in payment of the debt passes through the as- signor; that the assignee being only an agent, would have lio more right to transfer the title to himself with knowledge of the rights of the cestui, than the assignor would have the right to transfer the title to any subsequent equitable encumbrancer.3 The fallacy here lies in considering the assignee an agent, though it is true that the courts have invoked the fiction of agency to make a chose in action assignable. But an agent is a fiduciary; he is bound by the will and is under the control of the principal; he acts for the benefit of the latter. An assignee is not a fiduciary, his power is irrevocable and he acts for his own benefit.4 Even in states where he is not -allowed to sue in his own name, he is in complete control of any action he may have to bring for col- lection. 5 There is never any occasion for him to go into equity save where his legal right is threatened with destruction, and then his right is equitable only to the same extent as is the right of any legal owner of property. He is in law the dominus of the chose, having the legal power of control. Though acting in the name ot the assignor, he is not at any step the latter's agent. If, now, he collects the money, assuming that the title to it must first pass through the assignor, something which is at least doubtful, is there anything wrongful in his exercise of the power to transfer title to himself? He owes no obligation to the assignor; the latter is not even vicariously committing a breach of trust, for he surrendered control over the chose when he made the assign- ment. In fact the only method by which the cestui could prevent the collection of the debt would be by an appeal to a court of equity, since the cestui has no standing in a court of law. The question is, therefore, whether equity should interfere with the 3 Page 196. 4 Knapp v. Alvord, 10 Paige, 205; Dazey v. Mills, 10 Ill., 67. 5 King v. Miller, 53 Or., 542; Anderson v. Miller, 15 Miss., 586; Welch v. Mandevile, 11 U. S., 152; 1 Wheat., 233. O In the niandatum in rem suan of the Roman law, even before itb development by the praetor, the assignee came to be considered a true successor.