
    John D. Spicer and Henry R. Thomas, Resp’ts, v. Edward Snyder, App’lt.
    
      (Supreme Court, General Term, Third Department,
    
    
      Filed November 28, 1890.)
    
    Contbact—Equitable assignment oe moneys to become dub.
    A firm of house builders who were known to he insolvent entered into an agreement with defendant to build a house for him, furnishing all labor and materials. They immediately assigned to plaintiffs all moneys to become due under the contract as collateral security for lumber to be furnished for the house aud for a prior indebtedness, of which assignment defendant had notice. Thereafter the contractors not paying their workmen, defendant promised to pay them, and mechanic's liens were filed. Meld, that the instrument given to plaintiffs was not an absolute assignment of the moneys, but merely an equitable assignment operating upon the indebtedness as it arose from time to time; that the moneys paid to mechanics and material-men satisfied the contract to that extent, and that if plaintiffs were paid for the lumber put by them in the house, they could not complain of the payments made to others.
    Appeal by the defendant from a judgment entered in Bensselaer county upon the report of a referee.
    The action was to recover of defendant moneys alleged to have become due to plaintiffs, as assignees of Quinby & Yandenburgh, upon their contract with defendant to build a house.
    Quinby & Yandenburgh were partners as house builders. On the 12th day of February, 1884, they made a contract in writing with the defendant, whereby they agreed to build for him a two-story frame dwelling-house upon his lot and furnish all the materials, according to the - plans and specifications, for $4,393, seventy-five per cent of which the defendant agreed to pay, from time to time, as the work progressed and the balance when completed, the building to be completed May 1, 1884.
    
      Quinby & Yandenburgh were insolvent, and known to be so by the defendant. At the time of making said contract Quinby and Yandenburgh told the defendant that they had no monéy or means to carry it out, and that the defendant would have to advance the money as needed to pay for the work and materials put into the building, and the defendant assented thereto.
    The plaintiffs were lumber dealers in the city of Troy. They knew the insolvency of Quinby & Yandenburgh, and were their creditors at the date of the contract with defendant in the sum of $489.53 for lumber which they had furnished them for a house which they were then building for one Edmans, and they continued thereafter to furnish" them lumber for the Edmans house until the total' indebtedness of Quinby & Yandenburgh to the plaintiffs for such lumber was $1,086.84. Yandenburgh was also at the same time indebted to the plaintiffs for lumber in the sum of $215.31.
    On the 4th of March, 1884, Quinby & Yandenburgh gave the •plaintiffs the following assignment:
    “ For value received, we hereby sell, assign and transfer to J. D. Spicer & Co., of Troy, FT. Y., all moneys now due or hereafter to become due upon the annexed contract with Edward Snyder, and hereby authorize said John D. Spicer & Co. to collect the same in our name or otherwise. This assignment is given as collateral security to said John D. Spicer & Co. to secure them the payment of all moneys now due or hereafter to become due to said J. D. Spicer & Co., from us or either of us.”
    On the same day the plaintiffs gave the defendant notice that they held such an assignment.
    Quinby and Yandenburgh commenced the construction of defendant’s house. On April 1, 1884, their firm was dissolved, Quinby withdrawing. Thereafter Yandenburgh carried on the work aloné. The plaintiffs furnished Quinby and Yandenburgh, and after the dissolution of the firm, Yandenburgh, lumber for the defendant’s house, which was used in its construction, of the value of $1,390.93. The defendant paid plaintiff $1,018.25 thereon; $372.68 remains unpaid.
    Quinby and Yandenburgh, and after their separation, Yandenburgh, employed sub-contractors, masons, capenters and workmen, and contracted for materials to complete the defendant’s house. After the work had so far progressed that including the lumber furnished by plaintiffs, $2,700 had become due from defendant thereon, the masons, carpenters and other workmen stopped work because Yandenburgh did .not pay them; they refused to work unless the defendant would agree to pay them. The defendant, in order to procure them to finish the house, promised to pay them for what they had done and should thereafter .do. Both Quinby and Yandenburgh, and Yandenburgh individually, omitted to pay for a considerable part of the materials furnished, and liens to the amount of several hundred dollars were filed against the house.
    The defendant paid for the said work and materials, over and above his payments to plaintiffs, $2,343. The said labor and materials thus paid for were necessary in the building of the house, and the payments were made with the consent of Yandenburgh.
    The contract required the contractors to paint the house inside and out with three coats of good white lead and oil paint. The house was painted, but not according to the contract
    
      J. A. Cipperly, for app’lt; E. A. Parmenter, for resp’ts.
   Lájstdok, J.

The judgment can be upheld only in part. The -contractors were insolvent and could not build the house except upon the credit of their agreement with the defendant Before they became entitled to anything under the agreement they assigned whatever moneys should become due to them upon it to the plaintiffs, as collateral security not only for the lumber plaintiffs might put into defendant’s house, but for all other indebtedness the insolvent contractors either as a firm or individually did or should owe them. The plaintiffs, having given notice to defendant of the assignment, claim that the defendant could not apply the money which he was to pay the contractors for building the house in payment of the bills which the contractors had incurred for the labor and materials put into the house, although the contractors consented, and because he did so pay, he must pay so much of the amount over again to them as may be necessary to pay the old debts due them from the contractors. The referee sustained this claim.

The assignment to the plaintiffs was of “ all moneys now due or hereafter to become due upon the annexed contract with Edward Snyder.” By the annexed contract the contractors agreed to build a house furnishing all labor and materials for $4,393, which the defendant agreed to pay. That contract was based upon the contemporaneous understanding that the contractors had neither credit nor means to cony it out, and the oral agreement that the defendant would advance the money as needed to pay for the work and materials put into the building. The written contract was executory, and the parties to it had the right to execute it according to their contemporaneous oral understanding and agreement. The plaintiffs as assignees stood in no better condition than their assignors, and they could not prevent the parties to it from carrying it out according to such understanding and oral agreement. They had no standing to urge that the oral understanding and agreement were merged in the written instrument. ¡Nothing could become due to the contractors under the agreement except upon the execution of it, and the execution of it was in no way under plaintiffs’ control. The plaintiffs did not become parties to the building contract; they could not enforce its performance, of recover damages for its nonperformance.

The assignment to the plaintiffs of moneys hereafter to become due” did not operate at once as an assignment of such moneys. It was merely an equitable assignment, operating upon the indebtedness as it arose from time to time. Faulknor v. Swart, 55 Hun, 261; 28 N. Y. State Rep., 512. Equity will not enforce it to the denial of the right of the parties to the building contract to pay to whom due the price of the labor and materials put into the building. To permit such payment equity will limit the contractor’s interest to his profits. Rodbourn v. Wine Co., 67 N. Y., 217. Such being the situation, the oral agreement of the defendant to advance the money as needed to pay for the work and materials put into the building left it to the parties to determine when such advance was needed and to what mechanics, and material men it should be paid. Clearly it was needed when due to the mechanics and material men, and it was proper for the defendant in such case to pay them, the contractor either assenting or not dissenting. All the moneys thus paid by the defendant satisfied to that extent the contract price. There are unpaid bills for labor and materials which entered into the construction of the house which we think the defendant may safely pay upon the contract price. It was clearly the understanding of the defendant and the contractors that all labor and materials should be paid for to the extent at least of the contract price, and if the plaintiffs are paid for the lumber they put into the house, they will have no equity to complain of the honesty which refuses to rob third parties to pay'Quinby & Vandenburgh’s old debts.

There is another defense. The assignment to plaintiffs was of the moneys thereafter to become due to the firm of Quinby k Yandenburgh. At the date of the assignment, March 4, 1884, it does not appear that any moneys were due to Quinby k Yandenburgh upon the contract. On the 1st of April, 1884, the firm of Quinby & Yandenburgh was dissolved, and thereafter Quinby did no further work upon the contract. At the date of the dissolution of the firm the building was under construction. It does not appear what sum, if any, was then due to the firm upon the contract. The defendant subsequently paid the plaintiffs $1,018.25 upon account of the lumber they furnished for the building, and there is no doubt that the sum was more than the amount due Quinby k Yandenburgh at the date of the dissolution of the firm. After the dissolution the work upon the building was continued by Yandenburgh, and of course whatever moneys became due upon account thereof did not become due to Quinby k Yandenburgh, and .therefore were not embraced within the terms of the assignment to the plaintiffs.

The defendant requested the referee to find that Quinby k Yandenburgh “have never caused the house to be painted according to or as required by the terms and conditions of the said contract and by specifications therefor.” To which the referee responded: “I so find. There was a substantial performance.” It is plain that here is an open question between the contractor and the defendant: one that must be adjusted before it can be determined whether the final payments are due upon the contract. The referee’s finding is explicit that this work was not done according to the terms of the contract; and, in view of that finding, what is meant by the further finding that there was a substantial performance it is difficult to state. A substantial performance to be effective is a performance substantially as the contract requires. A substantial performance according to some other method cannot be allowed. Glacius v. Black, 50 N. Y., 145.

If the recovery had been limited to the balance due the plaintiffs upon the lumber they furnished for defendant’s house it would have been for what the plaintiffs ought to receive, and which the defendant doubtless can pay within the contract price. Substantial justice seems to require such a judgment, despite technical obstacles.'

The judgment is reversed, referee discharged, new trial granted, costs to abide the event, unless the plaintiffs will stipulate within twenty days after notice of this order to reduce their judgment to $372.68, with interest thereon and costs as in the original judgment, in which' case the judgment is so modified and as modified affirmed, without costs.

Learned, P. J., and Mayham/J., concur.  