Allhusen v. Caristo Construction Corp.
103 N.E.2d 891, 303 N.Y. 446 (1952)
Rule of Law:
A contractual provision that explicitly states an assignment of rights or money due under the contract "shall be void" without the obligor's written consent is effective to prevent such an assignment, rendering any attempted assignment ineffective against the obligor.
Facts:
- Caristo Construction Corp. (defendant), a general contractor, entered into subcontracts with Kroo Painting Company (Kroo) for painting work in New York City public schools.
- These subcontracts included a clause stating that "The assignment by the second party [Kroo] of this contract or any interest therein, or of any money due or to become due by reason of the terms hereof without the written consent of the first party [defendant] shall be void."
- Kroo subsequently assigned its rights to "moneys due and to become due" under these contracts to Marine Midland Trust Company of New York.
- Marine Midland Trust Company of New York, in turn, assigned these rights to Allhusen (plaintiff).
- Kroo did not obtain written consent from Caristo Construction Corp. for these assignments prior to them taking place.
Procedural Posture:
- Allhusen (plaintiff), as an assignee, sued Caristo Construction Corp. (defendant) in Special Term (the trial court) to recover $11,650 allegedly due and owing for work done by Kroo Painting Company.
- Caristo Construction Corp. answered with denials and asserted the anti-assignment clause as a defense, then moved for summary judgment demanding dismissal of Allhusen's causes of action.
- Special Term dismissed Allhusen's complaint, holding that the prohibitory clause must be given effect.
- Allhusen appealed to the Appellate Division, which affirmed the dismissal of the complaint, with one Justice dissenting.
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Issue:
Does a contractual provision explicitly stating that an assignment of money due under the contract "shall be void" without prior written consent effectively prevent such an assignment, or does it merely create a right to damages for breach of a personal covenant?
Opinions:
Majority - Froessel, J.
Yes, a contractual provision explicitly stating that an assignment of money due under the contract "shall be void" without prior written consent effectively prevents such an assignment, rendering it invalid against the obligor. The Court affirmed the lower court's dismissal, holding that while courts generally strive to uphold freedom of assignability, they also recognize the fundamental principle of freedom to contract. The effectiveness of an anti-assignment clause hinges on the clarity of its language. The Court distinguished this case from prior precedents, such as Manchester v. Kendall and State Bank v. Central Mercantile Bank, where clauses were interpreted either as mere personal covenants (leading only to damages for breach) or were deemed ineffectual due to ambiguous wording. In contrast, the clause here utilized "clear, definite and appropriate language" by unequivocally stating that any assignment "shall be void." The Court asserted that interpreting this explicit phrasing as merely an agreement not to assign would be to disregard its plain meaning. Furthermore, the Court determined that such a holding does not violate public policy, citing Professor Williston's view that the question of free alienation of property is not primarily involved in contract rights. The right to moneys asserted by the assignee arises directly from the very contract containing the prohibitory provision, and an assignee cannot claim rights while simultaneously invalidating the conditions that gave rise to those rights. Finally, Section 41 of the Personal Property Law (which generally permits the transfer of claims) does not override the parties' explicit agreement to the contrary, as statutory rights can be voluntarily surrendered through contractual terms.
Analysis:
This case is a foundational ruling in contract law, clarifying the enforceability of anti-assignment clauses and emphasizing the paramount importance of precise contractual language. It establishes a critical distinction between clauses that merely prohibit an assignment (potentially leading only to damages for breach) and those that expressly declare an attempted assignment to be "void" (thereby rendering the assignment ineffective against the obligor). The decision reinforces the principle of party autonomy and the power of contracting parties to control the transferability of their contractual rights, provided they use sufficiently explicit and unambiguous wording. This principle significantly impacts commercial agreements, lending practices, and risk management strategies, enabling parties to better manage who they conduct business with and who benefits from their contractual obligations.
