Citation. 21 Utah 2d 40, 440 P.2d 15 (Supreme Court of Utah, 1968)
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Brief Fact Summary.
An engineer assigned the proceeds from work he was doing for a city to somebody he had borrowed money from and was indebted to. The engineer had notice of the assignment served upon the city's mayor.
Synopsis of Rule of Law.
Knowledge of an assignment is imputed upon a city, if a party informs the mayor that an assignment exists.
In January of 1961, Holder borrowed $50,000 from Cooper. In March of 1961, Holder entered into a contract with the City of Moab to perform certain engineering services. In April of 1961, Holder borrowed another $10,000 from Cooper. As security for this $10,000 loan, Holder assigned to Cooper the right to receive the monies owed to him by the City of Moab for his work as an engineer. The Moab City Mayor, Kenneth E. McDougald, received a notice of assignment and he signed an acknowledgement "reciting that payment would be made in accordance therewith." For some reason the City of Moab did not honor the assignment and made the payment directly to Holder.
Does service of a notice of assignment upon a mayor of a city, place the city on notice of the assignment?
Yes. The court first addressed the city's argument that the mayor cannot himself enter into any contract on the city's behalf and as such should not be bound by the assignment. The court recognized however that the "obligation of a debtor to honor an assignment of a right to receive money payable is plainly something quite different in nature from the negotiation for and the entering into a contract for goods, property, or services in the first instance." Also, that "[a] study of the authorities dealing with [who service should be made upon] indicates that the requirement of proper notice is satisfied by serving it upon an official whose duty it would be to either act upon it himself or to communicate it to others who had such duty." Once Holder earned the money for the engineering work he provided the city, he could do with it what he pleased. The court observed that in [Bank of Spring City v. Rhea County] "it was held that notice of an assignment to the plaintiff of the right to receive money p
ayable on construction of a bridge given to one county commissioner was notice to 'the whole body of commissioners' and binding on the county." The court found the mayor's situation analogous, and determined the [Rhea County] doctrine would apply here.
It is interesting to see how the court distinguishes between contracts that cities enter into for "for goods, property, or services in the first instance" and agreements concerning the assignment of monies.