The agreement made by J. S. Faulkner with the plaintiff did not operate at once as an assignment of indebtedness thereafter to arise. But it was an equitable assignment which a court would enforce as acting upon the indebtedness as it arose from time to time. Field v. Mayor, 6 N. Y., 187; McLachlin v. Brett, 105 N. Y., 396; 8 N. Y. State Rep., 33. We cannot say then that the defendants never owed J. S. Faulkner, but at once owed the plaintiff for whatever Faulkner did. To say this would be to give a legal, and not an equitable, effect to the agreement made with the plaintiff by him. We must treat the matter as if J. S. Faulkner assigned to plaintiff the indebtedness of defendant to him after, and as soon as it accrued. The defendants had contracted with J. S. Faulkner and they could not be deprived of the terms of their contract. The plaintiff must take as an assignee of indebtedness which had previously been payable to J. S. Faulkner; that is, as an assignee of various dates, if the money was to be paid from time to time. If the money was to be paid at the end of the work, then the plaintiff must be considered as an assignee of the date of May 2, 1887.
How let us suppose for a moment that J. S. Faulkner had not assigned the claim and that, in January, 1888 (the time when this action was commenced), he had sued these defendants. Can there be any doubt that they could have maintained this counterclaim under § 501, subdivision 2 ? In that state of affairs these defendants would have been owing J. S. Faulkner for his services, and he would have been owing them on the endorsement of the note, which, at the commencement of the action, would have belonged to all the defendants.
Then how are the rights of the parties affected by Faulkner’s assignment to plaintiff, taking effect (say), May 2, 1887. Section *514502, subdivision 1, provides for this case. It says that a demand existing against the original party to the plaintiff’s assigned cause of action (in this case against J. S. Faulkner), at the time of the assignment, in this case May 2, 1887 (and the liability on the endorsement did then exist), and belonging to the defendant in good faith before notice of the assignment (and this demand belonged to the defendants August 27, 1887, before notice of the assignment, January, 1888), must be allowed as a counterclaim, if it might have been allowed against the original party (J. S. Faulkner), while the contract belonged to him.
This last clause refers to the nature and validity of the demand, and not to its ownership by the defendant before the assignment of plaintiff’s claim. Because the previous clause provides that it need belong to defendant in good faith only before notice of the assignment of plaintiff’s claim.
That this is the correct meaning appears by § 1909. This provides that the transfer of a demand passes an interest which the transferee may enforce as the transferor might have done, subject to any counterclaim existing against the transferor before notice of the transfer. The liability on the endorsement existed, and was in the ownership of defendants against J. S. Faulkner, the transferor, before notice of the transfer.
We think the language of the Code is plain on this point. And it is consistent with good sense. If an assignee of • a claim desires to protect himself against the purchase by the debtor of claims against the assignor, he has only to give notice of the assignment to the debtor. If he neglect to do this, then it is reasonable to permit the debtor to purchase, in good faith, any valid claim against his original creditor and to use it as a counterclaim when sued. The debtor acts in good faith, supposing, in the want of notice to the contrary, that he still owes the original creditor. And against such creditor it is reasonable to make him pay his own debts, when he is trying to collect a debt from others.
We have taken the facts in the way most favorable to the plaintiff. The testimony of J. S. Faulkner, relied on to show an assignment to plaintiff, is very questionable; and, taken in connection with the original complaint, in which the plaintiff swore to an assignment made to her December 12, 1887, the referee might well have doubted that the alleged agreement of February 1, 1887, was ever made.
Judgment reversed, new trial granted, referee discharged, costs to abide event.
Lardón and Fish, JJ., concur.