Facts
- Caristo Construction Corp. was the general contractor on New York City public school projects and subcontracted painting work to Kroo Painting Company.
- The subcontracts contained an express anti-assignment clause prohibiting assignment of the contract and “any money due or to become due thereunder” without Caristo’s written consent.
- Without obtaining written consent, Kroo assigned to a bank the money due or to become due under the subcontracts; the bank later assigned those rights to Herman Allhusen.
- Kroo fully performed the painting work.
- Caristo refused to pay Allhusen, relying on the anti-assignment clause.
- Allhusen sued Caristo to recover $11,650 allegedly owed for the completed work.
- The trial court dismissed the complaint; the Appellate Division affirmed (one dissent); the Court of Appeals affirmed.
Issues
- Whether a subcontract clause expressly prohibiting assignment, without written consent, of “any money due or to become due” is enforceable to bar an assignee’s claim for payment after the subcontractor has fully performed.
- Whether such a clause renders an unauthorized assignment of the right to receive payment void as against the obligor.
Decision
- The Court of Appeals affirmed dismissal of the assignee’s complaint.
- A clearly worded clause prohibiting assignment of both the contract and “any money due or to become due” is valid and enforceable.
- Because Kroo assigned payment rights without the required written consent, the assignment was void against Caristo, and Allhusen could not recover from Caristo.
- Statements in earlier cases favoring assignability of money due were treated as noncontrolling where the contract language expressly barred assignment of payment rights.
Legal Principles
- Parties may validly agree, in clear terms, to prohibit assignment of contract payment rights as well as the contract itself.
- When a non-assignment clause expressly covers “money due or to become due,” an assignment made without the required consent is ineffective against the obligor.
- Courts will enforce definite and specific non-assignment language to effectuate the parties’ intent, absent a statutory prohibition or overriding public policy.
- General statements favoring assignability do not override an explicit contractual prohibition directed at payment rights.
Conclusion
The court held that an explicit subcontract provision barring assignment of “any money due or to become due” without written consent is enforceable, making an unauthorized assignment void against the general contractor and defeating the assignee’s action for payment even after the subcontractor’s performance.