Opinion ID: 1216974
Heading Depth: 2
Heading Rank: 1

Heading: The Written Assignment

Text: Rice asserts that it is entitled to the insurance proceeds, even if it had notice of the court order to assign, because the written assignment given to it by Richard Van Hatten was prior in time to the assignment received by the McKnights. We reject this proposition because of the strong public policy in favor of the enforcement of court orders. Once a party is ordered by a court to assign a claim, that party has a duty to comply with the order forthwith. If the party ignores the order and assigns the claim to a third person, his act would be both wrongful and contemptuous. [2] Further, we conclude that such an assignment would be void as against public policy if the assignee had knowledge of the court order and thus knew that the assignment was wrongful. Section 317(2)(b) of the Restatement (Second) of Contracts (1981) provides: A contractual right can be assigned unless ... the assignment is ... inoperative on grounds of public policy... . See also Federal Deposit Insurance Corp. v. Barness, 484 F. Supp. 1134, 1151-53 (E.D.Pa. 1980). To determine whether an agreement [3] is inoperative on grounds of public policy requires that a balance be struck between the public policy interest against enforcement and interests favoring enforcement. See Restatement (Second) of Contracts § 178 (1981); [4] See also California Pacific Bank v. Small Business Administration, 557 F.2d 218, 224 (9th Cir.1977); Begelfer v. Najarian, 381 Mass. 177, 409 N.E.2d 167, 175 (1980). The balance would be rather easily struck against enforcement of the assignment in the example which we have given for there is a strong public policy that court orders be obeyed, and it is difficult to give much weight to the position of an assignee who has taken an assignment knowing that it has been given in defiance of a court order. In the present case, the McKnights produced evidence that Mr. Rice knew of the court order when he received the written assignment from Van Hatten. The McKnights' counsel stated that he had informed Mr. Rice on two occasions of the court order. Mr. Rice's testimony is unclear as to when he received notice of the court order. This is an issue of material fact. Since Civil Rule 56(c) provides that summary judgment is only appropriate when there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law, the grant of summary judgment in favor of Rice by the trial court was error. Alternatively, we conclude that the effect of the court's order requiring the assignment to the McKnights can be appropriately analyzed in terms of the constructive trust doctrine. The constructive trust may be defined as a devise used by chancery to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs. When a court of equity finds that a defendant is the holder of a property interest which he retains by reason of unjust, unconscionable, or unlawful means, it takes such interest from the defendant and vests it in the wronged party. G. Bogert, Trust and Trustees § 471, at 3 (rev. 2d ed. 1978); see also Restatement (Second) of Trusts § 1 comment e (1959); Restatement of Restitution § 160 (1937). By ordering Van Hatten to assign the insurance claim to the McKnights, Judge Taylor, in effect, determined that such property justly should belong to the McKnights. It is appropriate, in our view, to treat Van Hatten as a constructive trustee of the claim, under a constructive trust created as of the date of the court's order, March 26, 1981. Whether Mr. Rice had notice of the court order before he obtained the written assignment from Van Hatten is a fact which will have to be determined on remand. If notice existed, the assignment was ineffective under the constructive trust doctrine as well as for reasons of public policy. [I]f the trust property or its product can be traced into the hands of a third party, a constructive trust may be imposed upon the property in the hands of the third party unless he is a bona fide purchaser for value and without notice. Bogert, supra § 471, at 5-6; see also Baldwin v. Taplin, 113 Vt. 291, 34 A.2d 117 (Vt. 1943).