Opinion ID: 1769581
Heading Depth: 3
Heading Rank: 2

Heading: Assignment of Contractual Rights: A General Overview

Text: Mississippi law permits an assignment of contractual rights. Board of Trustees of State Institutions of Higher Learning v. Peoples Bank of Miss., 538 So.2d 361, 366 (Miss. 1989); see also Merchants & Farmers Bank of Meridian v. McClendon, 220 So.2d 815, 821 (Miss. 1969) (The general rule is that the right to receive money due or to become due under an existing contract may be assigned.) (citing Restatement of Contracts § 151 (1932)). Assigned contractual rights may be enforced by the assignee  who essentially stands in the shoes of the assignor and who takes no rights other than those which the assignor had possessed. [5] Indian Lumbermen's Mut. Ins. Co. v. Curtis Mathes Manufacturing Co., 456 So.2d 750, 755 (Miss. 1984); see also International Harvester Co. v. Peoples Bank & Trust Co., 402 So.2d 856, 861 (Miss. 1981) (It has long been held that a valid assignment of a debt or contract conveys the entire interest of the assignor to the assignee, and thereafter the assignor has no interest therein.); 6A C.J.S. Assignments § 73, at 710-12 (As a general rule, a valid and unqualified assignment operates to transfer to the assignee all the right, title, or interest of the assignor in the thing assigned, but not to confer upon the assignee any greater right or interest than that possessed by the assignor.).
Pursuant to Miss. Code Ann. § 75-9-318(3) (1972), the account-debtor or obligor must be provided adequate notice of the assignment: (3) The account debtor is authorized to pay the assignor until the account debtor receives notification that the amount due or to become due has been assigned and that payment is to be made to the assignee. A notification which does not reasonably identify the rights assigned is ineffective. If requested by the account debtor, the assignee must seasonably furnish reasonable proof that the assignment has been made and unless he does to the account debtor may pay the assignor. Because the Mississippi Legislature has adopted the Uniform Commercial Code (UCC), perusal of the official Comments to the corresponding UCC section would shed further light on the notice requirement: Subsection (3) clarifies the right of account debtor to make payment to his seller-assignor in an indirect collection situation (see Comment to Section 9-308). So long as the assignee permits the assignor to collect claims or leaves him in possession of chattel paper which does not indicate that payment is to be made at some place other than the assignor's place of business, the account debtor may pay the assignor even though he may know of the assignment... . ... . Subsection (3) requires reasonable identification of the account assigned and recognizes the right of an account debtor to require reasonable proof of the making of the assignment and to that extent validates such requirements in contracts or purchase order forms. If the notification does not contain such reasonable identification or if such reasonable proof is not furnished on request, the account debtor may disregard the assignment and make payment to the assignor. U.C.C. § 9-318, Comments 3 & 5 (1972). As explained by the New Mexico Supreme Court: The [Uniform Commercial] Code does not require any particular language to be used in directing payment to the assignee. One purpose for the provision requiring notice that payment is to be made to the assignee is to allow for commercial situations where accounts are used as collateral to secure a loan repayment. In such cases, the borrower often retains the right to collect the accounts, and the assignee's rights of collection ripen only upon default by the borrower. Such a transaction is referred to as an indirect collection. First Nat'l Bank v. Mountain States Telephone & Telegraph Co., 91 N.M. 126, 571 P.2d 118, 120-21 (1977) (holding that account debtor could readily determine from assignment form (1) that assignee had purchased assignor's right to proceeds of work contract with account debtor and (2) that assignee was therefore entitled to be paid such proceeds) (citing 4 R. ANDERSON, UNIFORM COMMERCIAL CODE § 9-318, Comment 3 & § 9-308, Comment 1 (2d ed. 1971)). See Warrington v. Dawson, 798 F.2d 1533, 1536 (5th Cir.1986); First Trust & Sav'gs Bank of Glenview v. Skokie Fed. Sav'gs & Loan Ass'n, 126 Ill. App.3d 42, 81 Ill.Dec. 246, 248, 466 N.E.2d 1048, 1050 (1984); see also Shields v. Taylor & Tarpley, 25 Miss. (3 Cushm.) 13 (1852).
Finally, an account-debtor has available to him or her various defenses against an assignee. See, e.g., Fall River Trust Co. v. B.G. Browdy, Inc., 346 Mass. 614, 195 N.E.2d 63, 64 (1964). In addition to the defense of failure to provide adequate notice, fraud and misrepresentation in the creation of an assignment may be asserted. This Court has not addressed assertion of this specific defense in cases involving an assignment, but other jurisdictions have. See, e.g., Daugherty v. Blaase, 191 Ill. App.3d 496, 138 Ill.Dec. 900, 902, 548 N.E.2d 130, 132 (1989) (In the absence of fraud or bad faith, a claim assigned prior to judgment constitutes a sufficient potential claim to make the assignment valid.); 99 Pratt Street Corp. v. Stand Realty Corp., 27 Conn. Supp. 101, 230 A.2d 613, 614-15 (1966) (fraudulent representation that defendant was a bona fide operating corporation authorized to do business in this state and was legally qualified in this state could constitute a good defense to assignee's claim under assignment); cf. Franchise Tax Bd. v. McKean, 168 Cal. App.3d 970, 215 Cal. Rptr. 36, 39 (1985) (court finds evidence of fraud involved in assignment); In re Estate of Vought, 76 Misc.2d 755, 351 N.Y.S.2d 816, 820 (Surrogate Ct. 1973) (defenses of usury, fraud and unconscionable contract preclude enforcement); see also 6 Am.Jur.2d Assignments § 3, at 187-88 ([O]nly those assignments which are ... free from elements of fraud ... are valid.). In a case involving a contract but not an assignment, this Court noted that [f]raud vitiates everything it enters into. The contract and notes which were the basis of this suit, having been procured by fraud, are void in all their provisions. J.A. Fay & Egan Co. v. Louis Cohn & Bros., 158 Miss. 733, 740, 130 So. 290, 292 (1930); accord Stand Realty Corp., 230 A.2d at 614. And this Court has repeatedly held that a party alleging fraud or misrepresentation must prove the following elements by clear and convincing evidence: (1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the person and in the matter reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance upon its truth; (8) his right to rely thereon; (9) his consequent and proximate injury. See, e.g., Johnson v. Brewer, 427 So.2d 118, 121 (Miss. 1983). This burden ... is a function of the degree of confidence we should have in the correctness of a factual determination that one has perpetrated a fraud. Anderson v. Burt, 507 So.2d 32, 38 (Miss. 1987) (emphasis added).