Court Opinion

ID: 9600436
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:27:01.768174+00
Date Added: 2024-06-11T09:09:18.844807
License: Public Domain

BURNETT, Judge,
concurring specially.
I concur in the result. However, I respectfully submit that the Court’s opinion addresses more issues than are necessary to dispose of this appeal. I write separately to explain my narrower view of the case.
The essential facts may be restated briefly. In 1974, a grain seller (Idle) began borrowing money from a bank (Idaho Bank & Trust). As security he assigned his right to proceeds of grain sale contracts with a grain buyer (Cargill). A cursory instrument combining the assignment and notice of the assignment was drafted by the bank. It was signed by the seller, and a copy was sent to the buyer. It said simply and un*91ambiguously that the assignment was “for value received.” It referred only to money due or to become due under “certain Grain Contracts held in your Warehouse.” The bank made several loans to the seller, identifying each loan to a particular contract. All loans made upon contracts in existence at the time of the 1974 assignment were repaid.
During 1975 and 1976, the bank made additional loans to the seller, upon contracts which came into existence after the assignment. The seller asked the buyer to put the bank’s name on checks in payment of these contracts. The trial court found that this request was made voluntarily by the seller, who had authority in his dealings with the bank to direct the proceeds of the grain sales. The buyer was given no reason for the seller’s request, but acquiesced in it. All of the loans related to these subsequent contracts were fully repaid.
In late 1976 and 1977, the bank again loaned the seller money on particular contracts. For simplicity, these contracts may be termed the “1977 contracts.” On several of these occasions, the seller requested the buyer not to put the bank’s name on checks in payment of the contracts. The trial court found that the seller was at liberty to revoke his earlier request in this regard. Again, the buyer acquiesced and issued checks on several 1977 contracts payable solely to the seller. The seller went bankrupt without fully repaying the 1977 loans related to these contracts. The bank sued the buyer for wrongful payment on the theory that the assignment in 1974 covered proceeds of the 1977 contracts.
These facts invoke application of the principle, arising from the general law of contracts, that an obligor under an assigned contract owes a duty of performance to the assignee only when the obligor has received notice of the assignment. See generally S. Williston, A Treatise on the Law of Contracts (Jaeger 3rd ed. 1960), § 433. A corollary flowing from this principle is that the notice must tell the obligor what performance is due to the assignee. This corollary has been incorporated into the Idaho’s Uniform Commercial Code, which requires that the notice to the obligor “reasonably identify the rights assigned.” I.C. § 28-9-318(3). A notice which fails to satisfy this requirement is ineffective.
In the present case I would hold that the assignment and cover letter drafted by the bank in 1974 failed to “reasonably identify” any right to proceeds of contracts not then in existence. They said nothing about after-acquired collateral, nor about any future advances to which such collateral might pertain.
The bank asserts that the assignment was enlarged, and that notice was commensurately broadened, when the seller asked the buyer to put the bank’s name on checks during 1975 and 1976. However, the record discloses no communication to the buyer linking this request to the 1974 assignment. The bank urges, in essence, that broadened notice be imputed to the buyer because the seller’s request should have put the buyer on inquiry concerning the scope of the assignment. However, I do not believe that I.C. § 28-9-318(3) authorizes such a result. I read the statute to require that an assignee make its rights known to the obligor. If the assignee could satisfy this requirement merely by putting an obligor on inquiry, the language providing that a notice “reasonably identify the rights assigned” would be eviscerated.
I conclude that the proceeds of the 1977 contracts did not fall within any rights of the bank reasonably identified in a notice to the grain buyer. Absent effective notice covering these contracts, the buyer was entitled to perform the contracts by paying the seller. The buyer did, in fact, fully perform. The trial court correctly decided that the bank was not entitled to compel the buyer to pay twice for the same grain.