No action can be brought in a U.S. court by an assignee unless the assignor could have maintained the action in that same court.[i] However, if an assignor begins an action in a U.S. court in a district and the defendant appears or if the assignor brought his action in the state court in the same district and removal is had by the defendant to U.S. court in that district, the question of maintaining suit only in the district of residence of the assignor or the defendant is waived.[ii]
In Cincinnati, H. & D. R. Co. v. Orr, 215 F. 261 (D.N.Y. 1914), the court held that the residence of an assignor is controlling upon the question of residence for the purpose of jurisdiction where suit is brought on an assigned claim.
If the obligor on a promissory note is a resident of the state at the time of the execution of the bond, but afterwards moves beyond its limits without the knowledge of the assignee or before he/she has a right to sue, the assignee may elect whether he/she will follow the obligor into another state or not.[iii] If the assignee elects not to follow the debtor, he/she is offering to rescind the contract and to return the bond to the assignor so that the assignor may recover the money from the debtor.
Where both assignor and assignee are citizens of the same state, a change of district by assignment for the purpose of preventing removal is not allowed as the basis for a forced application of the doctrine allowing suit by an assignee only when the assignor might sue in the same jurisdiction.[iv]
Even if it were for the purpose of a more convenient enforcement or to avoid the incapacity of the assignor to bring an action, the assignment is valid and a resident assignee may maintain an action in any state although his foreign assignor might himself be barred.[v]
In Banque de France v. Supreme Court of New York, 287 N.Y. 483 (N.Y. 1942), the court held that an action against a foreign corporation may be maintained by a resident of the state or by a domestic corporation for any cause of action. Additionally, transitory causes of action arising outside of the state are within the general jurisdiction of the courts of a state when brought by a resident of the state, even though the defendant is a foreign corporation and the plaintiff is the assignee of a person not himself a resident of the state.
[i] Cincinnati, H. & D. R. Co. v. Orr, 215 F. 261 (D.N.Y. 1914)
[iii] Drane v. Scholfield, 33 Va. 386 (Va. 1835)
[iv] Cincinnati, H. & D. R. Co. v. Orr, 215 F. 261 (D.N.Y. 1914)
[v] Wagner v. Braunsberg, 5 A.D.2d 564 (N.Y. App. Div. 1st Dep’t 1958)