Between Assignee and Subsequent Creditor or Lienor of Assignor

An assignee’s right is given priority over the right of a subsequent creditor or lienor of assignor.  The assignee acquires equitable ownership immediately on execution of assignment.  As a general rule all rights and remedies available to assignor is given to assignee along with subject of assignment[i]. Thus, any obligation created subsequent to assignment will not affect assignee’s rights.

The creditors cannot argue that they had no notice of assignment.  Notice is not mandatory for priority of assignee’s right.  Also, there is no statute governing the element of notice.

Even a judicial lien obtained over assignor’s property, is considered inferior to assignee’s rights.  However, if the assignment is revocable or voidable at the option of the assignor or by the person who obtained the lien, then judicial lien will have priority over assignee’s rights.

Time is considered as a relevant factor, while determining the question of priority between assignment and garnishment.  Here priority depends upon priority in time.  If the assignment has taken place before garnishment then the assignee’s right will prevail over the garnishee’s right.

In Johnson v. Dexter, 38 Mich. 695 (Mich. 1878), the plaintiff/company brought an action against the defendant for collection of a debt.  The defendant was garnished by one of defendant’s debtors.  No one appeared for garnishee and judgment was delivered against the garnishee.  In between, defendant made an assignment of his right against the garnishee to an assignee on the day when garnishee process was issued.  The assignee then brought an action to recover under the assignment.  The trial court held the action of the assignee is not barred by judgment obtained by plaintiff/company.  The judgment obtained by the plaintiff/company against the defendant cannot affect the right of assignee.  Therefore the assignee is entitled for a judgment against the defendant to the exclusion of plaintiff/company.  On appeal, the court upheld the trial court’s judgment.

[i] Townsend v. Carpenter, 11 OHIO 21 (Ohio 1841).

Inside Between Assignee and Subsequent Creditor or Lienor of Assignor