Order Drawn on Particular Fund as an Assignment

Most states in the U.S. have enacted statutes to regulate assignments for the benefit of creditors.  Creditors can assign their right to debt or a particular fund to a third person.

A creditor can assign a debtor to draw an order for payment of a debt from a particular fund or debt.  This assignment can be called an equitable assignment.  The creditor can make an assignment so that the debtor has to pay the debt to a third person.[i] After notice to the person to whom the assignment is directed, the debtor will be bound to act according to the terms of the assignment.  The order of assignment should specify the particular fund or debt.  However, if the language of the assignment is clear enough to decipher the intention of the assignee, the fund can be appropriated accordingly.[ii]

An agreement by a debtor to pay the debt out of a particular fund when he/she receives it is not an assignment of a fund.  A creditor should assign to a third party payment from a debtor for it to constitute an assignment.[iii]

In cases where the agreement did not expressly provide the terms of an assignment but the language of the parties can be understood to intend an assignment, it can can be considered to be a valid equitable assignment.  An equitable assignment can also be enforced by courts of equity.[iv]

[i] Erika, Inc. v. Blue Cross & Blue Shield, 496 F. Supp. 786 (N.D. Ala. 1980).

[ii] COUNTY OF HARRIS v. CAMPBELL, 68 Tex. 22 (Tex. 1887).

[iii] In re Duty, 78 B.R. 111 (Bankr. E.D. Va. 1987).

[iv] Lexington Brewing Co. v. Hamon, 155 Ky. 711 (Ky. 1913).

Inside Order Drawn on Particular Fund as an Assignment