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Rights and Securities Passing With Assignment

An assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee.[ii]  A transfer of all right, title and interest conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor.[iii]

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.[iv] However, an assignment does not confer upon the assignee any greater right or interest than that possessed by the assignor.[v]

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary.[vi] The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties, but also from the surrounding circumstances.[vii] When there is no writing to evidence the intention to transfer some identifiable property, claim or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions.[viii]

However, an unqualified assignment of a contract or chose in action with no indication of the intent of the parties vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.[ix]

Assignments are transfers that places a new party as the focus of legal relations with respect to the thing assigned.  Thus, subject to certain limitations, tort claims are assignable.  Similarly, rights attached to a contract including the right to sue for breach of contract are assignable.[x]

Even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those that are personal to the assignor and for his benefit only are not assigned.[xi]

An assignment of a debt carries with it all the liens, securities, and remedies which an assignor held or might have employed to enforce its payment.[xii] Thus, if the assigned property is subject to a lien, the assignee takes the assigned property subject to the lien.[xiii]

A lien is an obligation, tie, duty, or claim annexed to or attaching upon property by the common law, equity, contract, or statute.[xiv] A common-law lien is a personal privilege and not transferable by an assignment of the debt which it secures.[xv] An equitable lien reserved by express agreement passes by an assignment of the debt it is created to secure.[xvi]

In Ama Management Corp. v. Strasburger, 309 S.C. 213 (S.C. Ct. App. 1992), the court held that if the principal obligation is assignable, assignment of the debt operates as an assignment of the guaranty of the debt.  Similarly, unless the debt instrument or the instrument of guaranty prohibits assignment, an assignment does not release the guarantor, who is discharged only when the underlying debt has been paid or otherwise satisfied in full.

An unqualified assignment of a chose in action carries with it, as an incident to the chose, all securities held by the assignor as collateral to the claim and all rights incidental thereto, and vests in the assignee the equitable title to such collateral securities and incidental rights.[xvii]

Thus, the assignment of a debt ordinarily carries with it all liens and every remedy or security that could have been used or made available by the assignor as a means of indemnity or payment, although, they are not specifically named in the instrument of assignment and the assignment is not by any instrument in writing.[xviii]

An assignment of a chose in action for collection vests the legal title in the assignee whether or not any consideration is paid.[xix] In such case, the assignee may maintain a suit thereon in his own name, even though the assignor retains an equitable interest in the thing assigned.[xx]

An assignment for collection vests legal title in the assignee which is sufficient to enable him/her to maintain an action in his/her own name, but the assignor retains the equitable interest in the thing assigned.[xxi] The resulting split in ownership gives rise to a fiduciary relationship between the assignor and assignee and the relationship generally is one of principal-agent.[xxii]

An assignee for collection holds any proceeds of the assigned claim in trust for the assignor.[xxiii] If the assignee for collection attempts to set off the assigned chose in action against his/her individual obligation, he/she would be violating the elementary rule of the law of trusts which forbids the trustee from using trust property for his private or individual purposes.[xxiv]

An assignment for the purposes of collection does not transfer the beneficial ownership to the assignee but vests legal title in the assignee, empowers the assignee to collect, and permits the debtor to discharge himself by making payment to the assignee.[xxv]

[i] Eli’s, Inc. v. Lemen, 256 Neb. 515 (Neb. 1999)

[ii] Bishop v. Brookfield, 99 Ill. App. 3d 483 (Ill. App. Ct. 1st Dist. 1981)

[iii] Knott v. McDonald’s Corp., 985 F. Supp. 1222 (N.D. Cal. 1997)

[iv] EB, Inc. v. Allen, 722 So. 2d 555 (Miss. 1998)

[v] Id

[vi] Young v. Chicago Federal Sav. & Loan Ass’n, 180 Ill. App. 3d 280 (Ill. App. Ct. 1st Dist. 1989)

[vii] Id

[viii] Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

[ix] National Reserve Co. v. Metropolitan Trust Co., 17 Cal. 2d 827 (Cal. 1941)

[x] Essex v. Ryan, 446 N.E.2d 368 (Ind. Ct. App. 1983)

[xi] Rasp v. Hidden Valley Lake, Inc., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988)

[xii] Kinney v. Duluth Ore Co., 58 Minn. 455, 458 (Minn. 1894)

[xiii] Ehlers v. Perry, 242 Neb. 208 (Neb. 1993)

[xiv] Dupuy v. Western State Bank, 221 Neb. 230 (Neb. 1985)

[xv] Cincinnati Tobacco Warehouse Co. v. Leslie & Whitaker’s Trustees, 117 Ky. 478 (Ky. 1904)

[xvi] Id

[xvii] Cincinnati Tobacco Warehouse Co. v. Leslie & Whitaker’s Trustees, 117 Ky. 478 (Ky. 1904)

[xviii] Luikart v. Massachusetts Bonding & Ins. Co., 129 Neb. 771, 781-782 (Neb. 1935)

[xix] National Reserve Co. v. Metropolitan Trust Co., 17 Cal. 2d 827 (Cal. 1941)

[xx] Cohn v. Thompson, 128 Cal. App. Supp. 783 (Cal. App. Dep’t Super. Ct. 1932)

[xxi] Harrison v. Adams, 20 Cal. 2d 646 (Cal. 1942)

[xxii] DeBenedictis v. Hagen, 77 Wn. App. 284 (Wash. Ct. App. 1995)

[xxiii] Arthur Pew Constr. Co. v. Lipscomb, 965 F.2d 1559 (11th Cir. Ga. 1992)

[xxiv] Harrison v. Adams, 20 Cal. 2d 646 (Cal. 1942)

[xxv] Ecker v. Big Wheels, Inc., 136 Ill. App. 3d 651 (Ill. App. Ct. 4th Dist. 1985)

Inside Rights and Securities Passing With Assignment