Assignment For Collection or Security Only

An assignment is the transfer of some identifiable property, claim, or right from the assignor to the assignee.[i] In DeBenedictis v. Hagen, 77 Wn. App. 284 (Wash. Ct. App. 1995), the court distinguishes between two kinds of assignments:

  • assignment by a creditor/assignor of his/her claim against a debtor in such a way as to effect a complete sale of the claim.
  • assignment by a creditor/assignor of his or her claim against a debtor for purposes of collection.

In Wash. State Bar Ass’n v. Merchants’ Rating & Adjusting Co., 183 Wash. 611 (Wash. 1935), the court held that an assignment for the purpose of collection is an assignment for a valuable consideration.  The court further held that however, there is no need of any express consideration.

Thus, an assignment of a chose in action for collection vests the legal title in the assignee whether or not any consideration is paid.[ii] 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.[iii]

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 an equitable interest in the thing assigned.[iv] 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.[v]

Thus, an assignee for collection holds any proceeds of the assigned claim in trust for the assignor.[vi] If the assignee for collection attempts to set off the assigned chose in action against his 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.[vii]

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.[viii]

An absolute assignment divests an assignor of all interest in the thing assigned and vests the same in the assignee.  For purposes of maintaining a civil action on the thing assigned, the assignee becomes the real party in interest.  Conversely, a conditional assignment made as collateral security for a debt does not divest the assignor of all right or interest in the thing assigned and the assignor retains sufficient right or interest therein to qualify as a real party in interest in order to maintain a civil action.[ix]

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

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

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

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

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

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

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

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

[ix] Meier v. Boatmen’s Bank of Rolla, 846 S.W.2d 254 (Mo. Ct. App. 1993)


Inside Assignment For Collection or Security Only