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Validity of Assignments

An assignment is a transfer of some right or interest from an assignor to an assignee that confers a complete right in the subject matter to the assignee.[i] In other words, an assignment is a manifestation to another person by the owner of a right expressing his/her intention to transfer his/her right to such other person or to a third person.  However, not every transfer of interest is considered as an assignment.[ii]

Assignments which are not contrary to any express law, public policy or good morals are considered to be valid and an assignment is regarded as invalid if the same is against public policy.  For example, an assignment by a public officer of the unearned salary, wages, or fees of his/her office is void as against public policy.[iii]

Whereas, an assignment of wages to be earned under an existing employment made in good faith and for a valuable consideration is valid.[iv] Similarly, an assignment of wages earned in the future, under an existing contract is a valid one.[v] However, an assignee cannot insist upon his/her right to affirm a contract of assignment by holding to the judgment and at the same time disaffirm the same by claiming the consideration paid from the assignor.

Obtaining an assignment through fraudulent means invalidates the assignment.  Fraud destroys the validity of everything into which it enters.  It vitiates the most solemn contracts, documents, and even judgments.[vi] If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. In such case the innocence of the creditors named in the deed will not save it from condemnation if fraudulent in fact on the part of the grantor.[vii] The intentional withholding of assets from the assignee is regarded as a fraud upon the rights of creditors and it is sufficient to render the assignment void.[viii]

The motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other ways.[ix] The motives that induce a party to make a contract, whether justifiable or censurable will have no influence on its validity.[x] However, an illegal motive cannot justly be ascribed to the proper exercise of a legal right.[xi] The primary purpose or motive with which a voluntary transfer  of property is made by a party indebted at the time is immaterial.[xii]

[i] In re Chalk Line Mfg., 181 B.R. 605 (Bankr. N.D. Ala. 1995)

[ii] In re Ashford, 73 B.R. 37 (Bankr. N.D. Tex. 1987)

[iii] Fox v. Miller, 173 Tenn. 453 (Tenn. 1938)

[iv] Walker v. Rich, 79 Cal. App. 139 (Cal. App. 1926)

[v] Duluth, S.S. & A. R. Co. v. Wilson, 200 Mich. 313 (Mich. 1918)

[vi] International Milling Co. v. Priem, 179 Wis. 622 (Wis. 1923)

[vii] Luckemeyer v. Seltz, 61 Md. 313 (Md. 1884)

[viii] White v. Benjamin, 3 Misc. 490 (N.Y. Super. Ct. 1893)

[ix] Marshall v. Staley, 528 P.2d 964 (Colo. Ct. App. 1974)

[x] Leahy v. Ortiz, 38 Tex. Civ. App. 314 (Tex. Civ. App. 1905)

[xi] Bates v. Simmons, 62 Wis. 69 (Wis. 1885)

[xii] Westminster Sav. Bank v. Sauble, 183 Md. 628 (Md. 1944)

Inside Validity of Assignments