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Herzog v. Irace Case Brief

Summary of Herzog v. Irace
S. Ct ME [1991]

Validity of Assignment/Delegation-Payment Obligations

Relevant Facts: Atty Irace represented Jones who was injured in a motorcycle accident.  Jones was then injured again afterward in an unrelated event.  To receive treatment from Dr Herzog he issued a letter assigning a portion of his settlement to the doctor at a future date, directed to his attorneys.  Herzog contacted his attorney’s office and was informed by an employee that he assignment was sufficient to allow the firm to pay his bills out of the settlement.  The doctor performed the surgery and resulting treatment, but Jones directed his attorneys not to disburse any funds b/c he would pay the doctor himself.  Irace issued a check to Jones, who in turn issued a check to the doctor, which bounced b/c of insufficient funds. The doctor never got paid.

Legal Issue(s): Whether an assignment of a person’s right to future proceeds from pending litigation can be validly enforceable?

Court’s Holding: Yes

Procedure: Tr ct judgment in favor of Pl; Df appealed, Sup Ct. Me Affirmed; S. Ct Me Affirmed.

Law or Rule(s): An assignment is an act or manifestation by the owner of a right indicating his intent to transfer that right to another, and to be valid and enforceable against the assignor’s creditor, the assignor must make clear his intention to relinquish the right to the assignee and must not retain any control over the right assigned.

Court Rationale: Once and obligor has notice of the assignment, the fund is “from that time forward impressed with a trust; it is . . .impounded in the obligor’s hands, and must be held by him not for the original creditor, the assignor, but for the substituted creditor, the assignee.”  Future rights are freely assignable, UNLESS the assignment would materially change the duty of the obligor, materially increase the burden or risk imposed upon the obligor by his K.

The letter gives no indication that Jones attempted to retain control over the funds he assigned to Dr. Herzog.  The word “request,” did not give reason to question his intent to complete assignment.   Irace had adequate funds to satisfy all of Jones’ creditors, including Dr. Herzog, with funds left over for disbursement to Jones himself.  Dr Herzog was given preference over the other creditors by operation of the assignment.  Irace admit having notice of the assignment.

Plaintiff’s Argument: Jones’s intent to assign was provided in the letter of assignment.  Dfs were given notice of the letter, by both the Dr and Jones.  Future rights can be assignable.

Defendant’s Argument: Jones’s letter is invalid and unenforceable as an assignment b/c it fails to manifest Jones’s intent to permanently relinquish all control over the assigned funds and does nothing more than request payment from a specific fund.



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