Continental Purchasing Company v. Van Raalte Company

Appellate Division of the Supreme Court of New York, Fourth Department · 1937 · Contracts

251 A.D. 151 (1937)

Updated July 26, 2026

ContractsAssignmentsWage assignmentsNotice to debtorassignmentassigneeassignorchose in action

Facts

Mrs. Potter assigned to the plaintiff on April 21, 1934, all wages earned or to be earned as security for a debt that plaintiff had acquired. On September 12, 1934, plaintiff gave defendant employer written notice of the assignment, and defendant acknowledged receipt and proposed weekly deductions from Mrs. Potter's wages; plaintiff consented and withdrew its formal notice, after which defendant sent six payments of $1.50 to plaintiff. After that arrangement ended, plaintiff sent another formal notice and demanded direct payment of wages due Mrs. Potter, warning that payment to her would not discharge defendant. Despite knowing plaintiff claimed the wages under the assignment, defendant paid Mrs. Potter $19.20 directly.

Issue

Whether an employer who has notice of an employee's wage assignment remains liable to the assignee after paying the wages directly to the employee, and whether liability depends on the assignment being filed with or exhibited to the employer.

Rule

An assignee of a chose in action succeeds to the assignor's rights, but the debtor is not affected by the assignment until notice. Payment to the assignor before notice discharges the debtor; after notice, if the debtor pays the assignor money that belongs to the assignee or otherwise prejudices the assignee's rights, the debtor is liable for the resulting damage. No set form of notice is required; it is enough if the debtor is fully informed that the assignee owns the claim or is put on inquiry, and filing or exhibition of the assignment is not required absent a demand for further proof.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Toledo, Nora Kim assigned her right to collect a $4,000 consulting fee from Lakefront Design Studio to Birch Hollow Finance. Before Birch Hollow contacted the studio, the studio paid Nora the full fee when the invoice came due.

If Birch Hollow later sues Lakefront Design Studio for the same $4,000, which result is most likely?

Explanation. The governing rule is that although an assignee succeeds to the assignor's rights, the debtor is not affected by the assignment until it has notice. If the debtor pays the assignor in ignorance of the assignment, the debtor is relieved from liability to the assignee. Here, the studio paid Nora before receiving notice, so Birch Hollow cannot recover the same amount from the studio. (Derived from Continental Purchasing Company v. Van Raalte Company (1937).)