General Motors Acceptance Corp. v. Clifton-Fine Cent. School Dist.

• Decision Date: 23 February 1995
• Docket Number: CLIFTON-FINE
• Citation: 647 N.E.2d 1329,623 N.Y.S.2d 821,85 N.Y.2d 232
• Parties: , 647 N.E.2d 1329, 98 Ed. Law Rep. 951, 28 UCC Rep.Serv.2d 389 GENERAL MOTORS ACCEPTANCE CORPORATION, Appellant, v.CENTRAL SCHOOL DISTRICT, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 821

623 N.Y.S.2d 821

85 N.Y.2d 232, 647 N.E.2d 1329, 98

Ed. Law Rep. 951,

28 UCC Rep.Serv.2d 389

GENERAL MOTORS ACCEPTANCE CORPORATION, Appellant, v. CLIFTON-FINE CENTRAL SCHOOL DISTRICT, Respondent.

Court of Appeals of New York.

Feb. 23, 1995.

[85 N.Y.2d 233] [647 N.E.2d 1330] Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo (Paul K. Stecker, of counsel), for appellant.

[85 N.Y.2d 234] Belinda A. Wagner, Albany, for respondent.

OPINION OF THE COURT

SMITH, Judge.

Defendant Clifton-Fine Central School District paid a dealer for two buses even though it had received notice of an assignment of any payment to plaintiff General Motors Acceptance Corp. (GMAC). The principal issue here is whether Uniform Commercial Code § 9-318(3) renders defendant liable to plaintiff assignee for payment of the two school buses even though it paid the assignor. Since issues of fact exist which preclude summary judgment, we modify the order of the Appellate Division.

In July 1988, defendant Clifton-Fine Central School District contracted to purchase two GMC school buses for $81,242 from Maier-Schule GMC, Inc., a truck and bus dealership located in Buffalo. On December 12, 1988, Maier-Schule assigned to plaintiff General Motors Acceptance Corp. (assignee) "all accounts and sums due and to become due to Dealer from Clifton-Fine Central School (Purchaser) on account of the sale by Dealer to Purchaser from time to time of new GMC motor vehicles." On January 9, 1989, defendant's business manager acknowledged in writing receipt of the assignment and agreed to make payments for vehicles purchased from Maier-Schule in accordance with the terms of the assignment. Despite the assignment, on January 23, 1989 defendant paid the invoice for the buses by remitting an $81,242 check to Maier-Schule. The record does not indicate whether the dealer forwarded the proceeds to GMAC. Plaintiff, however, never registered an objection to defendant regarding this method of payment.

On September 7, 1989, defendant again contracted to purchase two GMC school buses from Maier-Schule for $80,318. As before, on January 12, 1990, it paid for the buses by remitting its check to Maier-Schule. Maier-Schule failed to forward the proceeds of the check to plaintiff and it went out of business in March 1990.

Plaintiff commenced this action seeking damages from defendant on the ground that defendant's January 1990 payment to Maier-Schule constituted a breach of assignment. Following joinder of issue, both parties sought summary judgment. Supreme Court denied plaintiff's motion, granted defendant's motion and dismissed the complaint. Citing UCC 9-318(3), it determined that although the debtor had knowledge of the assignment, the debtor was nonetheless justified in making payment to the assignor with respect to the second purchase contract under a classic "indirect collection" which permitted the assignor to collect moneys as the assignee elected not to enforce its rights under the assignment after purchase of the first set of buses. The Appellate Division affirmed, finding "a previous course of dealing" between the parties when GMAC permitted Maier-Schule to collect the January 23, 1989 payment from defendant without objection (199 A.D.2d 939, 940, 606 N.Y.S.2d 96). The Court found defendant justified in making payments to Maier-Schule because GMAC never notified defendant of its desire that future payments be made to it.

It is clear that absent notice of an assignment and notice that the debtor should pay the assignee, the account debtor is authorized to pay the assignor (UCC 9-318[3]. UCC 9-318(3) provides:

"The account debtor is authorized to pay the assignor until the account debtor receives notification that the amount due or to become due has been assigned and that payment is to be made to the assignee."

Here the defendant account debtor not only received notice of the assignment but also acknowledged in writing that it had received notice and agreed to make payment to GMAC as called for by the assignment.

Despite defendant's acknowledgment of the assignment, however, on this record summary judgment cannot be granted to the plaintiff. Because of defendant's payment for the first two buses to the dealer and not GMAC, and the apparent failure of plaintiff to protest or direct that payment be made to it, issues of fact exist as to whether plaintiff waived its rights under the assignment. Waiver requires the voluntary and intentional abandonment of a known right which, but for the waiver, would have been enforceable (Nassau Trust Co. v. Montrose...