Protection of the "first" asignee and debtor in repeated assignment of the same claim

In a recent ruling by the Supreme Court, file no. 33 Cdo 1788/2023 dated August 28, 2024, the court addressed the issue of the consequences of assigning the same claim to multiple assignees, which had not been thoroughly explored in previous case law. The case involved a situation where the assignor successively concluded two assignment agreements for the same claims, first with the plaintiff and later with the defendant. The debtors were notified only of the assignment of the claims to the defendant, and subsequently, the debtors made payments to the defendant. The plaintiff sought restitution for unjust enrichment, claiming that the claims had been assigned to her first, and in good faith, she believed she was the rightful creditor.

Appellate Court Decision

The appellate court upheld the decision of the first-instance court, concluding that the defendant (the second assignee) did not unjustly enrich herself at the expense of the plaintiff (the first assignee) by accepting payments from the debtors, who were only informed of the assignment in favor of the defendant. The court reasoned that the defendant rightfully received the payments since the claims had been assigned to her by the assignor based on a valid assignment agreement.

Supreme Court's Conclusions

The Supreme Court reviewed the legal reasoning of the appellate court and arrived at some different conclusions. The court confirmed that a claim can only be effectively assigned once. The assignee to whom the claim is assigned first becomes the new creditor, and subsequent assignment agreements of the same claim cannot have legal effect, as the assignor no longer owns the claim. Although another assignment agreement may be valid, it does not effectively transfer the claim to the new assignee, since the assignor has already lost the right to dispose of the claim.

The Supreme Court emphasized that debtor protection in cases of multiple assignments is primarily ensured by Section 1882(2) of the Civil Code, which stipulates that the assignment is effective against the debtor from the moment the debtor learns of it. If the debtor fulfills the obligation to the first notified assignee, the debtor is discharged of its obligation. However, if the debtor pays the second assignee, who is not the rightful creditor, unjust enrichment arises on the part of this second assignee at the expense of the rightful creditor, i.e., the first assignee.

Comparison of the Appellate and Supreme Court Decisions

While the appellate court concluded that the defendant did not unjustly enrich herself because she received the payments based on a valid assignment agreement, the Supreme Court highlighted that, although the agreement between the assignor and the defendant was valid, it could not produce legal effects in terms of transferring the claim. In this regard, the Supreme Court corrected the conclusions of the appellate court, stating that the defendant was unjustly enriched at the expense of the plaintiff (the rightful creditor) because she retained the payments from the debtors without legal grounds.

The second assignee, to whom the claim was ineffectively assigned, retains the right to claim defective performance against the assignor.

Summary and Practical Implications

The Supreme Court's decision confirms that a claim can only be effectively assigned once. Subsequent assignment agreements of the same claim cannot result in a transfer, as the assignor no longer has the right to dispose of the claim. However, the good faith of the debtor, who pays the first notified assignee, is protected. The Supreme Court's ruling also provides protection to the first assignee as the rightful creditor, establishing that the second assignee has no right to retain the payment made on the claim, even if it was provided in accordance with the assignor's notification.

This decision has significant implications for business practice, as it prevents situations where an assignor deliberately assigns the same claim to multiple entities, leaving the debtor and the respective assignees in legal uncertainty. The ruling clearly establishes that a debtor discharges their obligation lawfully only when paying the assignee whose claim was first communicated, thus providing protection for the debtor's good faith and legal certainty in contractual relationships.

The Supreme Court's decision can be understood as an important guideline for legal practice when assessing the consequences of repeated assignment of the same claim to multiple assignees.