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Delacy Investments, Inc. v. Thurman

March 22, 2005

DELACY INVESTMENTS, INC. D/B/A COMMISSION EXPRESS, APPELLANT,
v.
STEVEN ERNEST THURMAN, DEFENDANT, RE/MAX REAL ESTATE GUIDE, INC., RESPONDENT.



Hennepin County District Court File No. CT 03-016595.

Considered and decided by Halbrooks, Presiding Judge, Huspeni, Judge, and Crippen, Judge.*fn1

SYLLABUS BY THE COURT

Under Minn. Stat. § 336.9-404(a)(1) (2004), the rights of an assignee "are subject to . . . all terms of the agreement between the account debtor and assignor." This provision of the Uniform Commercial Code conforms with the common-law rule that an assignee of a claim possesses no greater rights than the original assignor.

The opinion of the court was delivered by: Halbrooks, Judge

Affirmed

OPINION

Appellant challenges the district court's grant of summary of judgment to respondent based on the district court's conclusion that an assignee is not entitled to a greater right in a real-estate commission than an assignor. Appellant argues (1) that the district court erred in interpreting revised article 9 of the Uniform Commercial Code (UCC) as to the assignment of an account receivable and (2) that the UCC does not permit an account debtor to contract away the rights of an assignee after notice of assignment. Because we conclude that the district court did not err, we affirm.

FACTS

Appellant Delacy Investments, Inc., d/b/a Commission Express (CE), is in the business of factoring receivables from real-estate agents. In this business, a real-estate agent can assign or sell his future receivable or commission to CE in exchange for immediate funds. Respondent Re/Max Real Estate Guide, Inc. (Re/Max) is a real-estate brokerage company.

On November 11, 2001, defendant Steven Thurman, a licensed real-estate agent, entered into a master repurchase and security agreement (MRSA) with CE. The substance of the MRSA "grant[ed] to CE a security interest under the [UCC] in allof [Thurman's] right, title and interest in and to [Thurman's] current and future accounts receivable . . . ." CE perfected its security interest by filing a UCC financing statement with the Minnesota Secretary of State.

On February 25, 2003, Thurman entered into a standard independent-contractor agreement with Re/Max. The agreement details the employment relationship between the two, whereby Thurman agreed to pay Re/Max certain overhead expenses. The agreement explains how Thurman will receive his "commission" from Re/Max and certain "nonpayment remedies." In pertinent part, the agreement states:

[Thurman] shall be deemed entitled only to 100 percent of the amount by which commissions generated by [Thurman's] efforts exceed past-due financial obligations imposed by the terms of Paragraphs 4 and 5 of the Agreement. That portion of commissions which does not exceed past-due financial obligations shall be deemed to belong to RE/MAX and shall be used by RE/MAX first to offset arrearages owed by [Thurman].

(Emphasis added.) Thus, in terms of the legal relationships that exist here, CE is an "assignee," having accepted Thurman's assignment of his commission by the MRSA. Thurman, in turn, is an "assignor," having assigned his right of commission to CE. Re/Max is an "account debtor" by virtue of its independent-contractor agreement with Thurman, whereby Re/Max possesses the potential right to receipt of that which Thurman assigned to CE.

In April 2003, Re/Max executed an acknowledgement of CE's security interest in Thurman's account receivable from the sale of a home on Javelin Avenue and directed that Thurman's commission from that sale be paid directly to CE.*fn2 On April 22, 2003, CE and Thurman entered into an Account Receivable Sale and Assignment Agreement (assignment agreement), whereby CE agreed to purchase a $10,000 receivable ...


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