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21. HERZOG v. IRACE Maine Supreme Court 594 A.2d 1106 (Me. 1991)
Facts
After being injured in a motorcycle accident Gary G. Jones was treated by Dr. John P. Herzog (plaintiff) and received surgery for shoulder injury unrelated to the accident. Since he was unable to pay for the medical bill at the time, he promised and wrote a letter indicating that he would pay for the surgery after he received money from the pending settlement of the accident. The doctor agreed and told Jones’ attorneys Anthony Irace and Donald Lowry (defendants) that Jones had signed an assignment of benefits whereby the defendants notified him that they would pay for the bills. However, after Jones received a $20,000 settlement he directed the defendants not to disburse funds because he would personally pay for the bills. Jones indeed sent a check to the plaintiff but the bank rejected for insufficient funds. The defendants disbursed the funds to other creditors and the plaintiff was never paid. The plaintiff brought this suit against the defendants breach of an assignment of personal injury settlement proceeds, and a District Court held for the plaintiff. The Superior Court of Cumberland County affirmed.
Issue
Does a letter constitute a valid, enforceable assignment where the client requests his attorneys to disburse medical bills from pending settlement of the accident regardless of his later change of mind not to?
Rules
Shiro v. Drew, 174 F.Supp. 495, 497 (D.Me.1959).
An assignment is an act or manifestation by the owner of a right (the assignor) indicating his intent to transfer that right to another person (the assignee). For an assignment to be valid and enforceable against the assignor's creditor (the obligor), the assignor must make clear his intent to relinquish the right to the assignee and must not retain any control over the right assigned or any power of revocation.
McLellan v. Walker (1896)
Because the client has the power to assign his right to funds held by his attorney, it follows that a valid assignment must be honored by the attorney in disbursing the funds on the client's behalf.
Application
The plaintiff contended that Jones’ letter established a manifest of assignment, so the defendants should be responsible for the failure of payments that he is entitled to. The defendant urged that Jones's letter is not equivalent as a valid assignment because the letter does not clearly present his intent to renounce the control over assigned funds in perpetuity, it was a mere request of how to disburse from a specific fund. The court first announced that to make an enforceable assignment, the assignor must make clear his intent to relinquish the right to the assignee and must not retain any control over the right assigned or any power of revocation. (Shiro v. Drew) Here, the assigner, Jones, did not manifest his intent through a letter to continuously control over the right said funds assigned to the plaintiff. Indeed, although there were some specific terms missing, such as the amount of payment, it was indicated that the plaintiff acknowledged the services and value provided the plaintiff was reasonable and necessary. Moreover, the plaintiff was clearly given preference over other creditors by operation of the assignment. In addition, the defendants argued that they have an ethical obligation to honor their client’s direction. The court also rejects such argument since once the client assigned his to funds held by his attorney, it follows that a valid assignment must be honored by the attorney in disbursing the funds on the client's behalf. (McLellan v. Walker) Therefore, the defendants should have disbursed the funds as they had been assigned as a contractual obligation.
Holding
Yes, the letter constituted a valid assignment.
Conclusion
Affirmed.
Feedback and notes
Unlike the previous case, the third parties of this case are the attorneys-only the doctor and the patient got the privity. In other words, the assigner is the patient, the assignee is the doctor, obligors are the lawyers. Although notice is required to the obligor, the obligor has no choice but to accept and diligently deliver the duty he owed.
It was our last case of the Contracts 2 class and the closing words resonated with me long after. We would never reach the level of satisfaction. Even after being a practice lawyer, we will proceed with cases always feeling insufficiency. But we mustn’t criticize ourselves for being insufficient. Because we will never be able to reach the point of satisfaction and we will always be insufficient which is normal.
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