General Motors Acceptance Corp. v. Clifton-Fine Central School District, 85 N.Y.2d 232 (1995)
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An assignee may waive its rights to direct payment from an account debtor under UCC § 9-318(3) through a course of conduct that implies a voluntary and intentional abandonment of those rights.
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Summary
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General Motors Acceptance Corp. (GMAC) sued Clifton-Fine Central School District for breach of an assignment agreement after the school district paid Maier-Schule GMC, the assignor, for school buses despite having acknowledged the assignment to GMAC. The school district had previously paid Maier-Schule directly for an earlier bus purchase without objection from GMAC. The court held that factual issues existed regarding whether GMAC waived its rights under the assignment by permitting the school district to remit payment to the assignor, precluding summary judgment. The court emphasized that waiver requires the voluntary and intentional abandonment of a known right.
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Facts
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Clifton-Fine Central School District contracted with Maier-Schule GMC to purchase two school buses. Maier-Schule assigned its accounts receivable from the sale to GMAC. The school district acknowledged the assignment in writing and agreed to make payments to GMAC. Despite the assignment, the school district paid Maier-Schule directly for the buses. GMAC did not object to this payment method. Subsequently, the school district purchased two more buses from Maier-Schule and again paid Maier-Schule directly. Maier-Schule then went out of business without forwarding the second payment to GMAC.
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Procedural History
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GMAC sued the school district for breach of the assignment. The Supreme Court granted summary judgment to the school district, reasoning that GMAC’s failure to object to the initial direct payment constituted an “indirect collection” scenario under UCC 9-318(3). The Appellate Division affirmed, finding a previous course of dealing. The New York Court of Appeals modified the order, denying the school district’s motion for summary judgment and remanding the case for trial.
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Issue(s)
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Whether GMAC, by failing to object to the school district’s initial payment to Maier-Schule, waived its right to enforce the assignment and demand direct payment for subsequent purchases.
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Holding
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No, summary judgment for the school district was not appropriate because issues of fact existed as to whether GMAC waived its rights under the assignment 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.
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Court’s Reasoning
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The court reasoned that while UCC 9-318(3) generally requires an account debtor to pay the assignee upon notification of the assignment, an assignee can waive its right to direct payment through its conduct. Waiver is defined as “the voluntary and intentional abandonment of a known right which, but for the waiver, would have been enforceable.” The court emphasized that waiver can be established by affirmative conduct or by failure to act in a way that demonstrates an intent to claim a purported advantage. The Court stated, “Plaintiff apparently never objected to Clifton-Fine’s unauthorized payment of the first contract directly to Maier-Schule nor did plaintiff object when the second contract was executed. If it can be established at trial that plaintiff had notice of this indirect payment to Maier-Schule, plaintiff may have impliedly waived the direct payment requirement under the assignment by permitting the account debtor to remit payment to the assignor over a substantial period of time.”
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The court distinguished the case from a classic