## Facts

- Ethel L. Potter was employed by Van Raalte Co. (Van Raalte).
- Potter owed money on an account at the Steckler Sporting Goods Store.
- Continental Purchasing Co. (Continental) acquired Potter’s account from the store and became her creditor.
- To pay the debt, Potter executed a written assignment to Continental of all “wages, or claims for wages, salary, or commission earned, or to be earned,” including wages she earned or would earn from Van Raalte.
- Continental sent Van Raalte written notice of the wage assignment.
- Van Raalte acknowledged receiving the notice and proposed a modified arrangement: it would withhold and remit only a small sum from each paycheck to Continental until the debt was paid, leaving Potter with the rest of her wages.
- Continental agreed to that arrangement, and Van Raalte made six remittances of $1.50 each to Continental from Potter’s wages.
- After Potter’s situation was referred to a charity, Van Raalte stopped sending any further payments to Continental and instead paid Potter all wages directly, disregarding the assignment.
- Continental sent additional written notice warning Van Raalte that wages paid to Potter would not discharge Van Raalte’s obligation under the assignment.
- Continental sued Van Raalte to recover the remaining $19.20 it claimed was payable under the wage assignment.
- The trial court entered judgment for Van Raalte on the theory that Van Raalte had already paid Potter.
- Continental appealed.

## Issues

1. After an employer has notice of an employee’s wage assignment and has acted on it by making payments to the assignee, does the employer remain liable to the assignee if it later pays the employee instead?
2. Does payment to the employee discharge the employer’s obligation to the assignee for wages covered by the assignment when the employer had notice that the assignee was entitled to receive them?

## Decision

- The appellate court reversed the judgment for Van Raalte.
- The court held that Van Raalte, having full knowledge of the assignment and having recognized it through its earlier remittances, could not discharge its obligation by paying Potter instead of Continental.
- By paying Potter directly despite notice that Continental was entitled to the wages under the assignment, Van Raalte acted at its own risk and remained liable to Continental.
- The court directed judgment in favor of Continental for the unpaid amount sought ($19.20).

## Legal Principles

- A valid assignment transfers to the assignee the assignor’s right to receive payment from the obligor to the extent of the assignment.
- Once an obligor receives notice that payment rights have been assigned, the obligor must pay the assignee; payment to the assignor after notice does not protect the obligor against the assignee’s claim.
- An obligor’s acknowledgment of an assignment and partial performance consistent with it supports treating the assignee as the proper payee for the assigned amounts.
- An obligor cannot avoid an assignee’s rights by unilaterally choosing to pay the assignor for reasons of sympathy or financial hardship; such reasons do not defeat the assignee’s claim to assigned funds.

## Conclusion

The court held that Van Raalte’s notice and prior recognition of Potter’s wage assignment required it to pay Continental the assigned wages, and its later decision to pay Potter directly did not discharge that obligation; Van Raalte therefore remained liable to Continental for the unpaid assigned amount.


Continental Purchasing Co. v. Van Raalte Co., 295 N.Y.S. 867 (1937)