## Facts

- Oregon Pacific Industries, Inc. purchased plywood from Centralia Plywood on December 12, 1968.
- Centralia assigned the resulting invoice to Seattle-First National Bank on December 13, 1968.
- The bank promptly notified Oregon Pacific of the assignment.
- Before the assignment, Oregon Pacific had placed two other plywood orders with Centralia that were not included in the assigned invoice.
- Centralia failed to deliver plywood on those additional orders, and Oregon Pacific claimed damages from the non-delivery.
- Oregon Pacific refused to pay the assigned invoice, asserting a setoff for its damages on the separate orders.
- At the time of assignment, Centralia was insolvent; the bank knew of the insolvency.
- Centralia and the bank were nonresidents of Oregon.

## Issues

1. Under ORS 79.3180(1) (former UCC § 9-318), may an account debtor set off against an assignee damages arising from separate transactions with the assignor when the claim did not arise from the assigned contract and did not accrue before notice of assignment?
2. Do the assignor’s insolvency (known to the assignee) and the nonresident status of assignor and assignee create additional setoff rights beyond those stated in ORS 79.3180(1)?
3. May pre-Code Oregon setoff doctrines be applied to expand account-debtor defenses against an assignee in a transaction governed by the UCC?

## Decision

- The Oregon Supreme Court affirmed judgment for Seattle-First National Bank.
- Oregon Pacific could not set off its claimed damages from Centralia’s non-delivery on other orders against the bank’s claim on the assigned invoice.
- ORS 79.3180(1) controlled and did not permit the asserted setoff because the claim neither arose from the assigned contract nor accrued before notice of assignment.
- The court rejected implied exceptions based on insolvency known to the assignee or the parties’ nonresidency.
- Pre-Code doctrines permitting broader setoff were not applied where the UCC governed and did not expressly incorporate them.

## Legal Principles

- Under ORS 79.3180(1)(a), an assignee’s rights are subject to the terms of the assigned contract and defenses or claims arising from that contract.
- Under ORS 79.3180(1)(b), an assignee’s rights are subject to other defenses or claims against the assignor only if they accrue before the account debtor receives notice of the assignment.
- Claims arising from separate transactions with the assignor, and accruing after notice of assignment, are not assertable against the assignee as setoff under ORS 79.3180(1).
- Courts will not add extra-statutory defenses to the UCC’s assignment rules based on pre-Code case law absent clear statutory adoption.

## Conclusion

The court held that the UCC’s assignment statute restricts an account debtor’s defenses against an assignee to contract-based claims and non-contract claims that accrued before notice of assignment, and it refused to expand setoff rights based on insolvency, nonresidency, or pre-Code doctrine.


Seattle-First Nat'l Bank v. Or. Pac. Indus., Inc., 262 Or. 578, 500 P.2d 1033 (Or. 1972)