CopyCited 2 times | Published | Florida 2nd District Court of Appeal | 92 U.C.C. Rep. Serv. 2d (West) 668, 2017 WL 1536070, 2017 Fla. App. LEXIS 5902
...Funding Corp. for the payment of certain accounts receivable that had been assigned to United Capital by one of the Department’s vendors, Arbor One, Inc. The appeal centers on a .provision of Article 9 of the Uniform Commercial Code— codified at section 679.4061, Florida Statutes (2012)—stating that, after receiving notice of an assignment, the debtor on an account receivable can discharge its con *128 tractual obligation to pay the account only by making payment to the assignee and not the assignor....
...1 We answer the first question in the affirmative and the second question in the negative. As a result, we conclude that once Arbor One’s accounts receivable were sold, the Department could discharge its contractual obligation to pay for those services only by paying United Capital as required by section 679.4061 and that sovereign immunity does not bar United Capital’s suit against the Department to enforce its contractual obligation to pay....
...ership and thereafter receives payments directly from the account debtor. Factoring relationships implicate Article 9 of the UCC because Article 9 applies to the sale of accounts, including accounts receivable. §
679.1091(l)(c). In that connection, section
679.4061 defines the rights and obligations of the business that originates and sells the accounts receivable, the debtors on the accounts, and the third parties to whom the accounts are sold....
...As applied to a factoring arrangement, the statute provides that an account debtor makes payments to the business .originating the account until such time as it is notified by either the business or the factor that the account has been assigned to the factor. § 679.4061(1). Once that notification is given, an account debtor must make all further payments to the factor, subject to a right of the account debtor to demand proof from the business or the factor that the account has in fact been assigned. §§ 679.4061(1), (3). The statute also provides that any term in an agreement between the business originating the accounts and its debtors that prohibits or restricts the assignment of the accounts is ineffective. § 679.4061(4)(a)....
...the account instead of the factor who bought the *129 right to be paid under it. The statute provides that a payment made to the business after notice has been given does “not discharge the obligation” owed by the account debtor on the account. § 679.4061(1)....
...sed to pay United Capital. In response, United Capital filed this declaratory judgment action against the Department seeking to enforce its rights to payment of the accounts receivable that Arbor One assigned to it, which in its view was required by section 679.4061(1). It later filed a motion for summary judgment that, as relevant here, the Department opposed on two principal grounds. First, the Department argued that section 679.4061(1) does not apply where, as here, a government agency is the account debtor on assigned accounts receivable....
...mary judgment, and entered a final judgment in United Capital’s favor. The Department timely appealed. II. In this case, there is no dispute as to any of the salient facts. The trial court’s determinations that the Department was obligated under section
679.4061(1) to make payments directly to United Capital and that sovereign immunity did not bar United Capital’s claims against the Department resolved pure questions of law. Our review is de novo. See Shaw v. Tampa Elec. Co.,
949 So.2d 1066, 1069 (Fla. 2d DCA 2007); Allstate Ins. Co. v. Regar,
942 So.2d 969, 971 (Fla. 2d DCA 2006). *130 A. ■ We first consider whether section
679.4061(1) applies when a government body like the ■ Department stands in the role of account debtor. We hold that it does. Section
679.4061 is titled “Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.” Overall, t...
...provides for free alienability of accounts, chattel paper, and payment intangibles by invalidating certain contractual and legal restrictions on their sale and specifies the rights and obligations ,of the parties when a sale of such assets occurs. §§ 679.4061(1), (4), (6). As concerns the rights and obligations of the parties, subsection (1) of section '679.4061 provides as follows: [A]n account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assigno...
...ischarge its contractual obligation to pay those accounts receivable only by paying,United Capital as-the as-signee, and its failure to do so would subject the Department to liability to United Capital. 2 On the face of it, there is no question that section 679.4061(1) is by its terms operative on these facts because there is no question that the statutory term “account debtor”—which identifies the category of persons obligated to make payment to an assignee of accounts receivable— reach...
...The general definitions section of the UCC, in turn, defines “person” to- include a “government” or “governmental subdivision, agency, or instrumentality” unless the context in which it is used indicates otherwise. §
671.201(30), Fla. Stat. (2012). We see nothing in sections
679.1021(c) or
679.4061(1) to indicate that the terms “account debtor” and “person” do not mean what the definitions say they mean. As such, we give, the term “account debtor” the meaning the legislature gave it. See Nicholson v. State,
600 So.2d 1101, 1103 (Fla. 1992). That meaning includes the Department, which renders
679.4061(1) operative as to the Department’s discharge of its obligation on assigned accounts receivable....
...[a]ny transfer by a government or governmental unit.” It asserts that because its payments on the accounts receivable at issue involve transfers of money by a governmental unit, the so-called government-transfer exception in section
679.1091(4)(n) prevents section
679.4061(1) from regulating how it may discharge its contractual obligation to make payment for the services Arbor One rendered to it. If the provisions of section
679.4061(1) could be read to “apply to” a “transfer” by a governmental unit where the governmental unit is merely an account debtor making a payment to the assignee of an account receivable rather than the assignor of that account, then the Department’s argument here would be correct....
...But, as we explain, the plain language of section
679.1091 excludes this construction. 3 The only published decision to address this question is MP Star Financial, Inc. v. Cleveland State University, 107 Ohio St.3d 176 , 837 N.E.2d 768 (Ohio 2006), which held - that Ohio’s analog to section
679.4061(1) does not apply to governmental account debtors....
...including the payment of money.” Id. (alterations in original). Applying those definitions, the court held that the government’s payment on an account receivable involves a transfer of money and was thus outside the' scope of Ohio’s analog to section 679.4061(1)....
...Auld,
450 So.2d 217, 219 (Fla. 1984), and give undefined statutory terms their common, everyday meaning, see Am. Heritage Window Fashions, LLC v. Dep’t of Revenue,
191 So.3d 516, 520 (Fla. 2d DCA 2016)—we disagree that these principles lead to the conclusion that section
679.4061(1) is inoperative in circumstances where a governmental unit is merely the account debtor....
...s where Article 9 otherwise “applies to” a transfer by the government. §
679.1091(4)(n) (“This chapter does not apply to ... [a]ny transfer by ... a governmental unit.” (emphasis added)). That requires that we determine whether holding that section
679.4061(l)’s provisions regulating discharge of an obligation upon assignment of an account receivable are operative as against a governmental account debtor is to “apply” Article 9 to a government transfer....
...e noun phrase “[a]ny transfer ... by a governmental unit” is the object of that predicate. See Mark Lester & Larry Beason, The McGraw-Hill Handbook of English Grammar and Usage, 33 (2d ed. 2013). “This chapter” clearly encompasses all of section 679.4061(1). “[D]oes not apply to” then clearly restricts applying section 679.4061 to government transfers that would otherwise be included. We are left with addressing whether an account debt- or’s payments on accounts receivable in accord with section 679.4061 are transfers to which Article 9 is being applied. Put differently, the question is whether an account debtor’s payments on accounts receivable are objects of section 679.4061....
...Transfers of money to make payment on an account, chattel paper, or payment intangible—as distinguished from the sales of such assets themselves—are not something to which Article 9 applies as an initial matter. See §
679.1091(1). As a result, we can only *133 interpret section
679.4061(l)’s regulation of an account debtor’s obligations upon assignment of an account, chattel paper, or payment intangible as applying to the transfer of the asset itself (here, the sale of the accounts receivable by Arbor One to United Capital), which is within the scope of Article....
...9, and not as applying to the transfer of money involved in discharging the account debtor’s contractual obligation to make payments on that account, chattel paper, or payment intangible (here, the Department’s payments on accounts receivable), which is not. This interpretation is confírméd by the text of section 679.4061, which governs sales of accounts, chattel paper, and payment intangibles and contains the discharge-upon-assignment provision to which the Department objects. Section 679.4061 invalidates restrictions on sales of those assets, specifies the various parties involved in such sales, and defines their rights and obligations vis-á-vis each other. As implicated here, it identifies the person to wl]om an account debtor owes performance both before and after the sale and directs performance to that person in order for the account debtor’s obligation to be discharged. § 679.4061(1) (“After receipt of the notification, the account debtor may discharge its obligation .......
...That circumstance, however, is not what the facts of this case present. Here, the accounts receivable were sold by Arbor One to United Capital, and the Department, as the governmental account debtor, was owed notice of the sale under the statute for the purpose of sending the same payments it always owed. The text of section 679.4061 shows that its object—the thing it applies to—is the assignment of accounts, chattel paper, and payment intangibles. In this case, that occurred through a sale of accounts receivable, by a nongovernmental entity, not the payment on those accounts by a governmental one. B. The Department contends that even if it is governed by section 679.4061(1), sovereign immunity affords it a complete defense to United Capital’s claims....
...ontinued paying medical benefits directly to patients after being informed that the patients had assigned their contractual rights to those payments to the doctor who had provided the medical, services to them. The same .result applies in this case. Section
679.4061(1)⅛ provision governing discharge upon assignment establishes a rule of contract performance: it determines how a party to a contract may discharge an obligation to make payment on an account created by virtue of that contract—i.e., how it can perform its contractual obligation to pay—after the party has been notified the account has been assigned. Cf. Bldg. Materials Corp.,
972 So.2d at 1092 (applying section
679.4061(1) in the context-of a claim for'breach of contract)....
...overeign immunity does not protect the Department. III. In sum, we hold that the government-transfer exception in. Article 9 of the UCC does not exempt a government agency in its role as account debtor from the discharge upon assignment provision of section 679.4061(1). We. further hold that assuming that the other requirements of section 679.4061(1) have been satisfied, where a government agency enters into an authorized and express written contract containing a payment obligation, sovereign immunity does not protect the agency from a claim by the assignee of contractual accounts receivable for failure to pay....
