Should You Revise Your NOAs: For Account Debtors in FL: Yes
Should you immediately revise your notices of assignment: for account debtors located in Florida, we say yes!
The State of Florida passed what it calls the "Judgment Lien Improvement Act" (the "Act") amending certain statutes within Chapter 55 of the Florida Statutes entitled, "Judgments". The Act's pronounced purpose was to clarify certain issues and priority conflicts that exist between judgment lien holders and security interest priorities held by secured creditors.
Let's first take a look at the relevant portions of the Act. Fla. Stat. 55.202 entitled, "Judgments, orders, and decrees; lien on personal property" subsections (2)(a)1 and 2 and subsection (d) are fairly straightforward and read, in relevant part as follows:
(2) A judgment lien may be acquired on a judgment debtor's interest in all personal property in this state subject to execution under s. 56.061, including payment intangibles and accounts, as those terms are defined in s. 679.1021(1), and the proceeds thereof, but excluding fixtures, money, negotiable instruments, and mortgages. (a) For payment intangibles and accounts and the proceeds thereof:
1. The rights of a judgment lienholder under this section are subject to the rights under chapter 679 of a secured party, as defined in s. 679.1021(1), who has a prior filed financing statement encumbering such payment intangibles or accounts and the proceeds thereof.
2. This section does not affect the obligation under s. 679.607(1) of an account debtor, as defined in s. 679.1021(1), except as the rights and obligations under this paragraph are otherwise adjudicated under applicable law in a legal proceeding to which the secured party and account debtor are joined as parties.
So, what's the problem?
The "problem" lies in that portion of the Act that amends Fla. Stat. 55.205 entitled, "Effect of judgment lien" and more specifically new subsection (7) which reads, in relevant part, as follows:
(7) Notwithstanding the attachment of a judgment lien acquired under s. 55.202 to payment intangibles or accounts and the proceeds thereof, the account debtor may, absent receipt of notice under s. 679.607(1)(a) from a secured party, discharge the account debtor's obligation to pay payment intangibles or accounts or the proceeds thereof by paying the judgment debtor until, but not after, the account debtor is served by process with a complaint or petition by the judgment creditor seeking judicial relief with respect to the payment intangibles or accounts. Thereafter, the account debtor may discharge the account debtor's obligation to pay payment intangibles or accounts or the proceeds thereof under this section only in accordance with a final order or judgment issued in such judicial process that complies with this section.
The drafters of this legislation in Florida elected to only expressly protect the rights of a Secured Party that sends an account debtor a notice under s. 679.607(1)(a), the law fails to include the rights of assignee that sends a Notice of Assignment to an account debtor under Fla. Stat. 679- 4061. Fla. Stat. 679.607(1)(a) entitled "Collection and enforcement by secured party" is contained in the section VI of Article 9 that governs "Default" and states "(1) If so agreed, and in any event after default, a secured party: (a) May notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party." The Act, however, neither makes refence to nor otherwise addresses the effect of the Act as to an assignee who delivers a Notice of Assignment under Fla. Stat. 679.4061.1
Conclusion
The Act's inclusion of the language "absent receipt of notice under s. 679.607(1)(a) from a secured party" and omission of any reference to section 9-406 may give rise to an ambiguity in the language of the Act. Ullman & Ullman, P.A. believes that excellent arguments may be made under Florida's version of 9-406 that an account debtor that receives a Notice of Assignment that is issued exclusively under 9-406 must be treated no different than a Notice of Assignment issued under Florida's version of 9-607, however, we believe it is best to avoid any ambiguity and for Notices of Assignment sent to Florida account debtors both sections 9-406 and 9-607 in a Notice of Assignment should be referenced.
Written by: Ullman & Ullman, P.A.
Fla. Stat. § 679.4061 entitled, "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" reads, in relevant part as follows: ... an account debtor on an account, chattel paper, or payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.