84-9-405. Modification of assigned contract. (a) Effect of modification on assignee. A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subsection is subject to subsections (b) through (d).
(b) Applicability of subsection (a). Subsection (a) applies to the extent that:
(1) The right to payment or a part thereof under an assigned contract has not been fully earned by performance; or
(2) the right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under K.S.A. 2024 Supp. 84-9-406(a), and amendments thereto.
(c) Rule for individual under other law. This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.
(d) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.
History: L. 2000, ch. 142, § 67; July 1, 2001.
KANSAS COMMENT, 1996
Except for the filing fee provisions and the requirement to list the federal employer tax identification number or the social security number of the debtor if the financing statement is filed with the secretary of state, and gender neutral language, this section governing assignment of security interests follows the 1995 Official Text version, and, except for the nonuniform provisions mentioned above, has not been amended since 1972. The section provides a permissive device whereby a secured party who has assigned all or part of a security interest may have the assignment noted of record. Under 84-9-302(2), no filing of such an assignment is required as a condition of continuing the perfected status of the security interest against creditors and purchasers from the debtor. After the filing of an assignment, the assignee is the secured party of record. See subsection (3). As such, the assignee needs no further documentation in order to file a continuation statement under 84-9-403(3), a termination statement under 84-9-404(1), or a release of collateral under 84-9-406. The assignment will avoid requests for information from third parties pursuant to 84-9-208. Pre-UCC Kansas statutes did not provide for the recording of assignments.
Under subsection (1) the assignment may be made by the financing statement or a copy of it, while under subsection (2) the assignment may be on a separate piece of paper assigning all or part of the secured party's rights.
Although there are no Kansas cases dealing with assignments under 84-9-405, some interesting decisions have come down in other jurisdictions. Since the filing of an assignment of security interest is permissive and not mandatory, failure to name the assignee in the financing statement, or to file an amendment when the assignment takes place, is not fatal in bankruptcy. In re Black Angus Steak House Corp., 33 U.C.C. Rep. 747 (D. Vt. (Bankr.) 1980). In Van Diest Supply Co. v. Adrian State Bank, 305 N.W.2d 342 (Minn. 1981), assignment of a bank's security interest to the Small Business Administration in exchange for SBA payment of 90 percent of the defaulted loan was held not to terminate the bank's security interest with respect to the 10 percent unguaranteed portion of the SBA loan. Therefore, a competing secured party lost to the assignor even though a notice of assignment had been filed under § 9-405 when the SBA 90 percent guarantee was paid; the permissive notice was held not to terminate the assignor's underlying security interest to the extent that some debt remained unpaid. In re Belize Airways Ltd., 31 U.C.C. Rep. 730 (S.D. Fla. (Bankr.) 1980), 7 B.R. 604, holds that assignment of a security interest gave the assignee no rights to enforce the security interest when the assignment was not accompanied by assignment of the underlying debt.
Revisor's Note:
Former section 84-9-405 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.
Law Review and Bar Journal References:
Mentioned in legislative survey, "Changes in Article Nine of the Kansas Commercial Code," Alan Tipton, 15 W.L.J. 212, 226 (1976).
"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 27 K.L.R. 301, 311 (1979).
CASE ANNOTATIONS
1. Subsection (5) cited; financing statement insufficient to meet statutory requirements. In re Fuqua, 461 F.2d 1186, 1187, 1188.
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