Ertel v. Radio Corp. of America
Supreme Court of Indiana
307 N.E.2d 471 (1974)
Delta Engineering assigned its accounts receivable, including one owed by RCA (defendant), as security for a loan from Economy Finance; RCA received notice of the assignment but nonetheless kept making payments to Delta instead of Economy. When Delta defaulted on the Economy loan, Economy sued Ertel (plaintiff), Delta's Secretary-Treasurer, who paid Delta's debt in full and then sued RCA directly, arguing that as subrogee he now held Economy's rights against RCA. The trial court ruled against Ertel on both claims; the appellate court reversed, holding Ertel was subrogated to Economy's rights against RCA and could recover free of RCA's set-off claims tied to its erroneous payments to Delta. RCA appealed.
Whether a debtor may assert defenses and claims arising from the underlying contract against an assignee of a creditor's interest, regardless of whether those defenses or claims arose before or after the debtor received notice of the assignment.