City of Hartford v. McKeever
Although, as stated in the 1969 Connecticut Supreme Court case of Fairfield Credit Corp. v. Donnelly, "an assignee of a contract takes it subject to all defenses which might have been asserted against the assignor," the assignee does not take it subject to affirmative claims against the assignor arising from the assignor's prior conduct without express assumption of such liability by the assignee. Brian McKeever, a Hartford apartment building owner, borrowed $143,065 in two loans from Community Development Corporation secured by mortgages on his property. An assignment of rents agreement empowered the corporation to collect rent directly from tenants in case of default. The corporation assigned its interest in the notes but continued to service the loans. In 2001, State Street Bank & Trust Company of Connecticut assigned the fully paid second loan to the city of Hartford for one dollar. The city determined that McKeever had defaulted on payments and filed a foreclosure action against McKeever. McKeever filed a five count counterclaim and sought an accounting of all payments made by tenants. The city withdrew its foreclosure complaint conceding a $17,397.93 loan overpayment. The defendant claimed overpayment of $195,909. Following trial, the court found for the defendant awarding him $195,909 without specifying on which count it made the award. On appeal, the city claimed that the court erred in concluding that, as assignee, it was liable for the defendant's overpayments, if any, to its assignor, State Street Bank or other prior note holders. The majority of the Appellate Court agreed and reversed the judgment. The plaintiff could have been found liable only for any overpayment by the defendant that occurred after it took assignment of the note. Neither the assignment nor the original agreement encumbered the plaintiff, as assignee of the note, with liability for State Street's or any other holder's pre-assignment conduct. The plaintiff, as assignee, had no greater or lesser rights thereunder than those of State Street at the time of the assignment. Judge Gruendel dissented finding the bright line rule adoptedthat an assignee, in all circumstances, may be held accountable for the liabilities of an assignor only when the assignee expressly assumes responsibility thereforis unwarranted and, in the context of equitable proceedings as here, a more flexible approach is demanded.