Rouse v. United States
Citation and Court
Rouse v. United States, 215 F.2d 872 (D.C. Cir. 1954)
Facts
Winston bought a heating unit from Rouse under an installment contract. Later, Winston sold her house to Rouse (different transaction context—Rouse was a purchaser) and the United States became involved as a party seeking to collect on a promissory note. The key legal issue centered on whether an assignee of contractual rights takes those rights subject to the defenses that the obligor had against the original assignor.
Issue
Whether an assignee of a contract takes the assigned rights subject to any defenses the obligor had against the original promisee/assignor.
Holding
The D.C. Circuit held that an assignee takes no better title than the assignor had, and the obligor may raise against the assignee any defense that existed at the time of the assignment.
Rule / Doctrine
An assignee of a contract right stands in the shoes of the assignor and takes the assigned right subject to all defenses that the obligor had against the assignor at the time of the assignment. An assignment does not improve the position of the assignee relative to the original obligor.
Significance
A foundational case on the principle that an assignee takes subject to defenses—“nemo dat quod non habet.” Fundamental to understanding the limitations of assignment and the rights of obligors when their contractual duties are assigned to third parties.