Prudential Federal Savings & Loan Ass'n v. King ( 1969 )

CALLISTER, Justice.

Plaintiff commenced this action to foreclose as a mortgage the interests of the defendants under a uniform real estate contract. (Paragraph 16C provided that upon default, the seller may elect to declare the entire remaining balance owing thereunder at once due and payable, to treat said'Contract as a note and mortgage, and to proceed immediately to foreclose the same.) The trial court issued a decree of foreclosure but declined to award the plaintiff a deficiency judgment against the defendants, who were assignees of the contract.

On February 1, 1962, Maurer Development Corporation entered into a uniform real estate contract, as seller, with Wells R. King and his wife, as buyers. Thereafter, on November 27, 1963, Maurer Development assigned and conveyed its seller’s interest to the plaintiff. Prior to the acquisition of title by plaintiff, the Kings assigned their interest in the real estate contract to the defendants, George W. Evans and his wife, who assigned their interest to James T. Rice and wife and Preston Norton and wife. All of the assignments were executed on similar printed forms with the appropriate blanks completed by the parties.

On appeal, plaintiff contends that the trial court erroneously dismissed its claim for a deficiency judgment, since by virtue of the assignment, the assignee assumed payment of the purchase price as set forth in the real estate contract. Defendants respond that there was no such assumption of the payment of the contract balance because the assignment did not specifically state the words: “the assignee agrees to assume or pay the balance due.”

The parties cite Paragraph 3 of the assignment to support their respective positions :

3. That in consideration of the assignors executing and delivering this agreement, the assignees covenant with the assignors as follows:

a. That the assignees will duly keep, observe and perform all of the terms, conditions and provisions of the said agreement that are to be kept, observed and performed by the assignors.

b. That the assignees will save and hold harmless the assignors of and from-any and all actions, suits, costs, damages, claims and demands whatsoever arising by reason of an act or omission of the assignees.

The parties have placed undue emphasis on Paragraph 3; all of the provisions of the assignment are of significance and should be construed together.

In the Assignment of Contract, which was the approved form of the Utah State Securities Commission and Utah State Realty Association, the assignors assigned all their right, title and interest in the uniform real estate contract to the assignees. The assignment recited that to induce the assignees to pay said sum of money and to accept the real estate contract, the assignors represent that they have performed all the conditions therein, that the contract is now in full force and effect and the amount of the current unpaid balance. The assignees covenanted to perform all of the terms, conditions and provisions of the uniform real estate contract that were to he kept, observed and performed by the assignors. The language clearly constitutes an assumption by the assignee to pay the balance due on the real estate contract.

In Radley v. Smith,¹ this court quoted with approval Sec. 164(1), Restatement of Contracts:

Where a party to a bilateral contract, which is at the time wholly or partially executory on both sides, purports to assign the whole contract, his action is interpreted, in the absence of circumstances showing a contrary intention, as an assignment of the assignor’s rights under the contract and a delegation of the performance of the assignor’s duties. Subsection (2) provides:

Acceptance by the assignee of such an assignment is interpreted, in the absence of circumstances showing a contrary intention, as both an assent to become an assignee of the assignor’s rights and as a promise to the assignor to assume the performance of the assignor’s duties.

In Lonas v. Metropolitan Mortgage and Securities Co.,² the court observed that where an assignee agrees to pay the balance due on a real estate contract and to observe and perform all the terms, conditions and covenants therein, the promised performance of the assignee will benefit someone other than the assignor, namely, the vendor, and will satisfy the assignor’s duty to the vendor; the latter is a creditor beneficiary.³ The assignee’s promise to discharge the assignor’s obligation under the contract creates a duty on the part of the assignee to the vendor to perform the promise.⁴ As a creditor beneficiary, the vendor may recover judgment against either the assignee or assignor or against each of them as to the purchaser’s obligation under the contract.⁵

The assignment in the Lonas Case, as in the instant action, also contained “a save harmless” provision, and the assignees argued that the assignment was a contract of indemnity. The court responded that the action was not to' énforce the indemnity provision; in addition to the indemnity provision, the assignment provided for the assumption by the assignee of the assignor’s obligation to pay the moneys due under the real estate contract. In so doing, the assignees became liable to the vendor of the property for the performance of the promises ’ in' that contract. Those were the promises which the vendor sought to enforce in the action; the ■ indemnification provision was not involved.

Based on the foregoing principles, the judgment-of the trial court is reversed and remanded for disposition in accordance with this opinion.⁶

CROCKETT, C. J., and HENRIOD and ELLETT, JJ., concur.

1 . 6 Utah 2d 314, 317, 313 P.2d 465 (1957).

2 . (Alaska, 1967) 432 P.2d 603, 604-605.

3 . Restatement of Contracts, § 133(1), (b).

4 . Id.,CO CO r-i

5 . Id rtf H

6 . The issue as to whether plaintiff correet- ■ ly followed proceedings for foreclosure was ■ not raised on this appeal.