Lojo Realty Co. v. Johnson

Finch, J.

The question presented by this appeal is whether, in a contract for the purchase of real property where the vendee is to give back a purchase-money bond and mortgage, the vendor may be compelled to accept in place of the vendee any one to whom the latter may have assigned the contract.

The question arises upon an appeal from an order striking out defenses set up in an answer. The complaint is by an assignee of a vendee to compel a vendor to execute and deliver a deed to the assignee and accept the assignee upon the purchase-money bond and mortgage in place of the original vendee. The vendor, as a defense, claimed a legal right to refuse to perform the contract unless the original vendee went upon the purchase-money bond and mortgage. The learned court at Special Term held this defense invalid.

This was error, since the mere assignability as such of a contract does not carry with it the right to change the terms so as to permit a different maker of the bond and mortgage than provided for by the parties in the contract. The vendor in a real estate contract has a right to rely upon the character of the maker of the bond and mortgage, as well as upon his financial responsibility. To hold otherwise would render it possible for a vendor to have foisted upon him a vendee whose financial responsibility in the case of a deficiency judgment upon foreclosure he would not have accepted. This holding accords with the general rule. The latter is fairly set forth in Corpus Juris (Yol. 5, p. 878), as follows: “It is also a general rule that a party to a contract may not, unless authorized by the other party, either in the contract itself, or otherwise, so assign the contract as to escape liability for the performance of acts or duties imposed upon him by its terms."

In Epstein v. Gluckin (233 N. Y. 490) Judge Cabdozo, in writing the opinion, assumed that the vendee had a right to have the contract carried out as made by the parties, even to the extent of requiring a purchase-money bond and mortgage by the original vendee in place of cash, if he so desired. That case has been frequently cited as determining that an assignee of a vendee might not only have specific performance to enforce his rights under the contract, but might also compel the vendor to permit him to assume the burdens under the contract in the place of the original vendee. The power of an assignee, with certain exceptions, to enforce the benefits under a contract has always been the law, but it has never been the law that the remedy of specific performance to enforce such rights comprises within it also the right to compel the vendor to change the terms of the contract so as to permit the original vendee to shed the burdens. In Langel v. Betz (250 N. Y. 159, 162) Judge Pound, writing for the court and referring to Epstein v. Gluckin {supra), said: “No change was made in the law of contracts nor in the rule for the interpretation of an assignment of a contract."

In Arkansas Smelting Co. v. Belden Co. (127 U. S. at p. 387) the Supreme Court of the United States, after holding that the benefits of a contract may be assigned, said: “ But every one has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his consent. In the familiar phrase of Lord Denman, ‘ You have the right to the benefit you anticipate from the character, credit and substance of the party with whom you contract.’ ”

In the highest court of Iowa the precise question here presented has arisen, and the headnote is as follows: “ A vendor need not accept a mortgage from the purchaser’s transferee, in satisfaction of the purchaser’s obligation to give a mortgage, in the absence of acquiescence in the arrangement.” (Hounchin v. Salvaras, 133 N. W. 48.)

The order appealed from should, therefore, be reversed, with ten dollars costs and disbursements, and the motion to strike out this defense denied, with ten dollars costs.

Merrell and McAvoy, JJ., concur; Dowling, P. J., and Proskauer, J., dissent.