Fuller v. Callister, Docket No. 37035
Supreme Court of Idaho
May 6, 2011
Opinion Author: R. Burdick, Justice
Concurring in Opinion: Eismann, Chief Justice; J. Jones, Justice; Horton, Justice
Whether the assignment of a purchase agreement relieves the assignor of liabilities and obligations under the agreement.
Summary of Ruling:
Confluence Management, LLC (“CM”) entered into a real estate purchase agreement with the Fullers to purchase certain property. In an addendum, CM agreed that it would deed a portion of the property to Ada County Highway District (“ACHD”) and transfer the proceeds from the sale to the Fullers. Then, before deeding the property to ACHD, CM assigned its rights under the purchase agreement to Liberty Partners, Inc., with the consent of the Fullers. LP proceeded to deed a portion of the property to ACHD, but it refused to transfer the proceeds to the Fullers. The Fullers brought an action against CM and LP, alleging that they had breached the purchase agreement. The district court dismissed the breach of contract claim against CM, holding that the assignment of the purchase agreement from CM to LP relieved CM from any obligations under the agreement, and the Supreme Court reviewed this ruling on appeal.
Quoting American Jurisprudence, the Supreme Court differentiated between a mere assignment, which does not release the assignor from its obligations under the contract, and a novation, which releases the assignor from its obligations under the contract. A novation requires that all parties agree that (1) the assignee assumes the assignor’s obligations under the contract, and (2) the assignor is released from further liability under the contract.
Turning to the facts of this case, the Fullers consented to CM’s assignment of the purchase agreement to LP, but the assignment did not purport to release CM from its obligations under the agreement. Therefore, the Court held that “there is no basis to believe that the Fullers intended for the addendum to constitute a novation.” The Court vacated the district court’s judgment and remanded the case for proceedings consistent with its opinion.
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