Assignment of Land Contract cannot be used to avoid personal liability

In Beauchamp v Schramm, an unpublished Michigan Court of Appeals opinion, the buyers on a land contract formed a corporation and assigned their buyer’s interest in the land contract to the corporation after the seller had declared a default and started land contract foreclosure proceedings.  The land contract permitted assignment.  The trial court dismissed the claims against the original buyers based upon the assignment.

The court of appeals reversed, finding that the assignment was made in bad faith with the intent to avoid personal liability for the deficiency upon sale of the property, likening the assignment to a fradulent conveyance under the Michigan version of the Uniform Fraudulent Conveyance Act.  The court reversed and remanded for a trial on the buyer’s liablity.

The interesting thing about the court’s opinion is that it raised the issue of the Uniform Fraudulent Conveyance Act without the issue having been raised or briefed by either party.

The issue could have been avoided entirely with appropriate drafting of the assignment clause.  Rather than simply providing that the contract could be assigned, the contract should have provided that it could be assigned, but that the buyers are not released from their liability under the contract without consent of the sellers.

© Steve Sowell 2017