On August 25, 2023, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Manda Intl. Corp. v. Red Hook 160 LLC, 2023 NY Slip Op. 33126(U), holding that an assignee does not automatically assume the obligations of the assignor, explaining:
The assignment entered into between the owner and Churchill states that “Contractor shall look only to the estate and interest, if any, of Lender in the Property for the satisfaction of Contractor’s remedies for the collection of a judgment (or other judicial process) requiring the payment of money in the event of any default by Lender as “Owner” under the Construction Management Agreement or under this Assignment, and no other property or assets of Lender shall be subject to levy, execution or other enforcement procedure for the satisfaction of Contractor’s remedies under or with respect to the Construction Management Agreement, the relationship of the “Owner” and “Construction Manager;’ under the Construction Management Agreement or any claim arising under this Agreement”. The above language specifically states the owner remains liable for any claims. Indeed, this exclusion of liability comports with the well-established rule that an assignment does. not release the assignor of its obligations under the assigned contract. Thus, the assignment agreement only assigned the benefits of the: construction agreement and not
any of its liabilities.The defendant argues that pursuant to New York law, when a contracting party consents to the assignment of the contract by the other party and accepts the assignee in place of the assignor, the assignor is relieved from its continuing liability under the contract. Therefore, RH 160, as assignor, is relieved of its continuing liability under the CM Agreement and Plaintiff must assert its claims, against the true counterparty to the CM Agreement – Churchill. However, the defendant failed to cite any cases in support of that broad proposition. In fact, that assertion is contradicted by numerous cases of the past one hundred years that have held otherwise. Therefore, Manda may pursue claims against the defendants including the owner of the property.
Consequently, the motion seeking to dismiss the action is denied.
(Internal citations omitted).