Corvallis & Alsea River R. v. Portland E. & E. Ry. Co.

163 P. 1173, 84 Or. 524, 1917 Ore. LEXIS 258

• Court: Oregon Supreme Court
• Decided: April 3, 1917
• Status: Published

Opinion

Mr. Justice Bean

delivered the opinion of the court.

At appropriate times counsel for defendant raised the questions involved in this case in several different ways, to wit: By a demurrer to the sufficiency of the complaint; by an objection to the introduction of any evidence on account of the insufficiency of the complaint; by a motion for a nonsuit; by a motion for a directed verdict in favor of defendant; and also by exceptions to instructions given by tbe trial court to tbe jury.

Tbe basis of the contention of counsel for defendant that the plaintiff cannot recover in this action is plainly stated in their brief as follows:

“In order to obligate the assignee to carry out the covenants of the assignor, there must be a special agreement to that effect, there must be a novation requiring a mutual agreement whereby the assignee was accepted by the original contractor or vendor and the contractor released from obligation. ’ ’

Defendant contends that the contract to build the extension was not assignable so as to obligate it to construct the same.

1. Taking the contract of sale and the deed in their entirely this much is plain, that the extension of the railroad into section 20 was agreed to be built by a certain date. The question is: Who should do this? Somebody must or suffer the consequences. The road was sold and conveyed by the Corvallis & Alsea River Railroad Company to the Portland, Eugene & Eastern Railway Company. Under the contract of sale and the deed of conveyance it is clear that the grantor would have no right to exercise any authority in the matter nor to interfere with the right of way, nor obtain any benefit therefrom. Keeping in mind the restriction in the contract for the sale as to the issuance of bonds for the extensions and betterments it would appear that the Portland, Eugene & Eastern Railway Company not only obtained the right, but assumed the responsibility to construct such an extension of the spur. It stipulated in order to preserve the security of plaintiff not to issue bonds for any such extension in excess of $25,000 per mile.

2. It was the defendant’s argument in the lower court that no greater obligation nor any less can be imposed upon the purchaser of the road than the writing itself contains. In order to construe the writings the court should be put in the position of the parties. Where a deed is ambiguous it may be shown by parol how the parties understood it and dealt with the substance thereof, in aid of its interpretation; Harlow v. Oregonian Pub. Co., 45 Or. 520 (78 Pac. 737). Looking at the written memoranda alone, should the vendor stand sponsor for the future conduct of operations and construct or pay for not constructing-an extension agreed to be built before the sale, without any recourse to the vendee, and thus reduce the compensation to be paid for the road? We think not. Does the contract in question stand upon any different foundation than uncompleted outstanding contracts for light, water and fuel to be furnished along the line and paid for, which we will suppose were in existence at the time of the sale? It seems to us that it does not. When the defendant bought and took an assignment of the contract which had been made between plaintiff and the Lumber Company for the construction of the extension of the branch spur and thereby acquired the right to receive the benefits thereof by obtaining materials for transportation, and the privilege of constructing its railroad over the lands of the Lumber Company and increasing its line, and accepted and partially performed, the stipulation, it assumed the liability of bearing the burden of the contract, together with the acquisition of the right of appropriating the benefits. It took the contract cum onere: Union Pac. R. Co. v. Douglas Co. Bank, 42 Neb. 469 (60 N. W. 886); Smith v. Rogers, 14 Ind. 224.

In a sale of a railroad it would be an utter impossibility to have all collateral contracts and transactions completed in toto; and it was meet and proper for the contracting parties, as they did in this instance, to stipulate that the vendor should liquidate all indebtedness incurred up to the time of the conveyance, and make provision for funds for future operations. Such a stipulation precludes the idea that the seller would be ultimately bound to bear the expenses of the construction of an extension or the making of betterments or running expenses after that time. All such later responsibilities were certainly at least impliedly assumed by the Portland, Eugene & Eastern, the vendee, by the contract of purchase which it executed and the deed which it accepted.

3. In construing contracts it is a recognized principle that the object of all rules of interpretation is to arrive at the intention of the parties as expressed in their contract, and that in written contracts which permit of construction, this intent is to be derived from an examination of the entire instruments.

“The problem is not what the separate parts mean, but what the contract means when considered as a whole”: 2 Page on Contracts, § 1112.

It was said by Mr. Justice Woods in Merriam v. United States, 107 U. S. 441 (27 L. Ed. 533, 2 Sup. Ct. Rep. 540):

“ It is a fundamental rule that, in the construction of contracts, the courts may look not only to the language employed, but to the subject matter and surrounding circumstances, and may avail themselves of the same right which the parties possessed when the contract was made.”

In Beach on Modem Law of Contracts, vol. 1, § 702, the author says:

“To ascertain the intention, regard must be had to the nature of the instrument itself, the condition of the parties executing it, and the objects which they had in view. The words employed, if capable of more than one meaning, are to be given that meaning which it is apparent the parties intended them to have. ’ ’

The contract for the extension was sold and assigned by inserting the word “contracts” in the agreement of sale and with like brevity in the deed of conveyance. We think, however, that the construction contract with the Lumber Company came within the descriptive terms of the sale contract and the deed and was assigned to the Portland, Eugene & Eastern Railway Company, the vendee (Sommer v. Island Mercantile Co., 24 Or. 216 (33 Pac. 559); Reinstein v. Roberts, 34 Or. 92 (55 Pac. 90, 75 Am. St. Rep. 564); La Vie v. Tooze, 43 Or. 595 (74 Pac. 210), and that the rights and duties of the'parties in carrying out the same are fairly shown by their agreement when considered in the light of the attending facts and circumstances: Atl. & N. C. R. Co. v. Atl. & N. C. Co., 147 N. C. 368 (61 S. E. 185, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 23 L. R. A. (N. S.) 228); Himrod Furnace Co. v. The C. & M. R. Co., 22 Ohio St. 451; American Bond. & Trust Co. v. Baltimore & O. S. W. R. Co., 124 Fed. 866, 875 (60 C. C. A. 52).

4. In the present case the contract involves no peculiar or special skill or personal element so far as the Lumber Company is concerned. A temporary road sufficient to transport the timber would fulfill the requirements of the contract. It appears that the Lumber Company assented to the agreement. We think the contract between the plaintiff and the Lumber Company was assignable.

The general rule is that an executory contract which is not necessarily personal in its character and which can consistently with the rights and interests of the adverse party be sufficiently executed by the assigneeis assignable, where there is an absence of an agreement in the contract in regard to the assignability: N. Y. Bank Note Co. v. Hamilton Bank Note Co., 180 N. Y. 280, 291 (73 N. E. 48); Smith v. Craig, 211 N. Y. 456, 461; Quinn v. Whitney, 204 N. Y. 363, 369 (97 N. E. 724); Himrod Furnace Co. v. C. & M. R. Co., 22 Ohio St. 451; Frese v. Moore, 1 Cal. App. 587 (82 Pac. 542). In its very nature the contract in question was one which would have to be performed by many men. It is for that reason assignable as declared by this court in Browne & Co. v. John P. Sharkey Co., 58 Or. 480, at page 483 (115 Pac. 156, at page 157), wherein Mr. Justice McBride said:

“The case of Campbell v. Sumner County, 64 Kan. 376 (67 Pac. 866), cited by appellant, wherein it is held that a contract to do county printing is one made in contemplation of the special skill of the contractor, does not meet with our approval. Contracts to print books, with or without illustrations, are such as must in their very nature be performed by many hands, and, unless there is something in the circumstances to indicate the contrary the general rule should be that the contract is for a certain quality of work, and not that a particular person shall perform it. The case of Carter v. State, 8 S. D. 153 (65 N. W. 422), holds exactly the reverse of the Kansas case above cited, and we tbiub- with better reason.”

In Devlin v. Mayor, 63 N. Y. 8, we find at page 17, the following:

“The assignability of a contract must depend upon the nature of the contract and the character of the obligations assumed rather than the supposed intent of the parties, except as that intent is expressed in the agreement.”

In the case at bar the original contract was made between two different corporations. It necessarily follows that the work was to be done through agents and servants and there could be no personal element involved. The Lumber Company was perfectly willing that the branch line of railroad should be constructed by plaintiff or any contractor or assignee with whom plaintiff might deal to that end. In 2 E. C. L., pp. 601, 602, it is stated:

“As a general rule it may be stated that building and construction contracts, which of necessity usually require the labor and attention of a number of men, are assignable, unless it appears that the contract was made because of the knowledge, experience or pecuniary ability of the contractor, or that for some reason he was especially fitted to carry it out, or that it involved some feature of a personal nature.”

In 21 L. R. A. (N. S.), 359, note, we find the following:

“As applied to building and construction contracts, which of necessity usually require the labor and attention of a number of men, it is generally held that such contracts do not come within the foregoing rule (involving personal relation) and are therefore assignable, unless it appears that the contract was made because of the knowledge, experience, etc., of the contractor.”

5. The usual test laid down in the cases is that a contract is generally assignable unless forbidden by public policy, or by the contract itself, or when its provisions are such as to show that one of the parties reposed a personal confidence in the other which he would not have been willing to repose in any other person. It is not pleaded in the present case that the Lumber Company would not have confided to any other company the duty of building the branch line. The work to be done by both parties was common ordinary work necessarily to be performed by many men. In New England Iron Co. v. Gilbert Elevated R. Co., 91 N. Y. 166, tbe following appears in tbe opinion:

“Tbe matter of the contract involved no personal relation or confidence between the parties, or exercise of personal skill or science, for the contractor was a corporation and its work was necessarily to be done through agents or servants. There are no words restraining its assignment, and the mere fact that the persons representing the contractor are assignees, and not merely agents or servants, will not operate as a rescission of or constitute a cause for terminating the contract.”

6. As between the Portland, Eugene & Eastern By. Company, the assignee, and the Corvallis & Alsea River Railroad Company, the assignor, the former is bonnd to carry out the provisions of the assigned contract and in all respects to comply with the terms of the assignment, as signified by the contract of sale and deed of conveyance of the road. The latter may recover from the defendant the damages it has sustained by reason of the failure of the assignee to carry out the assigned contract: 5 C. J., p. 976, § 168; 4 Cyc. 82 (B); Atl. & N. C. R. Co. v. Atl. & N. C. Co., 147 N. C. 368 (61 S. E. 185, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 23 L. R. A. (N. S.) 228); Cutting Packing Co. v. Packers’ Exchange, 86 Cal. 574 (25 Pac. 52, 21 Am. St. Rep. 63, 10 L. R. A. 369); Younce v. Lumber Co., 148 N. C. 34, 36 (61 S. E. 624); Bach v. Boston etc. Consol. Min. Co., 16 Mont. 467 (41 Pac. 75); State v. School Dist., 51 Neb. 237 (71 N. W. 727); Union Pacific R. Co. v. Douglas County Bank, 42 Neb. 469 (60 N. W. 886).

7. It may be stated generally that the assignment of a contract operates not merely as an assignment of the moneys thereafter to be earned, but of the whole contract with its obligations and burdens. After the same has been modified by the parties thereto it is an assignment of the contract as modified: 5 C. J., p. 947, § 122.

In Atl. & N. C. R. Co. v. Atl. & N. C. Co., 147 N. C. 368 (61 S. E. 185, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 23 L. R. A. (N. S.) 228), one Ives who had an oral contract with the plaintiff company to deliver cord-wood recovered judgment against it for violation of the agreement. The company paid the judgment and then sued the defendant on the ground that the Ives contract was assigned to the defendant to whom the plaintiff had leased its railroad and that the defendant owed plaintiff the duty of carrying out the assigned contract. Plaintiff recovered. Mr. Justice Hoke at page 231 of the opinion said:

“For while, as heretofore stated, the lessor company was not relieved of the obligation under this contract unless Ives had agreed to accept the lessee in discharge of the former, as between these parties, the lessor and lessee, the force and effect of the assignment were to establish, in any event, a primary liability in the lessee, and, under the general equitable principles of indebitatus assumpsit, tbe lessor having been forced to pay, can recover of the lessee the amount of this enforced recovery. Keener Quasi Contr., p. 396, 15 A. & E. Ency. Law, 1108. In the citation from Keener, supra, it is said: ‘It may be stated as a general proposition that a plaintiff can recover against a defendant as for money paid to his use to the extent that the claim paid by the plaintiff should have been paid by the defendant.’ * * (After quoting from the case of Cutting Packing Co. v. Packers’ Exchange, supra, it was said): While this ruling was made to depend to some extent on a section of the California Code, the statute itself is only an embodiment of the generally accepted doctrine applicable to the facts indicated.”

In Cutting Packing Co. v. Packers’ Exchange, 86 Cal. 574 (25 Pac. 52, 21 Am. St. Rep. 63, 10 L. R. A. 369), the plaintiff made a contract to purchase and one Blackwood to sell crops of apricots for certain years, stating the minimum and maximum amounts. The agreement was assigned by plaintiff to defendant, but Blackwood refused to accept the defendant in place of the plaintiff. It was performed for two years. During the third year the defendant refused to accept the apricots and the plaintiff received them, sold them upon the market for a less price than that stipulated by the contract, and thereupon brought action against the defendant for the deficiency by reason of the breach of the agreement. Mr. Justice Works, speaking for the court, said:

“The obligation thus assumed was apparent on the face of the contract. We therefore think it plain that as the plaintiff, as assignor, was still bound to Black-wood to pay the price stipulated in the contract, notwithstanding the assignment, and as the defendant, as assignee, assumed such obligation, the plaintiff, as between it and the defendant, stood in the nature of a surety for the latter for the performance of the obligation. If this be correct, it then follows, that from the assignment, an implied contract arose between the plaintiff and defendant, whereby the latter became bound to the former to receive and pay for the apricots according to the terms of the original contract.”

8. The assignment of a contract does not discharge the assignor from his original undertaking: Atl. & N. C. R. Co. v. Atl. & N. C. Co., 147 N. C. 368 (61 S. E. 185, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 23 L. R. A. (N. S.) 228); Cutting Packing Co. v. Packers’ Exchange, 86 Cal. 574 (25 Pac. 52, 21 Am. St. Rep. 63, 10 L. R. A. (N. S.) 369); R. L. Co. v. S. & P. P. Co., 135 (31 N. E. 1018); 4 Cyc. 84, par. 3; Martin v. Orndorff, 22 Iowa, 504.

9. The Portland, Eugene & Eastern Railway Company, having been notified to defend the action brought against the Corvallis & Alsea River R. Company, in the Circuit Court for Benton County, if ultimately liable is bound by the judgment in that case to the same extent as though it had been a party to the record. Such judgment is conclusive upon the defendant of the following issues in the present case: (1) That there was a valid contract between the plaintiff and the Lumber Company whereby plaintiff was bound to construct the branch line of railroad into section 20; (2) that the contract was violated; (3) that by reason of the violation of the contract the Lumber Company was damaged in the sum of $18,124: Astoria v. Astoria & Columbia Riv. Ry. Co., 67 Or. 549, 550 (136 Pac. 645, 49 L. R. A. (N. S.) 404); Oceanic Steam Nav. Co. v. Campania Transatlantic Española, 144 N. Y. 663 (39 N. E. 360); Washington Gaslight Co. v. Dist. of Columbia, 161 U. S. 316 (40 L. Ed. 712, 16 Sup. Ct. Rep. 564); Town of Waterbury v. Waterbury Terminal Co., 74 Conn. 152 (50 Atl. 3, 40 L. R. A. (N. S.) 1174, note); 23 Cyc. 1270. It was proper for the court to instruct the jury, if it found for plaintiff, to find a verdict for $18,124, and interest thereon at 6 per cent, as the Benton County judgment against defendant conclusively established that amount as the damage suffered by the Lumber Company, and it was clearly proved and not controverted, that plaintiff paid such sum: Crossen v. Grandy, 42 Or. 286, 287 (70 Pac. 906).

This leaves the main question of the liability of the defendant for the performance of the contract for the extension of the branch line to be tried and considered. There was no error in the refusal of the trial court to hold that the defendant was not liable nor in the denial of the several motions. -It was the duty of the trial court to construe the writing, which it did, but submitted to the jury the question of the identification of the contract and the intent of the parties as to the assignment and advised them that if they found that it was not the intention of the vendor and vendee that the contract in question should be assigned they should find for the defendant.

It appears that the trial court, after construing the writings to the effect as above -indicated, over the objection and exception of defendant instructed the jury as follows:

‘' The alleged contract between the plaintiff and the Corvallis Lumber Manufacturing Company was an assignable contract, with or without the consent of the Lumber Company, and if you find from the evidence that the said contract, if you find there was such a contract, was assigned to the defendant, then the defendant was bound to the plaintiff to perform the contract. ’ ’

The charge of the court was in strict accord with the law as shown by the authorities above referred to. The defendant requested the court to charge the jury in accordance with the law as contended for by defendant raising practically the same questions as the motions above adverted to. This request does not require a separate discussion. We find no error in the record. It follows that the judgment of the lower court should be affirmed and it is so ordered.

Affirmed. Rehearing Denied.

Mr. Justice Harris took no part in the consideration of this case.

Mr. Justice McCamant

delivered the following dissenting opinion:

I am unable to concur in so much of the foregoing opinion as approves the following instruction given by the court below, and to which the defendant excepted:

“The alleged contract between the plaintiff and the Corvallis Lumber Manufacturing Company was an assignable contract, with or without the consent of the Lumber Company, and if you find from the evidence that the said contract, if you find there was such a contract, was assigned to the defendant, then the defendant was bound to the plaintiff to perform the contract. ’ ’

The assignee of a contract is undoubtedly liable on its covenants if he expressly assumes them. In two of the cases cited in the majority opinion the liability of the assignee was predicated on such assumption: Younce v. Lumber Co., 148 N. C. 34, 36 (61 S. E. 624); Bach v. Boston Co., 16 Mont. 467 (41 Pac. 75). It is also well settled that in case the assignee.claims the fruits of the contract, he will be held to have assumed its burdens. The case of Atlantic Co. v. Atlantic Co., 147 N. C. 368 (61 S. E. 185, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 23 L. R. A. (N. S.) 228), charges the assignee with liability under the contract, on this ground: plaintiff had entered into a continuing contract with one Ives to purchase cordwood cut by Ives for use on plaintiff’s locomotives. Plaintiff subsequently leased Its railway line to the defendant and the defendant accepted cordwood from Ives for a period of time. Thereafter the defendant substituted coal for wood as fuel on its locomotives and sought to repudiate its obligations under the Ives contract. It was properly held that the defendant by enjoying the fruits of the contract had impliedly assumed its burden.

The case of State v. School District, 51 Neb. 234 (71 N. W. 727), was the same kind of a case. It involved the assignment of a building contract. The assignee accepted the assignment and completed the building. The court held that while he was entitled to the emoluments of the contract he was also chargeable with its burdens. Union Pacific Co. v. Douglas Bank, 42 Neb. 469 (60 N. W. 886), is to the same effect. A contract for the performance of work had been assigned by Mrs. Wells to Clarkson. Clarkson claimed the benefits of the contract and was held bound by its burdens. We quote from the opinion on pages 478 and 479 (on pages 888, 889, of 60 N. W.) of the report:

“We do not mean that the intention of the parties was by the assignment eo instante to impose upon Clarkson Mrs. Wells’ obligations.”

“We do not here determine that by the assignment he ipso facto rendered himself liable personally for the wages of the employee. What we do hold is that under siich an assignment he cannot be permitted in equity to avail himself of the benefits of the contract without discharging its obligations.”

The remaining case cited in the majority opinion is Cutting Co. v. Packers’ Exchange, 86 Cal. 574 (25 Pac. 52, 21 Am. St. Rep. 63, 10 L. R. A. 369). The facts as reported in this case are meager but if the case can be interpreted as holding that the mere acceptance of the assignment of a contract charges the assignee with the obligations of the assignor thereunder the case is out of harmony with the weight of authority and should not be followed. The law is stated in 2 R. C. L., pages 625, 626, as follows:

“A question has been raised as to whether the assignment of a contract operates to cast on the assignee liabilities imposed by the contract on the assignor, and it may be stated as a general principle that the assignment does not have any snch effect. ' ’

In New York Phonograph Co. v. Davega, 127 App. Div. 222, 234, 111 N. Y. Supp. 363, the court says:

“There are many decisions to the effect, and none that my research has disclosed to the contrary, that in the absence of express agreement the assignee of a personal contract is not liable on the covenants of his assignor.”

In Anderson v. New York Co., 132 App. Div. 183, 188, 116 N. Y. Supp. 954, the court says:

“The assignment was, doubtless, made and accepted with knowledge of all the provisions of the contract assigned, but something more than that was necessary to obligate the assignee to carry out the covenants of the vendee named in the contract. This could only be done by a specific agreement to that effect.”

To the same effect see: 2 Elliott on Contracts, § 1456; Suydam v. Denton, 84 Hun, 506, 508 (32 N. Y. Supp. 333).; Heinze v. Buckingham, 17 N. Y. Supp. 12; Smith v. Kellogg, 46 Vt. 560, 564; Consolidated Co. v. Peers, 166 Ill. 361, 374 (46 N. E. 1105, 38 L. R. A. 624); Tolerton Co. v. Anglo-Californian Bank, 112 Iowa, 706 (84 N. W. 930, 50 L. R. A. 777).

It is to be noted that the contract which was assigned to the defendant was only a liability. It is stated in Anson on the Law of Contract, Section 293, that “a promisor cannot assign his liability under a contract. ’ ’ Applying this principle to the facts in this case it is at least to be said that the defendant should not be presumed to have agreed to discharge plaintiff ’s liability on its contract with the Corvallis Lumber Manufacturing Company without convincing evidence to that effect.

By the instruction above quoted the jury was told that the mere fact of the assignment spelt a liability for the defendant. Under this instruction plaintiff was not required to prove that the defendant had assumed the obligations of the contract or even accepted the assignment. In my opinion this was prejudicial error calling for the reversal of the judgment.

Mr. Justice Burnett concurs in the result of the above dissenting opinion.