Crane Ice Cream Co. v. Terminal Freezing & Heating Co.

128 A. 280, 147 Md. 588, 39 A.L.R. 1184, 1925 Md. LEXIS 128

• Court: Court of Appeals of Maryland
• Decided: February 26, 1925
• Status: Published

Opinion

Parke, J.,

delivered the opinion of the Court.

The appellee and one W. 0. Frederick entered into a contract for the ‘delivery of ice by .the appellee to Frederick, and, before the expiration of the contract, Frederick executed an assignment of the contract to the appellant; ¡and on the refusal of the appellee to deliver ice to the assignee, it brought an action on the contract against the appellee to recover damages for the alleged breach. The common counts of-the declaration were abandoned, leaving -an amended special count on the contract ¡and assignment, to which.! a demurrer was filed and ¡sustained. It is from ¡the judgment against the appellant on this demurrer that the appeal was taken.

The demurrer admitted the following material allegar tions: At the execution of the contract, the 'Terminal Freezing and Heating Company, appellee, wias a corporation engaged in the manufacture and -sale of ice at wholesale within the State of Maryland, and William -0. Frederick made and sold ice cream in Baltimore, where has plant wasi located. The original contract between these two parties was made on April 2nd, 1911, and ran until April 2nd, 1920. -The contract was modified on June 3rd, 1918, by the increa.se of the original contract price of ice from $2.15 a ton to $3.25, and, before its expiration, the contract was renewed by the parties for another three years, so that the contract was continued until April 2nd, 1923, without change, save as to the higher-agreed cost of the ice delivered.

The contract imposed upon the appellee the liability to sell and deliver to Frederick such quantiti-ess of ice as he might use iu his business as an ice .cream manufacturer to the extent of two hundred and fifty tons per week, at and for the price of $3.25 a ton of two thousand pounds on the loading platform of Frederick. The contractual rights of the appellee were (a) to' be piaidl on every Tuesday, dtaiug the continuation of the contract, for all ice purchased by. Frederick during the week ending at midnight upon the next preceding Saturday; (ib) to require Frederick not to¡ buy or accept any ice from -any other source than the appellee, except in excess of the weekly maximum of -two- hundred and fifty tons; (c) to -annul the contract upon any violation of the agreement by Frederick; and (d) to sustain no liability for any breach of contract growing out of causes beyond its control. The converse of these rights and liabilities of the appellee were the correlative liabilities and rights of Frederick under the contract.

There w-as -a further provision .that the contract in its entirety should continue iu force from term to term, unless either party thereto gave to- the other party at leiast sixty days’ notice in writing; before the expiration of the term of the intention to- end the contract. The contract did not expressly permit or inhibit an assignment, but neither did it contain any word, such as assigns-, to indicate- that the parties contemplated an assignment by either.

Before the firs-t year -o-f the second term of the contract . had expired, Frederick, without the -consent or knowledge of the ap-pellee, executed and delivered to- the -appellant, for a valuable consideration, a written assignment, dated February 15th, 1921,; of the modified agreement 'between him and the appe-lle-e. The attempted transfer of the contract was .a part -of the transaction between Frederick .and the appellant, whereby the appellant acquired by purchase the plant equip* ment, rights and credits-, cho-seis in -action, “go-o-d will, trade, ■custom, patronage-, rights-, contracts” and other as-sets -of Frederick’s ice cream business, which had been established and conducted -by him in Baltimore. 'The purchaser- took full pois-ses-si-on and continued th-a former business carried -on by Frederick. It was then -and is now -a corporation “engaged in the ice cream business upon -a large -and extensive scale in the City -of Philadelphia, -as well as in the City of B-altimiore, -and State of Maryland,” -and had -a large capitalization, amp-le resource-si and credit, to meet -any of its -obligations, “and all -and .singular the- terms -and provisions” of the contract; .and it wais prepared to p-ay cash for -all ice deliverable under the contract.

As soon as¡ the .appellee learned of this purporting -assign-

meat and the absorption of the business of Frederick by the appellant, it notified Frederick that the contract Was at an end, and declined -to deliver -any ice to the appellant. Until the day of the assignment the obligations of both original parties had been fully performed and discharged.

It may be stated as .a general rule that a: contract cannot be enforced by or against a person who is not a party to it, but there are circumstaneeisi under which either -of the contracting- parties may substitute another for himself in the rights and duties -of the contract without obtaining the consent of the other party to the contract. The inquiry here is whether the facta bring the ease within the scope of the g’enieral rule, and -the answer must be found from‘a -eonsid•eration iu detail of -the relation of the parties concerned, the subject matter of the contract., its terms, and the- circumstances of its formation. , .

, The basic facts upon which the question for solution depends must be sought in the effect -of the attempted assignment of this executory bilateral contract on both the rights and the liabilities of -the contracting parties, -as every bilat•eral contract 'includes both rights and duties on each side while both sides remain -executory. 1 Williston on Gonirttcis, sec. 407. If the -assignment of rights and the assignment of duties by Frederick 'are -separa,ted, they fall into these t-wo divisions: (1) The rights of the'assignor were (a) to-take no ice, if the assignor used none in his business; but, if he did (b) to require the appellee to, -deliver, on the loading platform of the assignor, all the ice he might need in his business to the extent of twio hundred anid fifty tons a week; and (c) to buy any -ice he might need in excess of th-ei weekly two hundred -and fifty tons from any other persons; and (2) the liabilities of the -assignor were (.a) to. pay to the -appellee on every Tues-day -during the continuance .of -the contract the -stipulated price for all ice purchased and weighed by the assignor during the week ending -at midnight upon the next preceding 'Saturday, and (b) not, directly or indirectly, during the existence .of this agreement, to buy or accept any ice from, any- otter person, firm, or corporation than the- said Terminal Freezing and Hmting Company, except such amounts as might he in excess of the weakly limit of two hundred and fifty tons.

_■ Whether the attempted assignment of these rights, or the attempted delegation of these duties, must fail because the rights or duties are of too- personal a character is .a question of construction to be resolved from the nature of the contract and the express or presumed intention of the parties. Williston on Contracts, sec. 431.

Tire contract was made by a corporation with .an individual, William 0. Frederick, an ice cream manufacturer, with whom the corporation had dealt for three years; before it executed a renewal contract for a second like period. The character, credit, and resources of Frederick had been tried and tested by the appellee before it renewed the contract. Not only had his ability to pay as agreed been established, but his fidelity to Ms obligation not to buy or accept .any ice from any other source up to tvro hundred and fifty tons a week had been ascertained. In addition, the appellee had not asked in the beginning, nor on entering into, the second period of the contract, for Frederick to undertake to buy a specific quantity of ice; or even to- take any. Ehederick simply engaged himself, during a definite term, to accept •.and pay for such quantities of ice as he might use in his business! to the extent of two hundred and fifty tons a week. If he used no ice in Ms business, he Was under no obligation to pay for a pound. In -any week, the quantity coulid vary from zero to two hundred and fifty tons, -and its weekly fluctuation, throughout the life of the contract, could irregularly range between these limito. The weeldy payment might be nothing or as much] a'a $812.50-; tod' for every wegk a credit was extended to the eigjhth -day from the beginning of every week’s delivery.' From the -time of the beginning of every weeldy delivery of the ice to the date of the payment • therefor, the title to» the ice was in the purchaser, and the •seller had no security for its payment except in the integrity ■and solvency of Frederick. The performances, therefore, were not concurrent, but the performance of .the non-assigning party to the contract was to precede .the payments by the ■assignor.

When it is also considered that the ice was to be supplied .and paid for, according to its weight, on the loading platform of Frederick, ,at an unvarying price, without any reference either to the quantity used, or to the fluctuations in the cost ■of production, or to m(arket changes in the selling price, throughout three years, the conclusion is inevitable that the inducement, for the appellee to enter into the original contract and' into, the renewal lay outside ’the hare terms of the .contract, hut was implicit in them, and was the appel]ees reliance upon its. knowledge -of an average quantity of ice consumed, and probably to be needed, in the usual course' of Frederick’s business, .at all times throughout the year', and its confidence in the stability of his enterprise, in his competency in commercial .affairs, in his proibity, personal judgment, and in his continuing financial responsibility. The contract itself emphasized the personal equation by specifying that the ice was to be bought, for “use in his business as ;an ice cream maufacturer” and was to be paid for according to its weight “on the loading platform of the said W. 0. Frederick.”

When Frederick went out of business as .an ice cream manufacturer, and turned over his plant and everything constituting his business to the .appellant, it Was no longer his business, or his loading, platform, or subject to his care, control or maintenance, but it was the business of .a stranger, whose skill, competency 'and requirements of ice were .-alto^ •gefher different from those of Frederick. The assignor had his single plant in Baltimore. The assignee, in its purchase, simply added .another unit to its ice cream business, which it. had been, .and is now, carrying on “upon a large and extensive scale in the Oity of Philadelphia .and State of Pennsylvania., as well as in the Oity of Baltimore .and State of Maryland.” The .appellee knew that Frederick could not carry on his business -without ice wherewith - to manufacture ice creain at his plant for Ms trade. It also Was fiaimiliar with the quantities of ice hie would require, from time to time, in his business at his plant in Baltimore; and it consequently eo-nld make its other commitments for ice with this knowledge as a basis.

The, .appellant, on the other hand, might wholly supply its increased trade, acquired in the purchase -of Frederick’s business, with its ice cream produced upon a large and extensive scale by its manufactory in PhiladelpMa, which would result in no- ice being bought- by the assignee of the appellee, and s-O' the appellee would be deprived of the -benefit of its contract by the introduction of a different personal relation or element, wMch was never' contemplated by the original contracting parties. Again, -should the price of -ice be relatively high in PhiladelpMa in comparison with the stipulated price, tlie assignee -could run -its business in Baltimore -and furnish its patrons, or a portion of them, in Philadelphia, with its product from the wieddy maximum consumption of two hundred and fifty tons- o-f ic-e throughout the year. There can be no denial that the uniform delivery o-f the maximum quantity of two hundred and fifty tons a week would be a eonsaquence not witMn the normal scope -of the -contract, and would impose a greater liability on the -appellee than was anticipated.. 7 Halsbury’s Laws of England, sec. 1015, p. 501.

Moreover, the contract here to supply ice was undefined except as indicated from time to tome by -the personal requirements of Frederick in Ms specified -business. The quantities of ice to be supplied to Frederick to answer his weekly requirements must be very different from, ¡and would not be the measure of, the quantities- needed by Ms assignee, and, manifestly, to impose on thei seller the -obligation to -obey the demands of the substituted assignee is to -set up a n-ew measure of ice to be supplied and .so- a new term in the 'agreement that the appellee never hound itself to perform. Up to two hundred -and fifty tons o-f ice a week, Frederick engaged not to buy or accept any ice from any other party than the appellee. After Frederick had sold ¡away his business, -this covenant could not bind the assignee of his business, and even if it 'Continued to¡ bind Frederick, his refraining from not buying ice elsewhere was not a contemplated consideration for selling ice to my one except Frederick himself. Kemp v. Baerselman (1906), 2 K. B. 604, 608. 609. It was argued that Frederick was entitled to the weekly maximum of two 'hundred and fifty tons, and .that he-might have expanded his, business so as to require this weekly limit of ieei, and that, therefore, the burdens of the contract might have been as onerous to the appellee, if Frederick had continued in business, as they could become under the purporting assignment by reason of the increased requirements of the larger business of the asisdgpee. The unsoundness of this -.argument is that the la,w accords to every man freedom of choice in the party with whom hei deals, -and the terms of his dealing. He cannot be forced to do¡ a -thing which he did not agree to do because it is like and mo more burdensome than something which he did contract to do.

Under all the circumstances of the case, it is clear that the rights and duties of the contract under consideration were of so personal a character that the rights of Frederick cannot be -assigned nor hi© duties be -delegated .without defeating the intention of the parties to the original contract. "When-Frederick went out of the business of making dee -cream herniada it impossible for him to¡ -complete his performance of the contract, and hi© personal action and qualifications!, upon which the appellee relied, were eliminated from a contract which presupposed their continuance. Ftederi-efc not only attempted an assignment, but hisi course isi a repudiation of the obligations of the contract. He is not -even -alleged to-be ready to pay for any -ice which might be delivered after the date of the purporting assignment, but the allegations of the declara,tion simply aver that the assignee ¡alone had undertaken to- perform 'the further contractual -obligations -of the a-s-sigpor. Frederick, however, cannot be heiard to say that he has not repudiated a contract, whose contemplated! performance his own .act has made it impossible for him to fulfill. Eas tern Advertising Co. v. McGaw, 89 Md. 86, 88.

While a party to a contract m|ay .as a general rule assign all his beneficial rights, except where a personal 'relation is involved, his liability nmder the contract is not assignable inter vivos, because any one who is bonnd to any performance whatever or who owes money cannot, by any act of his own, or by any act in .agreement with any -other person than his creditor or the one to. whom his performance is -due, cast off Ms own liability -and substitute .another’s liability. If this Were not. true, obligor® could free themselves of their obligations by the isdmple expedient of assigning them. A further ground for the rule is that not only is a party entitled to know to whom he must look for the satisfaction of M» rights under the contract but, in 'the familiar word® of Lord Denman in Humble v. Hunter, 12 Q. B. 317, “you have a right to the benefit yon contemplate from the character, credit .and substance of the person with whom yon contract.” Eor these reasons it has; been uniformly held that a man cannot assign his liabilities under a contraet, but one who is bonnd so as to bear .an ime-scapable liability may delegiate the performance of his obligation to; ..another, if the liability be of .such a nature that its perf ormance -by another will be substantially the same thing as performance by the promisor himself. In such circumstances the performance of the third party is the act of the promisor, who remains liable under the contract and answerable in damage» if the performance be not in strict fulfillment of the contract. British Waggon Co. v. Lea, 5 Q. B. D. 149; Robson & Sharpe v. Drummond, 2 B. & Ad. 303; Anson on Contracts, 218, 219 (4th Am. Ed.), pp. 377-380; 7 Halsbury’s Laws of England, p. 495; Eastern Advertising Co. v. McGaw, 89 Md. 86-88; Tarr v. Veazey, 125 Md. 199; 1 Williston on Contracts, secs. 411, 412, 418, 421, 420, note 48, at pp. 784, 785; Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. S. 379; Edison v. Babka, 111 Mich. 235; Schultz v. Johnson, 5 B. Mon. 497; Lansden v. McCarthy, 45 Mo. 106; Hardy etc. Co. v. South Bend Co., 129 Mo. 222; Paige v. Faure, 229. N. Y. 114.

However, tha analysis of the facts on this appeal leaves no room for doubt that the ease at bar falls info the category of those .assignments where an .attempt is made both to transfer the rights .and to delegate the duties of the assignor under an executory bilateral contract, whose terms and the circumstances make plain that' the' personal qualification and action of the assignor, with respect to. both his benefits and burdens: under the contract, were essential inducemients in the formation of the contract; .and further that. the. assignment was a repudiation of any future liability of the assignor. ■ The attempted assignment before us. altered the conditions and obligations of the undertaking. The appellee would here be obliged moti only to. perform the subsequent stipulations of the contract for the benefit of a stranger and in conformity with his will, but also, to accept the performance of the stranger in place of that of the assignor with whom it contracted, and upon whose personal integrity, capacity and management in the course of .a particular business he must be assumed to have relied by reason of the very nature of the provisions of the contract and1 of the circumstances of the conti-aoting parties.. The nature and stipulations of the contract prevent it being implied that the non-assigning party had .assented to such an 'assignment of rights and ■ delegation of liabilities. The .authorities are clear, on the facts at bar, that -the appellant could noit enforce the contra,at against 'the appellee.

The principle applicable here has been enforced by this Court in Eastern Advertising Company v. McCaw, 89 Md. 72, and in Tarr v. Veazey, 125 Md. 199. In the latter of these two cases the Court said: “The rule was thus, stated in Delaware County v. Diebold Safe Co., 133 U. S. 488, and in Burck v. Taylor, 152 U. S. 651: ‘A contract to. pay money may doubtless be assigned by the person to whom the money is payable, if there is nothing in the terms of the contract ■which manifesto the intention of the parties to it that it shall .not he assignable. But when rights arising out of contract are coupled with obligations to be performed by the contractor, and! involve ,such a relation of personal confidence that it must have been intended that tbei rights should he exercised, and the obligations performed by him alone, the contract, including, both his rights and 'his obligation®, cannot be assigned without the consent of the other party to the original contract.’ ” Kemp v. Baerselman (1906), 2 K. B. 604; Demarest v. Dunton Lumber Co., 161 Fed. 264; Paige v. Faure, 229 N. Y. 114, 127 N. E. 898, 899; Burck v. Taylor, 152 U. S. 651.

The authorities cited on appellant’s brief have been examined, and they are not in 'conflict with the principles of law controlling this case, but rather serve to' illustrate their application to other .and' different combinations of facts, which do not afford any ground for this Oount to change its conclusion on the non-asisiginable character’ of the burdens and benefits arising from the stipulations and the nature of the contract- in this .appeal. The appellant stressed the case •of Tolhurst v. Associated Portland Cement Manufacturers (1903), A. C. 414, as supporting it® contention that the attempted assignment of the instant case involved no element of personal qualification or action. It may he.said of this case, that it raised a great difference -of opinion. It was decided one way by the King’s Bench; ■ and another way by the Oourt of Appeal, -and there wasi .a marked divergence of views in the Lions© of Lords, which affirmed the Oourt of Appeal, with the Earl of HaMntry doubting,' and Lord Robertson vigorously dissenting. (1901) 2 K.’ B. 811; (1902) 2 K. B. 660; (1903) A. 0. 414.

The decision has never been accepted -as wholly siatisr factory and' was not regarded as controlling in Kemp v. Baerselman (1906), 2 K. B. 604, where it was distinguished, and Lord Alverstione -stated that the House of Lords! had decided “in that particular case the contract for the supply of challe for fifty years was to' -be treated as a contract for the supply to a given cement-making place, and. not a personal contract.” p. 608.

TollrurS't wasi the owner of chalk quarries and made a contract with ‘the Imperial Portland Oemient Company, Limited, by which it was agreed that he would for fifty years supply to the company, and that the company should take and buy fr om him, at least seven hundred and fifty tons of challe per-week at a certain price, and -so much more as ‘the company should require for the whole of their manufacture of Portland cement upon their-land near the quarries. The Imperial Company was formed for the purpose of establishing cement works on land obtained from Tolhurst, near the chalk quarries, which were to supply the chalk to be used in making the cement. Tolhurst had built a tramway to the boundary of the land of the Imperial Company, which was to continue the tramw&y on its .own land1 to. a convenient place in -ordter to enable him to deliver chalk 'at the company’s plant.

The Imperial Company sold out to. a new and' larger company, and went into) voluntary liquidation, and its affairs had been fully Wound up and all its -assets had been distributed, when the assignee of its business land this contract brought 'an -action against Tolhurst, claiming a declaration that the contract wffl binding upon Tolhurst, -and that be must supply the -chalk to the -assignee in accordance with the -contract.

It will be observed that the cement works .and fhe¡ chalk quarries were -on parts of a tract of land that, was originally owned by Tolhurst, and that the cement company was formed for the commercial exploitation of the chalk deposit. The location of the enterprise wias obviously induced by the -advantages of a continuous supply from the quarries, -and so the contract was -drawn that, on completion of the extension of the tramway on its land by the Imperial Company, “the said Alfred Tolhurst will, for -a term -of fifty years, to be computed from the 25th day of December, 1891, or for such shorter period (not being less than thirty-five years) as he shall be possessed of chalk -available and -suitable for the manufacture of Portland cement, ¡and, capable of being quarried and got in the usual manner above water level, supply to the company, and! the eonxpany will take .and buy of the said Alfred Tiolburst at least seven ¡hundred and fifty tons per weak, .and so much more, if 'any, as the company shall require for the whole of their manufacture of Portland cement upon their said land.” The contract was, in substance, a -sale of 'all the chalk in the quarries by weekly deliveries, less what might be sold by Tolhurat to others'. As was said by WiUiston in his able work on contracts: “The case must be rested 'On a construction of the contract making the test of the amount of chalk to¡ be furnished not the personal needs of the -original promisee, but the capacity of that promisee’s land) and the machinery thereon.” Williston on Contracts, see. 421, p. 786; Kemp v. Baerselman (1906), 2 K. B. 604, 608.

It is manifest that this case is to¡ be distinguished from' the one at bar, but, if not, this Court would not be prepared to follow the reasoning of the final decision^ because the Imperial Company had renounced its obligations under' the contract; had gone out of business, and had disposed of .all its assets so as to be no longer able toi pay the .agreed price, ■and thereby the ¡seUer had -lost the credit of the original contracting party, ¡and the decision compelled' Tolhurst to give 'Credit to the asisigp.ee only. We take it to be sound doctrine that where one contracting party repudiates his obligations, the other party has the right of declining to be bound to a stranger by its term®. See Anson on Contracts (4th Am. Ed. by Corbin), note 2 pp. 378, 379; 1 Williston on Contracts, se e. 420; Hand v. Evans Marble Co., 88 Md. 226, 229, 230.

As it is the opinion of the Court that the judgment below wias in accordance with the principles of law applicable to the facts ¡admitted by the demurrer, the judgment wiU be. affirmed without comment on the ability of an assignee of an executory contract for the sale of goods to bring an action in bis own name. See Code, art. 8, sec. 1; Banks v. McClellan, 24 Md. 62, 80; Hand v. Evans Marble Co., 88 Md. 226, 229, 230.

Judgment affirmed, with costs to the appellee.