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274

Harper v. Dalzell, Gilmore & Leighton Co.

Third-They allege that they signed the contract as agents only, and that this fact, together with the extent of their authority was well known to the defendants.

The cause was tried before a jury, which returnd a verdict in favor of the corporation against the defendants.

Three grounds of error have been argued before us:

First That the court erred at the conclusion of the testimony of the plaintiff in allowing the petition to be amended so that it alleged that the assignment of the contract by the partnership to the corporation was made with the knowledge and consent of the defendants. It is contended that such amendment changed the cause of action.

Second-That the court erred in charging that the consent of one of the defendants to the assignment of the contract was the consent of ali. Third-That the court erred in instructing the jury on the subject of estoppel because no such issue was presented by the leadings.

We do not think the first ground of error is well taken. The action was by the corporation which claimed to have performed the contract. which had been assigned to it by the partnership, and the petition alleged that the defendants had niade payments to it (the corporation). These allegations were in effect that the defendants had recognized the corpora tion as the party who was carrying out the contract, and therefore impliedly alleged the assent of the defendants to the assignment of the contract by the partnership.

Furthermore, if such is not the legitimate effect of these allegations, and there was a failure upon the part of the plaintiffs to make the material allegation as to assent, we are clearly of the opinion that it was proper for the court to allow an amendment to the petition inserting such an allegation in it; and as it does not appear that the defendants have been misled by the amendment or were in any way prejudiced by such action of the court, we see no reason to reverse the judgment on that ground. The amendment did not change the cause of action. It merely inserted in the petition a material allegation which had been omitted.

An inquiry as to the second ground of error, viz.: The correctness of the charge of the court, that the consent of one of the defendants to the assignment of this contract by the partnership to the corporation, bound all of them necessarily involves two preliminary questions, viz.:

First-Was the corporation identical with the partnership, to the extent that they constituted the same person; and therefore, was an assignment from the latter to the former merely an assignment in form and not in reality, the contract always remaining in the same person; and

Second-Was this contract unassignable to the extent that any assignment of it by the partnership was invalid unless with the consent of the defendants.

That the corporation in this case is a different person from the partnership is a proposition we think that is beyond dispute.

A corporation is a creature of the law, an artificial being, indivisible and intangible. The members of a corporation may all be in court, but the corporation itself inay be absent. What all the members of a corporation may do is not always the act of a corporation.

But the corporation in this case was not limited in its stockholders to those persons only who had composed the partnership, but also included other persons. Such a corporation with the liability of its members different from that of the liability of a partnership, was with

Superior Court of Cincinnati.

274

reference to the contracting syndicates a different person, both in law and in fact, from the partnership.

Was this contract assignable without the assent of the defendants? The court below charged that the contract was a personal one, and could not be assigned without the consent of the defendants, and no exception was taken to that part of the charge by either party, although it has been argued here that the contract was assignable without such consent.

Now, it must be apparent without much reflection, that in this contract, where a number of syndicates contracted with the owners of a glass works to locate the same near their property, the personality of the owners is for three reasons an important feature.

First-If the persons are irresponsible, they may never carry out their part of the contract, and an action for damages would afford no compensation.

Second-If a partnership has contracted, there is an individual liability for the full amount of the damages in case of a breach of the contract; whereas, in the case of a corporation there is only a limited liability upon the part of each member of the corporation.

Third-The purpose of entering into the contract was not merely to secure a glass works at Findlay, but to secure one managed by men of character and standing which would, in all probability, become a permanent industry in the community; enhance its importance and the value of its land; and attract workmen to it who would want to buy homes for themselves. And this personal nature, we think, cannot be explained away by the suggestion that any glass works when erected might, after its completion, pass out of the hands of the original owners. That event is, of course, never impossible; but its immediate happening is not probable; and if the works are of such a character as reputable business men would establish, they are likely, even if sold, to pass into the hands of the same class of business men; because none others are likely to have the capital or experience to justify them in such a purchase.

Among the many authorities upon the subject of the assignability of contracts, we select a few well considered cases in which the law is clearly stated, and which seem to have an especial applicability to the case at bar.

In Arkansas Valley Smelting Co. v. Belden Mining Co. (127 U. S., 379), it was held that:

'A contract in writing, by which a mining company agrees to sell and deliver lead ore from time to time at the smelting works of a partnership to become its property upon delivery, and to be paid for after a subsequent assay of the ore and ascertainment of the price, cannot be assigned by the partnership without the assent of the mining company, so far as regards future deliveries of ore."

And that, "The defendant could not be compelled to accept the liability of any other person or corporation as a substitute for the liability of those with whom it had contracted."

In the course of the opinion of the court, Mr. Justice Gray said, "At the present day, no doubt, an agreement to pay money or to deliver goods may be assigned by the person to whom the money is to be paid or the goods are to be delivered, if there is nothing in the terms of the contract whether by requiring something to be afterwards done by him, or by some other stipulation which manifests the intention of the parties. that it shall not be assignable."

274

Harper v. Dalzell, Gilmore & Leighton Co.

But everyone has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his consent. In the familiar phrase of Lord Denman, "You have the right to the benefit you anticipate from the character, credit and substance of the party with whom you contract." Humble v. Hunter, 12 Q. B., 310, 317; Winchester v. Howard, 7 Mass., 303, 305; Boston Ice Co. v. Potter, 123 Mass., 28; King v. Batterson, 13 R. I., 117, 120; Lansden v. McCarthy 45 Mo., 106.

The rule upon this subject as applicable to the case at bar is well expressed in a recent English treatise.

"Rights arising out of contract can not be transferred if they are coupled with liabilities, or if they involve a relation of personal confidence, such that the party whose agreement conferred those rights must have intended them to be exercised only by him in whom he actually confided." Pollock on Contracts, (4th ed.) 425.

In the case of Lansden et al. v. McCarthy, 45 Mo., 106, the syllabus of the opinion is:

"Where the contract may have been founded in personal trust and confidence, the assignee thereof cannot recover upon it without the consent of the party contracting with his assignor to the assignment."

In this case the defendant, who was in the meat business, had contracted with the proprietors of a hotel to furnish them all the fresh beef, pork and mutton that might be ordered by said proprietors for the use and consumption of said hotel for the year then next ensuing, at ten cents per pound, the proprietors of the hotel agreeing to pay for the meat so furnished promptly at the end of each successive month during the continuance of said contract. The proprietors assigned said contract to their successors, and the defendant refused to deliver meat to them under said contract, and his refusal was sustained. The court in its opinion said:

"The defendant's estimate of the solvency and pecuniary credit and standing of the plaintiff's assignors may have constituted an important inducement to the contract, without which he would not have entered into it. There was a credit given. The meat was not to be paid for on delivery, but at the end of the successive months, involving credit to an indefinite amount. The contract imposed no obligation upon the defend ant to accept as his debtors any other parties than those with whom he contracted. Whether or not he would do so was a question for him alone to determine. He could not be forced into it against his will by an assignment of the contract without his consent."

Now, the "character, credit and substance" of the persons who were to erect the glass works must have constituted as we have previously seen an important consideration with the contracting syndicates; and the "rights arising out of the contract" were "coupled with liabilities," because the contracting syndicates were to advance money from time to time as the plant neared completion. It was therefore of importance to them that they should repose confidence in the persons to whom they made such advances; and further, if there was an individual liability of each partner in case the advancements were made to a partnership, it would be a material change in "liabilities" to have such advancements made to a corporation of which the partners were merely a part of the shareholders with the right to transfer the shares, and with only a limited individual liability.

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Nor does the fact that the corporation glass works has completed its part of the contract alter the right of any syndicate to refuse to carry out its part of the contract, unless it has assented to the substitution of such corporation in place of the partnership; for the reason, as we have seen, that the "character, credit and substance" of the contracting company does not cease to become an important consideration to the syndicates, upon the erection of the plant, inasmuch as the syndicates desire a plant owned and controlled by men of such character as will make the plant a permanent one, and make it an important influence in building up the community in which it is located.

But even were this not the case; and the personal features of the contract ceased upon its execution and completion, yet the authorities hold that in such a case, certainly so far as those syndicates are concerned upon whose land the works were not erected, no recovery could be had from those syndicates who had been ignorant that the contract was executed and completed by another than the one with whom they had contracted.

In the case of Boston Ice Company v. Edward Potter, 123 Mass., 28, it appears that "the defendant in 1878 was supplied with ice by the plaintiff, but on account of some dissatisfaction with the manner of supply terminated his contract with it: that the defendant then made a contract with the Citizens' Ice Company to furnish him with ice; that some time before April, 1874, the Citizens' Ice Co. sold its business to the plaintiff, with the privilege of supplying ice to its customers, and the plaintiff afterward delivered ice to the defendant for one year without notifying the defendant that it had bought out the business of the Citizens' Ice Company until after the delivery and consumption of the ice. The court held that there could be no recovery because there was neither an express or implied contract; and that "no presumption of assent can be implied from the reception and use of the ice, because the defendant had no knowledge that it was furnished by the plaintiff, but supposed that he received it under the contract made with the Citizens' Ice Co. Of this change he was entitled to be informed."

The following part of the opinion of the court is directly in point upon the question at bar.

"A party has a right to select and determine with whom he will contract and can not have another person thrust upon him without his consent. It may be of importance to him who performs the contract, as when he contracts with another to paint a picture or write a book, or furnish articles of a particular kind, or when he relies upon the character or qualities of an individual, or has, as in this case, reasons why he does not wish to deal with a particular party. In all these cases, as he may contract with whom he pleases, the sufficiency of his reason for so doing can not be inquired into. If the defendant before receiving the ice or during its delivery had received notice of the change, and that the Citizens' Ice Co. could no longer perform its contract with him, it would then have been his undoubted right to rescind the contract and to decline to have it executed by the plaintiff.

"But this he was unable to do, because the plaintiff failed to inform him of that which he had a right to know. Orcut v. Nelson, 1 Gray, 536-542; Winchester v. Howard, 97 Mass., 303; Hardman v. Booth, 1 H. C., 803; Humble v. Hunter, 12 Q. B., 310; Robson v. Drummond, 2 B. & Ad., 303. If he had received notice and continued to take the ice

274

Harper v. Dalzell, Gilmore & Leighton Co.

as delivered a contract would be implied. Mudge v. Oliver, 1 Allen, 74; Orcutt v. Nelson, supra; Mitchell v. Lafaye, Hoe N. P., 253.”

The foregoing discussion brings us to the question of the correctness of the view taken by the court below, that the act of assent of one of the syndicate parties, to the assignment of the contract and its completion by the corporation in place of the partnership, was binding upon the other parties.

The question is presented by an exception to the general charge upon this subject, and by the refusal of the court to give special charges submitted by defendants.

Upon the subject of the assent of one being the assent of all, the court in its general charge said: "Under the contract the parties of the second part are in the position of individuals engaged in a joint enterprise that is jointly liable, if liable at all, and the acts of one in carrying out the provisions of the writing itself are the acts of the others, and all are bound as fully as if the particular act was the act of the aggregate body." This part of the charge was excepted to by the defendants.

This charge could only have had reference to the matter of assent, because that was the only matter in which it was attempted to bind all the parties by the act of one of them.

The court also refused to give the following special instruction requested by the defendants, which refusal was excepted to by them: "I charge you that if you should find from the evidence that notice of the formation of the corporation, the Dalzell, Gilmore & Leighton Company, and of the assignment of the contract by the partnership to the corporation was given to any one of the defendants, and he assented to it, but there was no notice to the others or knowledge upon their part, and no assent by them, they are not bound by the notice to and the assent by one. And the same would be true of notice to and assent by more than one, but not to and by all. Those who did not have notice and did not assent would not be bound."

The ruling of the court below that the assent by one was binding upon all can only be sutained upon the theory that by virtue of the contract sued upon the syndicates or their representatives on their behalf had entered into a relation with one another which in effect constituted them partners, and that the act of one was therefore the act of all; because whether the contract was joint, or was a joint and several one, in either case no relation of agency would be established for that reason between the parties to the extent that one of them could set aside the contract with the partnership with whom it was made, and enter into a contract upon the same terms with an entirely different person such as we have found the corporation in this case was.

Our inquiry therefore must be as to whether a partnership relation existed between the syndicates, and if so, whether the scope of the partnership business was such that one of the parties could substitute a different glass manufacturer in the place of the one originally contracted with, and bind the others by such substitution.

The contention of plaintiff is that such a partnership relation exists by reason of the principle declared in Yeoman v. Laskey, 40 Ohio St., 190, that "if two or more persons agree to jointly buy a tract of land for the purpose of jointly selling it and sharing the profits, they are partners for the transaction and as between themselves hold the rights and owe the duties of that relation."

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