Mueller v. Northwestern University
63 N.E. 110
Ill.
1902
Check Treatment
Mr. Justice Hand

delivered the opinion of the court:

It is first contended, the assignment to Mueller being in express violation of the terms of the contract, as against the university the assignment is void, and that Mueller is entitled to no relief by virtue of said assignment, as against the university, even in a court of equity. The contract between the university and Sammis in express terms provides that the contractor shall not sell, assign, transfer or set over said contract, or any part thereof or interest therein, unto any person or persons whomsoever, without the consent, in writing, of the architects previously had and obtained thereto, and that an assignment or transfer of the contract without the written consent of the architects first had and obtained thereto shall be absolutely null and void; and no claim is made that the architects or the university consented, in writing, to the assignment made by Sammis to Mueller. The assignment relied upon not having been assented to, in writing, by the architects or the university, is such assignment null and void as to the university? The rule is laid down in volume 2 of the American and English Encyclopedia of Law, (2d ed. p. 1035,) that the parties to a contract may in terms prohibit its assignment, so that an assignee cannot succeed to any rights in the contract by virtue of the assignment thereof to him, and the rule thus announced is well supported by the authorities.

In Arkansas Valley Smelting Co. v. Belden Mining Co. 127 U. S. 379, the court say: “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. 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.’”

In Delaware County v. Diebold Safe and Lock Co. 133 U. S. 473, it is said: “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 manifests the intention of the parties that it shall not be 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 the rights should be exercised and the obligations performed by him alone, the contract, including both his rights and his obligations, cannot be assigned without the consent of the other party to the original contract.”

In Burck v. Taylor, 152 U. S. 685, the State of Texas made a contract with Schnell for the erection of its capítol building in accordance with certain plans and specifications, Schnell to furnish all the labor and do all the work for the consideration of the conveyance to him by the State of three million acres of land. The contract contained the following clause: “It is further agreed, covenanted and stipulated by the party of the second part that this contract shall not be assigned, in whole or in part, by the party of the second part without the consent, in writing, of the party of the first part, signed by the Governor of Texas and the capítol building commissioners, with the advice and consent of the heads of departments.” In a suit between assignees it was held: “It is true that in the case at bar we have no construction of a statute, but only of the terms of a contract. That contract, however, was as binding on the one party as the other. The contractor assented to its terms precisely as did the State, and his promise was, not to assign the contract, in whole or in part, without the consent, in writing, of the State authorities. It was a promise which entered into and became one of the terms of the contract, and one which was binding not only upon the parties, but upon all others who sought to acquire rights in it. It may be conceded that, primarily, it was a provision intended, although not expressed, for the benefit of the State, and to protect it from interference by other parties in the performance of the contract, to secure the constant and sole service of a contractor with whom the State was willing to deal, and to relieve itself from the annoyance of claims springing up, during or after the completion of the contract, in favor of parties of whose interests in the contract it had no previous knowledge and to the acquisition of whose interests it had not consented. Concede all this, and yet it remains true that it was a stipulation which was one of the terms of the contract'and binding upon the contractor, and equally binding upon all who dealt with him. It is unnecessary to hold that the contractor might not be personally bound upon his promise, made before the performance of the contract, to transfer a portion of his profits to any third party. Whatever liabilities he might assume by such a promise, it would be an independent promise on his part and would not let the promisee into an interest in the contract. It would give him no right to take part in the work, no right to receive anything from the State, and all that it would give him would be an independent right of action against the contractor for the failure to pay that which he had promised to pay, the contract remaining all the time the property of the contractor, subject to disposal by and with the consent of the State. To him alone the State would remain under obligations and with him alone would the State be required to deal. In no way, by garnishment, injunction or otherwise, could the promisee prevent the State from carrying out the entire contract with the contractor, paying to him the whole consideration and receiving from him a full release.”

In City of Omaha v. Standard Oil Co. 55 Neb. 337, the contract was between the city and the Metropolitan Street Lighting Company for the lighting by the company of certain streets, and contained this clause: “It is further agreed between the parties hereto that the party of the second part shall not assign this contract without first obtaining the consent of the first party, indorsed hereon in writing.” The Standard Oil Company furnished the lighting company the oil necessary to enable it to perform its contract with the city, and also loaned it considerable money, and the lighting company assigned to the oil company, as security, the money due under the former’s contract for the month of October, 1892. The Standard Oil Company sued the city and recovered judgment, which was reversed on appeal. In disposing of the case the court say: “The inhibition, it will be noticed, is not alone upon the assignment of the obligation to light the streets, but upon the assignment of the contract. What was the contract between the parties ? Certainly one of its important elements was the duty laid upon the city to make monthly payments to the lighting company for the services rendered; and anotheiywas the correlative right of the company to receive such payments. The assignment of the October installment, if valid, not only transferred to the plaintiff a right secured to the lighting company by the contract, but affected, as well, an important obligation on the part of the city. It compelled the city to deal with strafigers, and to determine, at its peril, which of the contesting claimants was entitled to the fund. This may have been one of the very contingencies contemplated by the city and against which it sought to provide by making the contract non-assignable. Another object in view might have been to prevent the company from losing interest in the performance of the contract by divesting itself of all beneficial interest therein. But it is needless for ns to speculate on the motives for the city’s action. It is enough for us to know, whatever its reasons may have been, that it has in plain language stipulated against an assignment of the contract. That stipulation is valid and must be enforced. To hold that it covers some, but not all, of the rights and obligations arising out of the contract, would be, it seems to us, an inexcusable perversion of its terms.”

In LaRue v. Groezinger, 84 Cal. 281, (18 Am. St. Rep. 179,) which was an action for damages for the breach of a contract to buy grapes, the court, after discussing the California statute providing for the assignment of written contracts for the payment of money or delivery of personal property, say: “In the first place, it was not intended to render null any agreement that the parties may have made on the subject. Hence, if the contract itself provides, in terms, that it is not transferable, it certainly cannot be transferred, although it otherwise might be so. Leases, and the tickets usually issued by railroad companies, are familiar instances of this. Upon the same principle, although a contract may not expressly say that it is not transferable, yet if there are equivalent expressions, or language which excludes the idea of performance by another, it is not assignable. Of this character is the case of Shultz v. Johnson, 5 B. Mon. 497, which is much relied upon for the appellant. There the defendant agreed to buy from one Johnson successive crops of hemp ‘of his own raising-,’ and it was held that the defendant could not be compelled to accept hemp raised by Johnson’s administrator. The court said that ‘the question * * * in every case must turn at last upon the intention of the parties,’ and that the phrase ‘of his own raising’ meant that the hemp was to be raised by him or under his personal superintendence and direction.”

If we assume, however, that the assignment of December 4, 1896, was valid, what is the legal effect thereof? We do not understand the appellant to contend that the assignment transferred to Mueller the contract in such manner that he had the right or could have been compelled to carry out the contract in all its terms, but that his position is that the assignment gave him the right to receive from the university the money to become due under the contract, as the same should accrue and be earned by Sammis,—in other wTords, that it was not an assignment of the contract, but only an assignment of the money which might thereafter accrue and become due thereon. The assignment was clearly not a transfer of all of the money that was to accrue and become due thereafter upon the contract, as a considerable portion thereof was expressly reserved in the assignment by Sammis with which to pay material-men, sub-contractors and laborers, outside of Mueller. It was therefore, at most, only an assignment, in part, of the money which was to accrue and become due upon the contract thereafter. How was it to be determined what portion of the money had and what portion had not been assigned to Mueller? The assignment is silent upon that point. The work had not been commenced and nothing was due upbn the contract at the time of the execution of the assignment. No method is pointed out therein whereby the amount that is going to Mueller or the amount that is to be retained by Sammis can be determined, and no provision is made in the assignment, in express terms, that Mueller is to collect and disburse the money as it accrued and became due. Sammis had the right to collect the money from the university, under the contract, prior to the time the assignment was made, and as he did not transfer, by the assignment, that right to Mueller, it remained in him. The assignment was prepared by the attorney of Mueller and must be taken most strongly against Mueller. If it had been intended that Mueller should collect the money directly from the university, the assignment would have certainly given him that power in express terms. We think, therefore, upon the face of the assignment alone, Sammis had the right to collect the money from the university as it accrued and became due, and to pay the material-men, sub-contractors and laborers, other than Mueller, out of the amount collected, and that the only right that Mueller acquired by virtue of the assignment, was to receive the balance from Sammis remaining in his hands from the amounts collected by him from the university after he had paid the material-men, sub-contractors and laborers provided to be paid by the assignment. This construction is the one put upon the assignment by the parties themselves, as shown by their course of business and the correspondence of Mueller found in this record. Where the construction of an instrument in writing is doubtful, and the parties thereto have given a construction to it by acting upon it in a certain manner, courts will usually adopt and follow the construction of the instrument which has been adopted by the parties. Neither is this construction a strained or unnatural one. The assignment was intended only as a security. At the time and for many months after the assignment was executed Mueller had confidence in Sammis. Sammis was in Chicago where the work was being done, where the architects’ certificates would be issued and the money paid, while Mueller was in Cincinnati. Sammis could readily collect the money, pay the local claims and remit the balance to Mueller. This could not be done by Mueller without going to Chicago. Up to about the time the building was completed Mueller undoubtedly believed Sammis would carry out the assignment in good faith and turn over to him what remained in his hands after the payment of the claims provided to be paid to parties other than Mueller by the terms of the assignment, and made no effort to collect the same himself. If the assignment is to be so construed,—and we are fully convinced such is the correct construction thereof,—then the sums paid to Sammis by the university were rightfully paid to him, and the fact that he subsequently violated his trust and refused to account to Mueller will not authorize Mueller to collect the money a second time from the university and after it has rightfully been paid to Sammis. In any event, we think the evidence clearly shows that there was an understanding between Mueller and Sammis that Sammis should collect from the university the money on said contract as it became due and payable, and after paying the material-men, sub-contractors and laborers in Chicago therefrom, turn over the balance to Mueller. Whether they reached such understanding from the terms of the assignment or by virtue of a subsequent parol agreement, as testified to by Sammis, is wholly immaterial. That Sammis collected the money due upon said contract from the university with Mueller’s consent we have no question.

The appellant urges that the provision in the contract that it shall not be assigned “without the consent, in writing-, of the architects previously had and obtained thereto,” was waived, and that by the conduct of the university and its agents it has estopped itself to insist that the assignment is null and void. We have no question that such provision, being for the benefit of the university, could be waived by it or that by its conduct it might estop itself from insisting thereon. We, however, find nothing in this record which can be construed into a waiver of such provision or into an estoppel as against the university, so as to make it liable to pay to Mueller more than the balance found to be due upon the contract with Sammis. The notice to D. H. Burnham & Co. of the assignment, contained in Mueller’s letter of December 11, 1896, is vague and uncertain, and gave them but little information as to the transaction between Mueller and Sammis. If, however, they had followed up such notice and made inquiry of Mueller and Sammis, the only parties who knew what the real arrangement between Mueller and Sammis was, all they would have learned would have been the fact that Sammis retained the right to receive the money from the university upon the contract as it accrued and became due, and that he was to account to Mueller for the balance remaining in his hands after the material-men, sub-contractors and laborers in Chicago had been paid. Such information would not have made the university an insurer that Sammis would carry out such arrangement in good faith with Mueller, or made it liable to Mueller in case Sammis converted to his own use such balance instead of paying the same to Mueller, or estopped it from showing, in defense of this cross-bill, that it paid to Sammis the various sums which he received under said contract, and that he had the right to receive the same.

It is claimed the university should have been required to pay interest on the balance due Sammis. It withheld the balance at the request of Mueller. The amount so withheld was claimed by each of the defendants to the bill of interpleader. The delay in payment, if any, was caused thereby, and through no fault of the university. There was no unreasonable and vexatious delay of payment on its part, and it should not be required to pay interest on said balance.

We find no reversible error in this record. The judgment of the Appellate Court will therefore be affirmed.

Judgment affirmed.