Burck v. Taylor/Opinion of the Court

That which arrests the attention is that, though the defendant furnished all the means and did all the work of building the capitol, and although the authorities of the state expressly recognized him as the contractor, bound in all respects to carry out the contract with the state in the same manner as the original contractor, and though he had no knowledge of any claim of plaintiff, the court is asked to recognize the latter as the owner of one thirty-second of the profits of the contract, and to compel the defendant to pay him that amount. While only one thirty-second of the profits is asked for, the rule would be the same if thirty-one thirty-seconds were sued for, and the first and principal question which arises is whether these transactions between Schnell and A. A. Burck and between A. A. Burck and plaintiff had, without the knowledge of the defendant, operated to create in the plaintiff a valid claim to a share of the profits. The contract, in its twenty-sixth clause, stipulated that there should be no assignment, in whole or in part, by the contractor, without the consent in writing of the state authorities. No such consent was given to the assignment by Schnell to Burck, nor does it appear that the state ever in any form recognized the plaintiff, or his immediate grantor, as having any interest in, or control of, the contract, or any part thereof. He was to both the state and the defendant, who did the work, an unknown party until after the full completion of the contract, when for the first time he appears claiming an interest in the profits by virtue of an assignment and transfer, made before the work was done, and in disregard of the terms of the contract.

It is earnestly insisted by counsel that this provision forbidding an assignment without the written consent of the state authorities was solely for the benefit and protection of the state; that it did not restrict or interfere with the right of the contractor to dispose in any way he saw fit, of an interest in the contract, or the profits thereof, so long at the party to whom such transfer was made attempted no interference with the actual work, and presented no claim against the state. The contract in the possession of the contractor was his property, and the profits arising terefrom, and any interest therein, were as much the subject of disposal as any other property, and the only limitation was one for the benefit of the state, and could not be claimed by any subsequent assignee from the contractor. The case of Hobbs v. McLean, 117 U.S. 567, 6 Sup. Ct. 870, is relied upon as authority for this contention. In that case one Peck, having, in response to an advertisement from the proper authorities, put in a bid for furnishing wood and hay to the government, and expecting that the contract would be awarded to him, entered into a partnership with McLean and Harmon, by which Peck was to furnish one-half of the capital necessary to carry on the partnership business, and McLean and Harmon each one-fourth; the profits and losses of the partnership to be divided in like proportion. The partnership was for the purpose of carrying out this expected contract. Subsequently the contract with the government was obtained, and, after it had been performed, and the money therefor paid to an assignee in bankruptcy of Peck, the other partners, McLean and Harmon, filed their bill to recover their proportionate share of the profits, as fixed by the terms of this partnership. Among the defenses was that the partnership was invalid, by reason of section 3737, Rev. St. which reads as follows:

'No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party, and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States are concerned. All rights of action, however, for any breach of such contract by the contracting parties, are reserved to the United States.'

But this defense was overruled; the court, by Mr. Justice Woods, observing in respect thereto:

'Interpreting the articles in the light of the statute, as it is the duty of the court to do, they were not intended to transfer, and do not transfer, to the plaintiffs any claim or demand, legal or equitable, against the United States, or any right to exact payment from the government by suit or otherwise. They may be fairly construed to be the personal contract of Peck, by which, in consideration of money to be advanced and services to be performed by the plaintiffs, he agreed to divide with them a fund which he expected to receive from the United States on a contract which he had not yet entered into. This is the plainly-expressed meaning of the partnership contract, and it is only by a strained and forced construction that it can be held to effect a transfer of Peck's contract with the United States, and to be a violation of the statute.

'We are of opinion that the partnership contract was not opposed to the policy of the statute. The sections under consideration were passed for the protection of the government. Goodman v. Niblack, 102 U.S. 556. They were passed in order that the government might not be harassed by multiplying the number of persons with whom it had to deal, and might always know with whom it was dealing until the contract was completed and a settlement made. Their purpose was not to dictate to the contractor what he should do with the money received on his contract after the contract had been performed.'

It is insisted that, tested by the rule thus laid down, this stipulation of clause 26 was one solely for the benefit of the state, and worked no restriction on the right of the contractor to dispose, in advance of the completion of the contract, of the profits which should inure therefrom.

We cannot concur in these views. By the section quoted not only was a transfer of the contract prohibited, but also the result of such a forbidden transfer declared. In terms it was said that any 'such transfer shall cause the annulment of the contract or order transferred, so far as the United States are concerned.' 'Expressio unius est exclusio alterius.' The express declaration that, so far as the United States are concerned, a transfer shall work an annulment of the contract, carries, by clear implication, the declaration that it shall have no such effect as between the contractor and his transferee. In other words, as to them, the transfer is like any other transfer of property, and controlled by the same rules. Its invalidity is only so far as the government is concerned, and it alone can raise any question of the violation of the statute. The government, in effect, by this section, said to every contractor, 'You may deal with your contract as you please, and as you may deal with any other property belonging to you; but, so far as we are concerned, you, and you only, will be recognized either in the execution of the contract or in the payment of the consideration.'

It is familiar law that not every contract in contravention of the terms of a statute is void, and the courts will search the language of the statute to see whether it was the intent of the makers that a contract in contravention of it should be void or not. Harris v. Runnels, 12 How. 79; Miller v. Ammon, 145 U.S. 421, 12 Sup. Ct. 884; Pangborn v. Westlake, 36 Iowa, 546.

It was in pursuance of this line of thought that the court, in Hobbs v. McLean, ruled as it did as to the effect of a transfer by a contractor with the United States of an interest in his contract to a third party. But it has never been doubted that, as a general rule, a contract made in contravention of a statute is void, and cannot be enforced, and the only exception arises when, from an examination of the statute, the courts are able to discern a different or a limited purpose on the part of the lawmakers.

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. By the three instruments of January 31, May 9, and June 20, 1882, this contract was wholly transferred to and accepted by the defendant. This was while the contract was executory, and before the work was done, and these transfers were with the written consent and approval of the state authorities, and by them the state in terms recognized 'Abner Taylor as the contractor, bound in all respects to carry out the contract with the state of Texas in like manner as the original contractor, Matthias Schnell, was bound.' In other words, by the consent of parties, and in accordance with the express provisions of the contract, before the work was done, Abner Taylor, the defendant, was substituted for Schnell as the contractor. It was precisely the same as though the contract with Schnell had been surrendered, and a new one made with Taylor. The contract was still executory. Nothing had been earned by Schnell, and nothing was due to him. He steps out of the contract and Taylor steps in. Taylor is accepted as the contractor, and proceeds with the work. Would it not be strange if, after having thus completed the contract, some person could, on the strength of an unknown transfer of the entire profits of the contract made before the transfer to Taylor, compel the latter to pay to him such entire profits? And yet, if one thiry-second of the entire profits can be so obtained, all the profits could, in like manner, have been obtained.

It will be borne in mind that the instrument of date January 31, 1882, by which Schnell transferred to Taylor, Babcock & Co. a three-fourths interest in the contract, did not operate to make Schnell a mere beneficiary of profits. He and they became thereby joint contractors with the state. He was under the same obligation of performance as they, and for any failure in respect thereto the state could hold him responsible equally with them. The mere fact that there was a division between themselves as to duties in no manner abridged the fact that he was a joint contractor with them. They, it is true, were to furnish the money, but he was to have the management and superintendence. He was to take his part in the performance of the contract. Not only that, but, as seen, he was to be personally responsible to them for any loss or damage caused or sustained by reason of his neglect or mistakes. So that, if he had gone on jointly with them in the performance of the contract as provided for, out of the profits earned in the performance of the contract they would have had a right to deduct from the amount coming to him all the loss and damages which they had sustained by reason of his neglect and mistakes.

We have thus far rested the nonassignability of this contract, or any interest therein, to plaintiff's arantor upon the express stipulation of clause 26; but, even in the absence of such a clause, it was not competent for Schnell, by his own act, and without the consent of the state, the other contracting party, to transfer any interest in this contract. It is a contract of that nature which is not susceptible of assignment without the consent of the other party. Arkansas Val. Smelting Co. v. Belden Min. Co., 127 U.S. 379, 8 Sup. Ct. 1308; Delaware County Com'rs v. Diebold Safe & Lock Co., 133 U.S. 473, 488, 10 Sup. Ct. 399. In the latter case it was said by this court:

'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 to it 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.'

So that, even if clause 26 had been omitted from the contract, Schnell, the contractor, could never have transferred an interest in it to the grantor of plaintiff so as to vest in him a right to take part in the work, or a subsequent right to recover from the state on the completion of the work. All that could ever have been acquired by an assignment or transfer by Schnell without the consent of the state was a right to maintain an independent action against him for whatever share of the profits he had attempted to transfer. But that obligation would be personal to Schnell, and was not assumed by the defendant, or Taylor, Babcock & Co. when they took an assignment of the entire contract from Schnell. Assuming to the state the performance of the contract carried with it no assumption of Schnell's unauthorized assignments or of his promises to pay over certain portions of the profits he would have received had he performed the contract. In other words, stepping into the place of Schnell in this contract with the state, they did not assume his personal liabilities to third parties. They assumed his obligations to the state, and they took with those obligations a right to receive the entire consideration promised by the state, and they did not agree to become liable for all or any independent promises he had made in reference to the contract.

It is ture that in that assignment it was stipulated that the profits were 'to be divided as the interests of the parties appear under the contract, or to their heirs or assigns.' If Schnell, with Taylor, Babcock & Co., had under that assignment performed the contract with the state, and had made profits thereby, it may be that this plaintiff, after giving notice, could have enforced both against Schnell and this defendant a one-thirty-second of such profits, resting upon this stipulation for division among the parties or their assigns; but, as Schnell never earned any share in the profits, there is nothing upon which that stipulation can take effect. The profits which would have resulted if Schnell, with Taylor, Babcock & Co., had performed the contract, might have been very different from that which did result from the performance of the contract by Taylor alone. It is a mistake to suppose that the profits to be derived from the performance of a contract, as yet unexecuted, are something separable from the performance,-as a coupon is detachable from a bond,-and can be sent floating through the channels of commerce as a separate obligation. The profits are tied up in the contract to such an extent that the promise in respect to them becomes of value only when he who makes the promise shall have earned the profits through the performance of the contract. And when the contract, being wholly executory, is transferred to a third party, who is accepted by the promisor in lieu of the original contractor, such third party enters upon the performance of the contract free from any disposition of the profits made by the original contract before the subsititution.

We have thus far considered this case on the assumption that the defendant proceeded with the completion of his contract in ignorance of any transfer to plaintiff; and that such was the case is, we think, a fair inference from the allegations of the bill. The pleader has evidently sought to charge constructive notice from the fact of record in the office of the clerk of the county in which the work was done, but in which none of the land promised and deeded was situated. It is not pretended that there was any statute providing for such record, or making the record notice to subsequent assignees or purchasers (Rev. St. Tex. art. 4331; Burnham v. Chandler, 15 Tex. 441; Wright v. Lancaster, 48 Tex. 250); but it is alleged that the assignments and transfers under which the defendant claims were recorded in that office. The argument seems to be that the defendant and his assignors selected filing and record in that office as a means of giving notice to other parties of their rights, and that having made such selection was equivalent to an admission that they would accept a like filing and record as notice to them; but that argument cannot be sustained. The defendant and his assignors may have desired to give as much publicity as possible to the fact of the transfers to themselves, and in seeking to give such publicity may have selected the filing and record in one of the principal offices of the county as a means thereto, but they did not thereby create a new law in respect to notice. They never, in terms, declared, and their own acts of filing for record carried no implied declaration of, their willingness to accept a similar record as notice to themselves. They had a right to rely upon the law of the state, as enacted by its legislature, and were not bound by any constructive notice other than those laws provided. If notice was essential to charge them, actual notice should have been given, at least in the absence of a statute providing some means for constructive notice. Indeed, it is a mere, and not very reasonable, inference from the fact that they placed these instruments on record that their purpose was thereby to give notice. As well might it be assumed that they simply sought to have preserved for their own use a recorded copy of their assignments, rather than rest upon their own possession of the original papers. It is true, in this part of the bill there is a statement that 'said Abner Taylor then had notice of the same.' This language, standing by itself, is open to a construction that actual notice was charged; but that no such construction should be given to it is evident from the paragraph immediately following, in which the pleader alleges that notice was given by filing and record, and states the reasons why such filing and record should be accepted as constructive notice. Indeed, we do not understand from counsel's brief or argumant that there is a claim that there was actual notice given of these transfers.

Finally, it is claimed that the defendant was chargeable with notice because the assignment which he took from A. A. Burck on May 27, 1884, was really nothing but a quitclaim; that a party taking under a quitclaim deed cannot be a bona fide purchaser, but takes with notice of all limitations of his grantor's rights, and in respect thereto several authorities are cited from the state of Texas and elsewhere as to the rights of one taking under such a deed.

We do not care to enter into the consideration of this question; for, while the instrument is open to two constructions, yet, conceding that it in terms only quitclaimed, it took nothing away from Taylor's rights. It was not executed until two years and over after Schnell had parted with all his interest in the contract to Taylor, Babcock & Co., and it could not possibly have the retroactive effect of vesting in the plaintiff a right, as against Taylor, which he did not theretofore have. All that can be inferred from that instrument is that more than two years after Schnell had parted with his entire interest in the contract to defendant and his associates, and they had assumed full responsibility to the state, and nearly two years after defendant had accepted the sole responsibility of the contract, and after he had partially performed its obligations, he ascertained in some way the existence of an outstanding claim in favor of A. A. Burck, and, rather than litigate with him the validity of that claim, purchased it. It was not an admission that A. A. Burck had a valid claim to the extent of the attempted assignment from Schnell to him, and the fact that it was in the mere language of a quitclaim as likely resulted from the unwillingness of A. A. Burck to assume the obligations of a covenant or warranty as from any other reason.

In conclusion, we hold that by the nature of the contract as well as its express stipulation Schnell was incapacitated from transferring an interest therein without the consent of the state; that the attempted transfers from him to A. A. Burck and from A. A. Burck to S. B. Burck created simply a personal obligation, which could be enforced against him alone; that the assignments and transfers with the consent of the state vested the absolute and sole interest in the contract in the defendant, Abner Taylor, that the latter took without notice of the plaintiff's claim; and that by his performance of the contract he acquired the right to the entire consideration promised by the state, and assumed no liability to Schnell, and no obligation to perform any promise which Schnell made to plaintiff or plaintiff's assignor. The judgment of the circuit court is affirmed.

Mr. Justice WHITE was not a member of this court when this case was argued, and takes no part in its decision.