MacKe Co. v. Pizza of Gaithersburg, Inc.

Singley, J., delivered the opinion of the Court. The appellees and defendants below, Pizza of Gaithersburg, Inc.; Pizzeria, Inc.; The Pizza Pie Corp., Inc. and Pizza Oven, Inc., four corporations under the common ownership of Sidney Ansell, Thomas S. Sherwood and Eugene Early and the same individuals as partners or proprietors (the Pizza Shops) operated at six locations in Montgomery and Prince George’s Counties. The appellees had arranged to have installed in each of their locations cold drink vending machines owned by Virginia Coffee Service, Inc., and on 30 December 1966, this arrangement was formalized at five of the locations, by contracts for terms of one year, automatically renewable for a like term in the absence of 30 days’ written notice. A similar contract for the sixth location, operated by Pizza of Gaithersburg, Inc., was entered into on 25 July 1967.

On 30 December 1967, Virginia’s assets were purchased by The Macke Company (Macke) and the six contracts were assigned to Macke by Virginia. In January, 1968, the Pizza Shops attempted to terminate the five contracts having the December anniversary date, and in February, the contract which had the July anniversary date. Macke brought suit in the Circuit Court for Montgomery County against each of the Pizza Shops for damages for breach of contract. From judgments for the defendants, Macke has appealed.

The lower court based the result which it reached on two grounds: first, that the Pizza Shops, when they contracted with Virginia, relied on its skill, judgment and ⁴⁸² reputation, which made impossible a delegation of Virginia’s duties to Macke; and second, that the damages claimed could not be shown with reasonable certainty. These conclusions are challenged by Macke. In the absence of a contrary provision—and there was none here—rights and duties under an executory bilat-. eral contract may be assigned and delegated, subject to the exception that duties under a contract to provide personal services may never be delegated, nor rights be assigned under a contract where delectus personae was an ingredient of the bargain. 1 4 Corbin on Contracts § 865 (1951) at 434; 6 Am.Jur.2d, Assignments § 11 (1963) at 196. Crane Ice Cream Co. v. Terminal Freezing & Heating Co., 147 Md. 588 , 128 A. 280 (1925) held that the right of an individual to purchase ice under a contract which by its terms reflected a knowledge of the individual’s needs and reliance on his credit and responsibility could not be assigned to the corporation which purchased his business.

In Eastern Advertising Co. v. McGaw & Co., 89 Md. 72 , 42 A. 923 (1899), our predecessors held that an advertising agency could not delegate its duties under a contract which had been entered into by an advertiser who had relied on the agency’s skill, judgment and taste. The six machines were placed on the appellees’ premises under a printed “Agreement-Contract” which identified the “customer,” gave its place of business, described the vending machine, and then provided: “TERMS “1., The Company will install on the Customer’s premises the above listed equipment and will maintain the equipment in good operating order and stocked with merchandise.. “2. The location of this equipment will be such ⁴⁸³ as to permit accessibility to persons desiring use of same. This equipment shall remain the property of the Company and shall not be moved from the location at which installed, except by the Company. “3.

For equipment requiring electricity and water, the Customer is responsible for electrical receptacle and water outlet within ten (10) feet, of the equipment location. The Customer is also responsible to supply the Electrical Power and Water needed. “4. The Customer will exercise every effort to protect this equipment from abuse or damage. “5. The Company will be responsible for all licenses and taxes on the equipment and sale of products. “6.

This Agreement-Contract is for a term of one (1) year from the date indicated herein and' will be automatically renewed for a like period,, unless thirty (30) day written notice is given by either party to terminate service. “7. Commission on monthly sales will be paid by the Company to the Customer at the following rate:* * *.” The rate provided in each of the agreements was “30% of Gross Receipts to $300.00 monthly [,] 35% over [$] 300.00,” except for the agreement with Pizza of Gaithersburg, Inc., which called for “40% of Gross Receipts.” We cannot regard the agreements as contracts for personal services. They were either a license or concession granted Virginia by the appellees, or a lease of a portion of the appellees’ premises, with Virginia agreeing to pay a percentage of gross sales as a license or concession fee1 or as rent, see Charlotte Coca-Cola Bottling Co. v. Shaw,. 232 N. C. 307 , 59 S.E.2d 819 (1950) and Herbert’s Laurel-Ventura, Inc. v. Laurel Ventura Holding Corp., 58 Cal.App.2d 684 , 138 P. 2d 43, 46-47 (1943), and were assignable by Virginia unless they imposed on Virgina du ⁴⁸⁴ ties of a personal or unique character which could not be delegated, S & L Vending Corp. v. 52 Thompkins Ave. Restaurant, Inc., 274 N.Y.S.2d 697 , 26 App.Div.2d 935 (1966).

The appellees earnestly argue that they had dealt with Macke before and had chosen Virginia because they preferred the way it conducted its business. Specifically, they say that service was more personalized, since the president of Virginia kept the machines in working order, that commissions were paid in cash, and that Virginia permitted them to keep keys to the machines so that minor adjustments could be made when needed. Even if we assume all this to be true, the agreements with Virginia were silent as to the details of the working arrangements and contained only a provision requiring Virginia to “install * * * the above listed equipment and * * * maintain the equipment in good operating order and stocked with merchandise.” We think the Supreme Court of California put the problem of personal service in proper focus a century ago when it upheld the assignment of a contract to grade a San Francisco street: “All painters do not paint portraits like Sir Joshua Reynolds, nor landscapes like Claude Lorraine, nor do all writers write dramas like Shakespeare or fiction like Dickens. Rare genius and extraordinary skill are not transferable, and contracts for their employment are therefore personal, and cannot be assigned.

But rare genius and extraordinary skill are not indispensable to the workmanlike digging down of a sand hill or the filling up of a depression to a given level, or the construction of brick sewers with manholes and covers, and contracts for such work are not personal, and may be assigned.” Taylor v. Palmer, 31 Cal. 240 at 247-48 (1866). See also Devlin v. Mayor, Aldermen and Commonalty of the City of New York, 63 N. Y. 8, at 17 (1875). Moreover, ⁴⁸⁵ the difference between the service the Pizza Shops happened to be getting from Virginia and what they expected to get from Macke did not mount up to such a material change in the performance of obligations under the agreements as would justify the appellees’ refusal to recognize the assignment, Crane Ice Cream Co. v. Terminal Freezing & Heating Co,, supra, 147 Md. at 588 . In support of the proposition that the agreements were for personal services, and not assignable, the Pizza Shops rely on three Supreme Court cases, Burck v. Taylor, 152 U. S. 634 , 14 S. Ct. 696 , 38 L. Ed. 578 (1894); Delaware County Comm’rs v. Diebold Safe & Lock Co., 133 U. S. 473 , 10 S. Ct. 399 , 33 L. Ed. 674 (1890); and Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. S. 379 , 8 S. Ct. 1308 , 32 L. Ed. 246 (1888), all of which were cited with approval by our predecessors in Tarr v. Veasey, 125 Md. 199, 207 , 93 A. 428 (1915).

We find none of these cases persuasive. Burck held that the contractor for the state capítol in Texas, who was prohibited by the terms of his contract from assigning it without the state’s consent, could not make a valid assignment of his right to receive three-fourths of the proceeds. In Delaware County, Diebold Safe and Lock, which was a subcontractor in the construction of a county jail, was barred from recovering from the county commissioners for its work on the theory that there had been a partial assignment of the construction contract by the prime contractor, which had never been assented to by the commissioners. This result must be limited to the facts: i.e., to the subcontractor’s right to recover under the assignment, and not to the contractor’s right to delegate.

See Taylor v. Palmer and Devlin v. Mayor, Aldermen and Commonalty of the City of New York, both supra. Arkansas Valley, which held invalid an attempt to assign a contract for the purchase of ore, is clearly distinguishable, because of a contract provision which stipulated that payment for the ore was to be made after delivery, based on an assay to be made by the individual purchaser named in the contract. The court concluded that this was a confidence im ⁴⁸⁶ posed in the individual purchaser’s credit and responsibility and that his rights under the contract could not be transferred to another. Tarr v. Veasey involved a situation where duties were delegated to one person and rights assigned to another and our predecessors held the rights not to be assignable, because of the parties’ intention that duties and rights were interdependent.

We find more apposite two cases which were not cited by the parties. In The British Waggon Co. & The Parkgate Waggon Co. v. Lea & Co., 5 Q.B.D. 149 (1880), Parkgate Waggon Company, a lessor of railway cars, who had agreed to keep the cars “in good and substantial repair and working order,” made an assignment of the contract to British Waggon Company. When British Waggon Company sued for rent, the lessee contended that the assignment had terminated the lease. The court held that the lessee remained bound under the lease, because there was no provision making performance of the lessor’s duty to keep in repair a duty personal to it or its employees.

Except for the fact that the result has been roundly criticized, see Corbin, supra, at 448-49, the Pizza Shops might have found some solace in the facts found in Boston Ice Co. v. Potter, 123 Mass. 28 (1877). There, Potter, who had dealt with the Boston Ice Company, and found its service unsatisfactory, transferred his business to Citizens’ Ice Company. Later, Citizens’ sold out to Boston, unbeknown to Potter, and Potter was served by Boston for a full year. When Boston attempted to collect its ice bill, the Massachusetts court sustained Potter’s demurrer on the ground that there was no privity of contract, since Potter, had a right to choose with whom he would deal and could not have another supplier thrust upon him.

Modern authorities do not support this result, and hold that, absent provision to the contrary, a duty may be delegated, as distinguished from a right which can be assigned, and that the promisee cannot rescind, if the quality of the performance remains materially the same. ⁴⁸⁷ Restatement, Contracts § 160 (3) (1932) reads, in part: “Performance or offer of performance by a person delegated has the same legal effect as performance or offer of performance by the person named in the contract, unless, (a) performance by the person delegated varies or would vary materially from performance by the person named in the contract as the one to perform, and there has been no * * * assent to the delegation * * In cases involving the sale of goods, the Restatement rule respecting delegation of duties has been amplified by Uniform Commercial Code § 2-210 (5), Maryland Code (1957, 1964 Repl. Vol.) Art. 95B § 2-210 (5), which