No. 12650
I N T E SUPREME C U T OF T E STATE O M N A A
H OR H F OTN
1974
ROTHER-GALLAGHER , a P a r t n e r s h i p composed
o f William J. Gallagher and James Rother, J r . ,
P l a i n t i f f s and A p p e l l a n t s ,
M N A A P W R COMPANY, a Montana Corporation,
OTN O E
Defendant and Respondent.
Appeal from: D i s t r i c t Court o f t h e Fourth J u d i c i a l D i s t r i c t ,
Honorable E. Gardner Brownlee, Judge p r e s i d i n g .
Counsel of Record:
For Appellants :
Goldman, McChesney and Datsopoulos, Missoula, Montana
James Wheelis and Milton Datsopoulos argued,
Missoula, Montana
For Respondent :
C o r e t t e , Smith and Dean, B u t t e , Montana
Kendrick Smith argued, B u t t e , Montana
Submitted: A p r i l 24, 1974
Decided : ~ t m 194
5
Filed: JUN 5 1974
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This is an appeal from an order of the district court
granting summary judgment in a timber sale contract dispute.
We affirm the judgment of the district court.
On July 23, 1958, two corporations, Rother's Inc. and
Rother Lumber Co., Inc., entered into a timber contract with the
Montana Power Company to log off an area in Missoula County.
Under the contract the two corporations agreed to construct a
main-haul timber road, known as the Rattlesnake Road. The road
was to be paid for through an amortization of the timber removed.
The Rother companies began immediate operations in 1958
and by 1964 had logged off some 18 million board feet of timber
and through the amortization program for paying for the road had
reduced the amount owing them by the Montana Power Company to an
alleged amount of $46,000.
At the end of 1964 the stockholders of the two Rother
companies decided for tax purposes to dissolve the two corpora-
tions. The stockholders at the time being James Rother, Jr.,
William J. Gallagher and a son of Gallagher who had a minority
interest. Immediately thereafter the two major parties in the
dissolving corporations alleged that they formed a partnership
which assumed all the duties and all the obligations of the two
corporations. Rother-Gallagher now alleges that they attempted
to operate under the timber sale contract but that respondent
refused to either designate timber to be cut or to revoke the
contract which would have required paying off the unamortized
road.
Respondent argues that this is not a simple forfeiture
suit but that a p p e l l a n t s i n ~ c o m p l a i n tsued for a breach of
contract and for alleged loss in profits of some $200,000; that
the original agreements between respondent and the Rother companies
called for specific reliance on the corporations; further that
Rother, the operations man of the corporations no longer lives
in Montana; and that in the assertion by appellants that pro-
tection of the Montana Power was "enhanced" is untrue, for over
$108,000 of book value assets of each of the companies referred
to in the dissolution amounted in actual value to a sum in excess
of over $300,000 and were distributed to the two principal stock-
holders of the two dissolved corporations. All of these reasons
respondent argues puts them in a far less desirable position in
dealing with the alleged partnership.
Respondent Power Company replies to the allegations of
the complaint noting that over 5 years had passed between the time
of the last work done under the contract in 1964, and the filing
of this action, and that parties to the original contract, the
Rother Lumber Company and Rother, Inc. had dissolved and were no
longer in existence. Further as an absolute defense against this
action that the contract they made with the Rother companies had
a provision, Para. 23, which prevented the assignment of any por-
tion of the contract without the consent of the Montana Power
Company. Paragraph 23 reads:
"(23) Rothers Ireferring to both of the companies]
shall not assign this contract, or any portion
thereof, nor shall the logging operations be
sub-let without the written consent of the Power
company."
It is admitted by appellants that no attempt was ever made
to secure a written consent from the Power Company to any assign-
ment nor was there ever any written consent to the alleged assign-
ments ever given. Due to this failure to obtain such a consent
the Montana Power Company alleges that appellants have no stand-
ing whatever to claim any privity or any rights against it.
Concerning the dissolution there was filed by the two
Rother companies statements of voluntary dissolution dated January
21, 1965. These statements stated that each company had ceased
to transact business, had no assets, had no intention of ever
again resuming operations and attached a tax clearance certifi-
cate as provided by section 15-1115, R.C.M. 1947, repealed effec-
tive December 31, 1968.
From the interrogatories of Rother and Gallagher it would
appear that they formed a partnership on December 31, 1964, but
without any written agreement. Gallagher stated "It was the
understanding that the Rother-Gallagher partnership would assume
the obligations and debts of the Rothers, Inc., and Rother Lumber
Company, as well as receiving their assets." Neither Gallagher
rxr Rother ever advised the Montana Power Company that the Rother
companies were dissolved at the end of 1964 nor was the Power
Company ever advised that there was a transfer of assets from
the Rother companies to the alleged partnership. The book value
of the assets turned over from the two companies amounted to
$59,219.37 from Rother Lumber Company and $59,219.37 from Rother,
Inc. Gallagher, when questioned about whether there was a partner-
ship or not, stated that when the change was made it was a change
in name to avoid double taxation. He said it was "sort of an
evolution of a business for thej. continued to use the same books,
the same ledger, the same everything * * *." In discussing how
they operated after the dissolution Gallagher said the partnership
operated as a joint venture.
In the period between the last cutting on the property,
which was the last quarter in the year 1964, and the time the legal
action was filed in February of 1970, Gallagher met with officials
of the Power Company several times, probably during the year 1967.
On one occasion he had Rother with him in an effort to either get
more timber off the property or to get the lease cancelled. These
efforts were unsuccessful.
The only issue raised is whether the trial court properly
granted summary judgment on the ground that appellants had no
standing to bring suit.
Appellants argue that the contract language does not
void assignments breaching the nonassignment clause and that the
general prohibition against transferring contracts of a personal
nature is not applicable here. 4 Corbin on Contracts, section
865; Gresmore on Contracts, Sect. 258 119651.
Appellantsfurther argue that the transfer of rights in
the contract between the Rother companies and the partnership is
not in violation of the nonassignment clause relying on the hold-
ings of the California Supreme Court in the cases of Trubowitch
v. Riverbank Canning Co., 30 C.2d 335, 344, 182 P.2d 182, 188;
People v. McNamara Corporation Limited, 28 C.A.3d 641, 104 Cal.
Rptr. 822. In these cases the California Supreme Court held that
where there is a transfer of an interest, or an assignment of a
contract, the court will look to see how it affects the interests
of the parties by the nonassignability clause of the contract and
will allow it if it can be made without a change of the beneficial
interest in and to the contract. See also: Ruberoid Co. v. Glass-
man Construction Co., 248 Md. 97; 234 A.2d 875.
However, as argued by the respondent, this is not the law
of Montana. We do not follow Trubowitch. Rather it has long been
the law of this state established in 1912 by the case of Winslow
v. Dundom, 46 Mont. 71, 82, 125 P. 136, that provisions for non-
assignment in a contract will be upheld. The key case, Standard
Sewing-Machine Co. v. Smith, 51 Mont. 245, 248, 152 P. 38, holds
that nonconsent to assignment (where nonassignability is set forth
in the contract) destroys or precludes the establishment of priv-
ity between an alleged assignee and the other party.
The Court in Winslow said:
"While the rule is uniform that a person may
contract with whom he pleases and may refuse to
contract with any particular person, still the
rule is equally well settled, as stated in
4 Cyc. 20, as follows: 'As to assignability
of private contracts, it may be stated as a
general rule that rights arising out of agree-
ments or contracts between private individuals
may be assigned, in the absence of any provision
or stipulation in the agreement or contract to
the contrary.' Certain well-recognized excep-
tions to that rule arise in case the right is
coupled with a liability, or the contract in-
volves the relation of personal confidence, or
the contract is for personal services; and the
reason for these exceptions is apparent at
once. I'
In Standard Sewinq-Machine Co. the Court, in speaking to
the above exceptions, said:
"In the last analysis all the exceptions to the
rule of assignability arise out of the nature
of the contract, and among them are these:
Contracts wherein rights are coupled with lia- .
bilities, contracts for personal services, and
contracts involving the relation of personal
confidence (4 Cyc. 22; Winslow v. Dundom, 46
Mont. 71, 125 P. 136.) A glance at the contract
in question, or the slightest consideration of
the stipulations above recited, will, we think,
disclose that it is within all these exceptions
* * *.'I
We find no reason to change the long established law in Montana
that controls this case. See also 6 C.J.S. Assignments 524;
Restatement of Law of Contracts 151; 3 Williston on Contracts,
Third Edition, 8411.
The judgment of the district court is affirmed.
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Justice
concur :
Justices