Hudson River Water Power Co. v. Glens Falls Gas & Electric Light Co.

Majority

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Hudson River Water Power Company, Respondent, v. Glens Falls Gas and Electric Light Company, Appellant, Impleaded with Glens Falls Portland Cement Company, Defendant.

Headnote

-Contract to furnish electric power — assignment thereof—estoppel to object to the assignment — arbitration clause — to what question it is inapplicable —'a demurrer that a counterclaim is not sufficient in law is not authorized,— an objection that a counterclaim is not proper under the Code must be specified, in the demurrer.

^February 7, 1901, an. electric power company made an agreement with a cement manufacturing corporation, by which the’ power company agreed to supply the cement company with electric power for a period of five years. The minimum supply was tobe 1,000 horsepower and an option was conferred upon the cement company to take double that amount. Payments were to be made by the cement company monthly. The contract contained the following ■provisions:

“ Tenth. The Cement Company agrees, as a condition precedent hereto, that •the electrical energy or power, hereby sold and to be taken by it, shall not be used or employed by it or its assigns during- the continuance of this agreement, .for the purpose Of manufacturing pulp or paper or fiber of any kind.”

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“Fourteenth. This contract shall inure to the benefit of and become binding upon the successors and assigns of the respective parties hereto.”

November 15, 1903, the cement company assigned the contract to ati electric light company. November 20, 1902, the electric light company notified the power company of the assignment and paid to it the monthly installment-due under the contract. December 16, 1902, the electric light company notified the power company of its- intention to install on the premises of the cement company certain electrical apparatus. December 18,1902, the electric-light company notified the power company that the electrical apparatus was actually installed and demanded that the power company supply power as provided in the contract. December 20, 1902, the electric light company paid to the power company another monthly installment.

December 23,1902, after the power company had written several letters to the-light company recognizing the assignment, the power company notified the-electric light company that it objected to the assignment of the contract to-the electric light company and offered to submit the question of the assign-ability of the contract to arbitration.

The contract provided for an arbitration “ whenever any question shall arise as. to the true intent and meaning of any of the provisions of this contract,” but the electric light company refused to submit the question to arbitration.

Held, that the power company was estopped from denying that the contract was . assignable to the light company, and from insisting that it was assignable only to a successor of the cement company in the cement business;

That as the light company’s right depended, not only upon the construction of the contract, but upon the question of estoppel, the controversy was not such a one as was contemplated' by the arbitration clause contained in the contract.

The objection that a counterclaim is not sufficient in law upon the face thereof is not an authorized ground of demurrer to the counterclaim within section 495-of the Code of Civil Procedure.

The contention that a counterclaim is not a proper one within the provisions of the Code of Civil Procedure, is not available on a demurrfer to such counterclaim unless such objection is specified in the demurrer.

Appeal by the defendant, the Glens Falls Gas and Electric Light Company, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Saratoga on the 19th day of August, 1903, upon the decision of the court, rendered after a trial at the Saratoga Special Term, sustaining the plaintiff’s demurrer to the counterclaim set up in the-amended answer of the said defendant.

Plaintiff is a domestic corporation owning and controlling a dam in the Hudson river from which it obtains and furnishes electric, power. The defendant company, the Glens Falls Portland Cement

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Company, is a corporation engaged in the manufacture of cement in the village of Glens Falls. The defendant appellant is a domestic corporation, engaged in furnishing electric power and in furnishing gas and electric light in and about the village of Glens Falls. For convenience, the defendant appellant may be called the light company, and the codefendant the cement company, and the plaintiff the power company.

Upon the 7th day of February, 1901, the plaintiff and the cement company entered into an executory contract for the sale of power by the former to the latter. The contract covered a period of five years. The minimum supply was to be one thousand horse power, with an option to the cement company to take, from time to time as it decided, up to double that.amount. The power was deliverable on the cement company’s property. Payments were to be made by the cement company monthly,.the minimum to be paid for in any event. The five-year term was to commence at a certain period when the power company’s regular service was ready. The 10th provision of the contract reads: “ Tenth. The Cement Company agrees, as a condition precedent hereto, that the electrical energy or power hereby sold and to be taken by it, shall not be used or employed by it or its assigns during the continuance of this agreement, for the purpose of manufacturing pulp or paper or fiber of any kind.” The 11th provision of the contract reads: “ Fourteenth. This contract shall inure to the benefit of and become binding upon the successors and assigns of the respective parties hereto.”

This five-year term was set in motion by virtue of a certain notification on October 1, 1902. On November 15, 1902, the cement company delivered to the light company, and the light company accepted, an assignment of this contract, “ together with all the rights and privileges to which the said cement company is now entitled or to which it may hereafter become entitled under or by virtue of said contract.” Upon November 20, 1902, the light company notified the plaintiff of the assignment, sending to them a copy thereof, and upon that date paid the plaintiff the monthly installment of $1,875, which .was accepted by the plaintiff. On December 16,1902, the light company notified the plaintiff that it was about to install on the premises of the cement company certain . motors and transformers of; standard make purchased by it from a

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reputable maker, to wit, the General Electric Company, and guaranteed by the manufacturer to have a power factor or efficiency as' high as any obtainable in the market, all as provided in the 2d clause of the contract. The light company at the same time offered to the plaintiff an opportunity to. test the same. On December 18,1902, the light company notified the plaintiff that the apparatus aforementioned was actually installed on the premises -of the cement company as provided in the contract, and was ready for operation, and demanded that plaintiff at once make the necessary connections and supply the power as provided in the contract. Opportunity was again offered to the plaintiff to make the test mentioned in the contract. This apparatus cost the light company $5,000. ' On" December 20, 1902, the defendant light company -again duly paid the plaintiff $1,875, and plaintiff accepted the same, and at the time of this payment the light company again demanded performance of the contract on the part of the plaintiff. On December 23, 1902,' after the plaintiff had several times written to the light company recognizing the assignment, and after the light company had made the two monthly payments to the plaintiff, which had been accepted, and after it had purchased expensive apparatus, the plaintiff notified the defendant light company that it objected to the assignment of the contract to the light company, and offered to submit the question of the assignability of the contract to arbitration. To that the light company replied that there was no question as to the true intent and meaning of any of the provisions of the contract upon - the matter of its assignability; and that plaintiff’s conduct with the light company during the thirty-four days prior thereto estop ped it from raising any such question if there had b een one. These facts are set up in the defendant’s counterclaim, and upon them relief is asked both legal and equitable. A demurrer by the ; plaintiff to this counterclaim has been sustained: From the interlocutory judgment sustaining said demurrer, the defendant light-company has appealed.

Howard, Taylor and William B. Anderson, for the appellant.

Richard Lockhart Hand and Henry W. Williams, for the respondent.

Plaintiff’s objections tó the counterclaim, as specified in the demurrer, are, first, that it is not sufficient in law upon the face thereof; and, secondly, that facts are not therein stated sufficient to constitute a cause of action. The objection first made is not an authorized ground of demurrer to a counterclaim within section 495 of the Code. The contention upon this appeal, that this is not a proper counterclaim within the provisions of the Code, cannot be here made because not specified in the demurrer. The sole question, then, for our determination is as to the sufficiency of the facts alleged in this counterclaim as constituting a cause of action. It is not necessary for üs to discuss whether that cause of action, if one be stated, be in law or equity. If any cause of action be therein stated, the plaintiff’s demurrer must be overruled-.

The determination as to the sufficiency of this counterclaim seems to hinge upon the right of the light company secured under the assignment from the cement company of November fifteenth. The plaintiff claims that that contract was not assignable, and, therefore, that the light company obtained nothing by the pretended assignment thereof. The defendant, however, contends, first, that the contract was assignable as a matter of law; and, secondly, even though not assignable without the consent of the plaintiff, nevertheless the plaintiff has by its acts estopped itself from objecting to such assignment, and has accepted the defendant light company as the proper assignee thereof.

In our view of the facts alleged in the defendant’s counterclaim it is not necessary for us here to decide whether there be in this contract any personal element which would give to the plaintiff the right to insist, that it would perform its contract only with the original contracting party. When this assignment was made upon November fifteenth notice of the assignment was given and a copy forwarded to the plaintiff.- Together with this notification was sent by the defendant light company a' monthly installment due upon the contract, which was accepted by the plaintiff. Upon December sixteenth the plaintiff was notified that the defendant light - company was about to spend a large amount of money in reliance-upon their assignment, and still made no objection thereto. On December eighteenth notice was given that the1 apparatus was

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actually installed, and a demand was made for power from the' plaintiff. Upon December twentieth the plaintiff, without objection to the assignment, again received from the defendant light company another monthly installment of $1,875, and it was not until December twenty-third, after the plaintiff had written several letters recognizing the assignment, that the plaintiff assumed to offer any objection to the assignment, or made any question, of the rights of the defendant light company thereunder. After the receipt of the money of the light company in payment of the installments upon said contract, with full notice of the assignment thereof, and after having permitted the light company to spend upward of $5,000 in placing apparatus upon the premises of the cement company under the contract, the plaintiff, under well-recognized principles of equity, must be held to be estopped! from making objection to this assignment on the ground of any personal element which may be deemed involved in the performance óf the contract, and must be held to have accepted the light company as the party entitled to the contract which it had executed originally with the cement company, unless there be something in the nature of the contract which renders impracticable its performance with this assignee.

At the time of the execution of this contract it was primarily contemplated that the power should be furnished to the cement company for its use. There are provisions in the contract especially applicable to such contemplated use. I am unable to find any provision of the contract, however, which, by fair interpretation, cannot be adjusted to the use of any assignee of such power. I apprehend that if the cement company had closed and another manufactory had been substituted upon its grounds, whose business in no way rivaled the business of the plaintiff, no question would be raised as, to the assignability of the contract, or as to: such interpretation thereof as to make it adaptable to the purposes of the substituted factory. If after the words “cement company,” wherever the same appear in that contract, should be inserted the words “ or its assigns,” the contract would still be intelligible and consistent. Such words have, in effect, been inserted by the parties to the contract in the 14th provision thereof which provides that the benefits of the contract shall inure to the successors and assigns of the

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cement company. I can see no reason for limiting the effect of this provision to the successors of the cement company in the cement business. No such limitation is expressed in the contract, and it could -only be justified by the impossibility of its performance with some -other party than a cement company. This view of the contract is also soméwhat enforced by the exception in the contract that the power thus sold should not be used for the manufacture of - pulp or paper or fiber of any kind. Even if we can go out of the record, and take the brief of the respondent in explanation of this provision, it still remains that by this exception is recognized the right of assignment of the power granted by the contract for other purposes.

The respondent further urges that in the counterclaim is shown a proposal of the plaintiff to arbitrate under the contract, which was refused, and, therefore, a breach of the contract which would prevent a recovery by the defendant light company. The clause in question is an agreement to arbitrate “ whenever any question shall arise as to the true intent and meaning of any of the provisions of this •contract.” Inasmuch as the right of the defendant light company rests not only upon the provisions of the contract, but also Upon acts of the plaintiff as constituting a waiver of rights which plaintiff might• otherwise be held to have under the contract, the controversy here is not such a controversy as is contemplated, by this provision -of the contract.

The interlocutory judgment should, therefore, we think, be reversed, and the demurrer overruled.

All concurred.

Interlocutory judgment reversed, with costs, and demurrer overruled, with costs, with leave to the plaintiff to reply upon payment of costs of demurrer.