Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

Exercise 10

FACTS The Dayton Country Club Company (the Club) offers many social activities to its members. However, the privilege to play golf at the Club is reserved to a special membership category for which additional fees are charged. The Club chooses golfing memberships from a waiting list of members according to detailed rules, regulations, and procedures. Magness and Redman were golfing members of the Club. Upon their filing for bankruptcy, their trustee sought to assign by sale their rights under these memberships to (1) other members on the waiting list, (2) other members not on the waiting list, or (3) the general public, provided the purchaser first acquired membership in the Club. The bankruptcy court found that the Club's rules governing golf membership were essentially anti-assignment provisions and therefore the estate could not assign rights contained in the membership agreement. On appeal to the district court, the bankruptcy court's ruling was affirmed. The district court added that this case was not a lease but rather a ''noncommercial dispute over the possession of a valuable membership in a recreational and social club.''
DECISION Judgment affirmed.
OPINION Joiner, J. *** [T]he contracts involve complex issues and multiple parties: the members of the club, in having an orderly procedure for the selection of full golfing members; the club itself, in demonstrating to all who would become members that there is a predictable and orderly method of filling vacancies in the golfing roster; and more particularly, persons on the waiting list who have deposited substantial sums of money based on an expectation and a developed procedure that in due course they, in turn, would become full golfing members.
If the trustee is permitted to assume and assign the full golf membership, the club would be required to breach its agreement with the persons on the waiting list, each of whom has contractual rights with the club. It would require the club to accept performance from and render performance to a person other than the debtor.
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The contracts creating the complex relationships among the parties and others are not in any way commercial. They create personal relationships among individuals who play golf, who are waiting to play golf, who eat together, swim and play together. They are personal contracts and Ohio law does not permit the assignment of personal contracts. [Citation.]
So-called personal contracts, or contracts in which the personality of one of the parties is material, are not assignable. Whether the personality of one or both parties is material depends on the intention of the parties, as shown by the language which they have used, and upon the nature of the contract.
Therefore, we believe that the trustee's motion to assign the full golf membership should be denied. We reach this conclusion because the arrangements for filling vacancies proscribe assignment, the club did not consent to the assignment and sale, and applicable law excuses the club from accepting performance from or rendering performance to a person other than the debtor.
INTERPRETATION When rights under a contract are personal, they may not be assigned.
ETHICAL QUESTION Is the court's decision fair to the creditors of Magness and Redman? Explain.
CRITICAL THINKING QUESTION Which type of contracts should not be assignable because of their personal nature? Explain.