Citation Numbers: 181 Iowa 707
Judges: Gaynor, Preston, Stevens, Weaver
Filed Date: 11/17/1917
Status: Precedential
Modified Date: 7/24/2022
It appears from the evidence and the admissions of the parties that, in May, 1912, defendant was appointed trustee for one J. B. Cecil, trading under the name of the Cash Mercantile Company of Wapello; that his appointment was for the benefit of a number of creditors; that after his appointment he continued the business, and left Cecil in charge of it; that, in the middle of June, 1913, the first sale of goods was made by the plaintiff through a traveling salesman; that this salesman was told by Cecil, at the time of the purchase, of the trusteeship, and was directed by Cecil, who was in charge of the business, to bill the goods to M. H. Smith, trustee, and was assured that Smith would pay the bills; that plaintiff then continued to sell goods to J. B. Cecil, in the name of Smith, as trustee, until the bill amounted to $731.76; that, after the account had accrued, plaintiff informed defendant, Smith, of the fact that it had furnished
“Tour letter of the 16th received, and in reply beg to advise that the writer, (defendant) is acting in the capacity of trustee of the Cash Mercantile Co. of Wapello, IoAva, and mail addressed to me in care of this firm will be received. If your inquiry is in connection Avith the Cash Mercantile Co. of Wapello, IoAva, perhaps I can save you time in saying that, unless Mr. Cecil’s parents come to his rescue next week, by advancing sufficient money to put him on his feet, I shall proceed to close out this business, either by sale of everything in a lump, or, if necessary, piecemeal, and avíII take care of your account against this concern at the earliest possible moment.”
On November 21, 1913, defendant Avrote:
“More than a year ago, this business was turned over to me as trustee in a practically bankrupt condition. * * * The business has been continued along the most conservative lines, * * and very little headway has been made since the writer’s appointment as trustee. * * * With reference to the payment of your account, avíII say that at this time I am wo'rking, endeavoring to effect a settlement whereby Mr. Cecil’s parents come to his assistance. Tf I am unable to arrange this matter, the business will be shortly closed out, and, of course, the current bills will be paid as promptly as possible, and the balance distributed among the old creditors. For your own good, I would strongly recommend that you discontinue shipping any goods to the Cash Mercantile Company until further advice, and as above stated, will take care of your account just as soon as possible.”
On April 24, 1914, the defendant sent a circular letter to the creditors of the company, among whom was this plaintiff, in which it was recited:
*711 “The present condition of the business is as follows:
Cash in bank...............................$ 855.G9
Book accounts in bank for collection......... 792.92
Book accounts with local lawyer............ 1,377.06
Fixtures, estimated sale price, exclusive of automobile .................................. 375.00
Remaining mdse, on hand, estimated sale price. 125.00 International Delivery Auto, estimated sale price..................................... 75.00
Total $3,600.67
“Incurred since trusteeship for merchandise . . 3,533.76
“The present available funds, $855.69, are being prorated today on the amount incurred since trusteeship, on the basis of 24 per cent. As fast as the remaining assets can be turned into money, further distributions will be made on the same accounts.”
Among these accounts is plaintiff’s account now in suit.
At this time, the defendant sent the following draft, presumably with this circular letter:
“Wapello, Iowa, April 24, 1914.
“The Citizens Bank: Pay to the order of James McCoy & Company One Hundred Seventy-five and 62-100 Dollars.
“(Signed by Defendant, Trustee.)”
This sum apparently is the 24 per cent, referred to in this circular letter.
On May 25, 1914, the defendant wrote the plaintiff, in substance, that he was in receipt of a letter from Burlington creditors, which led him to believe that within the next two or three days he would receive the acceptance of all the creditors of the company, and would do his best to close affairs as promptly as possible, and would advise the plaintiff what the deficiency might be, so that the plaintiff might reach a decision as to whether or not it would take
“The settlement of the affairs of the Cash Mercantile Company is a matter about which we have no concern. Onr account is with you, and, of course, we hold you for the payment of the same.”
Other letters passed between the parties, but their contents are not material to this controversy.
“The general rule undoubtedly is that a trustee cannot*714 charge the trust estate by his executory contracts unless authorized to do so by the terms of the instrument creating the trust. Upon such contracts he is personally liable, and the remedy is against him personally. But there are exceptions to this general rule. When a trustee is authorized to make an expenditure and he has no trust funds, and the expenditure is necessary for the protection, reparation or safety of the trust estate, and he is not willing to make himself personally liable, he may by express agreement make the expenditure a charge upon the trust estate. In such a case he could himself advance the money to make the expenditure, and he would have a lien upon the trust estate, and he can by express contract transfer this lien to any other party who may upon the faith of the trust estate make the expenditure..* * * If he was authorized to make anj contract about them, it was simply the ordinary contract in such cases, which would bind the trustee personally, and not the trust estate.”
In Blewitt v. Olin, 14 Daly (N. Y.) 351, the court said:
“The liability of the defendant does not at all depend upon his having trust funds in his hands. If, in person or by an agent, he orders work to be done upon the trust property, he is personally liable, whether he has trust money in hand or not. It is no answer to a debt that he has incurred, and for which he is by law personally liable, that he has paid out all the trust funds that he has received.”
The same doctrine is recognized by this court in Gates v. McClenahan, 124 Iowa 593. Tn Connally v. Lyons, 82 Texas 664 (27 Am. St. Rep. 935), the Texas court, discussing this question, said:
“As we are of the opinion that a trust estate was created, * * * it remains only to consider * * * whether or not the trustee (the defendant) was personally liable for the goods purchased by him for the trust estate. * * **715 That such trustees should be held personally liable is reasonable, because they have in their own hands the means wherewith to reimburse themselves, and should not assume a debt for the benefit of an estate of which they have the sole management and control without prospect of funds for payment thereof. '"' * * Purchases by trustees, when made in obedience to the trust, impose upon them a personal liability; the seller must look to them for payment, and they must look to the trust estate for reimbursement.”
In McIntyre v. Williamson, (Vt.) 47 Atl. 786, the Vermont court said:
“The action is general assumpsit. The court directed a verdict for the defendant on a motion which assigned as grounds therefor that the plaintiffs dealt with the defendant in his capacity as trustee, and that the plaintiffs’ testimony disclosed no cause of action under the pleadings. * * * The dealings upon which the suit is based were had by and with the defendant as ‘trustee.’ He could become personally holden notwithstanding the use of this term. The legal estate was in him, and he was acting for himself in managing it. His official title served only as a personal description, and to separate the dealings from those pertaining to his personal matters. If he dealt in behalf of the trust estate, and within the limits prescribed by law, he can secure reimbursement from the fund. But the parties with whom he dealt can hold him personally liable, whatever his situation as regards the trust estate. The fact that they knew of the trust, and that he ivas dealing on its account, will not protect him. He could relieve himself from personal liability only by a definite understanding that the transactions were had upon some other responsibility.”
The court erred in directing a verdict for the defendant. See also Knipp v. Bagby, (Md.) 95 Atl. 60.
In Taylor v. Mayo (Taylor v. Davis), 110 U. S. 330 (28 L. Ed. 163), that court said:
*716 “A trustee is not an- agent. An agent represents and acts for Ms principal, who may be either a natural or artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in or affecting property -is vested for the benefit of another. When an agent contracts in the name of his principal, the principal contracts and is bound, but the agent is not. When a trustee contracts as such, unless he is bound no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. As a trustee holds the estate, although only with the power and for the purpose of managing it, he is personally hound by the contracts he makes as trustee, even when designating himself as such. The mere use by the promisor of the name of trustee or any other name of office or employment will not discharge him. Of course when a trustee acts in good faith for the benefit of the trust, he is entitled to indemnify himself for his engagements out of the estate in his hands, and'for this purpose a credit for his expenditures will be allowed in his accounts by the court having jurisdiction thereof. If a trustee contracting for the benefit of a trust wants to protect himself from individual liability on the contract, he must stipulate that he is not to be personally responsible, but that the other party is to look solely to the trust estate. There are, no doubt, cases where persons occupy the position of quasi trustees, under the appointment of a court, such as receivers charged with the performance of active duties, in which it would involve much hardship to make them personally liable. But in such cases, as the parties have the right to prove their claims against the common fund, and have them allowed by the court, the officer may have the protection of the court by which he is appointed, restraining parties from bringing*717 suits against Mm, except where leave is given for the purpose of fixing the amount due.”
In Hussey v. Arnold, (Mass.) 70 N. E. 87, that court said:
“If the trustees contracted in the usual way, without referring to anything which would limit the liability resulting from an ordinary contract, they are personally liable, * * and judgment can be obtained and enforced against them individually.”
Mitchell v. Whitlock, (N. C.) 28 S. E. 292. This was a civil action to recover the value of goods sold and delivered by the plaintiff to the defendant. In disposing of the case, the court said:
“A trustee purchasing goods or incurring any other liability on account of his trust is personally liable for the payment thereof, unless his liability is limited by an agreement, expressed or implied, with the creditor.”
Though the deed creating the trust is not before us, and there is no competent evidence in the record as to its contents, the whole record discloses with reasonable certainty that there was in fact an instrument executed in which the estate of Cecil, or the Cash Mercantile Company, passed to this defendant as trustee, with full power to operate the business carried on by said Cash Mercantile Company, and to dispose of all its assets for the benefit of the existing creditors. There is no question from this record that the defendant assumed to act as trustee of the property, and carried on the business as such, and as such purchased the goods now sued for in this action.
“Between the dates June 13,1913, and January 13,1914, the appellant, through their salesman, sold and delivered to J. B. Cecil, at Wapello, who remained in full charge of the Cash Mercantile Company after May 22, 1912, certain merchandise on credit to the amount of $731.76.”
'We think the court erred in finding for the defendant in this suit, and the cause is therefore — Reversed and remanded.