Boyle v. Rider

Boyd, C. J., delivered the opinion of the Court. The appellee recovered a judgment against the three appellants, individually, for feed for livestock furnished them while they were acting as trustees for The Slack and Slack Company. That company had contracted with the City of Baltimore to build some sewers, and, having become financially embarrassed, made a deed of trust to Albert J. Boyle, one of the appellants, for the benefit of its creditors. A few days afterwards a meeting' of the creditors was held, and Messrs.

Kelly and Vervalen, with the consent of Mr. Boyle, were selected as co-trustees, subject to the approval of the Court having jurisdiction of the trust. An agreement dated ‘the 12th of November, 1915, was entered into between the ²⁸⁸ creditors and Mr. Boyle and, although not very clearly-shown, we understand that all of the creditors signed it. Theappellee was one of the number, but as hereinafter mentioned he testified that he did not read the agreement and that its-terms were misrepresented. It recited tbat it had been agreed that Messrs.

Kelly and Vervalen should be appointed co-trustees ; that part of the assets of the company consisted of two unfinished contracts with the Mayor and City Council of Baltimore, one of which being approximately 98 per cent., and the other approximately 25 per cent, completed; that three bonding companies were jointly responsible to the city for the completion of the contracts and had the right to take possession of the assets of The Slack and Slack Company, pertaining to the contracts, and to complete the work, and threatened to so enforce their rights; that it had been agreed, subject to the approval of the creditors and of Circuit Court No. 2 of Baltimore City, that if the appellants would give-their individual bond to said companies to protect them and! save them harmless, the bonding companies would accept it and waive their right to complete the work, provided no creditors of The Slack and Slack Company instituted bankruptcy proceedings against it, and that the bonding companies be reimbursed in full for their claims against that company for premiums due on the bonds furnished by them to the city,, and’for their Workmen’s Compensation bond; that it was reported to the creditors that if the bonding companies proceeded with the work the creditors would lose approximately $20,000 in the way of profits lost by reason of the failure on the part of the trustees.to complete the work, “whereas, if the trustees aforementioned are allowed to proceed with the-work in accordance with the above mentioned arrangement, whatever profits might accrue by the doing of the balance of the work would be applicable to the payment of .the claims of creditors of The Slack and Slack Company.” It was also agreed that the signing creditors did thereby signify their acceptance of the terms mentioned, to the intent that upon ²⁸⁹ the giving of the bond referred to, “the said Albert J. Boyle, Samuel A. Yervalen and John J. Kelly, trustees shall be authorized to proceed with the administration of the trust created by the said deed of trust, and to finally settle and close all matters appertaining to the administration of the said The Slack and Slack Company, a body corporate.” They further agreed not to petition, individually or jointly, to have The Slack and Slack Company adjudicated a bankrupt, and that the trustees were only to be allowed $3,000 commissions' — $2,000 to Boyle, $1,000 to be divided between the other two-, and $1,000 to be allowed as counsel fees to the attorneys for the trustees. Over forty companies, firms and individuals signed the agreement (eighteen of them after the plaintiff), the bond was given by the appellants and they were authorized by the Court to proceed with the work. They finished the contracts and were paid by the city the balances due, but it turned out that there were creditors who had prior claims, which the record shows were allowed by the Court, resulting in the trustees not having funds sufficient to pay in full the claims they contracted in finishing the work, after paying those allowed as priorities. The suit by the appellee was for a balance of $915.28, with interest, alleged to be due him for feed furnished the trustees for horses or mules held by them.

The plaintiff was a creditor of the company for four or five thousand dollars (apparently exclusive of a claim for $2,000 secured by a bill of sale on horses and mules of the company), and the three companies represented by the appellants were also creditors to considerable amounts. It was understood that in completing the contracts the trustees should buy from the creditors of The Slack and Slack Company, which they did, and the companies represented by the appellants, as well as others, furnished materials, and there is still money due those companies for1 what they furnished the trustees, besides about $1,200.00 advanced by the appel ²⁹⁰ lants themselves. Mr. Boyle testified that they finished the work and collected the money that was retained on the contracts, that “from time to time the Court passed orders for us to pay those preferred claims out of our money for hills that were contracted by The Slack and Slack Company before they appointed the trustees. Had that money not been paid preferred creditors, we would have been able to pay every cent that the trustees contracted for plus about fifteen thousand dollars on the original creditors’ indebtedness.” This is also in his testimony: “Did you or did you not know that those preferred claims were in existence?

A. No, sir, lots of them I did not. Q. When did you find out? A. Not ■until the orders were passed; just about the time the work was completed, taking that money away from us, I did not know that the assignment and bills of sale existed.” He was the original trustee and was the practical man in charge, but he said that there was no record of the preferred claims in The Slack and Slack Company’s affairs. It is admitted that there was no express agreement on the part of the appellee to look to the estate for what he sold the appellants beyond what may be inferred from the agreement of creditors referred to above, and he claims that his intention was to hold them individually for the amount of their purchases.' The appellants, on the other hand, r/mtend that the circumstances show that it was the intention • the •appellee not to hold them personally responsible.

Before considering the main question, it may be well to refer to the appellee’s contention that he did not read the agreement of the creditors, which he signed and which he claims, that Mr. Fodlick, the attorney for the trustees, and Mr. Slade, who was with him, told him that it was “simply to keep the old Slade and Slack Company from being thrown into a receivership” —meaning bankruptcy, as his subsequent evidence shows. Mr. Fodlick testified that he saw Mr. Eider twice about signing the agreement. At the first time he said he told him of the contents of the paper, what the creditors had agreed to ²⁹¹ and passed it over to him and he read it; that he refused to sign it the first time, saying that he wanted to think the matter over, that his claim was a large one. He went again the next day but Mr. Rider was not in and the following day he signed it.

The appellee testified in reply that he could not swear how many times Mr. Podlick called at his office, butilo only remembered one. Mr. Podlick could have had no possible reason for attempting to deceive Mr. Rider. ' The trustees had not then begun the work. The agreement, outside of the signatures, occupies, nearly two pages and a half' of the printed record, and we cannot understand how Mr. Rider could have thought that it was. only intended to prevent the creditors from throwing The Slack and Slack Company into bankruptcy. It was hoped by the creditors that' the plan proposed would result in not only paying expenses which the trustees incurred in finishing the work, but in paying part of the claims of the general creditors.

The agreement- does refer to bankruptcy proceedings and even if .Mr. Rider misunderstood it and thought that was all it included, he was bound to know what he was signing. Even if he was misled by what was told him, he was grossly negligent in signing the agreement without reading it, and there is nothing in the record which excuses his negligence. But beyond that, there is not a particle of evidence to show that the trustees, or the other creditors, knew that he had been misled into signing the agreement. On the contrary, he commenced at once to sell the trustees., who were proceeding under that agreement and the order of Court passed in pursuance of it.

As we have said in a number of cases, people cannot be thus negligent, and as. the result of their own carelessness sign, papers and then asks a Court, to excuse them for their negligence, especially if their action misled others. Even illiterate people cannot ordinarily so act, and receive tho aid of the Court, and the appellee is a business, man of experience. Wilson v. Pritchett, 99 Md. 583, 593 ; Smith v. Humphreys, 104 Md. 285, 290 ; Paper Bag Co. v. Carr, 116 Md. 541 , ²⁹² 551, and other decisions show the position, this Court has taken on that subject. - 'Another ground the appellee relies on to avoid the effect of' the agreement is, that after he signed it, the National Marine Bank signed it upon an express stipulation that it was not to interfere with its claim of priority under assignments covering all the money due, or to become due by the city to The Slack and Slack Company. But he testified that he “knew there was not a large amount of money to- be saved,” that “Mr. Slack had endorsed all these balances due by the city on retainers, they had all gone to the National Marine Bank, because Slack told mo the National Marine Bank held them all, there was no money there.

That is the great proposition they were going to get some money out of.” Yet he claims that he was so imposed on by the special agreement of the bank that it relieves him of any binding effect. If he knew it, as he swore several times he did, how could he have been injured by the special stipulation with the bank? In addition to that, he was himself a. preferred creditor— had a bill of sale on some of the live stock, for which he furnished feed to the trustees, and was allowed priority for it, but he signed the agreement without making any note as to his priority, or telling the trustees- or other creditors of it. Then he was asked: “Didn’t you know perfectly well that they (the trustees) were completing .contracts which Slack & Slack had in partial performance a.t the time that the failure occurred, and that there wasi a lot of withheld amounts which they were to get and would get payments- of as this work progressed, and that they were completing these contracts with the idea of securing money to help- pay the creditors ?” And he answered: “I did, yes.” So there is nothing in those contentions-, and we must treat the agreement of creditors as- his, asi well as of the others who signed it, and give- it such effect as it is entitled to.

The general principles are thoroughly established in this State as to- the- personal liability of trustees on contracts ²⁹³ made by them, but like most subjects, the question generally is as to the application of principles, of law to the facts, of each particular case. The ease of Gill et al. v. Carmine, 55 Md. 339 , is not only a loading one in this; State, but some of the facts are similar to those in this, ease, although different in some important respects,. Michael Roche, a builder, made a deed of trust to Grill and others of his, property for the benefit of his creditors. There were some, unfinished houses, the completion of which Roche said in his deed would greatly increase his assets.

Upon the, petition of the appellants as trustees, and at the instance of the creditors of Roche, the Circuit Court passed an, order authorizing the trustee before, making sale to complete seventeen, unfinished bouses, (including those upon which the appellee did the work and for which he furnished the materials sued for), and to pay for the same out of such amounts as might be received from, the trust estate. But as shown by the report of that case the appellee looked to the, appellants alone, for the payment of his account, and so told them before he finished the work. Judge Advey, after saying that “the law is perfectly well settled, that the party holding the estate in trust, even with general powers of management, is bound personally by the contracta that he may make as trustee, though he designates himself as such,” and quoting from, 1 Parsons on Contracts (4th Ed.) 102, referred at length, to, the case of New v. Nicoll, 73 N. Y. 127 , where it was held that, a trustee holding and managing a, trust estate*, who was, authorized to make an expenditure which was necessary for the protection, reparation or safety of the trust estate, but had no trust funds, and was not willing to make himself personally liable, could by express, agreement make the expenditure a, charge upon the trust estate, and have a lien upon it therefor, and could transfer such lien to another party who would agree, to make the necessary expenditure, upon the faith of the trust estate, lie then went on to say: “But, in the absence of such express agreement, or circumstances plainly indicating an in ²⁹⁴ tention on the part of the party doing" the work or making the expenditure, to exclude the personal liability of the trusr tee, and to rely exclusively upon the estate, or some other source for payment, the trustee, at whose request, the work was done or expenditure made, will be held personally liable. In such case, he must seek reimbursement from the trust estate.” In Glenn v. Allison, Trustee, 58 Md. 527 , there was a covenant by John Glenn, in a mortgage made by him as trustee of Margaret Armstrong, and he was sued personally on the covenant.

The Court* through Judge Robinson, after fully recognizing the general rule as to the personal liability of a trustee, said: “Where' it plainly appears from the face of the instrument, that he did not mean to bind himself personally, courts will construe the covenant according to the plainly expressed intention of thei parties, and this too, in cases where the covenantor had no right to bind himself in a fiduciary character.” He said that if the question depended solely upon the covenant itself, there could be no doubt as to Glenn’s personal liability: “But when the covenant is read in connection with the recitals in the mortgage which refer to the deed of trust, by which he was authorized to borrow the money, and the order of the Court having jurisdiction over the trust property, and to. whom the trustee was answerable for its proper administration, it is dear that Glenn neither meant to make himself personally liable, nor was it so