Seymour v. Finance & Guaranty Co.

Digges, J., delivered the opinion of the Court. The principal questions before us for decision on this appeal are, first, the sufficiency of the declaration; and, second, whether or not the plaintiff, by the conduct of its agents, has been estopped from prosecuting its claim as set up< by the allegations of the declaration. The first of these questions is raised by the demurrer to the declaration, which was overruled by the trial court; and the second is presented by the exception taken to the ruling on the prayers. The case was tried by jury and resulted in a verdict and judgment for the plaintiff for the sum claimed in the declaration.

There is m> dispute as to the correctness of the amount of the judgment, if the plaintiff is entitled to recover at all. The circumstances giving rise to the plaintiff’s claim, most of which are admitted or proven, may be summarized substantially as follows: William Hellbach was a contractor, engaged in the plumbing business, and in the spring of 1923 was awarded two plumbing contracts by the board of education of the City of Pittsburgh, in connection with the building of two1 schools in that city, one known as the David E. Oliver School, and the other the Peabody High School. During the progress of this work, Hellbach found it necessary to raise funds to carry on his business, including the two Pittsburgh school contracts; and in February, 1924, he consulted Roland R. Marchant, an attorney, as to means of securing the needed funds. As a result, Mr. Marchant, on behalf of Hellbach, made application to the Finance & Guaranty Company, the appellee, with that end in view, and presented a statement purporting to show Hellbaeh’s financial condition as of February 1st, 1924.

Among the items set forth in this statement were certain contracts for plumbing and heating then in process of installation. Two of these contracts were in connection with the Pittsburgh schools, ¡and it was stated: ⁵¹⁷ ■ “Peabody and Oliver Schools, Pittsburgh, Pa., amount of contracts, $81,400.00. Amount paid, $32,-676.83. Amount due on open account, $27,809.30.

Amount of reserval, $8,000.00.” After an, examination of this statement, and further investigation made by the appellee, it entered into an agreement with Hellbach under date of February 26th, 1924, by which it was provided that the appellee would from time to time, during the continuance of the agreement, and within the limits agreed upon, buy such accounts belonging to Hellbach as might be acceptable to the appellee. It provides in detail the terms under which the accounts should he purchased, and the percentage of each which should be paid therefor. It further provides that Hellbach warrants that he will transmit or deliver to the appellee, at its office in Baltimore, Md., on the day of the receipt thereof, all original checks, drafts, notes, acceptances, and other evidences of payment received in payment of, or on account of, any accounts purchased under the agreement, and that each account offered for sale to the appellee shall represent a bona, fide sale and delivery of property usually dealt in by Hellbach, and shall be for a certain, undisputed, liquidated claim or demand, which is due or to become due on the dates set forth; and F. R. Y. Williams or II. F. B'rown (the president and treasurer, respectively, of the appellee), or any person whom either of the named persons or the appellee might designate, is constituted the true and lawful attorney of Hellbach, with power to receive, open, and dispose of all mail addressed to him, and to endorse his name upon any notes, acceptances, checks, drafts, money orders, or other evidence of payment or collateral that may come into the possession of the appellee as payment of or upon accounts purchased by it.

The agreement further provides: “Neither of the parties hereto shall he hound by anything not expressed in writing by -and between the parties; this agreement and all of its provisions shall inure to and become binding upon the. parties, their heirs, executors, administrators, successors and assigns, only after ⁵¹⁸ acceptance by two duly authorized officer's of second party” (the appellee). This agreement contains a number of other provisions, but those we have referred to are all that are necessary for a proper consideration of the case. In pursuance of this agreement, Hellbach made a number of .assignments to the appellee. These were made on forms which were headed “Certificates of Indebtedness.” The first of those involved in this case was made by Hellbach to the appellee about February 26th, 1924, and purported to assign accounts against the board of education of Pittsburgh amounting to $27,809.30.

The loan obtained on tbe strength of this assignment was $13,330.28, it being the amount of money needed by Hellbach at that time. This certificate of indebtedness certified that the persons named therein were indebted to Hellbach in tbe sums set opposite their respective names for goods sold, shipped and delivered to the persons named therein, being tbe board of education of Pittsburgh, the amount being $27,809.30, which was set forth as being due March 10th, 1924. Following the above statement, there appears: “In consideration of $1.00 and other valuable considerations, the receipt of which is hereby acknowledged, the undersigned hereby sells, assigns and sets over to Finance and Guaranty Company, its successors or assigns, all its right, title and interest in and to the open accounts and contracts above named represented by invoices and shipping documents delivered herewith aggregating $27,809.30 ($13,330.28), including all moneys due and to become due upon the same. * * * * The undersigned represents that the above schedule correctly sets forth undisputed open accounts and contracts now owing the undersigned for bona fide sales and deliveries of merchandise in accordance with specifications of the buyer * * * that the correct maturities of said open accounts and contracts have been set forth and that proper entries have been made on the hooks disclosing the absolute sale thereof to Finance and Guaranty Company, its successors or assigns. * * * The undersigned hereby acknowledges receipt ⁵¹⁹ from Finance and Guaranty Company of the above open accounts and contracts for collection solely as agent for and under agreement existing with Finance and Guaranty Company.” The same form is used for each of the assignments or certificates of indebtedness involved in this case, all of which are signed William Hellbach, per Bertha M. Hellbach, or B. M. Hellbach. The certificate of indebtedness representing the second assignment was dated March 17th, 1924, and was of an account stated to he against the hoard of education of Pittsburgh in the mount of $4,600; while the third represented what purported to be an account against the hoard of education for $5,330, and was dated'March 26, 1924; and the fourth being an account against the same party for $3,000, dated March 27, 1924.

From the face value of each of the accounts represented by these respective certificates of indebtedness, the first of which, as stated, being taken for $13,330.28, certain deductions were made in accordance with the terms of the agreement; and after such deductions, checks for tho respective balances were, on the respective dates of the assignments, delivered to Hellbach, the amounts of these checks being $10,147.66, $3,519.00, $2,385.45 and $2,295.00 respectively. These checks were accepted and used by Hellbach, and there is no dispute as to' the amount of these payments, or the fact that Hellbach accepted them as being made in accordance with the terms of his agreement with the appellee. In the early part of March, 1924, Hellbach received from the hoard of education two checks payable to his order, each being dated March 7th, 1924, one for the sum of $1,299.84 for work on the Oliver School, and the other for $549.10 for work on the Peabody School. In accordance with the agreement, these checks, upon the receipt thereof by Hellbach, were by him endorsed in blank and turned over to the appellee, which deposited them and credited Hellhach’s account with the total amount represented thereby.

In April Hellbach received two further checks from the board of education, one for $1,873.02 on account of the Oliver School, ⁵²⁰ and the other for $639.95 on the Peabody School, payable to him. These chocks were likewise endorsed and delivered to the appellee, and Hellbach given credit for the amount represented thereby. Some time in the early part of April, Hellbach appearing to be in financial difficulties, certain of his larger creditors held a meeting to' discuss his financial condition and see if any step® could be taken to help him. This meeting resulted in the call of a meeting of all of his creditors, which was held at his place of business in Baltimore Oity on the 18th day of April, 1921.

At this meeting a large percentage of his creditors were present. Mr. Hoffman, the vice-president of the appellee, attended this meeting. Mr. Seymour, representing one of the larger creditors, acted as chairman of the meeting, stated its object, and read to the meeting a statement of Hellbach’s affair’s as it had been given to him by Hellbach, and which Seymour stated he believed was substantially correct. Seymour further stated that in his judgment it would be wise for the creditors to appoint a creditors’ committee to complete the various contracts that Hellbach had on hand, as there was an apparent profit in each of these contracts, if they should be finished, whereas if the contracts should be abandoned and the bonding company be allowed to. complete them, each contract would probably show a loss.

Referring specifically to the Pittsburgh school contracts, it was stated that there was an apparent or possible profit of from $25,000 to $27,000 if these contracts were completed. Mr. Seymour then asked for comments upon the proposed plan from any of the creditors present desiring to do so. A general discussion of the plan followed, resulting in a decision by the creditors present to appoint a creditors’ committee for1 the purpose of completing Hellbach’s contracts, including those on the two Pittsburgh schools. The testimony of witnesses for both the appellee and appellants is in substantial accord as to what transpired at this meeting.

As stated, the appellee was represented at this meeting by Mr. Hoffman, its vice-president, and there seems practically no dispute as to what his action was on that ⁵²¹ occasion; Mr. Hoffman’s testimony being that he (Hoffman), after hearing Seymour’s statement, expressed himself as believing that it was wise for the creditors to finish the contracts, rather than to allow the bonding company to take charge, but that his company was a preferred creditor of Hellbach; that Mr. Seymour presented estimates as to what it would require, and that he heard the creditors’ committee or the creditors then before the committee discussing whether or not it was advisable for them to go ahead and complete the job; that he hoard it all, and heard them finally determine that it was for the best interest of the creditors to do' it, but repeatedly stating that his company was a preferred or secured creditor; that lie understood from what was said at that meeting that it would require $50,000 to complete the Pittsburgh contracts, which would result in a profit estimated at that time of $25,000; that he knew that this $50,000 necessary to complete the contracts would have to he secured from soino source, but had no idea of what that source would be; that his company -was in a different position than other creditors, they being general creditors, while his company was a secured creditor. Philip B. Belt, the Baltimore cashier of the Crane Company, that company being the largest creditor of Hellbach, its claim amounting to $35,000, was present at the creditors’ meeting, representing his company. His testimony as to what occurred at the meeting is: “Mr. Seymour (general sales manager of the Crane Company) opened the meeting in the presence of all the creditors present, and in the presence of Mr. Hoffman. Mr. Seymour stated there was a preliminary investigation made about the affairs of Hellbach, and that Mr. Seymour and some of the largest creditors decided that Mr. Hellbach could not continue without help.

The meeting was called to lay these facts before the creditors to decide what could he done. A statement of Ilellbach’s contracts on hand was made and discussed. A full statement of TIellbach’s affairs was discussed and his entire affairs at that meeting. Several of the creditors asked questions and had remarles to make.

Mr. Seymour suggested that a creditors’ committee be ⁵²² appointed to take charge of Hellbach’s affairs.” Being asked if Mr. Hoffman got up and said anything, witness said: “Mr. Hoffman said that it would be the wise and proper thing to do, to finish the contracts. Mr. Hoffman stated the plaintiff’s account was secured, and he thought it was a wise thing to finish the contracts. That after Mr. Hoffman made his talk to the creditors there was a creditors’ committee appointed at ■ that meeting, while Mr. Hoffman was there. Mr. Hellbach was to assign his assets to the creditors’ committee, and the creditors’ committee took over all his assets.

The two Pittsburgh contracts were discussed at that meeting in the presence of Mr. Hoffman before the creditors’ committee was appointed. It was estimated at that meeting that there would be a surplus after the Pittsburgh contracts were completed of some $21,000. Mr. Seymour made that statement, but a report was made by Mr. Hellbach and Mr. Hellbach’s engineer, a Mr. Melvin. Mr. Hoffman made his talk before Mr. Seymour’s statement as to turning over Hellbach’s assets.

Before Mr. Hoffman made his statement, Mr. Seymour had given a general statement of the conditions. * * * Shortly after Mr. Hoffman made his statement, Mr. Seymour said that Mr. Hellbach would turn over all his assets to the creditors’ committee if a creditors’ committee was appointed. Mr. Hoffman was present when that statement was made. Mr. Hoffman did not say anything else after the statement was made by Mr. Seymour that Mr. Hellbach would turn over all his assets to the creditors to complete these jobs, if the creditors’ committee was appointed. The creditors’ committee was named at that meeting, and there was no> objection by anybody.” Mr. Marchant, being also present at the meeting, testified that he (the witness) made a statement at the meeeting, saying “that the contract was at a stand-still if Hellbach’s affairs were not operated by somebody; that the bonding company would step in and the Finance & Guaranty Company and the creditors would lose everything that they had in it, and the job would be gone, and it was not probable that the creditors would receive anything at all if the bonding company ⁵²³ completed it.

Witness remembers distinctly referring to tbe bonding company. There was a bond given for the completion of the work, made for the benefit of the hoard of education. Witness is certain that there was an assent of two or three creditors, with their experience with the completion of jobs by bonding companies. Something was asked about how the creditors would protect their money, Mr. Hoffman got np; he was sitting at the back of the room; I recall it very distinctly ; and he said that there was in his judgment nothing else to do, or words to that effect, that the creditors ought to complete the job, that they have no equity in it if it was not completed, and in that way everybody would be benefited, and then the general discussion turned into- how the creditors’ committee should he organized.

Some things were begun as to the draft of creditors’ committee agreement, what powers they should he given, and the members of the creditors’ committee were then selected,” and witness’ “recollection is that Mr. Hoffman was asked to serve on that committee. Mr. Hoffman then referred to the fact that his company held this assignment of the accounts, and- he did not think that they wanted a representative on the committee, and somebody else was put in his place, and then the committee so selected were instructed to draft an agreement or employ counsel to draft an agreement, and the meeting formally adjourned. Mr. Hoffman, Mr. Seymour, and several of them discussed what would happen, and they were all in a hopeful frame of mind about tbe whole thing. Everybody thought that by sticking together they would work the situation out.

That was the attitude of everybody towards the whole thing.” Subsequent to this meeting, and in pursuance of wbat had been agreed upon, a creditors’ agreement was prepared, a copy of which is filed with the declaration, -and which was sent to each of the creditors of Hellbach, together with a circular letter under date of April 18th, 1924. This letter was signed by the committee, and stated: “You will recall that- in the letter calling the meeting of the creditors of William Hellbach to be held on April 9, 1924, you were advised that Mr. Hell ⁵²⁴ bach’s assets amounted to approximately $194,000 and that his liabilities amounted to approximately $178,-000. In investigating some of the larger items among the assets no reason is found to change this statement. At a meeting of the creditors held on last Monday there were present or represented creditors whose claims aggregated approximately $164,000 out of the total indebtedness of approximately $178,000.

The situation was considered at some length and all of the creditors agreed that the affairs of Mr. Hellbach should be handled by a creditors’ committee, with authority to conduct the business or at least complete certain contracts on hand on which considerable work had been done. The undersigned were named to act as such a committee. An agreement has been prepared which we believe meets the requirements, a copy of which is enclosed herewith, and we urge that you affix your signature or acceptance and verify to us the amount of your claim. The committee is very anxious to take charge of the business as promptly as possible.

The original agreement has been executed by Mr. Hellbach and the members of the committee. Should you desire any additional information, please address your communication to the committee, 651 W. Baltimore Street, Baltimore, Maryland, and your inquiries will receive prompt response. We urge that you act promptly in this matter.” The creditors’ agreement was: “This agreement made this eighteenth day of April, nineteen hundred and twenty-four, by and between William Hellbach, of Baltimore City, in the State of Maryland, hereinafter called ‘Hellbach,’ party of the first part, and H. W. Seymour, James P. McPhail, Sidney O. Blumenthal, George Clautice, Arthur E. Thain and J. H. Sieppel, of said city and state, hereinafter called the ‘committee,’ parties of the second part, and creditors of William Hellbach, who joined in these presents, parties of the third part. “Whereas, Hellbach is now and has been engaged in - the plumbing contracting business in Baltimore ⁵²⁵ City and in the conduct of said business has incurred and now owes various sums of money to persons, firms, and corporations, wihch he is unable to pay currently as demanded, and “Whereas, at a meeting of the creditors of said Hellbaeh, held at his office in Baltimore City on Monday, April 14th, 1924 (at which said meeting creditors, whose claims aggregate more than ninety per cent, of the debtor’s whole indebtedness were present or represented), his affairs were discussed and fully considered, and it was unanimously agreed by those present that it would he for the best interest of all the creditors to operate the business under the supervision of a creditors’ committee; and at said meeting the parties of the second part were named to act as the committee of the creditors upon the conditions herein set forth, and “Whereas, said Hellbaeh also being present at said meeting agreed to said arrangement and further agreed to transfer or cause to he transferred to said committee, free from all dower rights of his wife, the parcels of real estate hereinafter more particularly described. “How, therefore, in order to make effective the plans of the creditors as agreed upon at said meeting, and in consideration of the mutual covenants, promises and conditions herein contained, the parties hereto agree as follows: “1. The said Hellbaeh hereby assigns and transfers to said committee all of his assets of every kind and description and wheresoever situate, and all cash on hand and in bank, accounts, bills and notes receivable, all contracts and rights in contracts of any kind and every kind, all equipment, tools, machinery, merchandise, and stock on hand, fixtures, automobiles, trucks, and every and all items of value now owned by him or to which he is entitled. “2.

The said Hellbaeh further agrees to transfer or cause to he transferred to the said committee or its control title in fee simple to all that tract of land and improvements thereon, situate on the north side ⁵²⁶ of the Hagothy River near Gibson Island in Anne Arundel County, together with the appurtenances to said property, and also all that parcel of land and improvements thereon in Baltimore City, known as 651 West Baltimore Street; the said property to be conveyed to said committee free of any claim of dower, but subject respectively to two mortgages, one for fourteen thousand two hundred fifty ($14,250) dollars, and one for six thousand ($6,000) dollars. “3. It is understood and agreed that the said assets shall be held, controlled, and disposed of by the said committee for the benefit of the parties of the third part to this agreement, - and according to the terms and conditions hereof. “4. When this agreement becomes effective, the said committee shall immediately take charge and control of the business of said Hellbach and shall proceed to conduct and operate the same, and in so doing convert all assets into cash as promptly as may be done, in their judgment, for the best interests of all the creditors. “5. During the period of operation of the said business the committee shall have full power and authority : “a.

To do all things necessary to complete any and all contracts heretofore undertaken by said Hellbach or, in their judgment, to abandon any of. said contracts. “b. To make and enter into contracts for additional work and to do all things necessary to perform the same. “c. To employ such agents and representatives, clerical and supervising help and labor as the committee, in its discretion, may from time to time deem necessary and proper, and fix and determine the compensation, and prescribe the duties of each and all of the agents and representatives so employed. “d. To determine and fix the depository of the funds of said business and designate the person or persons who shall sign checks thereon and other obligations. ⁵²⁷ “e.

To have free access and possession of all the books, contracts, documents, and papers of every kind and to have full information of all facts in the possession of said Hellbach pertaining to his business. “f. To enter into contracts for the sale, and to sell and convey, mortgage, or otherwise dispose of real estate in the hands of said committee, and to hypothecate or sell stock and other assets in the hands of said committee. “6. This agreement shall become binding and effective when the same has been executed by the parties of the first and second parts, and shall be approved or