Case ID: ohio-st_84/html/0201-01.html
Source: Caselaw Access Project
Author: {"author": "Shauck, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Furnace Run Saw Mill & Lumber Co. et al. v. The Heller Bros. Company.
    
      Instrument by debtor and his creditors — Authorizing trustee to carry on business for debtor — Empowers trustee to bind creditors on contracts, when — P'-’-ol proof may not contradict terms of instrument, when.
    
    1. An instrument executed by an embarrassed debtor and his creditors for the purpose of placing his business in the hands of one named as trustee for the purpose of carrying on the business, and completing the debtor’s unfinished contracts, authorizes the person so named as trustee to bind the creditors for such purchases as he may make in carrying on the business and completing the contracts.
    2. The authority so conferred may not be contradicted by proof of a contemporaneous agreement that the creditors should not be so liable, it not being incorporated in the instrument, nor communicated to one who extends credit in reliance upon the authority with which it clothes the trustee or agent.
    (No. 11740
    Decided May 9, 1911.)
    Error to the Circuit Court of Mahoning county.
    In January, 1905, H. O. Briggs, who was .engaged in the lumber business at Youngstown, became financially embarrassed when he entered into an arrangement with the plaintiffs in error, who were his creditors, to place his business in their charge with the' view to so conducting the business and managing his assets as to discharge his obligations with the proceeds thereof. To carry that arrangement into effect they executed a contract in writing as follows:
    “Whereas, H. O. Briggs, of the city of Youngstown, Ohio, is engaged in the 'lumber business of said city, and temporarily unable to meet his obligations as they become due;
    “Whereas, the said H. O. Briggs and all the-creditors of said H. O. Briggs desire to enter into an agreement temporarily deferring payment of all obligations now due or to become due; and
    “Whereas, it is the desire of all concerned to put a trustee in charge of said lumber business, the said trustee to be selected by the creditors, authorize said trustee to continue said lumber business, and to distribute the proceeds therefrom to all creditors in proportion to the amount due them in accordance with the agreement hereinafter entered into,
    
      “Now
    
    “Witness this article of agreement made and entered into this day' by and between the said H. O. Briggs and (the plaintiffs, in error).
    “In consideration of the presents and stipulations hereinafter set forth and especially in consideration of granting further time for the payment of bills now due and to become due, the said H. O. Briggs hereby agrees to place his business, including lumber yard, plant and all fixtures connected therewith, including books of accounts and credits of every character, at the disposal of his said creditors with a view to realizing sufficient money to pay off all his said indebtedness and until all his creditors have been fully paid.
    •“And in consideration of the presents moving from said H. O. Briggs’ creditors hereby agree to place in charge of said lumber plant a competent and practical man, to be known as a trustee for all concerned, whose duty it shall be to take charge of said lumber business, complete all outstanding contracts, pay all necessary running expenses of said business, and at the end of each thirty (30) days render a statement to each and every creditor of the financial condition of said concern, and make payment on all outstanding bills in proportion to the amount thereof at the end of each thirty (30) days.
    “That all moneys received by said trustee shall be deposited in the Dollars Savings & Trust Company bank of Youngstown, Ohio, in the names of said trustee as trustee.
    “That said trustee shall give surety bond, conditioned that he faithfully perform the duties herein set forth in the sum of ten thousand ($10,-000.00) dollars.
    “Further agreed that the said J. P. Huxley shall act as trustee with duties incumbent as herein-.before set forth:
    “That the compensation of said trustee shall be two per cent, on all moneys received.
    “And it is further agreed by and between the parties hereto that said trustee shall employ the said H. O. Briggs as general manager of said business, and that he shall receive as compensation for said services one hundred ($100.00) dollars per month.
    “And it is further agreed by and between the parties hereto, that this agreement shall continue until said creditors hereinbefore named shall be fully paid, or the majority of creditors in interest, as to the amount due, owing at a regular meeting, of which all creditors shall have notice, shall decide to discontinue to have said trustee.
    “And it is further fully understood and agreed that no creditor of the said H. O. Briggs shall' institute or prosecute any legal proceedings of any kind or character against the said H. O. Briggs during the continuance of this agreement.
    
      “It is fully understood by and between the parties hereto that this agreement obligates all the parties hereto only when it is approved and signed by the creditors hereinbefore named.”
    Said J. P. Huxley entered upon the discharge of his duties as trustee under said arrangement, and in their prosecution in the months of March, April and May, 1905, in the purchase of materials contracted' the obligation, for whose enforcement the original suit was brought against those who had signed said contract. The answer of The Morris Hardware .Company is presented in the printed record as a type of the answers of all the defendants. It consists of two defenses, the first of which is for the most part admissions of the allegations of the petition, and a denial of the construction of the contract which would make the defendants liable to the plaintiff. It admits the execution of the contract as alleged, and that Huxley entered upon the discharge of his trust with a view to realizing funds for the payment of the creditors. It denies that the defendants authorized Huxley to make new. contracts or held him out as having such authority.
    For a second defense it is alleged that at the time of making said contract, and previous thereto, at conferences among the parties thereto it was agreed that the creditors were not and should not be liable upon any contracts which Huxley might make. The plaintiff replying denies that it had any notice of the alleged agreement set out in the second defense. In the court of common pleas there was a judgment in. favor of the original plaintiff for the value of the articles so purchased by Huxley, and in the circuit court that judgment was affirmed. -
    
      Mr. W. C. Carman; Mr. B. F. Wirt and Mr. F. K. Bowman, for plaintiff in error.
    No brief filed on behalf of defendant in error.
   Shauck, J.

The case permits the concession to the plaintiffs in error that the contract signed by them did not constitute them partners, and that it did not constitute Huxley and Briggs, or either of them, general agents with authority to bind the creditors beyond the scope of the purposes indicated by the contract. This concession includes all that can be claimed for most of the principles stated and the authorities cited in the brief of their counsel.

By their exceptions to the rulings of the trial judge with respect to the instructions which should be given and refused, and with respect to the evidence which should be admitted or excluded they have laid the foundations for two propositions, one or the other of which it is incumbent upon them to maintain. One of these is that the contract which they signed did not authorize Huxley or Briggs, or either of them,. to contract obligations in the conduct of the business which might be asserted against them. That proposition regards only those terms of the contract which contemplated that the assets of Briggs were to pass into the control of the trustee to be by him converted into money to be applied to the discharge of his indebtedness to the several creditors who executed the contract. But it wholly excludes from consideration the stipulation that the trustee should “take charge of the said lumber business, complete all outstanding contracts and pay all necessary running expenses of said business.” It was in furtherance of the purpose thus expressly defined and authorized that Huxley contracted the obligation upon which the plaintiff counted in the original petition.

A proposition suggested by the exceptions taken upon the trial by the plaintiffs in error, and urged in the brief of their counsel, is, that if the terms of their written contract, considered alone, should be deemed sufficient to create the suggested liability for purchases made in the conduct of the business, the written terms should be treated as modified by the contemporaneous parol understanding that the signers of the contract should not be so bound. This is said to be so because the rule that written contracts cannot be varied by parol obtains only between the parties to the instrument. Although Huxley was denominated a trustee he was in the relation called in question here the agent of the plaintiffs in error for the conduct of the business, and the written contract was his letter of authority. It was in his possession for the purpose of obtaining credit, and it was so used by him in this instance. Certainly the plaintiffs in error are estopped to assert a limitation upon the written authority with which they clothed their agent by proof of a parol understanding neither carried into the instrument nor- communicated to one who relied upon it.

Judgment affirmed..

Spear, C. J., Davis, Price, Johnson and Donahue, JJ., concur.