Case Name: FRANZ, Trustee in Bankruptcy, Respondent, v. LISTUG et al., Appellants
Court: Montana Supreme Court
Jurisdiction: Montana
Decision Date: 1937-11-22
Citations: 105 Mont. 499
Docket Number: No. 7,696
Parties: FRANZ, Trustee in Bankruptcy, Respondent, v. LISTUG et al., Appellants.
Judges: Associate Justices Stewart and Morris concur.
Reporter: Montana Reports
Volume: 105
Pages: 499–510

Head Matter:
FRANZ, Trustee in Bankruptcy, Respondent, v. LISTUG et al., Appellants.
(No. 7,696.)
(Submitted October 1, 1937.
Decided November 22, 1937.)
[74 Pac. (2d) 1133.]
Mr. John L. Slattery and Mr. Ernest L. Walton, for Appellants, submitted a brief; Mr. Slattery argued the cause orally.
Mr. John M. Kline and Mr. C. D. Borton, for Respondent, submitted a brief, and argued the cause orally.

Opinion:
MR. JUSTICE ANDERSON
delivered the opinion of the court.
Defendants have appealed from a judgment entered in favor of plaintiff upon a directed verdict. At the close of plaintiff's evidence the defendants moved for a judgment of nonsuit which was denied. Thereupon defendants rested their case without the introduction of any testimony. Plaintiff moved for a directed verdict, which motion was granted.
Defendants have made a number of specifications of error, which present but three general questions, namely: The propriety of the admission of certain testimony over the objections of defendants ; the ruling of the court on the motions for nonsuit and directed verdict; and the denial of defendants' motion for new trial.
The complaint was in two counts. In the first, the corporate existence of one of the defendants is alleged; also that the adjudication in bankruptcy as a result of an involuntary petition filed on February 18, 1930, occurred on March 6 of the same year in the United States District Court of Minnesota, and the subsequent election and qualification of plaintiff as trustee of the bankrupt corporation. It is then alleged that on March 30 of the year mentioned, the day before plaintiff qualified, the defendants were and for a long time prior thereto had been the agents of one W. V. Harrington with authority from him to collect and sell each season his share of grain delivered by one Krogstad to Harrington under a contract for the sale of land between Harrington and Krogstad; that at the date of the adjudication the bankrupt corporation was the owner of Harrington's interest in this contract, and that the trustee was from the date of adjudication the owner of this contract and of all grain delivered under it; that during the months of August and September, 1930, Krogstad delivered to the defendants under this contract the grain grown that season; that plaintiff at all times mentioned herein, until the sale of the grain by the defendants, was the owner thereof; and, after the sale, the owner of the proceeds; that defendants, acting innocently and without knowledge of the interest of the corporation, received the grain and sold it, as they believed, for Harrington, and received $800 therefor after deducting expenses. It is further alleged that the defendants were entitled to a commission in the sum of $80 and that demand was made on the defendants for the residue of the proceeds. The second cause of action is identical with the first, except that it relates to a contract between Harrington and another purchaser involving different property and the sum of $192, less ten per cent, commission.
The. answer of the defendants to these two causes of action was in the nature of a general denial, and affirmatively alleged that defendants were entitled to certain set-offs arising out of certain transactions in connection with the farming of these two pieces of property as against Harrington. Issue was joined as to these affirmative allegations by reply.
During the progress of the trial evidence was offered on behalf of the plaintiff, over objections of defendants that it was immaterial. The admission of evidence of which complaint is made consisted of deeds showing that the bankrupt corporation was the owner of these two tracts of land since 1921; that in 1928 Harrington, as vendor, entered into written contracts to sell the real estate, each purchaser executing a promissory note payable to the order of Harrington for the purchase price. These notes were never endorsed to the corporation, nor were the contracts assigned by instruments in waiting, until long after the adjudication. It becomes important to determine, under the allegations of the complaint, upon what theory, if at all, it states a cause of action, in order to pass upon the materiality of this evidence.
Whatever is necessarily implied in, or is reasonably to be inferred from, an allegation is to be taken as directly averred. (Clem v. Clem, 97 Mont. 570, 36 Pac. (2d) 1034; Linney v. Chicago, M., St. P. & Pac. R. Co., 94 Mont. 229, 21 Pac. (2d) 1101; Robinson v. F. W. Woolworth Co., 80 Mont. 431, 261 Pac. 253; Marcellus v. Wright, 51 Mont. 559, 154 Pac. 714; Freeman v. Withers, 104 Mont. 166, 65 Pac. (2d) 601.) Viewing all the allegations of the complaint in the light of this rule, the evidence was admissible upon the theory that it stated a cause of action upon contracts made on behalf of an undisclosed principal. (Prosper v. Smith, 67 Mont. 308, 215 Pac. 649; 2 Am. Jur., sec. 410, p. 320.) Generally it is held that in the absence of express statutory provision that in an action on contracts by the principal there is no necessity of alleging that the contract was executed through an agent; in other words, the contract may be pleaded as if it were the contract of the principal without mentioning the agency, even though the contract was executed by the agent in his own name and without the name of the principal appearing thereon or being disclosed to the other contracting party. (2 Am. Jur., see. 438, p. 346.)
The decided cases are conflicting where the contract is in writing, many courts holding in such instances that it is necessary that the complaint contain appropriate allegations asserting that the agent entered into the contract for the benefit of his principal. (Note, 89 A. L. R. 901.) The opinion in the case of Montana Amusement Securities Co. v. Goldwyn Distributing Corp., 56 Mont. 215, 182 Pac. 119, is in conformity with the rule requiring, in the instance of a written contract, a pleading of the agency. That opinion was concurred in only as to the result by other members of the court, and, accordingly, what is said therein is not a controlling precedent. However, we need not now announce the rule on this question of pleading, for the two causes of action set forth in this complaint are not upon a written contract. They are upon contracts which, so far as this record discloses, were orally made; hence, there was no necessity of pleading the agency, and therefore this evidence was properly admissible.
It is suggested that the complaint is lacking in substance, in that it is reasonably inferable that Harrington at one time owned these land contracts; but when we apply the rule of liberal construction, it is inferable that Harrington was acting for the corporation as a principal, and hence if he was so in fact there was no necessity of alleging an assignment of any contracts from Harrington to the corporation. It was elicited on the trial that long after the adjudication, written assignments of these land contracts were executed and delivered to the plaintiff. It is said that since this was property acquired after the adjudication by the bankrupt corporation, the property so assigned did not pass to the trustee. The evidence discloses that the lands sold Avere at all times the property of the corporation, and that when Harrington, who was the president of the corporation and its chief and only stockholder, except perhaps some qualifying shares held by others, procured these contracts of purchase and the notes, he delivered them to the officer of the corporation who had charge of its records, by whom they were retained until after bankruptcy. No one assumed to testify that Harrington at any time ever individually owned any interest in these land contracts or the proceeds of any crops which were delivered to the defendants as his agents from these lands. If the bankrupt corporation OAvned the lands and the proceeds therefrom, as the evidence in this record all tends to prove, then the mere assignment of the contracts to the corporation long after the adjudication in bankruptcy could not deprive the trustee of the title to property or debts belonging to the bankrupt before bankruptcy, but, coming into his hands after adjudication, must be turned over by him to the trustee in bankruptcy. (6 Am. Jur., sec. 193, p. 626; 4 Remington on Bankruptcy, sec. 1382.)
It is argued that there was a variance between the pleading and proof amounting to a failure of proof. Treating the complaint as one upon contracts made by an agent for an undisclosed principal, the evidence admitted tends to prove that at all times the bankrupt corporation was the owner of the land, and hence the proceeds of the crops, and therefore there was no variance. Upon this theory many authorities hold that a person dealing with an undisclosed principal through an agent may have set-offs existing in favor of a third person against the agent as against the principal. (2 Am. Jur., see. 414, p. 323.) However, we are not concerned here with this question, since the defendants offered no proof in support of their affirmative defenses.
In view of what we have said, the court properly denied the motion for nonsuit, granted the motion for directed verdict and denied defendants' motion for a new trial. Judgment affirmed.
Associate Justices Stewart and Morris concur.