Gutelius v. Stanbon

• Decision Date: 25 March 1930
• Docket Number: No. 3430.,3430.
• Citation: 39 F.2d 621
• Parties: GUTELIUS v. STANBON et al.
• Court: U.S. District Court — District of Massachusetts

39 F.2d 621 (1929)

GUTELIUS v. STANBON et al.

No. 3430.

District Court, D. Massachusetts.

December 5, 1929.

On Rehearing March 25, 1930.

Phipps, Durgin & Cook and Marvin C. Taylor, all of Boston, Mass., for plaintiff.

Henry R. Mayo and James E. Connor, both of Lynn, Mass., for Sagamore Trust Co.

Edward S. Underwood, of Lynn, Mass., for Security Trust Co.

BREWSTER, District Judge.

This is an action of contract brought by the receiver of the Farmers' Bank & Trust Company, a Florida banking corporation, against three defendants in their individual capacity, who were trustees of the Stanbon, Nye & Hill Realty Trust.

The case was tried without a jury; the parties having duly stipulated to waive jury trial. The facts are not in dispute. The question presented is largely a question of law arising on the following statement of facts:

The Stanbon, Nye & Hill Realty Trust is a voluntary association existing by virtue of a certain written declaration of trust, dated June 14, 1918. The beneficial interest of the trust is divided into negotiable shares. The declaration of trust was made with reference to certain real estate situated in Massachusetts conveyed to the then trustees, but by the terms of the trust the trustees were empowered to "acquire by purchase or exchange, such real and personal property as shall be deemed by the Trustees for the best interests of the shareholders and for the best interests of the business carried on by the Realty Trust. The property, so acquired to be held by the Trustees under the same trusts" as those set forth in the declaration of trust.

On or about the 16th day of October, 1925, the defendants, who were then the duly constituted trustees of the trust, acquired by purchase certain lots of land in West Palm Beach, Fla., and on that date executed and delivered a purchase-money mortgage to secure four certain promissory notes, each for $2,187.50. The notes were all payable to the order of L. A. Winget at the Farmers' Bank & Trust Company, West Palm Beach, Fla., and were signed in the following manner:

"Harry Stanbon "William M. Nye "Walter H. Hill

"Trustees of the Stanbon, Nye & Hill Realty Trust."

The original declaration of trust was recorded in the registry of deeds for the county of Essex, Southern District, June 25, 1918. This was the only recording of the original instrument in Massachusetts.

On January 30, 1926, the declaration of trust, with certain amendments and records of the trust, were filed for record in the office of the clerk of the circuit court of the Fifteenth judicial circuit of Florida in and for Palm Beach county, and on February 1, 1926, were duly recorded.

Two of the promissory notes, above described, one maturing October 16, 1926, and the other maturing October 16, 1927, were duly indorsed in blank and pledged with the Farmers' Bank & Trust Company as collateral to secure certain obligations of one McWilliams. It was agreed that the bank became the holder in due course of these notes, and that the balance due the bank is in excess of the amounts due thereon. It was also agreed that the receiver was duly appointed and qualified, and that the defendants were the duly elected trustees of the realty trust.

The receiver has brought two actions upon these notes, one against the realty trust and the other against the three trustees in their individual capacity, alleging that they are liable jointly and severally as individual makers thereof.

It is conceded that as to the suit against the realty trust there is no defense, but the defendants in the above-entitled suit deny that any personal liability attaches to them by reason of the making of the notes upon which this suit is predicated.

The single question, therefore, presented for consideration is whether these defendants became personally liable by signing and delivering the two promissory notes in the manner above indicated.

The parties concede that, inasmuch as the notes were mailed to Florida and were payable there, the contracts are Florida contracts, and the rights and obligations of the parties are to be determined according to the laws of that state.

We are concerned with obligations issued by the trustees of a voluntary association created as a common-law trust, the terms and provisions of which are similar in purport to many realty trusts organized for the purpose of carrying on business, and found frequently employed in this commonwealth.

As I view the case, it does not turn upon the question whether the shareholders or cestui que trustent are liable as copartners. The relationship with which we have here to deal is that of principal and agent. The Florida courts recognize this relationship in Willey v. Hoggson Corp., 90 Fla. 343, 106 So. 408, 411.

The liability of the defendants, therefore, as trustees must be determined with reference to section 20 of the Negotiable Instruments Law (Compiled General Laws of Florida, 1927, section 6780), which became law in Florida on June 1, 1897. This section reads as follows:

"Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal does not exempt him from personal liability."

This statute apparently re-enacts the established rule of the common law applicable to contracts of agents made on behalf of a disclosed principal. It had been universally held, in the federal courts at least, that an instrument bearing on its face all the signs of being the contract of the principal could not be held to bind the agent personally. Hitchcock v. Buchanan, 105 U. S. 416, 26 L. Ed. 1078; Post v. Pearson, 108 U. S. 418, 2 S. Ct. 799, 27 L. Ed. 774; Falk v. Moebs, 127 U. S. 597, 8 S. Ct. 1319, 32 L. Ed. 266.

In the case at bar, the defendants added to their signatures words indicating that they signed in their representative capacity for and on behalf of a principal which was disclosed; namely, the Stanbon, Nye & Hill Realty Trust. That this section of the Negotiable Instruments Law applies to an obligation executed by trustees of a realty trust was held in Adams v. Swig, 234 Mass. 584, 125 N. E. 857.

No decision of the Florida courts has been cited, nor do I find any that deals with the application of this statute to obligations of a realty trust. In the absence of any controlling decision of the Florida courts to the contrary, this court would be entirely warranted in following the highest court of Massachusetts when it is fully convinced of the soundness of the law as laid down by that court.

It is argued by the plaintiff that the form of the signature operates to fix upon the defendants personal liability. It is true that, prior to the enactment of the section of the Negotiable Instruments Law, above cited, there were in some jurisdictions adjudications to the effect that, if the signature were followed by a description of the principal, the words of the description were merely descriptio personæ, and therefore to be treated as surplusage, leaving the agents as the only parties liable on the note. One of the effects of these provisions of the Negotiable Instruments Act was to abrogate this rule of law in those states that have adopted the act. Jump v. Sparling, 218 Mass. 324, 105 N. E. 878; Citizens' National Bank v. Ariss, 68 Wash. 448, 123 P. 593; Chatham National Bank v. Gardner, 31 Pa. Super. Ct. 135.

In the absence of any controlling authorities of the Florida court, I am prepared to adopt this interpretation of the act for the purposes of the case at bar.

It remains to be considered whether the defendants who signed in a representative capacity were duly authorized. By the terms of the declaration of trust, under which the defendants were acting, they were empowered to mortgage the trust...