Riedell v. Stuart

• Decision Date: 21 July 1931
• Docket Number: Case Number: 20083
• Citation: 1931 OK 475,2 P.2d 929,151 Okla. 266
• Parties: RIEDELL v. STUART et al.
• Court: Oklahoma Supreme Court

1931 OK 475

2 P.2d 929

151 Okla. 266

RIEDELL v. STUART et al.

Case Number: 20083

Supreme Court of Oklahoma

Decided: July 21, 1931

Syllabus

¶0 1. Trusts--Attributes of Trustee--Agent Distinguished -- Personal Liability of Trustee on His Contracts.

A trustee is not an agent. An agent represents and acts for his principal, who may be either a natural or an artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in or affecting property is vested for the benefit of another. When an agent contracts in the name of his principal, the principal contracts and is bound, but the agent is not. When a trustee contracts as such, unless he is bound no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. Taylor v. Davis, 110 U.S. 330, 4 S. Ct. 147.

2. Same--Corporations--Personal Liability of Trustee of Dissolved Corporation on His Contract.

The trustees of a dissolved corporation are personally liable for the contracts they make, and obligations they assume, even though the same are made, assumed, or undertaken for the express benefit of the trust estate, regardless of their designation as trustees, unless said trustees stipulate in positive terms that they are not to be bound personally and that the obligee must look entirely to the trust estate for his compensation or reimbursement, and unless they so stipulate and provide, they are personally and individually liable for the breach of such contracts, and an action for such breach should be brought against them in their personal and individual capacity.

Appeal from District Court, Oklahoma County; Sam Hooker, Judge.

Action by Chas. M. Riedell, doing business under the name and style of Chas. M. Riedell & Company, against R. T. Stuart et al. Judgment for defendants, and plaintiff appeals. Reversed and remanded, with directions to grant a new trial.

Fred E. Suits, C. E. Hall, and Wayne E. Wheeling, for plaintiff in error.

Rittenhouse, Lee, Webster, & Rittenhouse, for defendants in error.

McNEILL, J.

¶1 This is an appeal from the district court of Oklahoma county, and the parties will be referred to as they appeared in the trial court, Chas. M. Riedell, plaintiff in error, as plaintiff, and R. T. Stuart and A. L. Welch, defendants in error, as defendants.

¶2 Plaintiff commenced this action in said court on the 17th of November, 1926, and in his petition alleged, in substance, that he was an expert accountant, engaged in the business of preparing United States income tax reports for individuals, firms, and corporations, generally preparing and prosecuting before the Income Tax Division of the Treasury Department of the United States claims for refund of income taxes, preparation of briefs, protesting proposed additional taxes, and securing reduction of proposed taxes; that he performed such other business as is generally conducted by expert public accountants; that the defendant A. L. Welch had served as president and was director and stockholder in the Safety First Insurance Company, a corporation, organized and existing under the laws of the state of Oklahoma, and said defendant R. T. Stuart had been a stockholder in said company, and that said defendants A. L. Welch and R. T. Stuart owned and controlled all of the stock of said company.

¶3 Plaintiff further alleged that during the month of September, 1924, said defendants, through A. L. Welch, as ex-president of the Safety First Insurance Company, executed a power of attorney to this plaintiff, whereby they made, constituted, and appointed this plaintiff and T. J. Cleveland, who was in the employ of this plaintiff, and in charge of plaintiff's office at Oklahoma City, Okla., their true and lawful attorneys to represent said company in connection with its various federal tax returns. Plaintiff further alleged that he entered upon the employment of said defendants, and prepared and filed with the collector of Internal Revenue of the Treasury Department, briefs, claims, affidavits, various sundry and other kinds of papers, protesting a proposed additional tax against the said Safety First Insurance Company for the period from November, 1917, to December, 1921, of $ 11,084.62, and secured a reduction of said proposed tax to $ 697.47, thereby effecting a saving to the Safety First Insurance Company and the said defendants, officers, and stockholders thereof, of the sum of $ 10,387.15; that the terms of said employment were oral, and the amount of compensation to be paid by said defendants to this plaintiff was to be the usual and customary charges received by tax auditors and tax consultants for similar services; that plaintiff performed the services on behalf of said defendants, and that as a result of the employment of plaintiff by said defendants, said defendants, for and on behalf of the Safety First Insurance Company and themselves, received a refund or cancellation of said proposed tax of $ 10,387.17.

¶4 Plaintiff further alleges and states that the services performed by him were reasonably worth the sum of $ 1,500, and prays for judgment against said defendants and each of them for said amount, with interest thereon at the rate of six per cent. per annum from the 28th of August, 1926.

¶5 Thereafter, on the 13th day of June, 1928, plaintiff filed his amended petition, which is the same as the original petition, with the exception that paragraph "111" of said petition was amended to read as follows:

"That the defendant A. L. Welch had served as president and as director and stockholder in the Safety First Insurance Company, and that the said defendant R. T. Stuart had also been a director and stockholder in said company, and that the defendants A. L. Welch and R. T. Stuart owned and controlled all of the stock of said Safety First Insurance Company, prior to its dissolution on the 21st day of September, 1922, and that said A. L. Welch and R. T. Stuart thereafter continued to act for said corporation in closing out its business."

¶6 After the overruling of defendants' demurrer to said amended petition, the defendants filed their separate answers by way of general denial, and further alleged that the purported cause of action is a departure and a change from the cause of action attempted to be pleaded in plaintiff's original petition.

¶7 Further answering, alleged that said original petition failed to state a cause of action against them as stockholders, officers, or directors of said corporation, for the reason that the original petition alleged the existence of the corporation, and that the acts of the defendants as set forth in the original petition were alleged to have been done for and on behalf of the Safety First Insurance Corporation, and that plaintiff's original petition, wholly failing to state a cause of action, did not operate to toll the running of the statute of limitations upon plaintiff's cause of action attempted to be set out in his amended petition, and that the amended petition was filed long after the running of the statute of limitations upon plaintiff's purported cause of action.

¶8 Each of the defendants in his separate answer specifically denies that he entered into a contract with the plaintiff to perform the services alleged in plaintiff's petition. The answer of the defendant H. T. Stuart denies that defendant A. L. Welch had power or authority to bind the said R. T. Stuart by such agreement, and the answer of A. L. Welch denies, not only the agreement with plaintiff, but also denies that the income taxes of the Safety First Insurance Company were reduced by or through services performed by plaintiff. To these separate answers, the plaintiff replied, denying each and every allegation therein contained, inconsistent with the allegations of plaintiff's amended petition.

¶9 Thereafter, said cause came on to be heard on November 16, 1928, and said defendants and each of them objected generally to the introduction of evidence on behalf of the plaintiff under the pleadings on the ground that the petition and the amended petition of the plaintiff did not state facts sufficient to constitute a cause of action in his favor against said defendants.

¶10 The grounds of said objection were set forth as follows:

"First. That said amended petition does not state facts sufficient to constitute a cause of action in favor of the plaintiff and against these defendants, or either of them.

"Second. That said amended petition does not state facts sufficient to allege stockholder's liability.

"Third. That said amended petition does not allege facts sufficient to constitute liability upon the part of officers and directors of a corporation.

"Fourth. That said cause of action attempted to be alleged in said amended petition, if the same ever existed, is barred by the statute of limitations, the same not having been filed within three years from the accrual of the alleged cause of action, if any.

"Fifth. That said purported cause of action attempted to be set forth in said amended petition constitutes a departure and is a change from the cause of action attempted to be stated in the original petition; that the original petition wholly failed to state a cause of action against stockholders, officers, or directors, for the reason that it alleged the existence of the Safety First Insurance Company, and it further alleged that the acts of the defendants R. T. Stuart and A. L. Welch, as set forth in said original petition, were done for and on behalf of the Safety First Insurance Company; that the, petition, wholly failed to state a cause of action, did not toll the running of the statute of limitations and an amended petition filed after the running of the statute of limitations is subject to demurrer and objection to the introduction of evidence."

¶11 The court sustained the objections of the defendants, to which ruling of the court the plaintiff excepted, and plaintiff elected to stand on his...