Rothchild Bros. v. Kennedy

Mr. Justice Harris delivered the opinion of the court. At the trial the court permitted the defendant to testify, over the objection of plaintiff, that he had entered into an agreement with the traveling salesman,Felix Cohn, to the effect that the defendant was not to be liable for the purchase price of the goods sold, “but that plaintiff should accept in payment therefor its pro rata share with other creditors of the funds realized by the trust estate of which defendant was trustee.” At the close of the testimony the plaintiff moved for a directed verdict “on the ground that Cohn has no implied authority to make such an agreement, and that it was not, therefore, bound thereby.” The motion for a directed verdict was overruled, and when charging the jury the court gave the following instruction: “The defendant, Cohn, was authorized under the evidence here to solicit orders and to transmit them to his house, and that the house thereupon was to determine whether or not they should be accepted and the goods shipped, and it was his duty to transmit those orders as they were given to him with the condition and limitation, and if there was a condition that the goods were to be shipped to Kennedy as trustee, and that he wasn’t to be personally responsible, but was to pro rata with the other creditors with this plaintiff, it was the duty of this agent to transmit that condition with the order to his principal, and if he failed to do that his knowledge of the conditions would be imparted to his principal, so that is the reason I have denied the motion for a directed verdict. ’ ’ The assignments of error are predicated upon the admission of the evidence of defendant, the ruling on a motion for a directed verdict and the quoted instruction. — 570 — 1. It will be necessary at the very outset of the discussion to construe the language used by the defendant in his answer, because the argument is made that the only way in which Kennedy could escape individual responsibility was by making an express agreement that the plamtiff would rely for payment solely upon the trust estate; that a fair and legitimate construction of the language quoted from the answer means that the defendant claims that as trustee he was personally liable to the plaintiff for a pro rata share of the trust estate; and that, therefore, since the answer does not allege that it was expressly agreed that the plaintiff would rely solely upon the trust estate, the defendant is personally liable for the payment of the goods sold by plaintiff. This argument impliedly admits that the judgment of the trial court should be affirmed if the answer avers that it was agreed that the plaintiff would look solely to the trust estate for payment, because the whole point of the argument is that the answer contains no averment that the plaintiff would look for compensation solely or at all to the trust estate. While the evidence for the plaintiff contradicted the testimony received for the defendant, there was nevertheless evidence to the effect that it was agreed between Cohn and Kennedy that the latter would not be liable personally. 2. The verdict of the jury forecloses debate about the weight of the evidence. The Code prescribes the rule of construction which governs us, for it is said in Section 85, L. O. L., that: “In the construction of a pleading for the purpose of determining its effect, its allegations shall be liberally construed, with a view of substantial justice between the parties.” — 571 — Turning now to the quoted portion of the answer which is to be construed it will be noticed that the paragraph opens by saying that the plaintiff and the other creditors fully understood that the defendant was trustee of the saloon business for Cams; and it then continues with the averment that the plaintiff supplied goods to the defendant “as such trustee with the full and complete understanding and with the positive agreement to and with said defendant that the goods and liquors so supplied were to be paid for pro rata, and that the defendant was not bound nor held personally and was only liable as such trustee.” Here is a plain and unambiguous statement that it was agreed that defendant was not to be held personally at all, but that he should only be liable in his capacity as trustee and even in that capacity he was only to be liable “to the extent of the pro ratio share of the proceeds” derived from the Carns saloon business. At no time during the trial or on this appeal was it contended or even suggested by counsel that the answer meant that it was agreed that Kennedy was only to be liable personally to the extent of a pro rata portion of the proceeds of the business; but, upon the contrary, the cause was tried in the nisi prius court by both counsel and judge on the theory that the answer alleged that it was agreed that Kennedy would be exempted from liability entirely. When arguing the motion for a directed verdict counsel for plaintiff addressed the court thus: “The vital question in this case is whether or not there was an express contract entered into at the time of the sale whereby Mr. Kennedy- — whereby it was agreed that Mr. Kennedy should not be liable for goods he had then and there purchased and that, may it — 572 — please your Honor, is the question to . which I desire to address myself in this action.” In his charge, the court repeatedly told the jury that the defendant’s position was that the goods were ordered with the distinct understanding that he was not to he personally liable, and that the position of the plaintiff was that there was no agreement that defendant was not to be liable. Furthermore, the court instructed the jury that the burden was upon the defendant to establish “that he gave the order to pay as trustee and that the distinct understanding between the plaintiff and himself that he wasn’t to be personally liable.” Moreover, no exception to any part of the charge to the jury was predicated upon the theory that the defendant had alleged in his answer that his personal liability was limited to a pro rata share of the trust estate. The answer alleges that the plaintiff and defendant agreed that he was not to be liable personally at all, but that he was only to be liable as trustee and his liability as trustee was limited to a pro rata share of the trust estate. This allegation is only one way of saying that the plaintiff agreed to look solely to the trust estate for payment, and the trial was conducted by all parties on the assumption that such was the meaning of the answer. The defense interposed by Kennedy was sufficiently pleaded if he alleged that the goods were sold to him upon an agreement exempting bim from personal liability. He did so allege in his answer; and it was not necessary for him to allege more. When construed by the rule fixed by Section 85, L. O. L., and when viewed in the light of precedents the answer must be held to mean that Kennedy claimed to be entirely exempt as an individual: Wyatt v. Wyatt, 31 Or. 531, 537 (49 Pac. 855); West v. Eley, 39 Or. 461, 464 (65 Pac. 798); Patterson v. Patterson, 40 — 573 — Or. 560, 562 (67 Pac. 664); Walker v. Harold, 44 Or. 205, 207 (74 Pac. 705). Having construed the answer and ascertained the meaning of its language it will now be necessary to determine whether Kennedy can avail himself of the defense that he ordered the goods upon an agreement exempting him from personal responsibility. The plaintiff contends that even though it be conceded that Cohn and Kennedy agreed that the latter should not be liable personally, nevertheless, the plaintiff is not bound by such agreement because it did not have knowledge of the agreement when it shipped the goods and Cohn as agent had no authority to make such an agreement for the plaintiff. The question for decision is whether Cohn had authority to receive orders for goods from Kennedy as trustee with the understanding that the latter should be exempted from personal liability. It was Cohn’s business to solicit orders and he acted within the scope of his agency when he solicited and obtained orders from customers, whether such customers were individuals or otherwise. He acted within the scope of his agency when he solicited orders from a corporation or from a partnership or from a person acting in a representative capacity or from a person acting for himself individually; and, hence, Cohn did not exceed his authority if he solicited and obtained orders from Kennedy as an individual or from Kennedy as a representative. Kennedy defends by saying that the goods were purchased by him solely in his capacity as trustee with an agreement exempting him from personal liability. 3-5. It must be conceded that even though Kennedy purchased the goods for the benefit of the trust estate he would be personally liable in the absence of an agreement exempting him from liability: 39 Cyc. 333. — 574 — The main question for decision cannot involve any inquiry concerning the authority of Kennedy to purchase the goods sold by the plaintiff, for the trust agreement expressly conferred power upon him to purchase such new stock as was necessary to keep the business a going concern and he therefore was empowered to purchase the goods and to bind the trust estate by his promise as trustee to pay for the goods. Kennedy exercised his authority and by his promise did bind the es-state to pay for the goods sold by the plaintiff. Cohn had a right to deal with Kennedy solely as trustee as distinguished from Kennedy personally and in dealing with Kennedy as trustee he had a right to agree that he was not dealing with Kennedy personally and to stipulate that the orders for goods given to him were given to him and received by him as the orders of Kennedy as trustee only. If Cohn solicited orders from Kennedy as trustee only and expressly agreed that Kennedy should only be liable as trustee and should not be liable in his personal capacity then Kennedy in his character as trustee and not Kennedy personally was the customer. If Kennedy is not liable personally then the instant action must fail because it is prosecuted against him personally. It is not necessary to determine whether Cohn could bind his principal by agreeing to sell for prices less than those fixed by the principal; nor is it necessary to decide whether a traveling salesman can obligate his employer to allow discounts or rebates tc customers. The defense is — not that Kennedy as an individual is only liable to the extent of the amount of the trust assets prorated among the creditors; but, that he is not liable at all as an individual. The alleged stipulation relative to prorating the assets is a component part of the averred agreement with Kennedy as trustee. To — 575 — decide that Cohn had authority to solicit an order from Kennedy as trustee does not decide that Cohn could bind his principal to agree to prorate; and, on the other hand, to decide that Cohn could not bind his principal to prorate does not decide that Cohn could not accept an order from Kennedy as trustee. But to decide that Cohn could solicit and receive orders of goods from Kennedy as trustee upon an agreement exempting Kennedy as an individual is to decide that Kennedy as an individual is not liable; and such a decision ends the instant action. The verdict of the jury necessarily involves the finding that Cohn received the orders from Kennedy acting in his capacity as trustee only with the agreement that Kennedy should be divested of his character as an individual and be exempted from personal liability. The defendant was entitled to offer evidence about the stipulation to prorate the assets for the purpose of proving the defense that the orders for the goods were given by Kennedy as trustee and for the purpose of showing that it was agreed that Kennedy did not give the orders as an individual. Evidence of the conversation about prorating the assets of the trust estate was competent to go to the jury for whatever it might have been worth in deciding the ultimate fact of whether or not the goods were ordered by Kennedy acting solely as trustee. If it be assumed, without deciding, that a sale to a trustee as such involves the risk of being obliged to prorate with other creditors, on the theory that if the trust estate is insufficient to pay all the debts the law will compel the creditors to prorate, then the stipulation entered into between Cohn and Kennedy with reference to prorating did not change the rights of the parties in the least for they only agreed to do what the law would compel them to do even though they had — 576 — been silent upon the subject. It argues nothing to say that an order from Kennedy as trustee involves the contingency of being compelled to accept less than the price for which the principal authorized the commercial traveler to quote to solicited customers. Exactly the same result might follow when goods are sold to an individual, a partnership or a corporation. In the instant case Cohn did not quote an authorized price and then agree to make an unauthorized discount or to give an unauthorized rebate. All the goods were quoted to Kennedy as trustee and he ordered them at prices which Cohn was authorized to make to him and other customers. All the sales were ordered at authorized prices and the plaintiff is entitled in a proper action to recover the full amount of the price charged for the goods if the assets of the trust estate are sufficient to pay all debts. The salesman merely solicited a customer in the person of Kennedy clothed as a trustee and divested entirely of his character as an individual, and when such customer gave orders for goods to Cohn it was the duty of Cohn to transmit to his principal the orders as given to him by the customer Kennedy as trustee. Kennedy as an individual did not give the orders for the goods; he was not the customer. The judgment is affirmed. Affirmed. Mr. Justice Bean, Mr. Justice Benson and Mr. Justice Burnett concur.