Continental Supply Co. v. Robertson

Hart, J., (after stating the facts). In the case before ns the defendants were indebted to the plaintiff in a large amount for machinery and materials purchased by the former from the latter, to be used in drilling oil wells on leased territory operated by the defendants as trustees for certain other persons associated with them for the purpose of drilling wells for oil and gas. In this connection it may be stated that the defendants were personally liable for the account under a written guaranty signed by them, and the facts as disclosed in the record also show them to be liable as trustees, of a business trust doing business under a declaration vesting in them absolute authority over the trust business and property, within the rule laid down in Betts v. Hackathorne, 159 Ark. 621. Some time in December, 1919, the Continental Supply Company mailed to D. H. Echols, as trustee for the Texas & Arkansas Oil & Gas Company, which was the name under which his association was doing business, a statement of their account, showing a balance of $15,688.77. After receiving the statement, Echols wrote the plaintiff a letter on the letterheads of the Texas and Arkansas Oil & Gas Company, signed by himself as secretary, in which he asked to be personally released from all responsibility for purchases of his company or association. He sent a remittance of $15,688.77 with the letter. On December 27, 1919, the plaintiff acknowledged the receipt of the check and letters, and advised Echols that he was released from responsibility from this date. The settlement of the account by Echols was the only consideration for the release executed by the plaintiff. The effect of a release executed in consideration of the settlement of accounts between parties is not to render the settlement conclusive. If the account is impeached on the ground of fraud or mutual mistake, the release will not prevent the court looking into the settlement. The party seeking to impeach the settlement is bound to show affirmatively the mistake alleged. The force of the admission and the strength of the evidence which will be necessary to overcome it will depend upon the circumstances of each case. St. L. I. M. & So. Ry. Co. v. Morgan, 115 Ark. 529, and Hawkins Brothers v. Lesser-Goldman Cotton Co., 157 Ark. 299. It is manifest, under the rule just announced, that an account stated and a settlement of it, which is shown to have been examined by both parties and expressly agreed to by them, will afford stronger evidence of the correctness of the account than if it had been merely delivered by mail in the usual course of business and acquiesced in for a considerable period of time thereafter. In the instant case the account was settled and the balance paid by Echols, accompanied by a demand to be released from all further personal liability for purchases of his company. Echols expressly notified the plaintiff that he would not be responsible any further for any purchases made by the company or agent. This put the plaintiff upon notice that Echols, for some reason, desired to know the exact state of the accounts between the parties and to have the settlement made between them a final settlement. He states the reason that he did this was that he was about to retire from the company and to cease to act as trustee for his associates. He caused an audit of the affairs of his company to be made by a public accountant, in order that he might be advised of the exact state of its affairs. During the course of his investigation he did not find out any fact or circumstance which would lead him to believe that his company owed the plaintiff the account sued for in this action, or that his association or company was indebted to the plaintiff in any amount whatever. The affairs and business of the Texas & Arkansas Oil & Gas Company were wound up and the accounts between Echols and his co-trustees and their associates were adjusted and settled. All the property of the concern was sold to a foreign corporation. Robertson and Harris were advised of the action taken by Echols when he settled with the plaintiff. All three of the defendants engaged in winding up the affairs of the Texas & Arkansas Oil & Gas Company, under the belief that the company had made a final settlement with the plaintiff. They adjusted the accounts between each other and between themselves and their associates under this belief. They were not notified that the plaintiff claimed that there had been a mistake made in their final settlement until some time in the spring of 1921, more than a year after the final settlement had been made and some time after the affairs of the Texas & Arkansas Oil & Gas Company had been settled and the property and assets sold- to persons who were beyond the boundaries of the State. The defendants testified that, at this time, none of the property and assets of the Texas & Arkansas Oil & Gas Company were in their hands or in the hands of any of their associates. The fact that the mistake was made in settlement of the account is attributable to no fault of the defendants. The purchase of the articles in question was made by another agent of the company, and the defendants were ignorant of the fact that it had been made until the claim was sent to them some time in March, 1921. If the plaintiff had proceeded promptly, or at least within a reasonable time, and discovered the mistake, the defendants could have had an adjustment of the matter with their associates. It is true that they were personally liable to the plaintiff, but it appears from the record that the items of the account sued on were received and used by another agent of the Texas & Arkansas Oil & Gas Company, in the usual 'Course of business, and, under these circumstances, the defendants could have deducted their proportionate part of the. account, if the claim had been presented to them before the property and assets of the Texas & Arkansas Oil & Gas Company had been sold and the proceeds thereof distributed. Under tbe rule above announced it would be inequitable to allow a recovery against tbe defendants, and tbe case is brought witbin tbe principles of an equitable estoppel between tbe parties. Tbe account bas been .settled and tbe balance paid -upon tbe express demand that it should become a final .settlement. Tbe circumstances under which tbe settlement was made require more proof to overcome i-t than a mere account stated. Tbe plaintiff was expressly put upon notice, and bas waited an unreasonable time before discovering tbe alleged mistake. No excuse for tbe delay bas been shown. On tbe other band, tbe defendants have shown that they would be put to a great inconvenience and perhaps - considerable loss by having to pay the' amount now. Tbe settlement and release executed under such circumstances are binding upon tbe parties, and tbe decree must be affirmed.