Gordon Campbell Petroleum Co. v. Gordon Campbell-Kevin Syndicate

242 P. 540, 75 Mont. 261, 1926 Mont. LEXIS 11

• Court: Montana Supreme Court
• Decided: January 28, 1926
• Docket: No. 5,835.
• Status: Published

Opinion

ME. JUSTICE HOLLOWAY

delivered the opinion of the court.

In this action, upon an account stated, plaintiff recovered judgment, and defendants appealed.

The record discloses that on April 2, 1921, Gordon Campbell, Helen Campbell, his wife, and L. C. Stevenson executed, acknowledged and caused to be recorded a declaration of trust, in which the declarants recited that their purposes were to acquire certain real property, hold the same in trust, and explore it for oil and gas, and to conduct other operations enumerated; that the beneficial interests acquired should be represented by 10,000 units or shares evidenced by certificates; that the units or shares should be sold; that the trust should be known as the Gordon Campbell-Eevin Syndicate; that the business of the syndicate should be managed by a board of trustees consisting of three members, the first board to be composed of the declarants; that Stevenson should hold office until the first Monday in January, 1923, Mrs. Campbell, until the first Monday in January, 1924, and Gordon Campbell, until the first Monday in January, 1925; that, at the annual shareholders’ meeting on the first Monday of January of each year beginning in 1923, one trustee should be elected for the term of three years. Provision was made for regular monthly meetings of the board and for called meetings. The other terms of the declaration are not material here.

It appears that the 10,000 units or shares were sold; that at the annual meeting in January, 1923, E. M. Harvey was elected trustee to succeed Stevenson; that on February 10,1923; Helen M. Campbell resigned as a trustee; that on February 19, an attempt was made to appoint W. ~W: Rhea to fill the unexpired term; that later Rhea resigned, and on August 6, 1923, an attempt was made to appoint C. A. Springmyer to succeed him.

On March 4,1924, there was what purported to be a meeting of ^the trustees of the syndicate, at which meeting Gordon Campbell and Springmyer were the only persons present. Gordon Campbell presented an account for $40,903.94 in behalf of the plaintiff and against the syndicate. This account had been prepared by Springmyer at Campbell’s direction, and the purported action thereon, as disclosed by the minutes of the meeting, follows:

“Statement of account in detail between the Syndicate and the Gordon Campbell Petroleum Company as of March 1, showing amount of $40,903.94 owing by the Syndicate to the Gordon Campbell Petroleum Company was presented. The same was examined and discussed, and having been found correct, was duly approved and accepted as correct.”

We deem it unnecessary to consider at length Springmyer’s title to the office of trustee. For the purposes of this appeal, he may be treated as a de facto trustee.

An account stated is a new contract arising out of an ac count existing between the parties — an agreement that the items of the account and the balance struck are correct, with an agreement, express or implied, for the payment of such, balance. The consideration for the new contract is the original account (Martin v. Heinze, 31 Mont. 68, 77 Pac. 427), or speaking with greater exactness, the consideration is the settlement of the original account (Johnson v. Gallatin Valley Milling Co., 38 Mont. 83, 98 Pac. 883).

This action is upon the new contract, which it is alleged was entered into on March 3, 1924, and plaintiff must recover upon that contract or fail. (Noyes v. Young, 32 Mont. 226, 79 Pac. 1063.)

While plaintiff is in form a corporation, it is in fact but an alias under which Gordon Campbell was conducting his private business at the times mentioned herein. (Hanson Sheep Co. v. Bank, 53 Mont. 324, 163 Pac. 1151.) This is apparent from Campbell’s own testimony, and it is admitted to be the fact in the brief of plaintiff’s counsel.

If, then, the new contract pleaded was entered into at any time, it must have been made by Gordon Campbell as one party thereto and the syndicate represented by someone competent to act for it, as the other party.

The record discloses that the original account was presented by Gordon Campbell, and this constituted a sufficient offer. If it were agreed to and acknowledged to be correct by the syndicate, then there was an acceptance of the offer/ with the result that the account was stated and defendants cannot complain of the judgment. But it is axiomatic that a person cannot contract with himself. There must be the meeting of two separate and independent minds, at least two parties to a contract, and each must be competent. (See. 7468, Rev. Codes 1921.)

It is the contention of the defendants that the plaintiff’s own case discloses a want of competent parties to make the new contract pleaded and relied upon.

The defendant syndicate is not a legal entity. It is merely a voluntary association of individuals- — a business trust. The title to the property in which the individuals, as unit holders, are interested, is held by a board of trustees consisting of three persons, at least two of whom must concur in order to render valid any act done by or on behalf of the syndicate. The declaration of trust so provides, and its provisions measure the powers of the trustees so far as we are concerned now. ,(Sec. 7914, Rev. Codes 1921.) The representatives of the individuals are trustees of an express trust (sec. 7902, Rev. Codes), and the individuals as unit holders are the beneficiaries (sec. 7881, Rev. Codes).

But the trustees are not merely agents who act independently one of another. They constitute a board and they can act only as a unit (sec. 6789, Rev. Codes) in the disposition of any business of the trust which requires the exercise of judgment or discretion (Coleman v. Connolly, 242 Ill. 574, 134 Am. St. Rep. 347, 90 N. E. 278; Hosch Lumber Co. v. Weeks, 123 Ga. 336, 51 S. E. 439; Sears’ Trust Estates as Business Companies, see. 132; Dunn on Business Trusts, sees. 97, 98).

The relationship existing between the trustees and the beneficiaries is somewhat analogous to, but is of a more confidential character than, that existing between the directors of a corporation and the corporation itself (Tatem v. Fglanol Min. Co., 42 Mont. 475, 113 Pac. 295), and it is elementary that a corporation acts through its board of directors as an entity and not through the individuals who may happen to compose the board (Farrell v. Gold Flint Min. Co., 32 Mont. 416, 80 Pac. 1027).

If the contract, the account stated, was ever made at all, it was made on March 4 or April 12, 1924, and on each of those dates Gordon Campbell was one of the three trustees of the syndicate. The claim presented on March 4 was owned by Gordon Campbell, and the action taken on that day was adverse to the syndicate, in that it assumed to fix definitely a liability upon the syndicate of more than $40,000.

So much of section 7890, Revised Codes of 1921, as is material here, reads as follows:

“Neither a trustee nor any of his agents may take part in any transaction concerning the trust in which he or any one for whom he acts as agent has an interest, present or contingent, adverse to that of his beneficiary, except as follows:

“1. "When the beneficiary, having capacity to contract, with full knowledge of the motives of the trustee, and of all other facts concerning the transaction which might affect his own decision, and without the use of any influence on the part of the trustee, permits him to do so.”

Since Campbell was a trustee of the syndicate and was presenting his individual claim against it, he could not vote as a trustee upon the approval of his claim, if his vote were necessary to secure favorable action. (Curtin v. Salmon River etc. Co., 130 Cal. 345, 90 Am. St. Rep. 132, 62 Pac. 552; 4 Fletcher’s Ency. Corp., secs. 2340-2342), or, stated in different terms, before he could participate, the other two trustees must have been present and consenting.

The record discloses that Campbell and Springmyer were the only persons present at the meeting on March 4, when Campbell presented his account; hence Campbell’s presence was necessary to constitute a quorum, and his vote was necessary to the allowance or approval of his account. Under these circumstances it is impossible that a contract allowing his claim could have been made, for Campbell was disqualified to act upon the matter as a trustee. (Jones v. Morrison, 31 Minn. 140, 16 N. W. 854; North Confidence M. & D. Co. v. Fitch, 58 Cal. App. 329, 208 Pac. 328.) This would be the rule if the syndicate were a corporation and Campbell and Springmyer its directors. In McConnell v. Combination M. & M. Co., 31 Mont. 563, 79 Pac. 248, this court said: “The directors had power to adopt a Code of by-laws (Comp. Stats.-1887, Div. 5, sec. 454); but they could not, even under a by-law, vote a salary to one of their number, when the vote of such director was necessary to make up a quorum. Under the application, of this principle it makes no difference whether the trustees intended to defraud the company and the stockholders of the amount of money appropriated for the purpose of paying their salaries, or whether they acted in the utmost good faith.” Because of the more intimate relationship exist ing between a trustee and the beneficiary, this rule is applied most rigorously.

Campbell was incompetent to act upon his own claim, as a trustee of the syndicate, hence the pretended approval of his claim — the pretended statement of the account — was void for want of competent representatives of the syndicate. The transaction amounted to nothing more than the approval of the account 'by Springmyer alone.

But it is insisted by counsel for plaintiff that the pretended statement of the account by Campbell and Springmyer was ratified at the meeting of the trustees on April 12, when Harvey, Campbell and Springmyer were all present, and when Campbell’s vote was not necessary to favorable action. It is a sufficient answer to say that, even if the pretended contract of March 4 might have been ratified and made binding by the board by appropriate action taken on April 12, such action was not taken.

It is not material to inquire whether the trustees should have kept a record of the proceedings of their board meetings. They did keep such a record, and the minutes of the meeting of April 12 assume to disclose just what action was taken, and those minutes were approved and signed by Campbell as president of the board and by Springmyer as secretary. Springmyer testified that at that meeting “this identical account stated was considered and discussed.” He does not say that it was approved or that the action of Campbell and himself in assuming to state the account, was ratified. Concerning the meeting of April 12, Campbell testified: “All of the trustees were present, including Harvey. I personally attended that meeting, and I signed those minutes, and those minutes correctly state what business was transacted at that meeting or what was done at that meeting.”

Since Campbell is, in fact, the plaintiff herein, and was testifying in his own behalf under examination by his own counsel, we may assume that his statement above is true, and is as favorable to Mm as the facts would warrant. The minutes to which he refers read as follows: “The affairs of the syndicate were discussed. The indebtedness of the syndicate to the Gordon Campbell Petroleum Company was also discussed, and, upon motion made by Trustee Harvey, seconded by Trustee Springmyer, it was moved and carried that the trustees be empowered, authorized, and directed to execute a note to Gordon Campbell Petroleum Company for the indebtedness of the syndicate to the said Gordon Campbell Petroleum Company, or any part of such indebtedness, on behalf of the syndicate.”

It will be observed that the amount of the indebtedness is not mentioned, that nothing whatever is said concerning an account stated, no mention made of the pretended meeting of March 4. If it had been intended to ratify the action of Campbell and Springmyer, it is all but inconceivable that something would not appear to indicate that intention. The minutes negative the existence of such intention, for, not only do they not purport to approve the statement of the account, they l’eeite that the board ordered that a note be given for the amount of the indebtedness, without indicating the amount.

It is easily conceivable that Trustees Harvey and Springmyer, after due consideration of the matter, might have been quite willing to execute a note which would postpone action for a definite time and altogether unwilling to state an account which might be sued upon at once, without the necessity of proving the items upon which such statement was based.

But whatever the facts may be, this record fails to show that the action of Campbell and Springmyer, in assuming to state the account on March 4, was ever ratified by the board, either on April 12 or at any other time. The evidence not only fails to sustain the allegations of the complaint; it discloses affirmatively that the contract relied upon was not made.

Rehearing denied February 15, 1926.

The judgment is reversed and the cause is remanded, with directions to enter judgment for defendants for their costs.

Reversed.

Mr. Chief Justice Callaway and Associate Justices Galen, Stark and Matthews concur.