Darling v. Buddy

• Decision Date: 30 December 1927
• Docket Number: No. 26226.,26226.
• Parties: C.T. DARLING ET AL., Appellants, v. CHARLES A. BUDDY ET AL.
• Court: Missouri Supreme Court

1 S.W.2d 163

C.T. DARLING ET AL., Appellants, v. CHARLES A. BUDDY ET AL.

No. 26226.

Supreme Court of Missouri. Division No. 1.

December 30, 1927.

Appeal from Buchanan Circuit Court. — Hon. L.A. Vories, Judge.

AFFIRMED.

Charles H. Mayer and Floyd M. Sprague for appellant.

(1) The court erred in holding the syndicate agreement created a common law or so-called Massachusetts trust because: (a) There is no declaration of trust; the expressed intention of the parties was that the syndicate managers were merely to be the agents of the syndicate subscribers in carrying on an active commercial business for profit. Lemp v. Lemp, 264 Mo. 552; Taylor v. Davis, 110 U.S. 330, 28 L. Ed. 165. (b) The syndicate managers could not be both trustees and cestui que trust of the property at the same time. Willey v. Hoggson Corporation, 106 So. 412; McCamey v. Hollister Oil Co., 241 S.W. 695. (c) The syndicate managers were not merely to invest and collect dividends or interest or rental, and distribute the same among the syndicate members, but they were to carry on an active commercial business for profit, which made the syndicate merely an unincorporated joint-stock association. Hecht v. Malley, 265 U.S. 161; Thompson v. Schmitt, 274 S.W. 558; 3 Cook, Corporations (8 Ed.), 2251-2256. (d) The syndicate subscribers were principals and not mere beneficiaries in the joint enterprise, and were liable for the syndicate debts under the rules of law applicable to the relation of principal and agent. Thompson v. Schmitt, 274 S.W. 557; McCamey v. Hollister Oil Co., 241 S.W. 699, 274 S.W. 562; Weber Engine Co. v. Alter, 245 Pac. 147; 33 C.J. 873, sec. 100; 3 Cook, Corporations (8 Ed.), 2255; 1 Williston, Contracts, pp. 582-583, 596. (e) The attempted limitation of liability on the part of the syndicate subscribers, without complying with any incorporation or limited partnership statutes, is invalid because it is contrary to the express legislative policy of this State. Sec. 11, Art. 12, Mo. Constitution, R.S. 1909, chap. 90; Secs. 9237-9249, R.S. 1919; Chap. 33 (Secs. 10266-10278, R.S. 1909); Sutherland, Statutory Const., sec. 334; 25 R.C.L. sec. 229, pp. 982, 983; 36 Cyc. 1122, 1145; Richardson v. Pitts, 71 Mo. 128; Furniture Co. v. Crawford, 127 Mo. 364; Martin v. Fewell, 97 Mo. 411; Hurt v. Salisbury, 55 Mo. 310; Booth v. Scott, 276 Mo. 35; Commerce Trust Co. v. McMechen, 220 S.W. 1019; Weber Engine Co. v. Alter, 245 Pac. 143; Harris v. Oil Co., 204 Pac. 754; Thompson v. Schmitt, 274 S.W. 554; Victor Refining Co. v. Bank, 274 S.W. 561, 263 S.W. 622; McCamey v. Hollister Oil Co., 241 S.W. 699, 274 S.W. (Tex. Sup.) 562; Wells v. Telegraph Co., 239 S.W. 1007; American Nat. Bank v. Oil Assn., 101 So. 11; Reilly v. Clyne, 234 Pac. 35; State v. Hinkle, 219 Pac. 41; State v. Paine, 243 Pac. 2; Willey v. Hoggson Corporation, 106 So. 411; Roller v. Madison, 189 S.W. 914. (2) The court erred in refusing to hold that the syndicate members were jointly liable for its debts. Ing v. Liberty Nat. Bank, 287 S.W. 960; Continental Supply Co. v. Adams, 272 S.W. 329; Hambleton v. Rhind, 36 Atl. 601; Hossack v. Ottowa Dev. Co., 91 N.E. 455; Grover v. Marott, 136 N.E. 81; Thompson v. Schmitt, 274 S.W. 554; Burton v. Ross, 286 S.W. 1112; Standard Drilling Co. v. Slate, 262 S.W. 969; James v. Stokes, 261 S.W. 868; Palliser v. Erhardt, 61 N.Y. Supp. 191; Ijams v. Andrews, 151 Fed. 725; Dierks Lumber Co. v. Bruce, 239 S.W. 135; State ex rel. Pearson v. Railroad, 196 Mo. 536; Laney v. Fickel, 83 Mo. App. 60; Hunnewell v. Canning Co., 53 Mo. App. 245; Lengle v. Smith, 48 Mo. 276; McCamey v. Hollister Oil Co., 241 S.W. 700, 274 S.W. 562; Wells v. Telegraph Co., 239 S.W. 1006; Comer v. Brown, 285 S.W. 309; Willey v. Hoggson Corp., 106 So. 412; 33 C.J. 873, sec. 100, p. 841. (3) The court erred in refusing to hold that any provision in the agreement between the syndicate members inter se restricting their liabilities as partners to the amount of their subscriptions did not affect third persons. Richardson v. Pitts, 71 Mo. 128; Carter v. McClure, 38 S.W. 586; Farnum v. Patch, 60 N.H. 327; King v. Dodd, 9 East, 516. (4) The court erred in refusing to hold that the appellants were entitled to contribution from the respondents. Timberlake v. Hughes, 65 Mo. App. 640; Richardson v. Pitts, 71 Mo. 128; Dysart v. Crow, 170 Mo. 275; Sicklesteel v. Edmonds, 147 N.W. 1029; Victor Refining Co. v. Bank, 263 S.W. 622, 274 S.W. 561; 33 C.J. 888, sec. 35; 15 R.C.L. 507. (5) Even if it could be presumed that the Hershey State Bank had knowledge of the provisions of the syndicate agreement that would be no defense in this case. (a) Such a defense was not pleaded by defendants. (b) Mere knowledge of the bank of the provisions of the syndicate agreement limiting the personal liability of the subscribers would not be enough to relieve the members from individual liability. Chapman v. Witt, 285 S.W. (Tex.) 331; Victor Refining Co. v. Bank, 263 S.W. 622, 274 S.W. 561; Thompson v. Schmitt, 274 S.W. 560. (c) There is no evidence whatever upon which to base any such presumption; the uncontradicted evidence is that the bank had no knowledge of the syndicate agreement. (d) Any knowledge of Jayne, the vice-president of the bank and attorney for the railway corporation, was obtained through his private transactions and beyond the range of his official duties, and could not be imputable to the bank. Benton v. Bank, 122 Mo. 339; Bank v. Fitze, 76 Mo. App. 363. (e) Defendants cannot ask the court to presume that, because Jayne was attorney for the railroad company, not for the syndicate, he knew the terms of the syndicate agreement, and then presume that the knowledge obtained through his private transactions was communicated to the bank. One presumption will not be based upon another presumption. Cardinale v. Kemp, 274 S.W. 448; State ex rel. v. Cox, 298 Mo. 427; Phillips v. Travelers' Ins. Co., 288 Mo. 175. (f) The question of notice to the bank is res judicata, so far as respondents in the suit in equity are concerned. Victor Refining Co. v. Bank, 263 S.W. 625, 274 S.W. 561. (g) Respondents by their conduct are estopped to question the good faith of the defense made by the appellants in the two Iowa suits, and the validity of the judgments rendered in those cases. Hardwicke v. Wurmser, 180 S.W. 455.

W.B. Norris, W.M. Morton and Culver, Phillip & Voorhees for respondents.

(1) The syndicate agreement did not create a partnership between the syndicate members inter sese, nor did any of the defendants hold themselves out as partners to the Hershey State Bank; therefore none of the defendants was liable on the notes given to that bank. Nat. Bank of Commerce v. Francis, 246 S.W. 326; Dickson v. Dickson, 181 S.W. 84; Mackie-Clemments Fuel Co. v. Brady, 202 Mo. App. 551; Hughes v. Ewing, 162 Mo. 296. (2) The syndicate agreement created a common-law trust, and none of the members of the syndicate is liable for the payment of a debt created by the managers or trustees. Mayo v. Moritz, 151 Mass. 481; Jones v. Gould, 103 N.E. (N.Y.) 721; Williams v. Inhabitants of Milton, 102 N.E. 355; Betts v. Hackathorn, 252 S.W. 602; R.I. Hospital Trust Co. v. Copeland, 98 Atl. 273; Smith v. Andreson, 15 Ch. Div. 247; Home Lumber Co. v. Hopkins, 107 Kan. 190; Crocker v. Malley, 249 U.S. 223; Hamilton v. Young, 225 Pac. 1045; Wells-Stone Mer. Co. v. Grover, 75 N.W. 911; Rice v. Rickefeller, 134 N.Y. 174; Johnson v. Lewis, 6 Fed. 7. (3) The true test to determine whether the syndicate was a trust or a partnership is one of control and not of investment. Hamilton v. Young, 225 Pac. 1046. (4) The relation of principal and agent did not exist between the syndicate members and the managers or trustees. If the agreement created a trust, then the managers were trustees. A trustee is not an agent. He is the principal. Taylor v. Davis, 110 U.S. 330; Betts v. Hackathorn, 159 Ark. 621. (5) The debts of the syndicate are not the debts of the subscribers, but the debts of the managers or trustees. Unless the trustees expressly limit their liability by agreement with the creditor they are liable because the debt is their debt. There is nothing in the statutes or the law of this State which prohibits the syndicate members from stipulating that any debts created by the trustees shall be so created that they shall be debts of the trustees for which the members are not liable. Betts v. Hackathorn, 159 Ark. 621; Taylor v. Davis, 110 U.S. 330; Sears. Trust Estates as Business Cos. (2 Ed.) p. 46, n. 5. (6) Even if the certificate-holders were co-partners, they were not liable to the Hershey State Bank because that bank, through its vice-president and attorney, had knowledge of the terms of the syndicate agreement and that agreement did not authorize the managers to contract a debt that would personally bind the members. And even if the bank did not have knowledge of the contents of the syndicate agreement, it did have knowledge that there was an agreement and it was put on inquiry as to its contents and is to be charged with actual knowledge of all that it would have learned had it inquired. National Bank v. Francis, 246 S.W. 333. (7) Defendants had the right to prove the knowledge of the bank without pleading it. Greenway v. James, 34 Mo. 328; Young v. Glasscock, 79 Mo. 574. (8) The syndicate agreement never became binding because it was neither pleaded nor proved that the amount of subscriptions necessary to make it binding were ever obtained. Chapin v. Cherry, 243 Mo. 401; Strange v. Crowley, 91 Mo. 298. (9) The plaintiffs cannot jointly maintain this suit for contribution, each having paid separately a proportionate part of the judgment. Yore v. Yore, 240 Mo. 462. (10) The defendants are not bound by the judgment of the Iowa court. Strong v. Phoenix Ins. Co., 62 Mo. 299; Wheelock v. Obershiner, 110 Mo. 107; Robinson v. Seay, 175 Mo. App. 724. (11) Even if the plaintiffs and defendants are co-partners, plaintiffs cannot...