Enochs & Flowers, Limited v. Roell

• Decision Date: 23 April 1934
• Docket Number: 31165
• Parties: ENOCHS & FLOWERS, LIMTTED, v. ROELL
• Court: Mississippi Supreme Court

154 So. 299

170 Miss. 44

ENOCHS & FLOWERS, LIMTTED, v. ROELL

No. 31165

Supreme Court of Mississippi

April 23, 1934

Division A

1. JOINT-STOCK COMPANIES AND BUSINESS TRUSTS.

"Massachusetts trust" is business organization wherein property is conveyed to trustees and managed for benefit of holders of certificates like corporate stock certificates.

2 TRUSTS.

Where same person is both trustee and beneficiary, no trust estate exists.

3. JOINT-STOCK COMPANIES AND BUSINESS TRUSTS.

All certificate holders of Massachusetts trust being also trustees thereof, they could not escape personal liability on guaranty contract signed with trade-name, unless contract limited liability.

4 RECORDS.

Person having constructive notice is chargeable only with knowledge afforded by recorded instrument consistently with legal effect thereof.

5 GUARANTY. Judgment.

Guarantors jointly executing guaranty held primarily and equally liable to guarantee who, having sued all guarantors, could properly discontinued action against one without thereby involving res judicata doctrine (Code 1930, sections 2027, 2028, 2854).

6. PLEADING.

That plaintiff suing alleged partners failed to joint issue on sworn plea denying partnership held not ground for reversal: verdict for plaintiff curing writ (Code 1930, section 600).

HON. W. H. POTTER, Judge.

APPEAL from circuit court of Hinds county HON. W. H. POTTER, Judge.

Action by J. A. Roell against F. O. Cambre and Enochs & Flowers, Limited, as an association and partnership composed of E. G. Flowers and others. From a judgment in accordance with a peremptory instruction for plaintiff against all defendants except the first-named defendant, Enochs & Flowers, Limited, appeals. Affirmed.

Affirmed.

Green, Green & Jackson, of Jackson, for appellant.

Here there is a declaration and an election by the plaintiff to sue all of the defendants alleged to have been liable by an action alleging joint liability and, having elected to pursue the defendants jointly, it was erroneous for the court to have directed the jury to find against a part of the defendants without some disposition by judgment, or otherwise, of the other defendants jointly sued.

Kimbrough v. Ragsdale, 69 Miss. 674, 13 So. 830.

One cannot sue upon, prove and establish a joint contract and recover severally against a portion of those alleged and proven to be jointly liable.

Kimbrough v. Ragsdale, 69 Miss. 674, 13 So. 830; Spann v. Grant, 83 Miss. 28, 35 So. 217; Ozen v. Sperier, 150 Miss. 458, 117 Slo. 117; Pearl Realty Co. v. Wells, 164. Miss. 300, 145 So. 102.

There is no proof whatsoever in this record that Mr. Roell at any time relied upon or extended credit to any of the individuals, but on the contrary by the exhibits to the declaration it is apparent that he was at all times depending upon his contract expressly executed by Enochs & Flowers, Ltd., an association, which association is organized as a common law or Massachusetts trust, without individual liability of its trustees or the beneficiaries of the trust and those dealing therewith, by reason of the character of the organization, are required to make inquiry to ascertain the extent of the liability.

State v. Edward Hines Lbr. Co. et al., 150 Miss. 1, 115 So. 598; Hecht v. Malley, 265 U.S. 144, 44 S.Ct. 462, 68 L.Ed. 949; Roberts v. Aberdeen Southern Pines Syndicate, 71 A. L. R. 885, 198 N.C. 381, 151 S.E. 865.

The shareholders or beneficiaries have absolutely no control in the instant case over the trustees. This being true, under all of the authorities there can be no liability of the individuals here sought to be individually held.

As to the recording of the instrument, we submit that under the facts developed in this case it was unnecessary to record the same in Hinds county, for the reasons, first, that this is an action in tort; second, the instrument here creates a Massachusetts or common-law trust, and in neither case is there any requirement of statutes in this state that there be recording of the instrument in any particular county.

Loeb v. Chicago R. R. Co., Co., Miss. 939; Barkwell v. Swan et al., 13 So. 809; Burch v. Taylor, 68 L.Ed. 578.

Mr. Roell knew that he was dealing with "an association."

46 C. J. 543; Burke v. Payne, 50 Miss. 648; Parker v. Foy, 43 Miss. 260; 39 Cyc. 562, Notice, par. D.

Howie & Howie, of Jackson, for appellee.

The basis of this law suit is to be found in the reported case of Standard Lumber & Manufacturing Company v. Deposit Guaranty Bank & Trust Company, 152 So. 639.

A judgment shall not be stayed or reversed, after verdict, for any defect in the writ, or for a variance in the writ from the declaration or other proceedings, etc.

Sec. 600, Code of 1930.

An action shall not be maintained on a bill of exchange or promissory note which has been indorsed against any one secondarily liable thereon, without joining in the action all persons residing in this state who are liable before such person on the bill or note; and the action shall be brought in the county where the party, or someone who is at first liable on said bill or note, shall reside. And the clerk shall issue duplicate writs to the several counties for for various defendants.

Sec. 2854, Code of 1930; Sec. 605, Code of 1930.

The objections of counsel for appellants have all been interposed too late to be availed of at this stage of the suit and under the statutes of jeofails, all defects therein have been cured in so far as pleadings may be concerned.

A general rule in the law of trusts is that a trustee is a principal and not an agent for the cestui que trust. It follows from this rule that the trustee, and not the cestui que trust, is personally responsible for an indebtedness growing out of transactions in relation to the trust estate.

Betts v. Hackathorn, 31 A. L. R. 847, 159 Ark. 621, 252 S.W. 602; Goldman v. Oltman, 71 A. L. R. 871, 292 P. 624; Roberts v. Aberdeen-Southern Pines Syn., 71 A. L. R. 885, 198 N.C. 381, 151 S.E. 865.

The above decisions all hold, with none to the contrary, that the trustees of a Massachusetts trust are individually liable for their acts but that the shareholders of the certificates are not liable individually and as partners if they exercise no control over the trustees, but in the case at bar the trustees and the shareholders of the certificates of Enochs & Flowers, Ltd. are one and the same persons, therefore, there can be no dividing line between one and the other here.

We agree that if this act of the association had been performed by E. G. Flowers and I. C. Enochs, Jr., and had not been ratified by the other members of this association, composed of both its trustees and certificate holders, then there would not have been any liability upon the trustees other than that the ones signing it, but when, by their act, as shown by Exhibit B, they ratified the acts of Enochs and Flowers, then in that event each and every one of the trustees, same being the certificate holders also, thereby bound themselves to Mr. Roell personally to protect him.

Evans v. M. C. Lilly & Co., 48 So. 612, 95 Miss. 58; Alkahest Lyceum System v. Featherstone, 74 So. 151, 113 Miss. 226; Victor v. Adams, 106 So. 433, 140 Miss. 640; Johnson v. Perry Howard, 141 So. 573.

OPINION

McGowen, J.

J. A. Roell brought his action at law against Enochs & Flowers, Limited, as an association and partnership composed of E. G. Flowers, I. C. Enochs, Jr., Mrs. Mary E. Nugent, Mrs. Edwina E. Flowers, Miss Martha C. Enochs, and Mrs. Lucy E. Robinson, for damages, actual and punitive, based upon an alleged breach of an agreement of guaranty executed by Enochs & Flowers, Limited, in favor of Roell; the actual damages being the amount due on a note which Roell had indorsed payable to a bank, and which Roell had to pay, and Enochs & Flowers, Limited, had induced him to continue his indorsement by a written guaranty on which this suit is brought.

The allegation, in effect, was that the above-named individuals were liable as partners on the contract of guaranty. The agreement of guaranty, the note which had been paid by Roell, the declaration of trust executed by I. C. Enochs, Sr., to the above-named individuals as trustees, were all attached to the declaration as exhibits. The declaration sought a recovery on the same written agreement from F. O. Cambre whose name was signed thereto jointly with that of Enochs & Flowers, Limited. Cambre entered his appearance, but did not plead or otherwise contest the suit. Enochs & Flowers, Limited, and the individuals named as constituting a partnership, filed special pleas in abatement setting up that in the declaration of trust there was a limitation of liability, and denying that there was joint and personal liability because, in effect, the declaration of trust was a pure trust. Another plea set up that there was a pending suit by which Roell might be paid the amount of the note.

A demurrer was sustained to these pleas. Thereupon all the defendants, except Cambre, filed two pleas of the general issue and gave notice of special matter thereunder based mainly upon a misjoinder of parties, because only Cambre and Enochs & Flowers, Limited, as a trust, were the proper parties, and throughout denied that the declaration of trust constituted a partnership, and stated that it was a pure trust commonly called a "Massachusetts trust."

Reply was made to the matter set up in the notice under the general issue.

After the evidence was heard, and after the court had settled the amount due on the note, including attorney's fees, and had given a general peremptory instruction directing a judgment in favor of Roell, and when the court had announced that a peremptory instruction would be given against the...