In re Associated Trust

• Decision Date: 08 October 1914
• Docket Number: 21114.
• Citation: 222 F. 1012
• Parties: In re ASSOCIATED TRUST.
• Court: U.S. District Court — District of Massachusetts

222 F. 1012

In re ASSOCIATED TRUST.

No. 21114.

United States District Court, D. Massachusetts.

October 8, 1914

Hewitt & Williams, of Boston, Mass., for petitioning creditors.

John Nobel, Jr., of Boston, Mass., for objecting creditors.

MORTON District Judge.

This involuntary petition in bankruptcy is against 'The Associated Trust, a voluntary association and unincorporated company maintaining its principal place of business in Boston, district aforesaid, operating there, and Charles A Digney, Judd Dewey, and Forris W. Norris, all of Boston, as trustees of said The Associated Trust,' and it prays that 'The Associated Trust and Charles A. Digney, Judd Dewey and Forris W. Norris, as trustees of The Associated Trust,' may be adjudicated bankrupt. The questions now before the court arise on a plea and certain answers, which raise the point whether the respondent is subject to adjudication under the Act. The facts are settled by the stipulation of the parties. The petition does not allege that the respondent is a partnership, either of the trustees or of the shareholders, nor that it is a corporation within the broad definition of the Bankruptcy Act. Adjudication is not sought on either of those grounds. 'Voluntary associations' are not specifically referred to in the Bankruptcy Act, which apparently treats them as partnerships. The principal questions are (1) whether the respondent is an 'unincorporated company'; and, if not, (2) whether the respondents Digney, Dewey, and Norris are subject to adjudication as trustees, and not as individuals.

As to (1): The respondent is a Massachusetts real estate trust, a form of business organization which is not uncommon in this state and is very uncommon elsewhere. 21 Yale Law Journal 311. Its character is to be determined by the law of Massachusetts, where it is located. Re Hercules Atkin Co. (D.C.) 133 F. 813. The legal character of trusts resembling the respondent has several times arisen in the Massachusetts courts, generally upon questions of taxation, and the court has been called upon to decide whether they were to be taxed as partnerships, or as ordinary trusts. In some cases, such organizations have been held to be partnerships (Williams v. Johnson, 208 Mass. 544, 552, 95 N.E. 90), and in others to be strictly trusts (Williams v. Milton, 215 Mass. 1, 102 N.E. 355). The distinction between the two turns upon the provisions of the trust agreement or declaration. In cases where, by the declaration of trust, the shareholders are given substantial control of the management of the trust property, the trust is held to be a partnership; in cases where shareholders have no such control, the trust is held, for the purposes of taxation, to be of the same sort as the usual testamentary trust, and not to be a partnership. No middle ground is found in the Massachusetts decisions. The respondent therefore contends that it is either a strict trust, having no separate entity which can be adjudicated, or that it is a partnership, and that in neither case can a decree of adjudication be made upon this petition.

The words 'unincorporated company' are not found in any Massachusetts statute which has been considered in connection with these organizations. Their meaning in the Bankruptcy Act is by no means certain. The word 'unincorporated' is clear; the word 'company' in this connection is much less definite. It would seem to imply an association of individuals, not partners, carrying on business under a distinct name, and having common rights inter se, but having no individual ownership in the joint property, no individual control over the business in which their joint capital is embarked, and no direct individual liability for the company's debts. Its use in connection with the word 'unincorporated' would seem to imply that the organization should have some of the attributes usually found in corporations.

The character of the respondent is to be gathered from the...