Thompson v. Schmitt

• Decision Date: 24 June 1925
• Docket Number: (No. 4123.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 274 S.W. 554
• Parties: THOMPSON v. SCHMITT et al.
• Court: Texas Supreme Court

Page 554

274 S.W. 554

THOMPSON v. SCHMITT et al.

(No. 4123.)^*

Supreme Court of Texas.

June 24, 1925.

Certified Questions from Court of Civil Appeals of Ninth Supreme Judicial District.

Action by R. S. Schmitt and another against W. L. Thompson. Judgment for plaintiffs, and defendant appealed to the Court of Civil Appeals, which certified six questions to the Supreme Court. Five questions answered.

Kennerly, Williams, Lee & Hill, Richard T. Fleming, and T. M. Kennerly, all of Houston, for appellant.

W. P. Neblett, of Houston, for appellees.

GREENWOOD, J.

Certified questions from the honorable Court of Civil Appeals of the Ninth Supreme Judicial District of Texas, in an appeal from the county court of Harris county. The facts to be considered in determining the questions certified to the Supreme Court may be briefly stated as follows:

Appellees sued appellant as the holder of certificates of beneficial interest in the Dixie Cooperative Mail Order House, an association operating in this state under a declaration of trust, to recover the amount of a verified account for goods sold the house or the trustees thereof. Appellant denied under oath that the Mail Order House was a joint-stock association or a partnership, setting out all the provisions of the declaration of trust under which the business done in the name of the house was conducted, and claimed that said provisions exempted him from liability to appellees.

The county court of Harris county rendered judgment for appellees against appellant for the amount of the account, and the appeal from that judgment is pending in the Court of Civil Appeals. The case was tried on an agreement as to facts in substance as follows:

First: It is agreed that appellees, R. S. Schmitt and son, Roy E. Schmitt, are a co-partnership doing business under the name of R. S. Schmitt & Son, in the city of Houston, Harris county, Tex., and that the sworn account sued upon was entered into by and between R. S. Schmitt & Son and the Dixie Co-operative Mail Order House (Not Incorporated), and that said merchandise was purchased by the trustees in their official capacity, and sold in the ordinary course of trade, and is a true and correct account and is unpaid.

Second. It is agreed that the defendant, W. L. Thompson, was at the time, before, and since the obtaining of said merchandise a holder of certificates of beneficial interest in the said Dixie Co-operative Mail Order House (Not Incorporated), and that the said Dixie Co-operative Mail Order House (Not Incorporated) is a bankrupt, and became bankrupt soon after the purchase of said goods.

Third. It is agreed that the Dixie Co-operative Mail Order House (Not Incorporated) was engaged in the buying and selling of merchandise under a declaration of trust filed for record May 28, 1919, and recorded on May 30, 1919, in volume 420, page 623, Deed Records, Harris County, Tex., and a purported amendment thereto, recorded in volume 460, page 560, Deed Records, Harris County, Texas. By the declaration of trust, Charles H. Steding, Louis Minck, and H. A. Speed, of Harris county, agreed as between themselves and with all other persons who might afterwards become interested, as follows:

The purpose of the association, called "this trust," was "the purchase and sale, at either wholesale or retail, or both, of goods, wares, and merchandise, and other similar personal property, and to carry on and conduct a business for the purchase and sale as aforesaid of goods, wares, and merchandise, and other similar personal property, under the general plan commonly known as a mail order business, with the right at any time, and from time to time, to acquire, hold, use, sell, and convey, or otherwise dispose of, such property and/or any other character of property, real, personal, or mixed, as may seem to the trustees provided for herein to be necessary or advisable in the conduct and carrying on of said business, including the collection of any indebtedness that may be owing to this trust." The capital to carry on the business of the association was to come from the issuance and sale by trustees of transferable certificates of beneficial interest in an aggregate amount not to exceed $2,000,000, each certificate to have a par value of $1. The business of the association was to be conducted by Steding, Minck, and Speed, and their successors, as trustees. The title to all property of the association was to vest in these named individuals and their successors, in trust for the holders of the certificates of beneficial interest. The articles expressly granted to the trustees complete power and authority to do business under the name of "Dixie Co-operative Mail Order House (Not Incorporated)" to buy and sell merchandise, to contract debts, and to manage and control and dispose of anything and everything to be acquired under the articles' terms. The trustees were empowered to declare and pay dividends to the holders of certificates of beneficial interest at any time sufficient cash or securities were in their hands and the trustees deemed it advisable. The articles granted to the holders of certificates of beneficial interest the right to inspect an accurate record of all receipts and disbursements to be kept by the trustees, the right to receive dividends, and on termination of the association the right to have a division of principal and accumulated profits in the trustees' hands. The articles explicitly provided that all contracts, debts, and obligations incurred by the trustees should be entitled to payment out of the property in their hands, but that "the holders of said certificates shall not at any time be personally or individually liable for the payment of any indebtedness incurred by the trustees hereunder, nor for the performance of any obligations entered into by the trustees hereunder, nor for the torts of the trustees or the trust estate, or their or its officers, agents, or employés. The trustees hereunder shall not at any time be personally or individually liable for the payment of any indebtedness incurred by them hereunder, nor for the performance of any obligations entered into by the trustees hereunder, nor for the torts of the officers, agents, or employés of this trust estate or the trustees; and the trustees shall, in each case in executing notes, deeds of conveyance, or other instruments of writing of any character, specially stipulate that neither the holders of said certificates nor said trustees shall at any time be so held personally or individually liable." The association was to continue until May 1, 1936, unless sooner dissolved by the trustees, with the written consent of four-fifths in amount of outstanding certificates of beneficial interest. By an amendment, the association was to continue for 21 years after the death of the named trustees, unless incorporated by vote of four-fifths of the trustees, or unless dissolved by the trustees with the written consent of four-fifths in amount of the outstanding certificates.

Fourth. It is agreed that W. L. Thompson was the owner of a building at 2200 Washington avenue, in the city of Houston, Harris county, Tex., and was such owner at the time the Dixie Co-operative Mail Order House (Not Incorporated) was organized and became a tenant therein, in the year 1919, but that the said W. L. Thompson did not have any control over, nor participate in any manner whatsoever in the management or conduct of, the business of the company in its affairs, and exercised no management or control over the trustees or the trust property, other than as landlord and tenant, and that the trustees had the legal title to the trust property. Immediately before the company was declared a bankrupt, the various creditors of the concern took charge of the business and placed it in the hands of Retail Men's Credit Association of Houston. At the same time, the acting trustees of the company executed an agreement as to the amount of rents then owing to the defendant, W. L. Thompson, showing balance due him of $3,120.

Fifth. It is agreed that the defendant, W. L. Thompson, attended a meeting of creditors and holders of certificates of beneficial interest in the Dixie Co-operative Mail Order House (Not Incorporated), at which the question of reorganization of the company was discussed, prior to the time of bankruptcy and at the time they were in a failing condition, and it is agreed that the defendant, W. L. Thompson, did not attend any meeting of the trustees of the Dixie Co-operative Mail Order House (Not Incorporated) or of the holders of certificates of beneficial interest.

Sixth. It is agreed that the meeting attended by W. L. Thompson was held after the accounts were incurred upon which this suit is based, and that, prior to the dates contained in said account, W. L. Thompson did not attend any meeting of the trustees or holders of certificates of beneficial interest, if such were held.

Seventh. It is agreed that the plaintiffs, R. S. Schmitt & Son, did not file any claim with the referee in bankruptcy, or make any other effort than is made in this suit, to collect the account herein sued for, but that suit was entered for the said account before the company was declared a bankrupt.

Eight. It is agreed that the defendant, W. L. Thompson, never was at any time a trustee of the Dixie Co-operative Mail Order House, and never attended a meeting of the trustees, nor a meeting of the holders of certificates of beneficial interest, in that concern, except as above stated.

Ninth. It is agreed that the defendant, W. L. Thompson, at no time authorized any trustee, agent, or employé of the Dixie Co-operative Mail Order House to purchase bread or other merchandise from R. S. Schmitt & Son.

Tenth. It is agreed that the defendant, W. L. Thompson, never at any time appointed any one connected either as trustee or holder of certificates of beneficial interest in the Dixie Co-operative Mail Order House as his...