Connally v. W. H. Lyons & Co., 18 S.W. 799 (1891).
Connally v. W. H. Lyons & Co., 18 S.W. 799 (1891). Book View Copy Cite
Caution Distinguished 1 caution
Nathan Connally
v.
W. H. Lyons & Co.
E.B. Perkins and Whittle Son, for appellant. — The character of the estate created by the deed of M.A.T. Connally is difficult to classify. In the first place, it passed the title to the property, except as to the one-ninth interest reserved; the donor retained no title to the property conveyed. The deed conveyed a one-ninth interest, absolutely, to C.P. Connally, trustee. As to seven-ninths of the property, the trustee did not take title — the title vested in the seven brothers of the donor; but the trustee was given the power of managing, using, and controlling the entire amount. The character of the use was specified, to-wit, in merchandising. We submit that by the acquiescence of the donees the deed of M.A.T. Connally created a trading company or partnership, with C.P. Connally as managing agent and representative at a specified salary; that upon the death of C.P. Connally the partnership was dissolved, and when the parties came before the court and had another manager appointed it simply amounted to an agreement of partnership with a managing agent at a salary, and that any debt created by such agent is the debt of the partnership, and must be established against it just as any other debt contracted by an agent for his known principal. Patterson v. Lilly, 90 N.C. 82 . The true test in this character of case is, was the manager the agent of the parties in interest? Pars. on Con., 6 ed., p. 155; Wheatcroft v. Hickman, Cox v. Hickman, 90 Eng. C. L., 47. A partnership may be constituted so its to place the authority of making contracts for the firm in one partner only. Lineeth v. Cromley, 29 Kans., 47; Johnson v. Bernheim, 86 N.C. 339 ; Smith v. Denison, 101 Ill. 531 ; 1 Lind. on Part., 2 Am. ed., 124, and note 1. One dealing with a voluntary unincorporated association as an association, and not trusting the credit of a member, can not hold such member individually liable. Stafford v. Parmer, 47 Conn. 443 . Unincorporated joint stock companies with managing officers or trustees must sue and be sued as partners, and not by or against, their managers or trustees (2 Lind. on Part., 2 Am. ed., 760, 761); and whether Connally Co. were a mercantile copartnership or a trust estate it matters not, for in either event we insist that the judgment of the court below should be reversed; for if the firm of Connally Co. was a copartnership — and we insist that it was — and appellant was its business manager, and these facts as to the partnership and business manager being known to appellee at the time of the sale of the goods mentioned in appellee's petition — which they were — then it will not be insisted by appellee that a judgment against appellant, who is not a member of said firm, could be affirmed by this court; and if it is insisted that appellant was a member of the firm of Connally Co., then appellees would not insist that this judgment should be affirmed, because it is not even pretended that the other members of said firm are insolvent or beyond the reach of the process of the court below; and if it is a trust estate, as contended by appellee, then this judgment should be reversed, because there is nothing in the record to show that a demand for the payment of appellees' debt was ever made on the beneficiaries of said trust, nor that said beneficiaries were insolvent and unable or unwilling to pay said debt, nor that they were beyond the reach of the process of the court, below. E.C. McLean, for appellees. — 1. A trustee is personally bound by the contracts which he makes as trustee, even when designating himself as such. 2. If a trustee, contracting for the benefit of a trust, wants to protect himself from individual liability on the contract, he must stipulate that he is not personally responsible, but that the other party is to look solely to the trust estate. Taylor v. Mayo, 110 U.S. 330 -338; Norton v. Phelps, 105 U.S. 1072 ; Burlingame v. Brewster, 22 Am. Rep., 197.
Garrett.
including my storehouse on the west side of the public square of said town
GARRETT, Presiding Judge,

Section B.—Appellant’s first, second, and eighth assignments of error raise the question of parties as presented by his exceptions to the petition, but only on the ground that the persons who were claimed to be necessary parties were such as [*669] beneficiaries in a trust, and not as partners. If Connally & Co. were a partnership, all of the partners would be necessary parties to an action of debt for the price of the goods. It is not necessary to consider whether they would be in a suit for the value of the goods, if the possession thereof was obtained by the fraudulent representations of the defendant, because the court arrived at no conclusion that the goods were fraudulently obtained. But if Connally & Co. was a trust estate managed by the defendant as trustee, it is clear that the beneficiaries of the trust would not be necessary parties to a suit for a debt incurred in the management of the trust, if the trustee should be personally liable therefor; and this question will be considered under another assignment raising that question.

Mere participation in profits does not constitute partnership, although there should be a contract from which they were derived. Buzard v. Bank, 67 Texas, 89. There was no contract of partnership in this case. The defendant Hachan Connally acted as trustee under an appointment from the court, and had the entire control and sole management of the business. There was no right of control whatever reserved in the instrument executed by M. A. T. Connally to her father C. P. Connally, as trustee, either for herself or for the beneficiaries as such. A test of partnership is the right of control over the property or profits, or to make disposition thereof. 1 Bates on Part., sec. 37. There was no right whatever in the brothers of the grantor, who were beneficiaries therein, either to control or withdraw their several interests. From the terms of the instrument the business was to be conducted until the youngest was 25 years of age, or, if he died before that time, to such a time as he would have been 25 if he had lived. We must also infer that at least some of the beneficiaries were minors, and it will not be contended that they could be partners, although the instrument might indicate a partnership. The finding of the court is further strengthened by the fact that there is no statement of facts brought up with the record, and there may have been proof of other facts to sustain his conclusion that Hath an Connally was the trustee of a trust estate. We think, however, that a proper construction of the instrument alone would lead to the same conclusion. There was no evidence to make the beneficiaries partners by holding out, but such a partner would not be a necessary party.

Appellant’s ninth and tenth assignments of error are as follows:

“The court erred in its conclusions of fact and law in finding that the estate of Connally & Co. was a trust estate and Hathan Connally was trustee of same, and finding further that goods, wares, and merchandise mentioned in plaintiff’s petition were sold and delivered to Connally & Co. by plaintiffs, and then rendering judgment against defendant Hathan Connally for the debt here sued on.
[*670] “The court erred in its finding of law that defendant Hath an Connally would be liable for said debt personally, because he failed to make a contract with plaintiff exempting him from said liabilities.”

As we are of the opinion that a trust estate was created by the instrument of conveyance from M. A. T. Connally to her father C. P. Connally, it remains only to consider under the above assignments whether or not the trustee (the defendant) was personally liable for the goods purchased by him for the trust estate from plaintiffs.

Trustees of a corporate body with defined powers are not personally liable, and such has been the recognized rule in this State from the early decisions. Traynham v. Jackson, 15 Texas, 170; Dyer v. Sullivan, 18 Texas, 771; Gonzales College v. McHugh, 39 Texas, 348; Snyder v. Wiley & Porter, 59 Texas, 449. But whether or not the trustee of a voluntary association, or a trust estate, is personally liable has not been before our Supreme Court in any case that we can find. That such trustees should be held personally liable is reasonable, because they have in their own hands the means wherewith to reimburse themselves, and should not assume a debt for the benefit of an estate of which they have the sole management and control without prospect of funds for payment thereof. If this principle needed to be enforced by way of illustration, it may be done by the fact that the defendant a few days before the attachment withdrew from the bank the deposit of Connally & Co., amounting to over $4000 in cash. In Hill on Trustees, *533, the doctrine is broadly stated, that “a trustee who carries on any trade with the trust assets for the benefit of the cestui que trusts will be responsible to the creditors, not only to the extent of the trust assets, but also with the whole of his own property, and he may be made bankrupt and proceeded against in the same manner as any other trader. And it is immaterial that the trade is carried on by him in consequence of an express direction in the trust instrument; although the trust property will doubtless be primarily liable to the creditors, and will be first applied so far as it will go in discharge of the liabilities.” Purchases by trustees when made in obedience to the trust impose upon them a personal liability; the seller must look to them for payment, and they must look to the trust estate for reimbursement. Taylor v. Mayo, 110 U. S., 330; Hewitt v. Phelps, 105 U. S., 400; Sanford v. Howard, 29 Ala., 684; New v. Nicoll, 73 N. Y., 127. This doctrine is also recognized in Mason v. Pomeroy (Mass.), 24 Hortlieastern Reporter, 202, and Odd Fellows Hall Association v. McAllister (Mass.), 26 northeastern Reporter, 862. The Alabama case was where a guardian was held liable. It is also reported in 68 American Decisions, 101, which see for note as to executors and administrators. Our statute of frauds (Rev. Stats., art. 2484) has no application to the facts of this case, and does not affect the rule that would hold the trustee personally liable. Although the plaintiffs knew that the defendant was conduct [*671] ing the mercantile business of which he had the control and management as trustee for the benefit of the persons mentioned in the conveyance from M. A. T. Connally to her father C. P. Connally, and charged the goods, when sold, to Connally & Co., the defendant was nevertheless personally liable to the plaintiffs for the price of the goods, and it was not necessary first to establish the account as a debt against the trust estate. This rule is not only in accordance with the authorities, but is a salutary rule in the interest of common justice. Siuce the trustee was personally liable, it was not necessary that the beneficiaries should be made parties to the suit.

Adopted December 22, 1891.

The account sued on was not barred by limitation when plaintiffs’ first amended original petition was filed, so it is unnecessary to inquire whether or not the amended petition set up a new cause of action. It appears from the petition that the account was not due for a time after the date of the items, from which two years would extend past the filing of the amended petition; so the demurrer setting up limitation was properly overruled by the court.

We conclude that there was no error in the judgment of the court below, and that the same should be affirmed.

Affirmed.