power. The interest of the cestui que trustent is represented by a negotiable certificate assignable without the consent of the other shareholders. This privilege is not enjoyed by a copartnership. This organization acts through the majority of its trustees, while each member of a copartnership participates in its management. The association has the power as an association to make by-laws, to have a common seal, to sue and be sued, and to receive and to grant, to purchase and hold lands and chattels in the names of the trustees, with perpetual succession. These powers are in their nature corporate powers and not enjoyed by partnerships. The declaration of trust provides that the trust shall exist during the life of its present trustees, and for twenty-one years thereafter and cannot be terminated by the certificate holders."

In the Range Case reference is made to the decision of the Supreme Court of the United States in Crocker v. Malley, 249 U. S. 223, 63 L. ed. 573, 2 A.L.R. 1601, 39 Sup. Ct. Rep. 270, where that court held that a "Massachusetts trust" was not a corporation. Since the decision in the Range Case, however, the Supreme Court of the United States, in Hecht v. Malley, 265 U. S. 144, 68 L. ed. 949, 44 Sup. Ct. Rep. 462, has held that "Massachusetts trusts," whereby property was conveyed to (and it may be noted here. that those trusts referred to real estate in Boston used for office and business buildings) and managed in business operations by trustees, the shares of the cestuis que trustent being represented by transferable certificates entitling holders share ratably in the income and upon termination of the trust in the proceeds of the property, were corporations, and the prior case of Crocker v. Malley, supra, was, in effect, overruled. It is not necessary to again refer to the cases which are reviewed in the Range Case, but it is proper to make some reference

to

to decisions which have been made subsequent thereto.

In Hamilton v. Young, 116 Kan. 128, 35 A.L.R. 496, 225 Pac. 1045, the Supreme Court of Kansas, having before it before it a "Massachusetts trust," held that the trust created a corporation under the Kansas law to the extent that it was a legal entity distinct from the persons who composed it. In that opinion various cases involving the same question are considered, and the result reached is the same as that later reached by the Supreme Court of Arizona in Reilly v. Clyne, Ariz.

40 A.L.R. 1005, 234 Pac. 35, where it was held that a "Massachusetts trust" was a corporation within a constitutional definition similar to ours.

The Supreme Court of the United States still later, and in an opinion filed since the briefs in this case were written, has reconsidered the question, and in Burk-Waggoner Oil Asso. v. Hopkins, 269 U. S. 110, 70 L. ed. (Adv. 67), 46 Sup. Ct. Rep. 48, has again held that a "Massachusetts trust" possessed powers and privileges of corporations which are not possessed by individuals or partnerships, and follows the rule of the Range Case.

porations.

In view of our prior decision and these subsequent confirming authorities, it must be sufficient to follow that decision, and to hold, as did the trial court, Business truststhat the appellants how far corare exercising corporate rights without compliance with the requirements of our laws. Under those laws the state has said, as is its right, that no one shall exercise corporate powers except those upon whom the state has chosen to confer such powers, and, in order to be able to exercise those powers, which were created by virtue of law, an artificial person, that is, a corporation, should be created.

The appellants demurred on the ground that the respondent's action was a violation of § 1, Amend. 14, of the federal Constitution, but

And see Erisman v. McCarty (1925) 77 Colo. 289, 236 Pac. 777, infra, II. b. In Marchulonis v. Adams (1924) 97 W. Va. 517, 125 S. E. 340, the court said that it found nothing in the law of that state which declared the trust agreement to be contrary to public policy.

And the validity of business trusts appears to have been assumed, or at least not questioned upon the particular facts, in many of the recent cases; as, for example, Burk-Waggoner Oil Asso. v. Hopkins (1925) 269 U. S. 110, 70 L. ed. (Adv. 67), 46 Sup. Ct. Rep. 48, infra, III. b, 3; Greco v. Hubbard (1925) 252 Mass. 37, 147 N. E. 272, infra, IV.; Bouchard v. First People's Trust (1925) Mass. 148 N. E. 895, infra, III. b, 1; Reeves v. Powell (1924) Tex. Civ. App. -, 267 S. W. 328, infra, III. b, 2; Cattle Raisers' Loan Co. v. Sutton (1925)

Tex. Civ. App., 271 S. W. 233, infra, III. b, 1; and Continental Supply Co. v. Adams (1925) Tex. Civ. App. 272 S. W. 329, infra, III. b, 1. See also General American Oil Co. v. Wagoner Oil & Gas Co. (1925) 118 Okla. 183, 247 Pac. 99, infra, III. b, 1.

In Thompson v. Schmitt (1925) Tex., 274 S. W. 554, the court found it unnecessary to give a definite reply to a certified question as to whether a certain declaration of trust constituted under the particular circumstances a common-law trust, or Massachusetts trust, similar to or such as was referred to in Williams v. Milton (1913) 215 Mass. 1, 102 N. E. 355 (see 7 A.L.R. 622), or to the question whether such trusts were recognized and made lawful by the common law in Texas, but said: we were bound to apply the rule formulated in Massachusetts, as of course we are not, we would not hold the association under consideration to be other than a partnership." And, in reply to the question whether certain statutes respecting limited partnerships and joint stock associations prohibited the formation and operation of common-law trusts in Texas, it stated that these statutes did prohibit any limitation of partnership lia

"If

bility to creditors in the manner shown by the facts certified. (Further reference to this case will be found in subdivisions II. c; III. b, 1; and IV. infra.)

An Illinois court, however, after referring to a common-law trust which was sued as such, as a "supposed business organization now generally designated as a 'Massachusetts trust' by reason of the skill and erudition with which the rules applicable to such organizations have been laid down by the courts of that state," has expressed its doubt as to whether the socalled "Massachusetts trust" was legal in Illinois, although this question was not discussed in the briefs, and the decision turned on other grounds. Guthmann v. Adco Dry Storage Battery Co. (1924) 232 Ill. App. 327. See in this connection, Austin v. Parker (1925) 317 Ill. 348, 148 N. E. 19, infra, II. c, and V. d.

It will be noted that the court in STATE EX REL. COLVIN V. PAINE (reported herewith) ante, 165, refuses to recede from its previous view that, by virtue of the mandatory provisions of the Constitution of Washington, socalled common-law or Massachusetts trusts are prohibited from doing business in the state,-this view having been announced in State ex rel. Range v. Hinkle (1923) 126 Wash. 581, 219 Pac. 41 (see 31 A.L.R. 853), the court in the reported case declaring that the differences between it and the previous case were only superficial,—and also holds that, by excluding the trustees from exercising corporate rights without having complied with the law as to corporations, their privileges or immunities as citizens were not abridged, nor were they deprived of property without due process, nor denied the equal protection of the laws.

b. Capital stock or shares; effect of transferability.

(Supplementing annotation in 7 A.L.R. 616.)

In Erisman v. McCarty (1925) 77 Colo. 289, 236 Pac. 777, the court said in reference to a mining concern: "The company, instead of being a corporation, was a trust; that is, its prop

erty was held by trustees with powers defined by an instrument which appears in the record. Such an organization is sometimes called a Massachusetts trust because it is in common and familiar use in that state. It seems to be claimed by the plaintiff that this was in a way fraudulent per se; that the representations that it was a company were not supported by the fact that it was such as it was. There is no objection to the use of such an organization, nor is it per se fraudulent or deceitful. There is no reason why stock in such an organization should not be as valuable as in a corporation, nor why it should not pay as surely."

In Wimer & Co. v. Downs (1925) 77 Colo. 377, 237 Pac. 155, the court held that the declaration of trust of a certain mining concern did not expressly grant to the managers or trustees the right to control the sale of stock, or the power to refuse to make a transfer, and that, as the ownership or transfer of the stock did not concern them, they could not interfere with its transfer.

c. Provisions limiting liability. (Supplementing annotations in 7 A.L.R. 617; 10 A.L.R. 887; 31 A.L.R. 853; and 35 A.L.R. 503.)

Under articles of association in form of declaration of trust, trustees and shareholders are individually liable for the association's debts, notwithstanding attempted limitation of liability. WEBER ENGINE Co. v. ALTER (reported herewith) ante, 158.

In Thompson v. Schmitt (1925) Tex. —, 274 S. W. 554, where the declaration of trust of an unincorporated "trust," organized to operate a mailorder business, provided that neither certificate holders nor trustees should be personally liable for obligations. entered into by the trustees, the court held that the enterprise was a partnership, and declared: "Our statutes impose strict limitations on the right of a person to transact with others the business of buying and selling goods at wholesale or retail in Texas, without liability beyond such person's contribution to the capital of the business.

. . It is clear that what was done by the certificate holders in this case was to attempt to secure the very exemption from liability for the debts of the mercantile business they were providing the money to conduct, which the statutes accord only to special partners in a limited partnership. They attempted to secure such exemption without procuring anyone to join them as a general partner, and in fact without compliance with a single statutory requirement. They undertook to do the precise thing the statutes were framed to prevent, which was to set up a partnership composed altogether of nonliable partners, save to the extent of their respective capital contributions. The language of chapter 1 of title 102 of the Revised Statutes, as a whole, could hardly be plainer to fix upon each of these certificate holders liability as a general partner for the debts of the business in which they were engaged. . . . It follows that the provision of the articles is invalid which sought to create a partnership in which no one should be liable save as a limited partner." The court further stated that the principle which operated to deny the appellant (certificate holder) exemption from liability was definitely applied to members of a voluntary mutual insurance association, notwithstanding it was held not to be a partnership, in Sergeant v. Goldsmith Dry Goods Co. (1920) 110 Tex. 490, 10 A.L.R. 742, 221 S. W. 259.

In Victor Ref. Co. v. City Nat. Bank (1925) Tex., 274 S. W. 561, affirming (1924) Tex. Civ. App. —, 263 S. W. 622 (see 35 A.L.R. 503), the court held that the stockholders in a joint stock association were properly refused the right to show that, under its declaration of trust, they were relieved from personal liability to creditors of the association, since such exemption from personal liability could be secured only by compliance with statutes governing limited partnership.

In Hollister v. McCamey (1925) Tex., 274 S. W. 562, affirming (1922)

Tex. Civ. App. 241 S. W. 689 (see 31 A.L.R. 854), the court said that

the conclusions reached below (as to limitation of liability) were in harmony with the decision of Thompson v. Schmitt (Tex.) supra.

And in Howe v. Keystone Pipe & Supply Co. (1925) – Tex. —, 274 S. W. 563, reversing on another ground (1922) Tex. Civ. App. 242 S. W. 1091, rehearing denied on other grounds in (1925) - Tex. 278 S. W. 177, the principal contention, which was overruled, was that the shareholders should be so relieved.

Upon a rehearing in Continental Supply Co. v. Adams (1925) - Tex. Civ. App., 272 S. W. 329, a majority of the court took the view that, where the creditor of a trust "syndicate" did not expressly agree to an exemption of the stockholders from liability for the debt, they could not escape such liability. The dissenting judge considered that the creditor was charged with notice of the general practice of filing such declarations of trust, and thereby with notice of the limitations contained in the one in question, which was filed. In this connection, however, it may be noted that the only limitation in the declaration in question (which was set out in full in the majority opinion) apparently was that there should be no liability against the trustees or shareholders "by reason of a failure to produce oil or gas." And see reference to this case in subdivision III. b, 1, infra.

The decision in Oden v. Bone (1924)

Tex. Civ. App., 263 S. W. 640 (see 35 A.L.R. 503), was relied upon, however, in Dayle L. Smith Oil Co. v. Continental Supply Co. (1924) Tex. Civ. App. —, 268 S. W. 489, in holding that shareholders of the association or trust were not bound on a note signed in its name, where the declaration of trust contained a provision relieving them of personal liability, and the payee not only knew of such provision, but extended credit to the firm in the very face of such knowledge, the court observing that the creditor did not indicate that it regarded them as liable for the debt, or that it had extended the credit upon any consideration other than the assets and prospects of the association,

and that it was apparent that none of the creditor or debtor parties believed or assumed that the shareholders would be liable as individual members of a partnership.

And in Shelton v. Montoya Oil & Gas Co. (1925) Tex. Civ. App. —, 272 S. W. 222, shareholders who were expressly exempted from personal liability were held not to be liable on notes given by the "trust," even upon the assumption that it was a partnership, since the holder knew of the limitation of liability and dealt in respect thereto, the limitation being under these circumstances valid and effective, the court relying upon Oden v. Bone (Tex.) supra, and George v. Hall (1924) - Tex. Civ. App. 262 S. W.

174 (see 35 A.L.R. 505).

The validity as between the trustees and shareholders, of a provision in the declaration of trust of an association that the trustees should have no power to bind the shareholders personally, and that it should be their duty to embody in every written instrument a stipulation that neither they nor the shareholders should be personally liable thereon, was upheld in Mims v. Stephens County-Ranger Oil Co. (1924)

Tex. Civ. App., 268 S. W. 1014, holding that a trustee who became liable on a note executed by him for the association was not entitled to contribution from the other shareholders, since that provision was a contract between the trustees and shareholders, which was violated by his failure to embody such a stipulation in the note. The provision was not effective, however, against the payee of the note in question, who, having agreed to purchase stock upon a certain condition, received the note in return for his stock, and sold it before maturity, and accordingly such payee, who became liable as indorser, was entitled to such contribution.