stockholders who did not sign the note in question were relieved of liability thereon.

One who as attorney prepared a large portion of the trust agreement of an association, including probably its stipulations relieving the trustees and shareholders of personal liability, has been held not to be entitled to recover against them upon a note which the association gave him, and which itself stipulated that the trustees should not be personally liable, since he had agreed to the exemption. McVey v. United Timber & Kaolin Asso. (1925) Tex. Civ. App. 270 S. W. 572.

An agreement embodied in a declaration of a trust, attempting to relieve members from any judgment or recovery against them by personal suits, has no application to the tortious acts and wrongs which members perpetrate against the association itself. Haines v. Bankers' Petroleum & Ref. Co. (1925) Tex. Civ. App. -, 273 S. W. 940.

In Austin v. Parker (1925) 317 Ill. 348, 148 N. E. 19, a declaration of trust imposed upon the trustees the duty to stipulate in every written contract that neither they nor the holders of the beneficial interest should be held to any personal liability by reason of such contract, and "to convey notice in that language to third parties that the trustees were not dealing on their own responsibility as individuals, but as trustees in an express trust under the common law," and further provided that, to the extent of the trust estate held by them, but not personally, the trustees should indemnify and hold harmless the beneficiaries and such other persons as might be associated with them, against loss or liability by reason of any obligation entered into by them as trustees; and the trustees were held not to be liable as such to one who rendered services under an agreement with one trustee, where it was not shown that the others had anything to do with it or ratified it, nor that there was any stipulation that the trust estate should be bound,--the court regarding the liability in question as a personal one.

In Dickinson v. Butt (1925) 278 S. W. 19 (not officially reported, see 169 Ark. 1211), where the declaration of trust of a certain common-law business trust contained a provision that no personal liability should rest upon the trustees for the liabilities of the trust estate, the court said that it necessarily followed from the decision of Betts v. Hackathorn (1923) 159 Ark. 621, 31 A.L.R. 847, 252 S. W. 602, that the trustees could not, in a contract between themselves, shield themselves from the liability imposed by law, and that if the plaintiff (former trustee of such trust) were asserting a liability of the trust estate which accrued to him directly while he was one of the trustees, he would be estopped by his joint contract with the other trustees from asserting liability against them. The plaintiff's suit, however, was based upon his purchase of a claim against such trust (from another similar one) for a balance due upon the purchase price of the assignment of a certain contract, and upon his release of all his interest in the trust to his cotrustees, who thereupon expressly agreed to assume all its obligations, as well as all other liability resting upon the plaintiff in connection with the trust; and the court took the view that he did not derive his right of action through transactions directly with the trustees of the trust, but that it accrued to him by purchase of the other trust's right of action; that, while he could not have created an obligation to himself for the trustees, the fact that there was a provision in the declaration of trust against liability of the trustee did not prevent him from acquiring and enforcing the right of action from another; and this, notwithstanding he had agreed, in releasing his interest, to continue as trustee-the trust having been transferred and it having thereby ceased active operation upon the same day. (And the contention was overruled that the assignment of the contract was without consideration, by reason of a prior agreement made by a trustee of the other trust, the court considering that such agreement was a personal affair.)

d. As affected by rule against perpetui

ties.

No later decision herein. For earlier cases, see annotation in 7 A.L.R. 618.

III. Purpose and legal nature.

a. Purposes for which business trust may be formed.

(Supplementing annotations in 7 A.L.R. 619; 10 A.L.R. 887; 31 A.L.R. 856; and 35 A.L.R. 503.)

In comparatively few of the recent cases have the trusts apparently been formed exclusively for real estate or building purposes. In fact, the only cases covered by the present annotation in which the purpose seems to have been thus restricted are Willey v. W. J. Hoggson Corp. (1925) Fla. 106 So. 408 (real estate); and Greco v. Hubbard (1925) 252 Mass. 37, 147 N. E. 272 (building).

However, in many of the cases the acquiring and holding of real estate has been one of the expressed purposes, there being a decided tendency in the recent trust declarations to broaden the purposes so as to authorize the trust to engage in industries of a more extensive and varied nature, in connection with which the acquiring and holding of real estate seems to be commonly included.

Thus, in Bouchard v. First People's Trust (1925) Mass., 148 N. E. 895, the purpose of the trust was "to undertake and carry on anywhere any business transaction or operation which an individual could legally undertake or carry on conformably to the law of the land where the business transaction or operation is undertaken and carried on," this clause being followed by an enumeration of a great variety of kinds of business in which the trustees might engage, accompanied by the specific statement that the object of the trust and the power of the trustees was not to be limited in any way thereby. (The business which this trust actually conducted included the making of loans secured by mortgages and pledges, purchasing accounts, stocks, bonds, notes, and conditional sale contracts, and also acquiring a large office building.) The

The owning and operation of coal mines was apparently the principal purpose in Marchulonis v. Adams (1924) 97 W. Va. 517, 125 S. E. 340; this having been carried into effect; other purposes were also specified in the declaration, including the dealing in coal and oil and operation of boats. And see, as to mining operations, Erisman v. McCarty (1925) 77 Colo. 289, 236 Pac. 777, and Wimer & Co. v. Downs (1925) 77 Colo. 377, 237 Pac. 155.

In Wright v. Webb (1925) 169 Ark. 1145, 278 S. W. 355, the trust was created for the purpose of selling interest-bearing contracts and lending money to holders of contracts at a low rate of interest for the purpose of building homes; the court expressly refrained from commenting upon the character of this business,-its providence or improvidence.

The trust in Gray v. Lincoln Housing Trust (1924) 229 Mich. 441, 201 N. W. 489, conducted a business along the lines of a building and loan association; and the making of loans on cattle was the business conducted in Cattle Raisers' Loan Co. v. Sutton (1925) Tex. Civ. App. —, 271 S. W.

233.

The scope of the trust in Reeves v.

Powell (1924) Tex. Civ. App. 267 S. W. 328, was the transaction of practically all commercial business, but particularly the operation of a chain of wholesale and retail grocery stores, which was apparently the only business enterprise which it actually undertook. And the trust in Austin v. Parker (1925) 317 Ill. 348, 148 N. E. 19, was formed to establish and operate grocery or other stores, wholesale and retail.

In McCrea v. Day (1925) 113 Neb. 538, 204 N. W. 56, the object of a common-law trust was "to install a system of highway motor transportation, for the carrying of freight to market, such as grain, live stock, and farm produce, and to make door to door delivery of merchandise and the like, all for hire, by the use of motor transportation trucks, in Nebraska and adjoining states, 'for members only.""

The purpose of carrying on different lines of business, including the purchase of foreign merchandise and foreign exchange, was expressed in the declaration in Gallagher v. Hannigan (1925; C. C. A. 1st) 5 F. (2d) 171.

The raising and spending of money for the production of moving pictures was the purpose in De Witt v. Cabanne (1924; C. C. A. 3d) 2 F. (2d) 322; and the manufacture of automobiles, in Palmer v. Taylor (1925) 168 Ark. 127, 269 S. W. 996.

b. Legal nature of organization. 1. In general. (Supplementing annotations in 7 A.L.R. 621; 10 A.L.R. 887; 31 A.L.R. 856; and 35 A.L.R. 504.)

In holding that a certain "trust" was not properly sued as an "association" under Gen. Laws, chap. 182, § 6, and that the trustees might be substituted as defendants, the Massachusetts court in Bouchard v. First People's Trust (1925) Mass. -, 148 N. E. 895, has recently stressed the general distinction between voluntary associations and express trusts, noting some of the stipulations of the declaration of trust in question, particularly those giving the trustees unlimited power, and providing that the shareholders should have practically no power ex

cept to receive dividends, also referring to stipulations that the trustees "shall not be partners of each other or in association with each other," and that the shareholders were "not partners or associates or in any other relation whatever between themselves with respect to the trust property." After expressing the opinion that this was a trust rather than a partnership, the court reviewed the history of the legislation in question, which indicated that the legislature had in mind the distinction above referred to, commented on some of the cases, and said: "While express trusts and voluntary associations established by written instruments may in many instances run into each other and have factors in common, the former may exist without any element of association between the beneficiaries, and the latter import some element of co-operation. It seems plain to us that there is no association in the sense in which that word is commonly used among the shareholders of the First People's Trust. Each of them has simply a property interest in a fund held for their common benefit. The arrangement established by the declaration of trust involves a total want of legal power by the shareholders as to the trust. They have no voice, direct or remote, in its management. They cannot exercise the slightest control over the selection or conduct of the trustees. No question as to its execution can be ever submitted to them for apEach proval, or even for advice. shareholder, by subscribing for a certificate, which is by individual choice and not by joint action, surrenders to those who are and from time to time become trustees by the self-perpetuating selection of the trustees for the time being, all legal power over the money paid for the subscription. The shareholders are unassociated; they have no organization; each of them has simply an equitable interest in the trust. The various definitions of the word 'association' all imply, if they do not require, as an essential element, that there be some form of organization resembling modes of procedure inherent in incorporated

bodies. A business corporation is unthinkable where the shareholders are devoid of legal rights, have no officers, and are and must remain forever dumb as to the selection, approval, or disapproval of managers and methods of conduct of corporate affairs. The declaration of trust in the case at bar is different from any hitherto considered by this court, in that the shareholders are utterly destitute of every legal right and of every means of expressing an opinion touching the trust. No avenue of action occurs to us as open to them, except a court of equity for the enforcement of whatever rights may be cognizable in a court of equity. The trustees

can hardly be termed an association. They have no personal or beneficial interest in the corpus of the trust. They are a part of an entire scheme established by the declaration of trust. To call such trustees an association would involve an extension of the meaning of that word to include persons who act jointly for many purposes quite remote from resemblance to the present trustees."

In Cattle Raisers' Loan Co. v. Sutton (1925) Tex. Civ. App. —, 271 S. W. 233, where the beneficiaries in an association retained no right of control, or right to change the declaration, but a single trustee had entire control, the court considered that a pure trust rather than a partnership was created, observing that such a trust had long been recognized in England as well as in this country, and that it was expressly recognized by the legislature since the trading or business trust became a common institution in the state.

In Thompson v. Schmitt (1925) Tex., 274 S. W. 554, supra, II. a, however, the court held, in reply to certified questions, that a certain so-called "trust," which was organized to conduct a mail-order business, was a partnership, and "that species of partnership called a joint stock company;" stating further: "Looking to the substance of the written articles, and disregarding mere form, we see no escape from the conclusion that the holders of certificates of beneficial interest

were persons who were to furnish capital for a mercantile business to be operated for their joint account and for their mutual profit, and to be conducted by their chosen agents, who were specially empowered to contract debts such as that sued upon by appellees. . . . We have no difficulty whatever in regarding the parties by whom the business was to be managed and conducted, though denominated trustees, as actual agents of the certificate holders. All authority they possessed was delegated to them by the shareholders through their joinder in the articles, either when originally executed or when subsequently adopted. Not only did the trustees exercise purely derivative power, but it was exercised for and on behalf of the certificate holders." And, after distinguishing Connally v. Lyons (1891) 82 Tex. 664, 27 Am. St. Rep. 935, 18 S. W. 799 (see reference to this case in 7 A.L.R. at pages 613 and 621), the court observed: "With certificate holders occupying the relation to the property of its actual and ultimate proprietors, entitled to remedies enforcing their rights as such, we cannot assent to the doctrine that they lack anything in the way of interest in or control over the property which would warrant our refusal to consider them partners. Despite the contrary view of eminent courts of other jurisdictions, we cannot allow the mere matter of an express delegation to certain members of a voluntary commercial association of exclusive control over the common property to convert into a trust what would otherwise be universally considered a joint stock company, with the members subject to the liabilities of partners."

seem would be applied in Massachusetts," the supreme court observing, further: "The vitally important power to increase the capital with which the business was to be done was dependent on express authorization of a majority of the stockholders. The trustees were empowered to do any act necessary or proper to effect the purposes specified, either in the declaration of trust or in any amendments thereof, and the shareholders by majority vote could alter or amend the declaration of trust. The trustees were therefore certainly subject to the control of the certificate holders, and, under the decisions of the supreme judicial court of Massachusetts, the company would be regarded as a partnership." And see Victor Ref. Co. v. City Nat. Bank (1925) Tex. - 274 S. W. 561, affirming (1924) - Tex. Civ. App., 263 S. W. 622.

In holding stockholders liable on a note given by an oil syndicate to a third party, where the declaration of trust contained a provision that the trustees should retain a certain percentage of the product to cover expenses, and that the balance should be divided into "units" and sold to subscribers, the majority of the court in Continental Supply Co. v. Adams (1925) Tex. Civ. App. —, 272 S. W. 329, upon rehearing, took the view that "the organization was clothed in all the habiliments and outward appearances of either a corporation or limited partnership or joint stock company, all for the purpose of dealing with the public on that basis. It thus appears from the declaration of trust that it was an association organized for the purpose of drilling oil wells.

. All persons purchasing certificates of membership in the association were thereby entitled to a certain portion of the oil runs or profits derived from such drilling operations. In the event the wells proved to be dry or nonproductive, each member lost the money which he had invested therein. The trustees were investing their labor and efforts, and agreeing, in the contingency stated, to invest their capital also, against the capital and money being invested by the va46 A.L.R.-12.

rious members or certificate holders. If oil was discovered, then each and all were to participate therein in accordance with the proportion set out in the declaration of trust. If no oil was discovered, each and all of the trustees and members of the association participated in the resulting losses. It follows, then, that the trustees and certificate holders alike had a joint or community interest in the drilling of the two wells on the said lease, which might have resulted in either gains or losses for each and all alike. The entire business was to be conducted under the name of the Man O'War Oil Syndicate. The very word 'syndicate' carries with it the idea of an association or partnership.

A Massachusetts trust is usually nothing more nor less than a joint stock association which, by article 6149 of our statutes, is given authority to sue and be sued in its company name, and by article 6153, it is provided that, in a suit against such an association, citation may also be served on the stockholders or members, and that, in case judgment is rendered against the association, it will be equally binding upon the individual property of the stockholders or members so served.

To hold that a number of persons may associate themselves together for the purpose of transacting the ordinary business of the country for the joint benefit of all persons concerned therein, and may reap those benefits at the expense of a creditor, who is not a member of the association and in no sense a party to the contract under which it is organized, simply by operating under a Massachusetts trust agreement, would certainly be contrary to every principle of justice and fair dealing." And the shareholders were apparently considered to be liable as partners, notwithstanding an express provision of the declaration that the trust should not be considered in any sense as either a copartnership nor a joint association. As to this case, see also subd. II. c, supra.

And the trusts or associations involved were considered as partnerships, at least so far as third parties were concerned, in Dayle L. Smith Oil