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 oper-
ate 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. 895, has recently stressed the general 148 N. E. 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 in-
stances run into each other and have
factors in common, the former may
exist without any element of associa-
tion between the beneficiaries, and the
latter import some element of co-oper-
ation. 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 arrange-

ment 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 approval, or even for advice. Each 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."

In Hollister v. McCamey (1925) Tex. 274 S. W. 562, affirming (1922) Tex. Civ. App. - 241 S. W. 689 (see 31 A.L.R. 856 and 857), the supreme court concurred in the lower court's view that the particular articles of association conferred such control on the shareholders over the company and its business as to prevent a decision that they created a trust “under the refined rule which it would

seem would be applied in Massachu-
setts," the supreme court observing,
further: "The vitally important pow-
er to increase the capital with which
the business was to be done was de-
pendent on express authorization of a
majority of the stockholders. The
trustees were empowered to do any act
necessary or proper to effect the pur-
poses specified, either in the declara-
tion of trust or in any amendments
thereof, and the shareholders by ma-
jority 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 part-
nership." And see Victor Ref. Co. v.
City Nat. Bank (1925) Tex. —, 274
S. W. 561, affirming (1924)
App., 263 S. W. 622.

--

Tex. Civ.

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 va

46 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

Co. v. Continental Supply Co. (1924)

Tex. Civ. App. —, 268 S. W. 489, supra, II. c; Wineinger v. Farmers' & Stockmen's Loan and Invest. Asso. (1925) Tex. Civ. App. —, 278 S. W. 932, infra; IV.; Haines v. Bankers' Petroleum & Ref. Co. (1925) Tex. Civ. App. 273 S. W. 940, infra, VI; and Pomona Mut. Oil Syndicate v. Williamsport Wire Rope Co. (1926) -Tex. Civ. App., 282 S. W. 958, infra, IV.

a

In Marchulonis v. Adams (1924) 97 W. Va. 517, 125 S. E. 340, the test of association of the shareholders and control by them over the conduct of the business, as laid down in Williams v. Milton (1913) 215 Mass. 1, 102 N. E. 355 (see 7 A.L.R. 622), was applied, SO as to constitute a partnership, a partnership, rather than a trust, the concern in question, which operated under trust agreement (which was apparently executed in the latter state, where all but one of the trustees resided and the shareholders' meetings were held) the court being influenced by a number of provisions of the declaration of trust, such as one regarding meetings of the shareholders for annual election of trustees and other business, a provision that the shares might be increased or diminished only with the consent of two thirds of the shareholders, one that the trustees could not mortgage or pledge any property without the same consent, and others as to their right to terminate or continue the trust and to amend the declaration.

In holding that each one of the trustees and subscribers under a certain common-law real estate trust should be joined in an equity suit, the court in Willey v. W. J. Hoggson Corp. (1925) Fla. 106 So. 408, declared that this was so "because such a so-called trust, in which the trustees are pretended to be vested with the power of acquiring and selling property and reinvesting the proceeds of the sale thereof for the common advantage and profit of trustees and subscribers, is nothing but a veiled and futile effort to avoid the liabilities of a copartnership, and acquire the privileges and immunities of a corpora

tion without complying with the corporation laws of the state. Such an association is nothing more than a copartnership or joint stock company, in which the members are jointly and severally liable. When a suit or an action is brought in behalf of such an association, it must be brought in the names of all the members as copartners. No statute in this state makes provision for suits to be brought in behalf of joint stock companies in the name of the company or its trustees." The court further stated that the phrase "common-law trust" had reference to the method of its creation, rather than to the powers, duties, and liabilities of the trustees and cestuis, and that the document referred to as creating such a trust created nothing more than a copartnership, in so far at least as the liabilities of the parties were concerned.

In United States v. Invader Oil Corp. (1925; D. C.) 5 F. (2d) 715, infra, V. b certain organizations created by a trust instrument were said to be in their nature commercial associations, except for the fact that the trustees had great powers and were practically immune.

A trust was regarded as a distinct legal entity in Forgan v. Mackie (1925) 232 Mich. 476, 205 N. W. 600, infra, V. c; while one was held not to be an entity in Guthmann v. Adco Dry Storage Battery Co. (1924) 232 Ill. App. 327, infra, V. d.

The contention that there was no evidence to establish the nature or legality of the plaintiff concern, which was suing as a common-law trust or organization, was overruled in General American Oil Co. v. Wagoner Oil & Gas Co. (1925) 118 Okla. 183, 247 Pac. 99, by holding that, while the trustees might not be said to be an association or legal entity, the defendant was estopped to raise this objection, having dealt with the association as a legal entity.

In Gordon Campbell Petroleum Co. v. Gordon Campbell-Kevin Syndicate (1926) Mont., 242 Pac. 540, infra, V. d, the court said that the defendant syndicate was "not a legal en