H. Kramer & Co. v. Cummings

Mr. Justice Barnes delivered the opinion of the court. This suit was brought to recover $177.12, the price of goods sold and delivered. The court found the issues for plaintiff and entered judgment for that sum against the several defendants. Two of the defendants, Condon and Burkholder, have appealed. The main question is whether the evidence was sufficient to establish a joint liability, or any liability, on the part of defendants. Condon, Burkholder and Cummings entered into a written agreement with one another, termed “Declarations of Trust of Boman Metals Co., Ltd.,” by which they, as. trustees, were to take title to all property, including manufacturing processes and plants, and take the management, etc., of such processes and plants, receive contributions of money or other property, for which they would issue trustees ’ certificates or receipts, and manage and control the same for the benefit and profit of all contributors or shareholders, their assigns or successors. In such management and control they were free from any power or control over them or the business by the certificate holders, and were to be designated in their collective capacity as the ‘ ‘ Boman Metals Company. ’ ’ The declaration provided that: “All who extend credit to, or contract with, or have any claim against the trustees shall look only to the funds or property of the trust for the performance or payment thereof, * * * so that neither the trustees, shareholders, nor officers, present or future, shall be personally liable therefor.” « Certain other powers of the trustees and limitations thereon are enumerated, but a recital of them is unnecessary to a determination of the question before us. It is not questioned that the goods were purchased for and delivered to the Roman Metals Company and billed to it. Credit does not appear to have been given to any of the other defendants, individually or collectively. The transaction as to the order for the goods took place between Chapman, plaintiff’s agent, and defendant Condon. Their versions of it differed. Chapman testified that Condon told him to send the bill to the Roman Metals Company, and he or Cummings would see that it was paid. Condon testified that Chapman inquired specifically .whether the goods were for him and Cummings personally, and whether the company was incorporated, and that he fully explained to Chapman the character of the company, that it was not a corporation or copartnership, that its articles “were on file in the records of Cook County,” that they were not personally liable and he would have to look to, the company for payment; that thereupon Cummings said he would do so, and sent the goods to the company, and bills for the goods in its name. Chapman did not deny this specific testimony by Condon, and, therefore, plaintiff must be presumed to have entered into the transaction with full knowledge of the character of the company and the terms of its articles of association. If the contract was not made with the trustees acting hr such capacity, then according to Chapman’s testimony it was made either with Condon individually, in which case there was no joint liability, or with Condon as a partner of Cummings and Burkholder. - The character of an association, with similar articles, was very extensively discussed in Williams v. City of Waltham, 215 Mass. 1, where the court, analyzing various cases, draws a distinction between a trust and partnership, the theory of which is succinctly expressed in Frost v. Thompson, 219 Mass. 360 (365) as follows: “A declaration of trust or other instrument providing for the holding of property by trustees for the benefit of owners of assignable certificates, representing the beneficial interest in the property, may create a trust or it may create a partnership. Whether it is the one or the other depends upon the way in which the trustees are to conduct the affairs committed to their charge. If they act as principals and are free from the control of the certificate holders, a trust is- created; but if they are subject to the control of the certificate holders, it is a partnership.” Tested by these principles the declaration in question created a trust, and we think it must be so interpreted. . ' But we need not discuss the refined distinctions made in those decisions, and others of the State of Massachusetts, where this subject has been particularly discussed, as upon undisputed evidence plaintiff entered into the transaction with full knowledge or notice of the character of the concern with which it was dealing, and must be held bound by the limitations imposed by its articles of association with reference to which the contract must be deemed to have been made. What was said in Glenn v. Allison, 58 Md. 527, seems particularly applicable to this state of facts: “Although one may covenant as trustee, he may limit and qualify the character in which he is to be held answerable; and where it plainly appears from the face of the instrument, that‘he did not mean to bind himself personally, courts will construe the covenant according to the plainly expressed intention of the parties, and this too, in cases where the covenantor had no right to bind himself in a fiduciary character. If the plaintiff he without remedy in such cases he has no one to blame but himself, in accepting a covenant of such a character. He certainly had no right to rely upon the individual liability of the covenantor.” The same principle would apply to an oral contract, like that at bar, which discloses an intention that the parties should not be personally bound. The theory of plaintiff’s suit, therefore, is not supported by the evidence, either as to the character of the company, or Condon’s power to bind his associates individually or as copartners. The suit is manifestly predicated upon the individual and joint liability of defendants, and not as to their liability as trustees to the extent of the assets of the trust, and as they cannot under the terms of the trust, and the contract made specifically with reference thereto, be liable in their individual capacity, severally or jointly — whatever may be their liability to one having no notice of the character of the company — the judgment must be reversed. The case of Greene v. People, 150 Ill. 513, a quo warranto where individuals were acting as a corporation, has no application to this state of facts, nor have the corporation or securities acts cited from the Session Laws of 1919 [Cahill’s Ill. St. ch. 32, ¶¶ 1-158, ¶¶ 254-296.]. Defendants were not acting, or assuming to act, in a corporate capacity or purporting to issue or deal in securities. Reversed. (xridley, P. J., and Mobbill, J., concur.